Amended in Assembly May 1, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 576

Introduced by Assembly Member V. Manuel Pérez

February 20, 2013

An act to add and repeal Part 12.2 (commencing with Section 15910) of Division 3 of Title 2 of the Government Code, relating to begin insert the end insert underground begin delete operations end delete begin insert economy end insert .

LEGISLATIVE COUNSEL’S DIGEST

AB 576, as amended, V. Manuel Pérez. begin delete Centralized Intelligence Partnership end delete begin insert Revenue Recovery and Collaborative Enforcement Team end insert Act: pilot program.

Existing law requires various state entities, including, but not limited to, the State Board of Equalization, the Franchise Tax Board, and the Department of Justice, to enforce laws relating to the taxation and legal operation of businesses throughout the state under their respective jurisdictions.

This bill would establish, until January 1, 2019, a pilot program to create a multiagency begin delete partnership end delete begin insert team end insert consisting of the begin delete Employment Development Department, end delete Franchise Tax Board, begin insert Department of Justice, end insert and State Board of Equalization, to be known as the begin delete Centralized Intelligence Partnership end delete begin insert Revenue Recovery and Collaborative Enforcement Team end insert , to collaborate in combating begin delete illegal underground operations end delete begin insert criminal tax evasion associated with the underground economy end insert by, among other activities, begin delete providing end delete begin insert developing a plan for end insert a central intake process and organizational structure begin delete , with an administrator and support staff, end delete to document, review, and evaluate data and complaints. The bill would authorize other specified state entities to participate in the pilot program in an advisory capacity. begin delete The bill would create an advisory committee, comprised of one representative from each entity in the partnership, and those serving in an advisory capacity, as specified, to provide guidance on the activities and operations of the partnership. The bill would require the advisory committee to the partnership to determine the appropriate agency to house the processing center for the partnership. end delete The bill would authorize begin delete duly authorized representatives of members of the partnership end delete begin insert team members and representatives of other participating agencies end insert to exchange information for the purpose of investigating begin delete illegal underground operations end delete begin insert criminal tax evasion associated with the underground economy end insert . The bill would require the begin delete partnership end delete begin insert team end insert , on or before July 1, 2015, to annually report to the Legislature and begin delete entities participating in the partnership end delete begin insert each participating agency end insert on its activities. The bill would require an additional report to be filed with the Legislature by December 1, 2017, to include the number of complaints received by the begin delete partnership end delete begin insert team end insert and cases investigated or prosecuted begin delete , as specified end delete begin insert as a result of team collaboration end insert .

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

The Legislature finds and declares all of the
following:

begin delete

(a) According to the Employment Development Department’s
analysis of findings made by the Internal Revenue Service, the
underground economy in California is estimated to be between
sixty billion dollars ($60,000,000,000) and one hundred forty
billion dollars ($140,000,000,000) each year.

end delete begin delete

(b)

end delete

begin insert (a) end insert  According to the State Board of Equalization, an begin delete estimate
of eight end delete begin insert estimated nine end insert billion dollars begin delete ($8,000,000,000) end delete
begin insert ($9,000,000,000) end insert in corporate, personal, and sales and use taxes
goes uncollected in California each year, with unreported and
underreported economic activity responsible for the vast majority
of that total.

begin delete

(c) For purposes of this section, “underground economy” means
the activities of individuals, businesses, or other entities that
knowingly and intentionally use practices designed to conceal
illegal or fraudulent activities that negatively impact legitimate
businesses, workers, and consumers, as well as deprive the state
and local governments of vital resources.

end delete begin delete

(d) The underground economy

end delete

begin insert (b) end insert begin insert   end insert begin insert Criminal tax evasion associated with underground economic
activities end insert begin insert end insert hurts all Californians. Revenues to support government
services are lost, workers are forced to go without basic
employment protections, and legitimate businesses are confronted
with unfair competition. begin insert Despite significant statewide efforts,
California continues to lose billions of dollars in annual tax
revenues due to the underground economy. end insert

begin insert

(c) The mission of the Labor Enforcement Task Force (LETF)
and the Joint Enforcement Strike Force (JESF) is to combat the
underground economy to ensure a level playing field for California
businesses. However, these programs focus on labor violations
while often overlooking or disregarding criminal tax evasion.

end insert begin delete

(e) Since the activities of many operating in the underground
economy span across multiple jurisdictions, various joint agency
enforcement efforts have been undertaken to combat the
underground economy, including, but not limited to, the creation
of the Joint Enforcement Strike Force on the Underground
Economy in 1993, and the creation of the Economic and
Employment Enforcement Coalition in 2005. Furthermore, various
individual agency efforts have been created, including, but not
limited to, the State Board of Equalization’s Statewide Compliance
and Outreach Program and the Contractors’ State License Board’s
Statewide Investigative Fraud Team. Thus, investigative
collaboration among state agencies is not a new concept in
California. Many collaborative efforts are already under way,
pursuant to which investigators periodically meet to discuss current
investigations, collaborate to conduct sting operations, and develop
best practices policies.

