Amended in Senate May 8, 2013

Senate BillNo. 211


Introduced by Senator Price

February 11, 2013


An act to amend Sectionsbegin insert 19551,end insert 19551.1begin insert,end insert and 19551.5 of,begin delete and to amend and repeal Section 19551 of,end delete the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL’S DIGEST

SB 211, as amended, Price. Tax administration: disclosure of information: Franchise Tax Board and cities.

Existing law authorizes, until December 31, 2013, a city that has entered into a reciprocal agreement, as defined, with the Franchise Tax Board, to exchange tax information, as provided. Existing law limits the use of the tax data received from the Franchise Tax Board for business tax administration purposes and provides that any other use or disclosure of the information is punishable as a misdemeanor.

This bill wouldbegin delete deleteend deletebegin insert extend the authorization until January 1, 201end insertbegin insert9, and extendend insert the repeal date of the provisions relating to the reciprocal agreements between the Franchise Tax Board and citiesbegin delete, thus indefinitely extending the duration for these provisionsend delete.begin insert This bill would add an additional limitation on the use of the tax data to require the data to be utilized in a form and manner to safeguard the tax information, as prescribed.end insert

Because this bill would continue the operation of the reciprocal agreementbegin delete tax information agreementend deletebegin insert exchangeend insert, and the unauthorized use of such information would be a crime, it would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 19551 of the Revenue and Taxation Code,
2as amended by Section 1 of Chapter 345 of the Statutes of 2008,
3is amended to read:

4

19551.  

(a) The Franchise Tax Board may permit the
5Commissioner of Internal Revenue of the United States, other tax
6officials of this state, the Multistate Tax Commission, the proper
7officer of any state imposing an income tax or a tax measured by
8income or the authorized representative of that officer, or the tax
9officials of Mexico, if a reciprocal agreement exists, to inspect the
10income tax returns of any taxpayer, or may furnish to the
11commission, or the officer or the authorized representative thereof
12an abstract of the return or supply thereto information concerning
13any item of income contained in any return or disclosed by the
14report of any investigation of the income or return. The information
15shall be furnished to the Multistate Tax Commission, the federal
16or state officer or his or her representative, or the officials of
17Mexico for tax purposes only. Except when furnished pursuant to
18a written agreement, information furnished pursuant to this section
19shall be furnished only if the request is in the form of an affidavit
20under penalty of perjury stating that the purpose for the request
21relates to an investigation of the tax specified in the request and
22that the information will be used in the ordinary performance of
23the applicant’s official duties.

24(b) Notwithstanding subdivision (a) and except as otherwise
25provided in Section 19551.1, tax officials of political subdivisions
26of this state shall request information from the Franchise Tax Board
27by affidavit only. At the time a tax official makes the request, he
28or she shall provide the affected person with a copy of the affidavit
29and, upon request, make the information obtained available to that
30person.

P3    1(c) For purposes of this section, “reciprocal agreement” means
2a formal agreement to exchange information between national
3taxing officials of Mexico and taxing authorities of the State Board
4of Equalization, the Franchise Tax Board, and the Employment
5Development Department. Furthermore, the reciprocal agreement
6shall be limited to the exchange of information that is essential for
7tax administration purposes only. Taxing authorities of the State
8of California shall be granted tax information only on California
9residents. Taxing authorities of Mexico shall be granted tax
10information only on Mexican nationals.

begin insert

11(d) This section shall remain in effect only until January 1, 2019,
12and as of that date, is repealed.

end insert
begin delete13

SEC. 2.  

Section 19551 of the Revenue and Taxation Code, as
14added by Section 2 of Chapter 345 of the Statutes of 2008, is
15repealed.

end delete
16begin insert

begin insertSEC. 2.end insert  

end insert

begin insertSection 19551 of the end insertbegin insertRevenue and Taxation Codeend insertbegin insert, as
17added by Section 2 of Chapter 345 of the Statutes of 2008, is
18amended to read:end insert

19

19551.  

(a) The Franchise Tax Board may permit the
20Commissioner of Internal Revenue of the United States, other tax
21officials of this state, the Multistate Tax Commission, the proper
22officer of any state imposing an income tax or a tax measured by
23income or the authorized representative of that officer, or the tax
24officials of Mexico, if a reciprocal agreement exists, to inspect the
25income tax returns of any taxpayer, or may furnish to the
26commission, or the officer or the authorized representative thereof
27an abstract of the return or supply thereto information concerning
28any item of income contained in any return or disclosed by the
29report of any investigation of the income or return. The information
30shall be furnished to the Multistate Tax Commission, the federal
31or state officer or his or her representative, or the officials of
32Mexico for tax purposes only. Except when furnished pursuant to
33a written agreement, information furnished pursuant to this section
34shall be furnished only if the request is in the form of an affidavit
35under penalty of perjury stating that the purpose for the request
36relates to an investigation of the tax specified in the request and
37that the information will be used in the ordinary performance of
38the applicant’s official duties.

