BILL ANALYSIS Ó
AB 576
Page 1
Date of Hearing: May 24, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 576 (V. Manuel Pérez) - As Amended: May 1, 2013
Policy Committee: Revenue and
Taxation Vote: 8-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill establishes a multiagency team consisting of the
Department of Justice (DOJ), the Franchise Tax Board (FTB), and
the State Board of Equalization (BOE), to collaborate in
combating criminal tax evasion, as specified. Specifically,
this bill:
1)Establishes the team in state government as a pilot program,
provides the multiagency team shall include DOJ, FTB and BOE
and allows six specified agencies to participate in an
advisory capacity to the team.
2)Requires the agencies making up the team to do the following:
a) Develop a plan to provide a central intake process and
organizational structure to document, review and evaluate
data and complaints.
b) Evaluate the benefits of a processing center to receive
and analyze data, share complaints and research leads from
the input of each impacted agency.
c) Provide both participating and nonparticipating agencies
with investigative leads where collaboration opportunities
exist for felony-level criminal investigations, including
referring leads to agencies with appropriate enforcement
jurisdiction.
3)Provides that the Advisory Committee shall comprise one
representative from each of the team members, DOJ, FTB and
BOE. In addition, any advisory agency may provide a
AB 576
Page 2
representative to the team to offer guidance and advice.
4)Permits duly authorized representatives of team members and
advisory agencies to exchange intelligence, data, documents,
information, complaints or lead referrals to investigate
illegal underground operations.
5)Provides that information exchanged pursuant to this act shall
retain its confidential status and shall remain subject to the
confidentiality provisions contained in various specified code
sections.
FISCAL EFFECT
Estimated costs of approximately $200,000 per year across state
government.
COMMENTS
1)Purpose . The author states at a time when California has been
reducing, and in some cases eliminating, funding for vital
public services, it is estimated the state loses up to $8
billion a year in tax revenue due to the effects of the
state's prolific underground economy, currently valued at $60
billion to $140 billion. According to the author, the state
lacks a coordinated effort among its various agencies to
tackle the underground economy. The author argues AB 576 will
address the problem by establishing a Revenue Recovery and
Collaborative Enforcement Team between nine state agencies to
enable the sharing of information and investigate leads.
2)Support . The BOE, the bill's sponsor, supports the creation
of the team as a collaborative, strategic effort to combat tax
evasion resulting from activities in the underground economy
through comprehensive data and resource analysis. They
contend this collaborative effort is intended to significantly
increase the efficiency and effectiveness of the BOE's efforts
to recapture revenue lost to illegally operating businesses,
thereby resulting in a more robust, legitimate economy.
Other supporters, including the California Chamber of
Commerce, contend businesses that operate in the underground
economy gain an unfair advantage over law-abiding employers by
conducting their operations outside the parameters of the law.
Such bad actors either underpay or completely neglect to pay
AB 576
Page 3
required taxes, licenses, insurance, or wages. By unlawfully
reducing their expenses, these businesses undercut legitimate
businesses that in good faith comply with required laws. Many
compliant businesses are unfortunately forced to shut down due
to this unfair competitive advantage, further impeding
California's economic recovery.
3)Existing efforts .
a) Joint Enforcement Strike Force on the Underground
Economy. In 1993, Governor Wilson signed Executive Order
W-66-93, which established the Joint Enforcement Strike
Force on the Underground Economy, which was subsequently
codified in 1995. The Strike Force, chaired by the EDD
director, is responsible for developing and sharing
information necessary to combat the underground economy.
The Strike Force also works to improve the coordination of
enforcement activities, and to develop methods to target
the enforcement resources of participating agencies. The
Strike Force is empowered to form joint enforcement teams
when appropriate to utilize the investigative and
enforcement capabilities of the Strike Force's members.
In addition to the EDD, the Strike Force's formal
membership is comprised of the Department of Consumer
Affairs, the Department of Industrial Relations and the
Department of Insurance. The FTB, the BOE and the
Department of Justice are each encouraged, under existing
law, to participate in the Strike Force's activities. The
Strike Force is required to report to the governor and the
Legislature annually regarding its activities.
b) The Labor Enforcement Task Force . The Department of
Industrial Relations also works to combat the underground
economy in California through its Labor Enforcement Task
Force. In this joint effort between state agencies and
affected communities, information and resources are shared
to ensure workers receive proper payment of wages and are
provided a safe working environment. In addition, the
Labor Enforcement Task Force works to ensure that
California receives all employment taxes, fees, and
penalties due from employers. The Labor Enforcement Task
Force is comprised of the Labor and Workforce Development
Agency, the Department of Industrial Relations, the EDD,
the Contractor's State Licensing Board, the California
AB 576
Page 4
Department of Insurance, the BOE, the Bureau of Automotive
Repair and the Attorney General.
4)There is no registered opposition to this bill.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081