(f) Despite significant statewide efforts, California continues
to lose billions of dollars in annual revenue due to the underground
economy.

(g)

end delete

begin insert (d) end insert  The Legislature intends this act to enhance existing efforts
to combat begin delete the underground economy end delete begin insert criminal tax evasion
associated with underground economic activities end insert by
institutionalizing collaboration among state agencies begin delete through a
Centralized Intelligence Partnership, a pilot program that acquires
relevant data for collaborative data analysis, economic threat
assessment, strategic planning, and provides a referral tracking
and value-added referral disbursement process to monitor the
progress and measure the success of the partnership activities end delete . This
collaborative effort to combat begin delete the underground economy will, in
turn, end delete begin insert criminal tax evasion will end insert further aid the state in its progress
toward begin insert protecting consumers from counterfeit products, increasing
public services, and end insert preventing human trafficking begin insert by enhancing
the state’s ability to identify and punish offenders end insert . The Legislature
recognizes that the state needs to comprehensively address the
underground economy and capitalize on each agency’s enforcement
efforts and investigative resources by creating the begin delete Centralized
Intelligence Partnership end delete begin insert Revenue Recovery and Collaborative
Enforcement Team end insert . A key element of this effort is to authorize
and facilitate data and intelligence sharing among begin delete the Centralized
Intelligence Partnership and end delete begin insert participating end insert state agencies. It is the
intent of the Legislature in enacting this act to focus on the criminal
and civil prosecution of those begin delete operating in the underground
economy in flagrant violation of the law. Businesses that are in
compliance with state employment, safety, licensing, and tax laws
that are found to have committed minor or inadvertent violations
of existing law are to be addressed through other administrative
procedures end delete begin insert who operate in the underground economy and
flagrantly violate the tax laws end insert .

begin delete

(h) It is the intent of the Legislature that this act be part of
ongoing efforts by the Legislature to combat the underground
economy in this state through legislation.

end delete

SEC. 2.  

Part 12.2 (commencing with Section 15910) is added
to Division 3 of Title 2 of the Government Code, to read:

 

PART 12.2.  begin delete Centralized Intelligence Partnership end delete
begin insert Revenue Recovery and Collaborative
Enforcement Team end insert Act

 

15910.  

This part shall be known, and may be cited, as the
begin delete Centralized Intelligence Partnership end delete begin insert Revenue Recovery and
Collaborative Enforcement Team end insert Act.

15912.  

(a) The begin delete Centralized Intelligence Partnership end delete begin insert Revenue
Recovery and Collaborative Enforcement Team end insert is hereby
established in state government as a pilot program.

(b) For purposes of this part, the term begin delete “partnership” end delete begin insert “team end insert begin insert ” end insert
shall refer to the begin delete Centralized Intelligence Partnership end delete begin insert Revenue
Recovery and Collaborative Enforcement Team end insert .

15914.  

(a) The begin delete partnership end delete begin insert team end insert shall include all of the
following state entities:

begin delete

(1) Employment Development Department.

end delete begin delete

(2)

end delete

begin insert (1) end insert  Franchise Tax Board.

begin insert

(2) Department of Justice.

end insert

(3) State Board of Equalization.

(b) In addition to the agencies listed in subdivision (a), the
following agencies may participate in the pilot program in an
advisory capacity to the begin delete partnership: end delete begin insert team: end insert

(1) California Health and Human Services Agency.

(2) Department of Consumer Affairs.

(3) Department of Industrial Relations.

(4) Department of Insurance.

(5)  begin delete Department of Justice. end delete begin insert Employment Development
Department. end insert

(6) Department of Motor Vehicles.

(c) If, in its normal course of investigation, an agency listed in
subdivision (b) discovers a violation of law that would result in
increased tax revenues to the state, that agency begin delete shall end delete begin insert may end insert notify
the appropriate tax agency listed in subdivision (a).

begin delete

15916.  

(a) The advisory committee to the Centralized
Intelligence Partnership is hereby established to provide guidance
to, and advice on, the activities and operations of the partnership.

(b) The advisory committee shall be comprised of one
representative from each of the entities in the partnership listed
under subdivision (a) of Section 15914. Each representative shall
be appointed by the head of the entity in the partnership and serve
at the pleasure of the appointing authority. An agency participating
in an advisory capacity may provide a representative to the advisory
committee to offer guidance and advice to the partnership.

(c) The advisory committee

end delete

begin insert

begin insert 15916. end insert   

end insert

begin insert The team end insert shall meet as needed, but at least quarterly,
to conduct its business.

