BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 2009
                                                                  Page  1

          Date of Hearing:   May 7, 2014

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

                    AB 2009 (Weber) - As Amended:  April 10, 2014

          Policy Committee:                              Revenue &  
          Taxation     Vote:                            9-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              No

           SUMMARY  

          This bill extends the Managed Audit Program (MAP) authority of  
          the Board of Equalization (BOE) that currently exists under the  
          Sales and Use Tax Law to 12 additional special tax and fee  
          programs.  Under the MAP, a taxpayer may voluntarily agree to  
          conduct a self-audit of its books and records to determine, in  
          accordance with instructions provided by the BOE, if it has any  
          unreported tax liability for the relevant audit period.   
          Taxpayers that participate in the MAP receive a 50% reduction in  
          the interest due on any unpaid liability discovered during the  
          audit.

           FISCAL EFFECT  

          1)Minor and absorbable costs to the BOE.

          2)BOE estimates potential revenue gain from additional audits  
            and better utilization of audit resources of approximately  
            $250,000.

          COMMENTS  

          1)  Purpose.   According to the author and the sponsor, the BOE,  
            MAPs are advantageous to taxpayers and the state because they  
            limit disruption to a taxpayer's business activities and allow  
            the BOE to reallocate audit resources to focus on other  
            taxpayers.  BOE staff has found that taxpayers who participate  
            in the MAP develop a better understanding of the tax laws and  
            are able to report tax liability more accurately.  By  
            extending the MAP authority to special tax and fee programs,  
            this bill will build upon an already successful program.








                                                                  AB 2009
                                                                  Page  2


          2)  Managed Audits.   Managed audits are essentially self-audits  
            conducted under close supervision by the BOE.  The BOE  
            determines which taxpayers are eligible to participate in a  
            managed audit and enters into MAP Participation Agreements  
            with taxpayers who volunteer to participate.

            Participating taxpayers receive a 50% interest reduction on  
            any unpaid liability discovered during the audit, while MAP  
            audits resulting in a credit or refund are computed using the  
            standard running balance method.  In return, BOE saves the  
            staff resources that would otherwise have been used to perform  
            verification activities not performed by that taxpayer.  The  
            audit resources saved can be redirected to more complex,  
            revenue-generating audits.

            The MAP provisions do not limit the BOE's general authority to  
            examine a taxpayer's books and records.

            The BOE has observed other benefits to managed audits,  
            including: earlier resolution of taxability issues; fewer  
            protested audits from taxpayers; improved cooperation between  
            the BOE and taxpayers; improved taxpayer education and  
            compliance; and decreased disruption of a taxpayer's regular  
            business activities.

          3)  Special Tax and Fee Programs Added to MAP.   AB 2009 extends  
            the MAP authority to the following special tax and fee  
            programs:

             a)   Motor Vehicle Fuel Tax Law;

             b)   Use Fuel Tax Law;

             c)   Cigarette and Tobacco Products Tax Law;

             d)   Alcoholic Beverage Tax Law;

             e)   Energy Resources Surcharge Law;

             f)   Emergency Telephone Users Surcharge Act;

             g)   Hazardous Substances Tax Law;

             h)   Integrated Waste Management Fee Law;








                                                                  AB 2009
                                                                  Page  3


             i)   Oil Spill Response, Prevention, and Administration Fees  
               Law;

             j)   Underground Storage Tank Maintenance Fee Law;

             k)   Fee Collection Procedures Law; and, 

             l)   Diesel Fuel Tax Law.  


           Analysis Prepared by  :    Joel Tashjian / APPR. / (916) 319-2081