BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 576
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          ASSEMBLY THIRD READING
          AB 576 (V. Manuel Pérez)
          As Amended  May 1, 2013
          Majority vote 

           PUBLIC SAFETY       5-2         REVENUE & TAXATION       8-0    
           
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          |Ayes:|Ammiano, Jones-Sawyer,    |Ayes:|Bocanegra, Dahle, Gordon, |
          |     |Mitchell, Quirk, Skinner  |     |Mullin, Nestande, Pan, V. |
          |     |                          |     |Manuel Pérez, Ting        |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Melendez, Waldron         |     |                          |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           APPROPRIATIONS      17-0                                        
           
           ----------------------------------------------------------------- 
          |Ayes:|Gatto, Harkey, Bigelow,   |     |                          |
          |     |Bocanegra, Bradford, Ian  |     |                          |
          |     |Calderon, Campos,         |     |                          |
          |     |Donnelly, Eggman, Gomez,  |     |                          |
          |     |Hall, Ammiano, Linder,    |     |                          |
          |     |Pan, Quirk, Wagner, Weber |     |                          |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUMMARY  :  Establishes a pilot program to create the "Revenue  
          Recovery and Collaborative Enforcement Team" consisting of  
          specified agencies to collaborate in combating criminal tax  
          evasion associated with the underground economy.  Specifically,  
           this bill  :  

          1)Makes legislative findings relative to uncollected taxes in  
            California (estimated to be $9 billion annually) associated  
            mostly with underreported or unreported taxes related to  
            underground economic activities and its threat to the health  
            of the state's economy, business community, and workers.

          2)Recognizes that while the Labor Enforcement Task Force and  
            Joint Enforcement Strike Force work to combat the underground  
            economy, these programs focus on labor violations and often  
            overlook criminal tax evasion.








                                                                  AB 576
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          3)Declares legislative intent to enhance existing efforts to  
            combat criminal tax evasion associated with the underground  
            economic activities by collaboration among state entities  
            through the newly-created "Revenue Recovery and Collaborative  
            Enforcement Team" (team) by focusing on the criminal and civil  
            prosecution of those who operate in the underground economy  
            and flagrantly violate tax laws.

          4)Establishes the team as a pilot program.

          5)Includes the Franchise Tax Board (FTB), Department of Justice  
            (DOJ), and State Board of Equalization (BOE) in the team.

          6)Allows the California Health and Human Services Agency,  
            Department of Consumer Affairs, Department of Industrial  
            Relations, Department of Insurance, Employment and Development  
            Department, and Department of Motor Vehicles to participate in  
            the pilot program in an advisory capacity to the team.

          7)Requires the team to meet as needed, but at least quarterly.

          8)Requires participating agencies to do all of the following to  
            combat criminal tax evasion associated with the underground  
            economy: 

             a)   Develop a plan for 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 participating and nonparticipating agencies with  
               investigative leads where collaboration opportunities exist  
               for felony-level criminal and civil investigations.

          9)Allows duly authorized team members and representatives of the  
            other participating agencies to exchange intelligence, data,  
            documents, information, complaints, or lead referrals for the  
            purpose of investigating criminal tax evasion associated with  
            underground economic activities.









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          10)Prohibits any member or ex-member of the team, any agent  
            employed by a member agency, or any person who has obtained  
            such knowledge from any of the above agencies or persons, from  
            divulging any information in a manner not allowed by law.   
            Information shall retain its confidential status and shall  
            remain subject to specifically enumerated confidentiality  
            statutes guiding each agency.

          11)Requires the team to report on or before July 1, 2015, and  
            annually thereafter, to the Legislature and to each  
            participating agency on its activities and accomplishments. 

          12)Requires the team to submit a report to the Legislature on or  
            before December 1, 2017, detailing the number of leads or  
            complaints it received, the number of cases investigated or  
            prosecuted either in civil or criminal court, and any  
            recommendations for modifying, eliminating, or continuing  
            operations of the team.

          13)Sunsets the partnership on January 1, 2019, and repeals it as  
            of that date unless a later-enacted statute extends it.

           EXISTING LAW  : 

          1)Provides that all property is taxable unless otherwise  
            provided by the California Constitution or the laws of the  
            United States.  

          2)Establishes the BOE which administers sales and use taxes,  
            excise taxes, special taxes, and the state's fee programs.  

          3)Allows taxes on or measured by income to be imposed on  
            persons, corporations, or other entities as prescribed by law.  
             

          4)Contains various provisions criminalizing tax evasion.  

           FISCAL EFFECT  :  According to the Assembly Appropriations  
          Committee, estimated costs of approximately $200,000 per year  
          across state government.

           COMMENTS  :  According to the author, "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  








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          billion a year in tax revenue due to the effects of the state's  
          prolific underground economy, currently valued at between $60  
          and $140 billion. While the impact of the underground economy on  
          the state is extensive, the state lacks a coordinated effort  
          among its various agencies to tackle the underground economy

          "AB 576 will address the problem by establishing a California  
          Intelligence Partnership between nine state agencies to enable  
          the sharing of information and investigate leads.

          "A collaborative, strategic, targeted and focused effort to  
          combat the underground economy would create a synergy among the  
          various enforcement agencies, increasing the state's  
          effectiveness in recapturing revenue lost to businesses  
          operating illegally in the State of California.

          "As such, AB 576 will create a Centralized Intelligence  
          Partnership (CIP) between nine member agencies including the  
          Board of Equalization, the Franchise Tax Board, the Employment  
          Development Department and California Department of Justice.   
          Each duly authorized representative of the partnership would be  
          allowed to exchange intelligence, data, documents, information,  
          complaints, or lead referrals for the purpose of investigating  
          illegal, underground operations.  Information obtained by the  
          CIP would retain its confidential status and would be subject to  
          all the existing confidentiality statutes guiding each agency."

          Please see the policy committee analysis for a full discussion  
          of this bill.  


          Analysis Prepared by  :    Sandy Uribe / PUB. S. / (916) 319-3744 


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