BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 2415 HEARING: 6/18/14
AUTHOR: Ting FISCAL: No
VERSION: 6/12/14 TAX LEVY: No
CONSULTANT: Grinnell
PROPERTY TAX AGENTS
Requires property tax agents to register with the Secretary
of State's Office.
Background and Existing Law
Section One of Article XIII of the California Constitution
provides that all property is taxable unless explicitly
exempted by the Constitution or federal law. The
Constitution limits the maximum amount of any ad valorem
tax on real property at 1% of full cash value, usually the
purchase price, plus any locally-authorized bonded
indebtedness. Assessors reappraise property whenever it is
purchased, newly constructed, or when ownership changes.
When a taxpayer wants to appeal an assessor's valuation of
a property, Section 16 of Article XIII the California
Constitution provides that each county board of
supervisors, or an assessment appeals board of its own
creation to consider the appeal. Taxpayers and assessors
may appeal decisions of these boards to Superior Court.
The term "tax agents" refers to individuals who represent
taxpayers in property tax appeals. The conduct of tax
agents, individuals who represent taxpayers before
assessors and assessment appeals boards, is largely
unregulated unless the individual is an attorney licensed
by the State Bar, or an accountant regulated by the
California Board of Accountancy. One section of the
Business and Professions Code regulates representations
made by firms that file assessment appeals on behalf of
taxpayers. At the federal level, Internal Revenue Service
(IRS) Circular 230 regulates the conduct of anyone
providing tax advice or preparing tax returns for
compensation, including attorneys, certified public
accountants, and enrolled agents. The Secretary of the
Treasury may suspend, disbar from practice, censure or
AB 2415 - 6/12/14 -- Page 2
impose a monetary penalty a representative who violates its
provisions.
On January 4, 2011, an appraiser at the LA County
Assessor's Office spotted discrepancies in property
assessments of affluent homes. A month later, the LA
County District Attorney's Office announced it had launched
an inquiry into allegations of influence peddling in the
office of LA County Assessor John Noguez. In May 2012,
Scott Schenter, a county appraiser, was arrested on 60
felony counts for lowering the property tax of homes in
affluent areas of LA in exchange for contributions to
Noguez's campaign. Allegations quickly focused the
investigation on the possibility that Noguez himself had
directed staff to illegally reduce certain tax assessments
in exchange for campaign contributions. In June 2012,
Noguez took an indefinite paid leave of absence from
office, but was arrested in October for allegedly taking
$185,000 in bribes from a particular tax consultant and
campaign contributor, Ramin Salari. In March 2013, Noguez
posted bail after nearly five months in jail. Noguez was
charged with additional felony counts of embezzlement and
grand theft in October 2013, but has plead not guilty to
all counts and is currently awaiting trial.
Proposed Law
Assembly Bill 2415 enacts a registration process for tax
agents, prohibits tax agents from engaging in specific
acts, and provides enforcement mechanisms for tax agents
engaging in barred acts. The bill preempts and supersedes
any local ordinance regarding the registration of an
individual who communicates directly or indirectly with any
county official for the purpose of influencing official
action regarding a property tax assessment, but counties
can enact an ordinance providing reporting requirements for
campaign contributions for tax agents.
AB 2415 applies to individuals seeking to influence
official action by a county official regarding establishing
taxable value in any way, but not to individuals contacting
county officials to ascertain a property's value, a refund,
or an exemption application. The measure also doesn't
apply to:
Elected officials acting in an official capacity,
AB 2415 - 6/12/14 -- Page 3
Persons representing themselves or an immediate
family member,
Persons providing an expert opinion to a county
official who accompanies the taxpayer or a tax agent,
Persons acting on behalf of entity in which they
own more than 10%, by value.
