BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    THIRD READING


          Bill No:  AB 576
          Author:   V. Manuel Pérez (D)
          Amended:  9/3/13 in Senate
          Vote:     21

           
           SENATE LABOR & INDUSTRIAL RELATIONS COMMITTEE  :  4-0, 6/26/13
          AYES:  Monning, Wyland, Leno, Yee
          NO VOTE RECORDED:  Padilla

           SENATE GOVERNANCE & FINANCE COMMITTEE  :  7-0, 7/3/13
          AYES:  Wolk, Knight, Beall, DeSaulnier, Emmerson, Hernandez, Liu
           
          SENATE APPROPRIATIONS COMMITTEE  :  7-0, 8/30/13
          AYES:  De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg
           
          ASSEMBLY FLOOR  :  75-3, 05/30/13 - See last page for vote


            SUBJECT  :    Revenue Recovery and Collaborative Enforcement Team  
                      Act:  pilot program

           SOURCE  :     State Board of Equalization


           DIGEST :    This bill establishes a pilot program to create the  
          Revenue Recovery and Collaborative Enforcement Team (Team)  
          consisting of specified agencies to collaborate in combating  
          criminal tax evasion associated with the underground economy.

           ANALYSIS  :    Existing Federal law provides that any person who  
          willfully fails to collect or truthfully account for and pay  
          over taxes shall, in addition to other penalties provided by  
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          law, be guilty of a felony and, upon conviction thereof, shall  
          be fined not more than $10,000, or imprisoned not more than five  
          years, or both, together with the costs of prosecution.  

          Existing Federal law also provides that any person who willfully  
          fails to collect such tax, or truthfully account for and pay  
          over such tax, or willfully attempts in any manner to evade or  
          defeat any such tax or the payment thereof, shall, in addition  
          to other penalties provided by law, be liable to a penalty equal  
          to the total amount of the tax evaded, or not collected, or not  
          accounted for and paid over.  

          Existing law requires the Director of the Employment Development  
          Department (EDD) to serve as Chairperson of the Joint  
          Enforcement Strike Force on the Underground Economy (JESF).   
          JESF shall include, but not be limited to, representatives of  
          the:  EDD, the Department of Consumer Affairs (DCA), the  
          Department of Industrial Relations (DIR), the Department of  
          Insurance (CDI), and the Office of Criminal Justice Planning. 

          Other agencies that are not part of the administration, such as  
          the Franchise Tax Board (FTB), the State Board of Equalization  
          (BOE), and the Department of Justice (DOJ), are encouraged to  
          participate in JESF.  

          Existing law provides that it is a violation of the law for any  
          employer or employing unit to willfully fail or refuse to make  
          any contributions which are due under the Unemployment Insurance  
          or Disability Insurance programs.  

          Existing law provides that any person or employer who, with or  
          without intent to evade, fails to withhold or fails to pay over  
          any personal income tax withheld, is guilty of a misdemeanor  
          and, upon conviction, shall be fined an amount not to exceed  
          $1,000, or imprisoned for not more than one year, or both the  
          fine and imprisonment, at the discretion of the court.  

          Existing law provides that any person required to collect,  
          account for, and pay over any personal income tax or amount  
          required to be withheld who willfully fails to collect or  
          truthfully account for and pay over the tax or amount shall, in  
          addition to other penalties provided by law, be guilty of a  
          felony and, upon conviction thereof, shall be fined an amount  
          not more than $20,000, or imprisoned 16 months to three years,  

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          or both the fine and imprisonment, at the discretion of the  
          court.  

          This bill creates the Team pilot project as a collaborative  
          effort to combat criminal tax evasion.  Specifically, this bill:

          1. Creates the Team, made up of the FTB, DOJ, BOE, and EDD.

          2. Permits the California Health and Human Services Agency, DCA,  
             CDI, and Department of Motor Vehicles to participate as  
             advisory agencies.

          3. Allows advisory agencies to notify the Team of criminal  
             violations that, through enforcement, would lead to increased  
             revenues for California. 

