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