The measure enacts a registration system for property tax
agents, directing the Secretary of State to begin accepting
applications by January 1, 2016:
First, property tax agents must pay a $250 fee, the
proceeds of which must be deposited in the Business
Fees Fund, and file an application for registration
with the Secretary of State under penalty of perjury
that includes:
o The agent's full name, business address,
business telephone number, business email
address, date of birth, and any applicable
previous property tax agent number issued by the
Secretary. If any of this information changes,
the agent must update registration information to
be accurate within 10 days.
o The name of the agent's employing firm,
if applicable,
o A statement affirming that the person has
not been convicted of any felony under state or
federal laws; any criminal offense involving
dishonesty, breach of trust, or moral turpitude;
or had his or her professional license as an
attorney, certified public accountant, public
accountant, or actuary revoked,
o A statement that the agent has read and
understands the duties and prohibitions created
by the bill.
Second, the Secretary must issue a registration
number to the agent,
The Secretary may cancel the registration of a
property tax agent if the check for the application
fee bounces, and may require the property tax agent to
pay by cashier's check or equivalent upon first
written notice. If the individual doesn't pay, the
Secretary must send a second notice and cancel the
registration, within specified timelines.
The Secretary must develop a list of registered tax
agents, and a list of registered agents with their
business name and address who have been fined under
AB 2415 - 6/12/14 -- Page 4
the bill, issued a cease and desist order, or had
their license revoked, and publish both on the its
website.
Lastly, the agent must notify the Secretary that he
or she is no longer acting to influence official
action.
After April 1, 2016 tax agents cannot represent taxpayers
before county officials without a registration number.
Registration lasts for two years unless revoked or
terminated by the agent. The Secretary must issue the same
number to an agent who reregisters on a subsequent date,
and send the agent a notice of expiration within at least
30 days, but no more than 90 days, from the end of the
two-year period.
AB 2415 prohibits tax agents from:
Using, or participating in the use of, any public
communication or private solicitation containing
false, misleading, fraudulent, or deceptive
representations,
Intimating that the property tax agent is able to
improperly obtain special consideration or action from
any county official,
Acting, attempting to act as a property tax agent
for, or representing a taxpayer before a county
official without the taxpayer's authorization,
Using a government seal, emblem, insignia, trade or
brand name, or other content,
Making untrue or misleading statements in
connection with offering or performing assessment
reduction services,
Knowingly aiding or abetting another person to act
a tax agent when they aren't registered as one,
Directly or indirectly attempting to influence, or
offering or agreeing to attempt to influence, the
official action of any county official by use of
threats, false accusations, duress, or coercion, by
offer of any special inducement or promise of any
advantage or by bestowing any gift, campaign
contribution, favor, or thing of value,
Doing anything with the purpose of placing any
county official under personal obligation to the
property tax agent or another,
Representing, directly or indirectly, that the
Property Tax Agent can control the official action of
AB 2415 - 6/12/14 -- Page 5
any county official,
Making a gift or gifts of any monetary value to a
county official, or act as an intermediary to make or
arrange for a gift,
Acting as a tax agent in a county where he or she
is a county supervisor or member of the assessment
appeals board,
The measure provides three different forms of sanctions for
tax agents or persons acting as tax agents, based on the
act:
The Secretary of State shall issue a cease and
desist order to a person acting as a tax agent who has
been convicted of any felony under state or federal
laws; any criminal offense involving dishonesty,
breach of trust, or moral turpitude; or had his or her
professional license as an attorney, certified public
accountant, public accountant, or actuary revoked.
The Secretary shall first notify the person with
written notice and an opportunity to demonstrate that
the grounds for the cease and desist order do not
exist. The Secretary shall also issue a cease and
desist order and disqualify from registration an
individual who intentionally provides false
information on the application.
The Secretary of State shall issue a cease and
desist order to a property tax agent that commits any
of the barred acts listed above, and provide a copy to
the Attorney General. Unless the agent is also
subject to a civil penalty, the Secretary shall
provide the agent with written notice and an
opportunity to demonstrate that grounds for
deregistration don't exist,
The Secretary must also issue a cease and desist to
an individual who is employed, received compensation,
or is under contract to act as a tax agent but doesn't
register, and must provide a copy of the notice to the
Attorney General,
Any violation of the bill's requirements is subject
to a $1,500 civil penalty for each violation. The
Attorney General, a district attorney, or a city
attorney may bring an action to assess the penalty.
