BILL ANALYSIS Ó
AB 672
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Date of Hearing: April 10, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 672 (Harkey) - As Introduced: February 21, 2013
Policy Committee: Revenue and
Taxation Vote: 9-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill eliminates the requirement for the representative of
specified estates to obtain a tax clearance certificate from the
Franchise Tax Board (FTB) prior to the probate court accepting
the final accounting of the estate.
FISCAL EFFECT
The FTB staff estimates that this bill will result in an annual
revenue loss of $3,000 in fiscal year 2013-14, $6,000 in
2014-15, and $7,000 in 2015-16.
COMMENTS
1)Purpose . The author states that probate is already a
challenging and lengthy ordeal. The author argues this bill
would eliminate a burdensome process that is part of probate
but is not necessary to prevent assets under probate control
from being distributed to nonresident beneficiaries before
state income tax liabilities are paid. The bill's sponsor,
FTB, argues the elimination of the tax clearance requirements
would make the probate process faster and easier.
2)Background . A final decedent income tax return is required to
be filed to account for the decedent's final tax year. If any
income is generated by the estate prior to distribution to its
beneficiaries, an income tax return is required to be filed
for the estate. After filing, FTB issues a tax clearance
certificate, but it is required only in those cases where the
estate's assets meet specified thresholds set by FTB.
AB 672
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A tax clearance certificate provides that all taxes, additions
to tax, penalties, and/or interest imposed upon the estate or
decedent have been paid and that all other amounts that may
become due in the future are secured by bond, deposit or
otherwise. According to the FTB, only a small number of
estates must comply, they receive an average of 500 estates
requesting tax clearance certificates each year. In the
absence of the certificate, the California Probate Court is
prohibited from allowing the final accounting of these
estates.
3)Notice Requirement to the FTB . The personal representative
appointed by the court to administer a decedent's estate is
required to exert diligent efforts to identify creditors of
the decedent. In addition, in 2008, the Legislature passed AB
361 (Ma), Chapter 105, Statutes of 2007, to require a personal
representative of an estate to notify the FTB of the probate
proceedings no later than 90 days after the date when Letters
of Administration are first issued for the estate by the
court. This notification requirement gives the FTB an
opportunity to file a Creditor's Claim in the probate
proceedings to protect the interest in the estate's
distributable assets. The FTB may file a claim for
outstanding tax liabilities against an estate in probate court
within 18 months of receiving written notice. In the case
where no notice or written request is submitted to the FTB and
the estate has been distributed, the FTB may file a claim, at
any time, against any beneficiary of the estate that received
the property.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081