Amended in Assembly August 13, 2013

Amended in Senate May 8, 2013

Senate BillNo. 211


Introduced by Senatorbegin delete Priceend deletebegin insert Hernandezend insert

February 11, 2013


An act to amend Sections 19551, 19551.1, and 19551.5 of, the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL’S DIGEST

SB 211, as amended, begin deletePriceend delete begin insertHernandezend insert. 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 would extend the authorization until January 1, 2019, and extend the repeal date of the provisions relating to the reciprocal agreements between the Franchise Tax Board and cities. 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.

Because this bill would continue the operation of the reciprocal agreement exchange, 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.begin delete Except whenend deletebegin insert Ifend insert furnished pursuant
18to a written agreement, information furnished pursuant to this
19section shall be furnished only if the request is in the form of an
20affidavit under penalty of perjury stating that the purpose for the
21request relates to an investigation of the tax specified in the request
22and that the information will be used in the ordinary performance
23of the 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.

31(c) For purposes of this section, “reciprocal agreement” means
32a formal agreement to exchange information between national
33taxing officials of Mexico and taxing authorities of the State Board
P3    1of Equalization, the Franchise Tax Board, and the Employment
2Development Department. Furthermore, the reciprocal agreement
3shall be limited to the exchange of information that is essential for
4tax administration purposes only. Taxing authorities of the State
5of California shall be granted tax information only on California
6residents. Taxing authorities of Mexico shall be granted tax
7information only on Mexican nationals.

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9and as of that date, is repealed.

10

SEC. 2.  

Section 19551 of the Revenue and Taxation Code, as
11added by Section 2 of Chapter 345 of the Statutes of 2008, is
12amended to read:

13

19551.  

(a) The Franchise Tax Board may permit the
14Commissioner of Internal Revenue of the United States, other tax
15officials of this state, the Multistate Tax Commission, the proper
16officer of any state imposing an income tax or a tax measured by
17income or the authorized representative of that officer, or the tax
18officials of Mexico, if a reciprocal agreement exists, to inspect the
19income tax returns of any taxpayer, or may furnish to the
20commission, or the officer or the authorized representative thereof
21an abstract of the return or supply thereto information concerning
22any item of income contained in any return or disclosed by the
23report of any investigation of the income or return. The information
24shall be furnished to the Multistate Tax Commission, the federal
25or state officer or his or her representative, or the officials of
26Mexico for tax purposes only. Except when furnished pursuant to
27a written agreement, information furnished pursuant to this section
28shall be furnished only if the request is in the form of an affidavit
29under penalty of perjury stating that the purpose for the request
30relates to an investigation of the tax specified in the request and
31that the information will be used in the ordinary performance of
32the applicant’s official duties.

33(b) Notwithstanding subdivision (a), tax officials of political
34subdivisions of this state shall request information from the
35Franchise Tax Board by affidavit only. At the time a tax official
36makes the request, he or she shall provide the affected person with
37a copy of the affidavit and, upon request, make the information
38obtained available to that person.

39(c) For purposes of this section, “reciprocal agreement” means
40a formal agreement to exchange information between national
P4    1taxing officials of Mexico and taxing authorities of the State Board
2of Equalization, the Franchise Tax Board, and the Employment
3Development Department. Furthermore, the reciprocal agreement
4shall be limited to the exchange of information that is essential for
5tax administration purposes only. Taxing authorities of the State
6of California shall be granted tax information only on California
7residents. Taxing authorities of Mexico shall be granted tax
8information only on Mexican nationals.

9(d) This section shall become operative on January 1, 2019.

10

SEC. 3.  

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

12

19551.1.  

(a) (1) The Franchise Tax Board may permit the tax
13officials of any city to enter into a reciprocal agreement with the
14Franchise Tax Board to obtain tax information from the Franchise
15Tax Board, as specified in subdivision (b).

16(2) For purposes of this section, “reciprocal agreement” means
17a formal agreement to exchange information for tax administration
18purposes between tax officials of a city and the Franchise Tax
19Board.

20(b) The information furnished to tax officials of a city under
21this section shall be limited as follows:

22(1) The tax officials of a city are authorized to receive
23information only with respect to taxpayers with an address as
24reflected on the Franchise Tax Board’s records within the
25jurisdictional boundaries of the city who report income from a
26trade or business to the Franchise Tax Board.

27(2) The tax information that may be provided by the Franchise
28Tax Board to a city is limited to a taxpayer’s name, address, social
29security or taxpayer identification number, and business activity
30code.

31(3) Tax information provided to the taxing authority of a city
32may not be furnished to, or used by, any person other than an
33employee or agent of that taxing authority and shall be utilized in
34a form and manner to safeguard the tax information as required
35by the Franchise Tax Board, including, but not limited to:

36(A) The completion of a data exchange security questionnaire
37provided by the Franchise Tax Board prior to approval of a data
38exchange by the Franchise Tax Board.

39(B) The tax official or agent of a city shall allow for an onsite
40safeguard review conducted by the Franchise Tax Board.

P5    1(C) The completion of disclosure training provided by the
2Franchise Tax Board and a confidentiality statement signed by all
3employees or agents with access to information provided by the
4Franchise Tax Board confirming the requirement of data security
5with respect to that information and acknowledging awareness of
6penalties for unauthorized access or disclosure under Sections
719542 and 19552 and Section 502 of the Penal Code.

8(D) The tax official or agent of a city shall notify the Franchise
9Tax Board within 24 hours upon discovery of any incident of
10unauthorized or suspected unauthorized access or disclosure of
11 the tax information and provide a detailed report of the incident
12and the parties involved.