          4. Requires the Team to meet at least quarterly.

          This bill also requires the Team to:

          1. Develop a plan for a central intake process and  
             organizational structure to document, review, and evaluate  
             data and complaints.

          2. Evaluate the benefits of a processing center to receive and  
             analyze data, share complaints, and research leads from the  
             input of each impacted agency.

          3. Provide participating and nonparticipating agencies with  
             investigative leads where collaboration opportunities exist  
             for felony-level criminal investigations, including, but not  
             limited to, referring leads to agencies with appropriate  
             enforcement jurisdiction.

          4. Submit to the Legislature on or before December 1, 2017, 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 Team.

             B.    The number of cases investigated or prosecuted through  
                civil action or criminal prosecution as a result of team  
                collaboration.


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

          This bill also sunsets the provisions on January 1, 2019, unless  
          a later enacted statute, that is enacted before January 1, 2019,  
          deletes or extends that date.

          This bill requires the Team to operate the pilot program using  
          existing funding of the DOJ, the FTB, the BOE, and the EDD and  
          shall not request additional funding for the pilot program until  
          after making its report to the Legislature, as specified.

          This bill also makes findings and declarations on the problems  
          of tax evasion and the underground economy and its impacts on  
          California's economy.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

          According to the Senate Appropriations Committee:

             BOE, FTB, and DOJ indicate minor and absorbable costs. 

             Unknown future revenue gains, potentially in the low  
             millions of dollars annually (General Fund), related to the  
             pilot project's enforcement actions and increased tax  
             collections.  A portion of the revenue gains could be offset  
             by revenue losses to the extent partnership activities  
             supplant existing revenue-generating enforcement efforts  
             among the participating entities.  

             Significant cost pressures to hire additional  
             administrative, investigative, and enforcement staff among  
             the participating state entities upon full implementation of  
             the Partnership (General Fund).  These costs would likely be  
             mitigated and perhaps completely offset by future revenue  
             gains resulting from increased enforcement activities.

           SUPPORT  :   (Verified  9/3/13)

          State Board of Equalization (source)
          Association for Los Angeles Deputy Sheriffs
          California Association of Professional Employees

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          California Building Industry Association
          California Chamber of Commerce
          California Chapter of American Fence Contractors Association
          California Construction and Industrial Materials Association
          California Farm Bureau Federation
          California Fence Contractors Association
          California Manufactures and Technology Association
          California Municipal Revenue & Tax Association
          California Professional Association of Specialty Contractors
          California State Council of Laborers
          Cities of Bellflower and Lakewood
          Engineering Contractors Association
          Flasher Barricade Association
          Los Angeles Area Chamber of Commerce
          Los Angeles Police Protective League
          Marin Builders Association
          Riverside Sheriffs' Association

           ARGUMENTS IN SUPPORT  :    Proponents note that 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.  Proponents further note that such bad  
          actors either underpay or completely neglect to pay required  
          taxes, licenses, insurance, or wages.  Proponents argue that, by  
          unlawfully reducing their expenses, these businesses undercut  
          legitimate businesses that in good faith comply with required  
          laws, and that many compliant businesses are unfortunately  
          forced to shut down due to this unfair competitive advantage,  
          further impeding California's economic recovery.  Proponents  
          believe that this bill will help coordinate governmental efforts  
          in the fight against the underground economy.

           ASSEMBLY FLOOR  :  75-3, 5/30/13
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,  
            Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,  
            Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway,  
            Cooley, Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier,  
            Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell,  
            Gray, Grove, Hagman, Hall, Harkey, Roger Hernández, Jones,  
            Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein,  
            Mansoor, Medina, Mitchell, Morrell, Mullin, Muratsuchi,  
            Nazarian, Nestande, Olsen, Pan, Patterson, Perea, V. Manuel  
            Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone,  
            Ting, Wagner, Weber, Wieckowski, Wilk, Williams, Yamada, John  

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            A. Pérez
          NOES:  Donnelly, Melendez, Waldron
          NO VOTE RECORDED:  Holden, Vacancy


          PQ:k  9/3/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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