BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                 AB 1411
                                                                 Page  1

         ASSEMBLY THIRD READING
         AB 1411 (Revenue and Taxation Committee) 
         As Amended  May 23, 2013
         Majority vote 

          REVENUE & TAXATION           6-2APPROPRIATIONS           12-5    
          
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         |Ayes:|Bocanegra, Gordon,        |Ayes:|Gatto, Bocanegra,         |
         |     |Mullin, Pan,              |     |Bradford,                 |
         |     |V. Manuel Pérez, Ting     |     |Ian Calderon, Campos,     |
         |     |                          |     |Eggman, Gomez, Hall,      |
         |     |                          |     |Ammiano, Pan, Quirk,      |
         |     |                          |     |Weber                     |
         |     |                          |     |                          |
         |-----+--------------------------+-----+--------------------------|
         |Nays:|Dahle, Nestande           |Nays:|Harkey, Bigelow,          |
         |     |                          |     |Donnelly, Linder, Wagner  |
         |     |                          |     |                          |
          ----------------------------------------------------------------- 
          SUMMARY  :  Authorizes the Franchise Tax Board (FTB) to use the  
         taxpayers' updated address information obtained through the  
         Financial Institution Record Match (FIRM) program for purposes  
         other than tax collection.  Specifically,  this bill:

          1)Removes the prohibition on using FIRM tax debtor address  
           information for tax administration purposes.  

         2)Applies to both individual and corporate taxpayers.

         3)Makes conforming, technical changes to provisions relating to  
           the FIRM program. 

          EXISTING LAW  :  

         1)Provides that use of the taxpayer's last known address is  
           sufficient to satisfy the reasonable notice element of due  
           process.  

         2)Defines "last known address" as the address that appears on the  
           last return filed with the FTB unless the taxpayer has provided  
           the FTB clear and concise written or electronic notification of  
           a different address or the FTB has an address it has reason to  
           believe is the most current address for the taxpayer. 









                                                                 AB 1411
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         3)Requires financial institutions doing business in this state to  
           participate in a quarterly data exchange process with the FTB to  
           match the FTB's, State Board of Equalization's (BOE), and  
           Employment Development Department's (EDD) lists of delinquent  
           debtors with the financial institution's account holder records.  
            (Revenue and Taxation Code (R&TC) Section 19266(b)(1) and  
           (b)(2)). 

         4)Specifies that any use of the information received from FIRM for  
           purposes other than tax collection is prohibited and is a  
           misdemeanor.  (R&TC Section 19266(b)). 

          FISCAL EFFECT  :  The FTB staff estimates that this bill will result  
         in an annual revenue gain of $150,000 in fiscal year (FY) 2012-13,  
         $200,000 in FY 2013-14, and $150,000 in FY 2014-15.

          COMMENTS  :   

          1)The Purpose of this Bill  .  The FTB is sponsoring this measure,  
           which allows the FTB to use tax debtor address information  
           obtained through the FIRM system for purposes other than tax  
           collection.  The FTB states that the use of the information  
           obtained from FIRM would improve fair and efficient tax  
           administration by allowing the use of the most current address  
           available to contact taxpayers. 

          2)The FIRM Program:  Background  .  Under existing law, the FTB is  
           required, in coordination with financial institutions doing  
           business in this state, to operate the FIRM system, which  
           provides a means to match delinquent tax debtor records with  
           customer records provided by financial institutions.  (SB 86  
           (Senate Budget and Fiscal Review Committee) Chapter 4, Statutes  
           of 2011).  The FIRM system permits the FTB to identify  
           previously unknown non-interest-bearing deposit accounts held by  
           delinquent income tax debtors and collect outstanding income tax  
           debts.  

           This data match program is similar to one used by the existing  
           Financial Institution Data Match program mandated by federal law  
           for the collection of delinquent child support payments.   
           Financial institutions doing business in California are required  
           to conduct records matches on delinquent taxpayers and are  
           compensated for their costs of compliance with these  
           requirements.  









                                                                 AB 1411
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           In 2012, the Legislature authorized the expansion of the FIRM  
           program to the EDD and BOE.  The FTB is required to operate and  
           administer FIRM for those two agencies, utilizing automated data  
           exchanges to identify accounts of delinquent tax debtors held at  
           financial institutions doing business in California.  

          3)Is There a Problem  ?  Through the use of automated data  
           exchanges, the FIRM system allows the FTB to match its list of  
           delinquent tax debtors against the names of financial  
           institution accountholders.  This information exchange is used  
           solely for tax collection, and existing law prohibits the use of  
           FIRM-obtained information for any other purpose.  This  
           prohibition occasionally prevents the FTB from using updated  
           address information obtained through the FIRM system for other  
           purposes.  This can result in taxpayers not receiving notices,  
           refunds, or other important correspondence from the FTB.  This  
           bill would remedy this problem by simply removing the  
           prohibition on the FTB using address information obtained  
           through the FIRM system for purposes other than tax collection. 

          4)The Operative Date  .  While this bill would be effective January  
           1, 2014, it would apply to information obtained through FIRM not  
           only after, but also before, that date. 

          5)Related Legislation  .  SB 1015 (Senate Budget and Fiscal Review  
           Committee), Chapter 37, Statutes of 2012, requires the EDD and  
           the BOE to participate in the FTB's FIRM program.

         SB 86 (Senate Budget And Fiscal Review Committee), Chapter 14,  
           Statutes of 2011, requires the FTB, in coordination with  
           financial institutions doing business in this state, to  
           establish FIRM using automated data exchanges to the maximum  
           extent feasible.

          
         Analysis Prepared by  :    Oksana Jaffe / REV. & TAX. / (916)  
         319-2098                                               FN: 0000682