BILL ANALYSIS �
AB 1222
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Date of Hearing: April 15, 2013
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Raul Bocanegra, Chair
AB 1222 (Bloom) - As Introduced: February 22, 2013
Majority vote. Fiscal committee.
SUBJECT : Taxpayers' Rights Advocate: levy or notice to
withhold: return of funds
SUMMARY : Increases the amount of levied funds the Taxpayers'
Rights Advocate (TRA) may order returned to a taxpayer<1> upon a
finding that the levy or notice to withhold threatens the health
or welfare of the taxpayer or the taxpayer's family.
Specifically, this bill :
1)Increases, from $1,500 to $2,300, the amount of money the TRA
may order returned to a taxpayer under the following tax and
fee programs:
a) The Sales and Use Tax Law;
b) The Use Fuel Tax Law;
c) The Alcoholic Beverage Tax Law;
d) The Energy Resources Surcharge Law;
e) The Emergency Telephone Users Surcharge Act;
f) The Hazardous Substances Tax Law;
g) The Integrated Waste Management Fee Law;
h) The Oil Spill Response, Prevention, and Administration
Fees Law;
i) The Underground Storage Tank Maintenance Fee Law; and,
j) The Diesel Fuel Tax Law.
--------------------------
<1> The term "taxpayer" also includes feepayers, as applicable.
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2)Provides the TRA, for the first time, comparable fund return
authority under both the Cigarette and Tobacco Products Tax
Law and the Fee Collection Procedures Law.
3)Provides that, on or before March 1, 2014, and on or before
March 1 each year thereafter, the State Board of Equalization
(BOE) shall adjust the maximum return amount for inflation, as
specified.
EXISTING LAW :
1)Authorizes the BOE's TRA to order, within 90 days of receiving
funds through a levy or notice to withhold, the return of up
to $1,500, upon a finding that the levy or notice to withhold
threatens the health or welfare of the taxpayer or the
taxpayer's family. Specifically, this authority currently
extends to the following tax and fee programs the BOE
administers:
a) The Sales and Use Tax Law;
b) The Use Fuel Tax Law;
c) The Alcoholic Beverage Tax Law;
d) The Energy Resources Surcharge Law;
e) The Emergency Telephone Users Surcharge Act;
f) The Hazardous Substances Tax Law;
g) The Integrated Waste Management Fee Law;
h) The Oil Spill Response, Prevention, and Administration
Fees Law;
i) The Underground Storage Tank Maintenance Fee Law; and,
j) The Diesel Fuel Tax Law.
2)Authorizes the TRA, under both the Cigarette and Tobacco
Products Tax Law and the Fee Collection Procedures Law, to
release a levy or notice to withhold upon a finding that the
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levy or notice to withhold threatens the health or welfare of
the taxpayer or the taxpayer's family.
3)Does not authorize a hardship return of levied funds under
either the Cigarette and Tobacco Products Tax Law or the Fee
Collection Procedures Law.
FISCAL EFFECT : The BOE estimates annual revenue losses of
approximately $4,600. Specifically, the BOE's staff analysis
notes, "Over the past ten years the TRA has averaged a return of
funds about once per year."
COMMENTS :
1)The author has provided the following statement in support of
this bill:
This bill is sponsored by the BOE to update the amount of
temporary relief taxpayers may receive when a levy
threatens their health and welfare or the health and
welfare of their family. The bill increases from $1,500 to
$2,300 the levy amount the BOE's TRA is authorized to
return to a taxpayer. The bill also adds levy return
authority to the remaining BOE-administered tax and fee
programs that lack the authority. The return of levied
funds does not reduce the tax liability, but instead
provides a means for taxpayers to meet their basic needs
once their bank accounts have been levied and the BOE has
seized funds. The return amount has not been increased
since 1996, when the return authority first became
effective. Increasing from $1,500 to $2,300, the amount
that the TRA may return, accounts for inflation since 1996
and provides a mechanism to ensure that the return amount
keeps pace with the cost of living.
At a time when many Californians are struggling to make
ends meet, it is essential that the BOE have tools at its
disposal to protect taxpayers while still ensuring their
taxes are paid in full. AB 1222 is an important step
toward that goal.
2)BOE Member George Runner, who supports this bill, notes:
As an elected member of the [BOE], I hear frequently from
taxpayers, including many small business owners, who are
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struggling to get back on their feet again as a result of
California's severe economic downturn. When these
taxpayers fall behind on their tax payments, the state may
issue a levy or notice to withhold, which can sometimes
negatively impact their ability to provide basic
necessities for their family.
AB 1222 remedies this problem by providing the [TRA] the
needed discretion to restore additional funds, thus helping
struggling business owners provide for their families.
