BILL ANALYSIS                                                                                                                                                                                                    Ó


          |SENATE RULES COMMITTEE            |                        SB 211|
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                                    THIRD READING

          Bill No:  SB 211
          Author:   Price (D)
          Amended:  5/8/13
          Vote:     21

           SENATE GOVERNANCE & FINANCE COMMITTEE  :  7-0, 5/1/13
          AYES:  Wolk, Knight, Beall, DeSaulnier, Emmerson, Hernandez, Liu

           SENATE APPROPRIATIONS COMMITTEE  :  4-2, 5/20/13
          AYES:  De León, Hill, Padilla, Steinberg
          NOES:  Walters, Gaines
          NO VOTE RECORDED:  Lara

           SUBJECT  :    Tax administration:  disclosure of information:   
          Franchise Tax Board and cities

           SOURCE  :     Author

           DIGEST  :    This bill extends the sunset to January 1, 2019, on  
          the state-local tax sharing program; allows city agents to  
          receive confidential state tax information; and adds an  
          additional limitation on the use of the tax data to be utilized  
          in a form and manner to safeguard the tax information, as  

           ANALYSIS  :    Existing state and federal laws generally prohibit  
          unlawful disclosure or inspection of any income tax return  
          information.  Existing state law allows a committee of either  
          house of the Legislature to examine confidential taxpayer  
          information.  Criminal sanctions, including imprisonment, apply  


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          to Franchise Tax Board (FTB) personnel convicted of unlawful  
          disclosure or inspection of tax records.  The FTB must notify a  
          taxpayer if criminal charges have been filed for willful  
          unauthorized inspection or disclosure of their tax data.

          In 2001, the Legislature reenacted the program, but in the  
          reverse: it allowed city tax officials to obtain state income  
          tax information subject to a written agreement between FTB and  
          the taxing authority of a city (AB 63, Cedillo, Chapter 915,  
          Statutes of 2001); FTB charged the cities for its costs for  
          collecting and sending the information.  In 2008, the  
          Legislature extended the program until 2014, but allowed cities  
          to offset costs paid by providing its business license tax  
          information to FTB to assist Personal Income and Corporation Tax  
          collection (SB 1146, Cedillo, Chapter 345, Statutes of 2008).   
          Under the program, FTB may grant information limited to a  
          taxpayers' name, address, social security or taxpayer  
          identification number, and business activity code.  Only city  
          employees may use the tax information provided to the city, and  
          may only use it for tax collection purposes.

          This bill extends the sunset from December 31, 2013 to January  
          1, 2019, on the state-local tax information sharing program, and  
          allows agents of the city to receive information.

          This bill adds 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.

          Tax information provided to a city's taxing authority may not be  
          furnished to, or used by, any person other than an employee of  
          that taxing authority and shall be utilized in a form and manner  
          to safeguard the tax information as required by the FTB,  
          including, but not limited to:

             A.   The completion of a data exchange security questionnaire  
               provided by the FTB prior to approval of a data exchange by  
               the FTB.

             B.   The tax official or agent of a city shall allow for an  
               onsite safeguard review conducted by the FTB.

             C.   The completion of disclosure training provided by the  
               FTB and a confidentiality statement signed by all employees  


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               or agents with access to information provided by the FTB  
               confirming the requirement of data security with respect to  
               that information and acknowledging awareness of penalties  
               for unauthorized access or disclosure under Sections 19542  
               and 19552 and Section 502 of the Penal Code.

             D.   The tax official or agent of a city shall notify the FTB  
               within 24 hours upon discovery of any incident of  
               unauthorized or suspected unauthorized access or disclosure  
               of the tax information and provide a detailed report of the  
               incident and the parties involved.

             E.   All records received by the tax officials of a city or  
               its agents shall be destroyed in a manner to make them  
               unusable or unreadable so an individual record may no  
               longer be ascertained in a time frame specified by the FTB.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  Yes

          According to the Senate Appropriations Committee, the FTB  
          indicates that this measure would result in revenue gains of  
          $1.5 million in 2014-15 and $4.9 million in 2015-16.  FTB's  
          indicates that it currently has reciprocal agreements with 102  
          cities, and that its administrative costs to administer the  
          program are about $718,000 annually.

           SUPPORT  :   (Verified  5/23/13)

          California Municipal Revenue and Tax Association
          City of Big Bear Lake
          City of El Segundo
          City of Oakland
          City of Sunnyvale

           OPPOSITION  :    (Verified  5/23/13)

          California Taxpayers Association

          AB:ej  5/23/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE


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