39(b) Notwithstanding subdivision (a), tax officials of political
40subdivisions of this state shall request information from the
P4    1Franchise Tax Board by affidavit only. At the time a tax official
2makes the request, he or she shall provide the affected person with
3a copy of the affidavit and, upon request, make the information
4obtained available to that person.

5(c) For purposes of this section, “reciprocal agreement” means
6a formal agreement to exchange information between national
7taxing officials of Mexico and taxing authorities of the State Board
8of Equalization, the Franchise Tax Board, and the Employment
9Development Department. Furthermore, the reciprocal agreement
10shall be limited to the exchange of information that is essential for
11tax administration purposes only. Taxing authorities of the State
12of California shall be granted tax information only on California
13residents. Taxing authorities of Mexico shall be granted tax
14information only on Mexican nationals.

15(d) This section shall become operative on January 1,begin delete 2014end delete
16begin insert 2019end insert.

17

SEC. 3.  

Section 19551.1 of the Revenue and Taxation Code
18 is amended to read:

19

19551.1.  

(a) (1) The Franchise Tax Board may permit the tax
20officials of any city to enter into a reciprocal agreement with the
21Franchise Tax Board to obtain tax information from the Franchise
22Tax Board, as specified in subdivision (b).

23(2) For purposes of this section, “reciprocal agreement” means
24a formal agreement to exchange information for tax administration
25purposes between tax officials of a city and the Franchise Tax
26Board.

27(b) The information furnished to tax officials of a city under
28this section shall be limited as follows:

29(1) The tax officials of a city are authorized to receive
30information only with respect to taxpayers with an address as
31reflected on the Franchise Tax Board’s records within the
32jurisdictional boundaries of the city who report income from a
33trade or business to the Franchise Tax Board.

34(2) The tax information that may be provided by the Franchise
35Tax Board to a city is limited to a taxpayer’s name, address, social
36security or taxpayer identification number, and business activity
37code.

38(3) Tax information provided to the taxing authority of a city
39may not be furnished to, or used by, any person other than an
40employee or agent of that taxingbegin delete authority.end deletebegin insert authority and shall be
P5    1utilized in a form and manner to safeguard the tax information as
2required by the Franchise Tax Board, including, but not limited
3to:end insert

begin insert

4(A) The completion of a data exchange security questionnaire
5provided by the Franchise Tax Board prior to approval of a data
6exchange by the Franchise Tax Board.

end insert
begin insert

7(B) The tax official or agent of a city shall allow for an onsite
8safeguard review conducted by the Franchise Tax Board.

end insert
begin insert

9(C) The completion of disclosure training provided by the
10Franchise Tax Board and a confidentiality statement signed by all
11employees or agents with access to information provided by the
12Franchise Tax Board confirming the requirement of data security
13with respect to that information and acknowledging awareness of
14penalties for unauthorized access or disclosure under Sections
1519542 and 19552 and Section 502 of the Penal Code.

end insert
begin insert

16(D) The tax official or agent of a city shall notify the Franchise
17Tax Board within 24 hours upon discovery of any incident of
18unauthorized or suspected unauthorized access or disclosure of
19the tax information and provide a detailed report of the incident
20and the parties involved.

end insert
begin insert

21(E) All records received by the tax officials of a city or its agents
22shall be destroyed in a manner to make them unusable or
23unreadable so an individual record may no longer be ascertained
24in a time frame specified by the Franchise Tax Board.

end insert

25(4) The information provided to the tax officials of the city by
26the Franchise Tax Board under this section is subject to Section
2719542, and may not be used for any purpose other than the city’s
28tax enforcement, or as otherwise authorized by state or federal
29law.

30(5) Section 19542.1 applies to this section.

31(c) The Franchise Tax Board may not provide any information
32pursuant to this section until all of the following have occurred:

33(1) An agreement has been executed between a city and the
34Franchise Tax Board, that provides that an amount equal to all
35first year costs necessary to furnish the city information pursuant
36to this section shall be received by the Franchise Tax Board before
37the Franchise Tax Board incurs any costs associated with the
38activity permitted by this section. For purposes of this section, first
39year costs include costs associated with, but not limited to, the
40purchasing of equipment, the development of processes, and labor.

P6    1(2) An agreement has been executed between a city and the
2Franchise Tax Board, that provides that the annual costs incurred
3by the Franchise Tax Board, as a result of the activity permitted
4by this section, shall be reimbursed by the city to the Franchise
5Tax Board.