13(E) All records received by the tax officials of a city or its agents
14shall be destroyed in a manner to make them unusable or
15unreadable so an individual record may no longer be ascertained
16in a timeframe specified by the Franchise Tax Board.

17(4) The information provided to the tax officials of the city by
18the Franchise Tax Board under this section is subject to Section
1919542, and may not be used for any purpose other than the city’s
20tax enforcement, or as otherwise authorized by state or federal
21law.

22(5) Section 19542.1 applies to this section.

23(c) The Franchise Tax Board may not provide any information
24pursuant to this section until all of the following have occurred:

25(1) An agreement has been executed between a city and the
26Franchise Tax Board, that provides that an amount equal to all
27first year costs necessary to furnish the city information pursuant
28to this section shall be received by the Franchise Tax Board before
29the Franchise Tax Board incurs any costs associated with the
30activity permitted by this section. For purposes of this section, first
31year costs include costs associated with, but not limited to, the
32purchasing of equipment, the development of processes, and labor.

33(2) An agreement has been executed between a city and the
34Franchise Tax Board, that provides that the annual costs incurred
35by the Franchise Tax Board, as a result of the activity permitted
36by this section, shall be reimbursed by the city to the Franchise
37Tax Board.

38(3) Pursuant to the agreement described in paragraph (1), the
39Franchise Tax Board has received an amount equal to the first year
40costs.

P6    1(d) Any information, other than the type of tax information
2specified in subdivision (b), may be requested by the tax officials
3of a city from the Franchise Tax Board by affidavit. At the time a
4tax official makes the request, he or she shall provide the person
5whose information is the subject of the request, with a copy of the
6affidavit and, upon request, make the information obtained
7available to that person.

8(e) This section does not invalidate any other law. This section
9does not preclude any city or county from obtaining information
10about individual taxpayers, including those taxpayers not subject
11to this section, by any other means permitted by state or federal
12law.

13(f) Nothing in this section shall be construed to affect any
14obligations, rights, or remedies regarding personal information
15provided under state or federal law.

16(g) Notwithstanding subdivision (c), the Franchise Tax Board
17shall waive a city’s reimbursement of the Franchise Tax Board’s
18cost if a city enters into a reciprocal agreement as defined in
19paragraph (2) of subdivision (a). The reciprocal agreement shall
20specify that each party shall bear its own costs to furnish the data
21involved in the exchange authorized by this section and Section
2219551.5, and a city shall be precluded from obtaining
23reimbursement as specified under Section 5 of the act adding this
24subdivision.

25(h) This section shall remain in effect only until January 1, 2019,
26and as of that date, is repealed.

27

SEC. 4.  

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

29

19551.5.  

(a) Notwithstanding any other law, each city that
30assesses a city business tax or requires a city business license shall,
31upon the request of the Franchise Tax Board, annually submit to
32the Franchise Tax Board the information that is collected in the
33course of administration of the city’s business tax program, as
34described in subdivision (b).

35(b) Information, collected in the course of administration of the
36city’s business tax program, shall be limited to the following:

37(1) Name of the business, if the business is a corporation,
38partnership, or limited liability company, or the owner’s name if
39the business is a sole proprietorship.

40(2) Business mailing address.

P7    1(3) Federal employer identification number, if applicable, or
2the business owner’s social security number.

3(4) Standard Industrial Classification (SIC) Code or North
4American Industry Classification System (NAICS) Code.

5(5) Business start date.

6(6) Business cease date.

7(7) City number.

8(8) Ownership type.

9(c) The reports required under this section shall be filed on
10magnetic media such as tapes or compact discs, through a secure
11electronic process, or in other machine-readable form, according
12to standards prescribed by regulations promulgated by the
13Franchise Tax Board.

14(d) Cities that receive a request from the Franchise Tax Board
15shall begin providing to the Franchise Tax Board the information
16required by this section as soon as economically feasible, but no
17later than December 31, 2009. The information shall be furnished
18annually at a time and in the form that the Franchise Tax Board
19may prescribe by regulation.

20(e) The city data provided to the Franchise Tax Board under
21this section is subject to Section 19542, and may not be used for
22any purpose other than state tax enforcement or as otherwise
23authorized by law.

24(f) If a city enters into a reciprocal agreement with the Franchise
25Tax Board pursuant to subdivision (a) of Section 19551.1, the city
26shall also waive reimbursement for costs incurred to provide
27information required under this section and shall be precluded
28from obtaining reimbursement as specified under Section 5 of
29Chapter 345 of the Statutes of 2008. The reciprocal agreement
30shall specify that each party shall bear its own costs to furnish the
31data involved in the exchange authorized by Section 19551.1 and
32this section, and the Franchise Tax Board shall be precluded from
33obtaining reimbursement as specified under subdivision (c) of
34Section 19551.1.

35(g) A city shall not be required to provide information to the
36Franchise Tax Board pursuant to this section if the Franchise Tax
37Board fails to provide tax information to the city pursuant to a
38reciprocal agreement entered into pursuant to subdivision (a) of
39Section 19551.1 for reasons other than concerns related to
40confidentiality of tax information provided to the city.

P8    1(h) This section shall remain in effect only until January 1, 2019,
2and as of that date, is repealed.

3

SEC. 5.  

No reimbursement is required by this act pursuant to
4Section 6 of Article XIII B of the California Constitution because
5the only costs that may be incurred by a local agency or school
6district will be incurred because this act creates a new crime or
7infraction, eliminates a crime or infraction, or changes the penalty
8for a crime or infraction, within the meaning of Section 17556 of
9the Government Code, or changes the definition of a crime within
10the meaning of Section 6 of Article XIII B of the California
11Constitution.



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