The Court shall impose a penalty for each violation,
and may consider:
o The nature and seriousness of the
misconduct,
AB 2415 - 6/12/14 -- Page 6
o The number of violations,
o The persistence of the misconduct,
o The length of time over which the
misconduct occurred,
o The willfulness of the defendant's
misconduct,
o The defendant's assets, liabilities, and
net worth,
Any person who isn't registered but acts as a tax
agent is guilty of a misdemeanor.
Whichever entity prosecutes or brings an action must notify
the Secretary of State of any misdemeanor conviction, or
civil action.
The measure divides revenues from penalties according to
who brought the action:
One-half to the treasurer of the county in which
the judgment was entered, and one half to the state's
General fund if initiated by the Attorney General,
The entire amount to the treasurer of the county
in which the judgment was entered, if brought by the
district attorney,
One-half to the treasurer of the county in which
the judgment was entered, and one half to city if
initiated by the Attorney General,
The bill defines several terms, and provides that local
agencies can seek mandate reimbursement by applying to the
Commission on State Mandates.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . According to the author, "AB 2415
is a balanced measure that seeks to strengthen public
confidence in the property tax appeal process without
creating unreasonable burdens on property tax consultants
or their clients. It establishes a uniform statewide
property tax agent registration system and makes public the
identity of tax agents who represent taxpayers in property
tax appeal cases. In 2011, investigators for the Los
AB 2415 - 6/12/14 -- Page 7
Angeles County district attorney began probing improper
property tax reductions granted to more than 100 Los
Angeles County property owners. The investigation was
prompted by complaints from assessor's office employees who
claimed they were pressured to lower property taxes for
politically-connected individuals. In October 2012, the
investigations led to multiple arrests and indictments,
which included charges of bribery and corruption. This
incident cast an ethical cloud over the property tax
appeals process which AB 2415 seeks to remedy. Other
states, such as Texas and Tennessee, have enacted similar
statewide registration for property tax agents in their
states. AB 2415 will establish transparency and restore
public trust in the tax appeals system. By establishing
uniform statewide registration, it alleviates the need for
a county-by-county system that would pose a costly
regulatory burden on county government. It also does not
create unreasonable burdens on property tax consultants or
their property taxpayer clients."
2. Worthwhile ? Property tax agents are essentially
lobbyists who attempt to convince assessors and assessment
appeals boards to accept their assessment of a property's
taxable value. As such, they don't fit into the regulatory
boxes for accountants performing attest or return services,
attorneys representing people or firms in Court,
professionals who prepare tax returns, or lobbyists that
appear before the Board of Supervisors seeking to influence
policy. While any of the above persons may also be tax
agents, lobbying taxable value is a distinctly different
activity. However, being distinct doesn't necessarily mean
that lobbying value must be regulated. While the
allegations in the Noguez case are alarming, they're being
prosecuted by the relevant authorities, and the bill
wouldn't have likely prevented the alleged acts any more
than existing criminal statutes. Additionally, the measure
provides that it's the exclusive means for regulating tax
agents, precluding local agencies from imposing their owner
regulations and requirements beyond disclosure of campaign
contributions. It's unclear whether state registration
will provide sufficient benefits to offset the loss of
local discretion.
3. Right model ? AB 2415's structure borrows largely from
current regulation of immigration consultants, instead of
the more robust testing, licensure, enforcement, continuing
AB 2415 - 6/12/14 -- Page 8
education, and professional board oversight requirements
state law imposes on many other professions. Under the
bill, property tax agents need only pay a fee when applying
to the Secretary of State, disclose specified information,
promise that they haven't broken any laws, and avoid any
act barred by the bill. The Secretary of State is the
state's record-keeper, and doesn't really regulate
professions. Additionally, only the Attorney General, the
District Attorney, or the City Attorney can seek penalties,
which are limited to $1,500 per act. How will the
appropriate authorities learn of violations? Do they have
sufficient resources to dedicate to enforcement? The
Committee may wish to consider whether AB 2415 is the right
model to apply to tax agents.