6(3) Pursuant to the agreement described in paragraph (1), the
7Franchise Tax Board has received an amount equal to the first year
8costs.

9(d) Any information, other than the type of tax information
10specified in subdivision (b), may be requested by the tax officials
11of a city from the Franchise Tax Board by affidavit. At the time a
12tax official makes the request, he or she shall provide the person
13whose information is the subject of the request, with a copy of the
14affidavit and, upon request, make the information obtained
15available to that person.

16(e) This section does not invalidate any other law. This section
17does not preclude any city or county from obtaining information
18about individual taxpayers, including those taxpayers not subject
19to this section, by any other means permitted by state or federal
20law.

21(f) Nothing in this section shall be construed to affect any
22obligations, rights, or remedies regarding personal information
23provided under state or federal law.

24(g) Notwithstanding subdivision (c), the Franchise Tax Board
25shall waive a city’s reimbursement of the Franchise Tax Board’s
26cost if a city enters into a reciprocal agreement as defined in
27paragraph (2) of subdivision (a). The reciprocal agreement shall
28specify that each party shall bear its own costs to furnish the data
29involved in the exchange authorized by this section and Section
30 19551.5, and a city shall be precluded from obtaining
31reimbursement as specified under Section 5 of the act adding this
32subdivision.

begin insert

33(h) This section shall remain in effect only until January 1, 2019,
34and as of that date, is repealed.

end insert
35

SEC. 4.  

Section 19551.5 of the Revenue and Taxation Code
36 is amended to read:

37

19551.5.  

(a) Notwithstanding any other law, each city that
38assesses a city business tax or requires a city business license shall,
39upon the request of the Franchise Tax Board, annually submit to
40the Franchise Tax Board the information that is collected in the
P7    1course of administration of the city’s business tax program, as
2described in subdivision (b).

3(b) Information, collected in the course of administration of the
4city’s business tax program, shall be limited to the following:

5(1) Name of the business, if the business is a corporation,
6partnership, or limited liability company, or the owner’s name if
7the business is a sole proprietorship.

8(2) Business mailing address.

9(3) Federal employer identification number, if applicable, or
10the business owner’s social security number.

11(4) Standard Industrial Classification (SIC) Code or North
12American Industry Classification System (NAICS) Code.

13(5) Business start date.

14(6) Business cease date.

15(7) City number.

16(8) Ownership type.

17(c) The reports required under this section shall be filed on
18magnetic media such as tapes or compact discs, through a secure
19electronic process, or in other machine-readable form, according
20to standards prescribed by regulations promulgated by the
21Franchise Tax Board.

22(d) Cities that receive a request from the Franchise Tax Board
23shall begin providing to the Franchise Tax Board the information
24required by this section as soon as economically feasible, but no
25later than December 31, 2009. The information shall be furnished
26annually at a time and in the form that the Franchise Tax Board
27may prescribe by regulation.

28(e) The city data provided to the Franchise Tax Board under
29this section is subject to Section 19542, and may not be used for
30any purpose other than state tax enforcement or as otherwise
31authorized by law.

32(f) If a city enters into a reciprocal agreement with the Franchise
33Tax Board pursuant to subdivision (a) of Section 19551.1, the city
34shall also waive reimbursement for costs incurred to provide
35information required under this section and shall be precluded
36from obtaining reimbursement as specified under Section 5 of
37Chapter 345 of the Statutes of 2008. The reciprocal agreement
38shall specify that each party shall bear its own costs to furnish the
39data involved in the exchange authorized by Section 19551.1 and
40this section, and the Franchise Tax Board shall be precluded from
P8    1obtaining reimbursement as specified under subdivision (c) of
2Section 19551.1.

3(g) A city shall not be required to provide information to the
4Franchise Tax Board pursuant to this section if the Franchise Tax
5Board fails to provide tax information to the city pursuant to a
6reciprocal agreement entered into pursuant to subdivision (a) of
7Section 19551.1 for reasons other than concerns related to
8confidentiality of tax information provided to the city.

begin insert

9(h) This section shall remain in effect only until January 1, 2019,
10and as of that date, is repealed.

end insert
11

SEC. 5.  

No reimbursement is required by this act pursuant to
12Section 6 of Article XIII B of the California Constitution because
13the only costs that may be incurred by a local agency or school
14district will be incurred because this act creates a new crime or
15infraction, eliminates a crime or infraction, or changes the penalty
16for a crime or infraction, within the meaning of Section 17556 of
17the Government Code, or changes the definition of a crime within
18the meaning of Section 6 of Article XIII B of the California
19Constitution.



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