BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 1222 HEARING: 6/19/13
AUTHOR: Bloom FISCAL: Yes
VERSION: 2/22/13 TAX LEVY: No
CONSULTANT: Grinnell
TAXPAYERS' RIGHTS ADVOCATE
Increases amounts of funds BOE's taxpayer rights advocate
may return in certain circumstances.
Background and Existing Law
The State Board of Equalization (BOE) administers the Sales
and Use Tax Law, Use Fuel Tax Law, Alcoholic Beverage Tax
Law, Energy Resources Surcharge Law, Emergency Telephone
Users Surcharge Law, Hazardous Substances Tax Law,
Integrated Waste Management Fee Law, Oil Spill Response,
Prevention, and Administration Fees Law, Underground
Storage Tank Maintenance Fee Law, and Diesel Fuel Tax Law.
In addition, BOE operates other fee programs such as the
Ballast Water, California Tire, Covered Electronic Waste
Recycling, Fire Prevention, Marine Invasive Species, and
Water Rights Fees, as well as the Natural Gas Surcharge,
which are governed by the Fee Procedures Collections Law.
Similar to its counterparts in the Internal Revenue Service
and the Franchise Tax Board, the Taxpayers' Rights Advocate
(TRA) Office in the Board of Equalization (BOE) helps
taxpayers to resolve a matter outside normal channels,
provide information regarding a particular set of
circumstances, identify rights violations in the audit, and
assist in property tax areas. TRA facilitates
communication between taxpayers, BOE, and county staff to
eliminate potential misunderstandings. TRA's vision is to
"be the clear and trusted voice of reason and fairness when
resolving issues between taxpayers and the government," and
its mission "to positively affect the lives of taxpayers by
protecting their rights, privacy, and property during the
assessment and collection of taxes." TRA reports directly
to the Executive Director, and is separate from other BOE
offices and programs.
AB 1222 (Bloom) - 2/22/13 -- Page 2
When taxpayers' complain about the BOE, TRA has direct
access to all BOE documents and staff involved in the
taxpayers' issues, and acts as a liaison between taxpayers
and BOE. If TRA disagrees with BOE staff and is unable to
resolve the situation satisfactorily, the issue is elevated
to the Executive Director for resolution.
TRA has specific powers to help taxpayers, including
staying actions by BOE where taxpayers have suffered
irreparable loss as a result of BOE staff actions. TRA may
order the release of a levy or notice to withhold within 90
days if the TRA finds that the levy threatens the
taxpayer's health or welfare or that of his or her family
for all taxes, and may return up to $1,500 to the taxpayer.
Neither the release nor the return affects tax due.
Proposed Law
This bill increases from $1,500 to $2,300 the amount of
levied funds the TRA is permitted to return when the levy
threatens the health or welfare of the taxpayer or the
taxpayer's family. The bill also allows TRA to return up
to $2,300 in levied funds under the Cigarette and Tobacco
Products Tax Law and the Fee Collection Procedures Law,
paralleling similar authority in the Cigarette and Tobacco
Products Tax Law and the Fee Collection Procedures Law.
The measure directs BOE to annually adjust the $2,300
threshold for inflation for all taxes.
State Revenue Impact
BOE estimates revenue losses of approximately $4,600
annually.
Comments
1. Purpose of the bill . According to the Author, "AB 1222
updates the amount of levied funds the BOE may return to a
taxpayer when the levy threatens the taxpayer's or their
family's health or welfare. It increases the allowable
amount from $1,500 to $2,300. The bill also adds these
provisions in the remaining BOE-administered tax and fee
programs that currently lack it."
AB 1222 (Bloom) - 2/22/13 -- Page 3
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. One of a kind . BOE is the nation's only elected tax
appeals board. As such, they have been criticized for its
tax appeal decisions being politicized and favorable to
affluent taxpayers. BOE allows taxpayers and their
representatives to directly lobby its members, which is
generally barred in judicial or quasi-judicial settings,
creating the impression that effective lobbying and
political strategy is more influential than applying the
facts to the law in tax cases. BOE didn't usually publish
decisions, leaving little to no guidance for either
taxpayers or tax enforcement agencies on the correctness of
tax positions, until the Legislature required publication
(AB 2323, Perea, 2012). In the recent California Appellate
Court case, City of Palmdale v. State Board of
Equalization , 2012 Cal.App. LEXIS 610, the Court provides a
condemning indictment of BOE's performance in the case,
faulting them "for rendering a decision without due regard
for the statutory and constitutional laws that govern its
decision-making." The Court held that, "To vacate the
judgment and reinstate [BOE's] decision would not only
imply the agency acted properly, it would also undermine
the effectiveness of the judgment in exposing [BOE's]
deficiencies in handling the administrative appeal."
The trial court's judgment found that BOE's decision
granting the City of Pomona's petition for a reallocation
of local sales tax required "express findings and a
discussion of the evidence supporting them." However, BOE
did "not even hint at the reasons for [its] decision" and,
as a result, the trial court was "forced into unguided and
resource-consuming explorations . . . ."
In refusing to vacate the trial court's judgment, the Court
of Appeal noted that, under BOE's decision, the City of Los
Angeles stands to lose $2.32 million in tax revenues and
that cities and their residents "have a right to know why a
city is losing or gaining millions in local sales tax
revenues, that is, a right to know the [BOE's] grounds for
reallocating those taxes." The Court also noted:
AB 1222 (Bloom) - 2/22/13 -- Page 4
As recited in the judgment, the [BOE]: (1) failed to
understand that it must explain the basis of its
decisions; (2) paid little attention to its statutory
authority, or lack thereof, to apply regulations
retroactively; (3) appeared unconcerned with the
principles of due process; (4) was oblivious to the
inequities of considering an appeal filed eight years
after the Board Management decision; and (5) ignored
the requirements of the Administrative Procedure Act.
While the above criticism applies to BOE, not TRA which is
granted additional authority by this bill, should the
Legislature grant any additional authority to BOE before
improves transparency and accountability in its
decision-making, especially by successfully implementing AB
2323? Ultimately, BOE is responsible for its staff and is
accountable to the Legislature for its performance;
however, a fair argument can be made that a bill expanding
the authority of the historically independent TRA shouldn't
be affected by BOE's noted shortcomings. If the Committee
wants to go part of the way, it could amend AB 1222 to
simply index the existing $1,500 threshold to annual
inflation growth in the future and not grant the authority
to return funds for BOE's other taxes. The Committee may
wish to consider whether BOE is sufficiently trustworthy to
grant it additional powers.
3. Necessary ? According to BOE, TRA uses the authority
expanded by AB 1222 approximately once per year.
Additionally, no example exists of a case where TRA wanted
to return more funds to a taxpayer that met the criteria,
but were limited by the cap the bill hikes. The Committee
may wish to consider whether there's a sufficient problem
that makes enacting AB 1222 necessary.
Assembly Actions
Assembly Revenue and Taxation8-0
Assembly Appropriations 17-0
Assembly Floor 75-0
AB 1222 (Bloom) - 2/22/13 -- Page 5
Support and Opposition (6/13/13)
Support : State Board of Equalization.
Opposition : Unknown.