4. Premature ? AB 2415 enacts a registration regime for
property tax agents that begins on January 1, 2016.
However, not much of the allegations and evidence against
Noguez is public, and details of that case could help
inform legislators about the activities of property tax
agents when considering whether and how to regulate them.
What's the pressing need to act now when more information
is forthcoming?
5. Accountants . The California Society of Certified
Public Accountants opposes AB 2415, arguing that it
duplicates existing regulation from the Board of
Accountancy. Accountants state that they make enquiries to
assessors' offices that are necessary to complete income
tax returns or property tax forms clients, such as
ascertaining value necessary for depreciation. These
services are distinct from lobbying value, but the bill
could compel an accountant to register as a tax agent.
6. Direction change . In 2012, the Committee approved, but
the Senate Floor defeated AB 404 (Gatto), which required
counties with an ordinance regulating lobbying the Board of
Supervisors to apply it to property tax agents. Also in
2012, the Committee approved AB 2183 (Smythe) required
counties to set up a tax agent registration program,
created a code of conduct, and set forth a list of acts
prohibited of tax agents, borrowing largely from IRS
Circular 230. The author didn't set AB 2183 for hearing in
the Committee on Appropriations. Both of these measures
were opposed by this bill's sponsor, the California
Alliance of Taxpayer Advocates.
AB 2415 - 6/12/14 -- Page 9
7. Technicals . Committee staff recommend the following
technical amendments (Page and Line numbers are from the
5/23/14 version).
Move the contents of 22260.2 into 22260.6's list of
barred acts.
Move the contents of 22260.3 (Page 7, Lines 8
through 20) as modified below into 22260.1.
Page 7, Line 10, insert "accurate" between "file"
and "registration."
Page 7, Line 10, delete everything after "Section
22260.1," delete lines 18 through 20.
Page 8, Line 8, delete "has been deregistered as a
Property," strike lines 9 and 10 and insert "not
currently registered by the Secretary of State as a
property tax agent."
Page 10, Lines 17 through 20 should either specify
that the grounds for the cease and desist order do not
exist, or direct the Secretary of State to revoke the
tax agent's registration, or both.
Page 10, lines 37 and 40, and Page 11, line 3,
after "entered" insert "for distribution to the county
general fund."
Page 10, line 37 after the second "the" insert
"State"
Page 11, line 2, after "entered" insert "for
distribution to the city's general fund."
Renumber sections as appropriate.
Assembly Actions
Assembly Floor 48-26
Assembly Appropriations 12-4
Assembly Revenue and Taxation 6-2
Assembly Local Government 6-2
Assembly Rules 7-0
Support and Opposition (06/12/14)
Support : Assessment Counselling Services (Robert Slavin);
California Alliance of Taxpayer Advocates; California
Association of Clerks and Election Officials; County of
Santa Clara; County of Los Angeles; Lawrence E. Stone,
Santa Clara County Assessor; Easley, McCaleb and
AB 2415 - 6/12/14 -- Page 10
Associates, Inc. (Paul Maquera); Fred Keeley, Santa Cruz
County Treasurer-Tax Collector (if amended); Gangloff and
Gangloff, Attorneys at Law (Ronald Gangloff); Independent
Tax Representatives, LLC (Mark Ong); Los Angeles County
Board of Supervisors; Paradigm Tax Group (6 individuals);
POER (3 individuals); Property Tax Assistance Company, Inc.
(9 individuals); Property Tax Solutions, Inc. (Richard
Dennis); Rural County Representative of California; Ryan
Innovative Solutions to Taxing Problems (7 individuals);
Versatax Consulting (2 individuals).
Opposition : California Chamber of Commerce (unless
amended); California Society of Certified Public
Accountants (one individual); Howard Jarvis Taxpayers
Association;