BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 576|
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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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