3)The BOE, which is sponsoring this measure, notes the following
in its staff analysis:
a) Sponsor and purpose : "The BOE is sponsoring this bill
to adjust for inflation the amount of temporary assistance
taxpayers may receive when a levy threatens their or their
family's health or welfare. In addition, the bill provides
the TRA consistent levy return authority for all BOE
administered tax and fee programs."
b) The return of levied funds does not reduce the tax
liability : "The BOE is authorized to levy bank accounts to
collect delinquent amounts. Occasionally a taxpayer is
unable to contact the TRA to stop the funds from being
levied until after the BOE has seized the funds. In these
rare cases, levied funds are needed to cover the taxpayer's
basic living expenses. Only the TRA, and not the [BOE], is
allowed to order funds returned when the levy threatens the
health or welfare of the taxpayer or the taxpayer's
family."
"The BOE's TRA bases the decision to return levied funds
upon a taxpayer's reasonable documentation and financial
condition disclosure. Typically the taxpayer completes a
BOE financial statement with accompanying documents to
substantiate income and expenses. Since California is a
community property state, the BOE requests information
about total household income and expenses."
c) Basis for the suggested increase : "The increase from
$1,500 to $2,300 is based on the accumulated California
inflation factor from the date [R&TC] Section 7094 was
first effective, on January 1, 1996, to the present. This
measure also provides a mechanism for future inflation
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adjustments."
"The amount returned may not cover a taxpayer's monthly
living expenses, but a reasonable increase in the funds
returned will help a taxpayer provide for his or her family
when the need arises. The incremental inflationary
adjustment ensures that the amount returned will keep pace
with the cost of living."
4)Committee Staff Comments:
a) General background : In 1988, the Legislature enacted
the Harris-Katz California Taxpayers' Bill of Rights
(Harris-Katz). The legislation was designed to, "ensure
that the rights, privacy, and property of California
taxpayers are adequately protected during the process of
the assessment and collection of taxes." [Revenue and
Taxation Code (R&TC) Section 7081]. Among its many
provisions, Harris-Katz directed the BOE to establish the
position of the TRA. [R&TC Section 7083]. The TRA is
charged with facilitating the resolution of taxpayer
complaints, including complaints alleging unsatisfactory
treatment by BOE employees. [Id.]
Harris-Katz also added R&TC Section 7094, which authorized
the TRA to order the release of a levy upon finding that
the levy threatens the health or welfare of the taxpayer or
the taxpayer's family. The BOE notes that this provision
placed no limitation on the time for requesting a release
or the amount of money that could be released.
In 1995, SB 718 (Committee on Revenue and Taxation) amended
R&TC Section 7094 to read as it does today. Among other
things, SB 718 authorized the TRA to order, within 90 days
of receiving funds through a levy or notice to withhold,
the return of up to $1,500, upon a finding that the levy or
notice to withhold threatens the health or welfare of the
taxpayer or the taxpayer's family. It is difficult to
divine the Legislature's intent in providing the TRA this
expanded authority, given that SB 718 was run as an omnibus
tax bill with multiple provisions. Nevertheless, the BOE's
staff analysis offers the following commentary:
Although the available legislative history does not
explain the rationale for the dollar threshold, the
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statute itself seems to suggest that the Legislature
attempted to strike a balance between the expanded
power to return funds and the potential revenue
impact.
b) Accounting for inflation : This bill would increase,
from $1,500 to $2,300, the amount of money the TRA may
order returned to a taxpayer under numerous
BOE-administered tax and fee programs. The BOE notes that
this increase is designed to account for inflation from the
date R&TC Section 7094 because effective to today. This
bill would also provide a mechanism for future inflation
adjustments.
Based on the plain language of R&TC Section 7094, it would
appear that the current $1,500 cap on returned funds
applies to each levy, and is not a cap on the aggregate
amount that may be returned to a taxpayer each month. For
example, assume the BOE receives $5,000 from a levy on May
1st. Further assume that, on May 5th, the BOE receives an
additional $5,000 from a separate levy imposed on the same
taxpayer. Under current law, it would appear that the TRA
could order up to $3,000 returned ($1,500 x 2 levies) to
the taxpayer in May alone, assuming a finding of adequate
hardship. However, if the BOE were to receive $10,000 from
a single levy imposed on another taxpayer in the month of
May, the TRA would only have authority to return up to
$1,500, despite a finding of similar hardship. To ensure
the equitable treatment of all taxpayers, this Committee
may wish to consider taking amendments establishing an
aggregate cap on returned funds per month.
REGISTERED SUPPORT / OPPOSITION :
Support
State Board of Equalization (sponsor)
State Board of Equalization Member George Runner
Opposition
None on file
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098
AB 1222
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