15918.  

begin delete (a) end delete begin delete   end delete To serve the best interests of the state by combating
begin insert criminal tax evasion associated with end insert the underground economy,
the begin delete partnership shall do all of the following to combat illegal
underground operations: end delete begin insert participating agencies shall do all of the
following: end insert

begin delete

(1) Provide

end delete

begin insert (a) end insert begin insert   end insert begin insert Develop a plan for end insert a central intake process and
organizational structure to document, review, and evaluate data
and complaints.

begin delete

(2) Establish

end delete

begin insert (b) end insert begin insert   end insert begin insert Evaluate the benefits of end insert a processing center to receive and
analyze data, share complaints, and research leads from the input
of each impacted agency.

begin delete

(3)

end delete

begin insert (c) end insert  Provide participating and nonparticipating agencies with
begin delete value-added end delete investigative leads where collaboration opportunities
exist for felony-level criminal investigations, including, but not
limited to, referring leads to agencies with appropriate enforcement
jurisdiction.

begin delete

(4) Provide that each participating and nonparticipating agency
retain jurisdictional authority over whether to pursue partnership
strategies or collaborative investigative leads based upon the
direction of their respective governing structures or available
resources.

end delete begin delete

(5) Document and provide intake data analysis, analytic data
findings, referrals, collaborative opportunities, outcomes, emerging
evasion trends, lessons learned, as well as additional enforcement,
administrative, and legislative opportunities.

end delete begin delete

(b) The scope of activities and projects undertaken by the
partnership shall be consistent with the amount of funds
appropriated by the Legislature.

end delete begin delete

(c) The advisory committee to the partnership shall determine
the appropriate agency to house the processing center for the
partnership.

end delete begin delete

(d) The partnership may hire an administrator and staff.

end delete

15920.  

Duly authorized begin delete representatives of end delete begin insert team end insert members begin delete of
the partnership, and agencies participating in an advisory capacity, end delete
begin insert and representatives of other participating agencies end insert may exchange
intelligence, data, documents, information, complaints, or lead
referrals for the purpose of investigating begin delete illegal underground
operations end delete begin insert criminal tax evasion associated with underground
economic activities end insert . Any member or ex-member of the begin delete partnership end delete
begin insert team end insert , any agent employed by any member begin delete of the partnership end delete
begin insert agency end insert , or any person who has at any time obtained such
knowledge from any of the foregoing begin delete partners end delete begin insert agencies end insert or persons begin delete , end delete
shall not divulge, or make known in any manner not provided by
law, any of the confidential information received by, or reported
to, the begin delete partnership end delete begin insert team end insert . Information exchanged pursuant to this
section shall retain its confidential status and shall remain subject
to the confidentiality provisions contained in the following
provisions:

(a) California Health and Human Services Agency: Subdivision
(c) of Section 6254 of this code and Section 14100.2 of the Welfare
and Institutions Code.

(b) Department of Consumer Affairs: Section 30 of the Business
and Professions Code and Section 56.29 of the Civil Code.

(c) Department of Industrial Relations: Sections 11181, 11183,
and 15553 of this code, Article 7 (commencing with Section 1877)
of Chapter 12 of Part 2 of Division 1 of the Insurance Code, and
Sections 92, 138.7, 1026, 3762, 6309, 6322, 6396, and 6412 of
the Labor Code.

(d) Department of Insurance: Section 11180 of this code and
Sections 1872.6, 1873, 1874.2, 1875.1, 1877.1, 1877.3, 1877.4,
and 1877.5 of the Insurance Code.

(e) Department of Justice: Section 11183.

(f) Department of Motor Vehicles: Sections 1808.2, 1808.4,
1808.5, 1808.6, 1808.21, 1808.24, and 12800.5 of the Vehicle
Code.

(g) Employment Development Department: Sections 1094 and
1095 of the Unemployment Insurance Code.

(h) Franchise Tax Board: Sections 19542, 19542.1, and 19542.3
of the Revenue and Taxation Code.

(i) State Board of Equalization: Section 15619 of this code,
Section 42464.8 of the Public Resources Code, and Sections 7056,
7056.5, 8255, 9255, 9255.1, 30455, 38705, 38706, 43651, 45981,
45982, 45983, 45984, 46751, 50159, 50160, 50161, 55381, 60608,
and 60609 of the Revenue and Taxation Code.

15922.  

On or before July 1, 2015, and annually thereafter, the
begin delete partnership end delete begin insert team end insert shall report on its activities and accomplishments
to the Legislature in compliance with Section 9795, and to each
begin delete entity in the partnership end delete begin insert participating agency end insert .

15923.  

The begin delete partnership end delete begin insert team end insert shall submit to the Legislature
on or before December 1, 2017, and in compliance with Section
9795, a report of the pilot program that includes, but is not limited
to, the following information:

(a) The number of leads or complaints received by the
begin delete partnership end delete begin insert team end insert .

(b) The number of cases investigated or prosecuted through
civil action or criminal prosecution begin insert as a result of team
collaboration end insert .

(c) Recommendations for modifying, eliminating, or continuing
the operation of any or all of the provisions of this part.

15924.  

This part shall remain in effect only until January 1,
2019, and as of that date is repealed, unless a later enacted statute,
that is enacted before January 1, 2019, deletes or extends that date.