BILL ANALYSIS �
SB 211
Page 1
SENATE THIRD READING
SB 211 (Ed Hern�ndez)
As Amended September 3, 2013
Majority vote
SENATE VOTE :32-6
REVENUE & TAXATION 6-1 APPROPRIATIONS 12-4
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|Ayes:|Bocanegra, Gordon, |Ayes:|Gatto, Bocanegra, |
| |Mullin, Pan, | |Bradford, |
| |V. Manuel P�rez, Ting | |Ian Calderon, Campos, |
| | | |Eggman, Gomez, Hall, |
| | | |Holden, Pan, Quirk, Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Dahle |Nays:|Harkey, Bigelow, |
| | | |Donnelly, Wagner |
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SUMMARY : Extends the sunset on the state-local tax information
sharing program and codifies existing safeguard practices.
Specifically, this bill :
1)Extends the sunset date on the reciprocal sharing of tax
information between the Franchise Tax Board (FTB) and a city's
tax officials until January 1, 2019.
2)Requires that tax information provided to a city 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 the city shall allow the
FTB to conduct an onsite safeguard review;
c) The completion of disclosure training provided by the
FTB and a confidentiality statement signed by all employees
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
SB 211
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for unauthorized access or disclosure under Revenue and
Taxation Code (R&TC) Sections 19542 and 19552, and Penal
Code Section 502;
d) The tax official or the 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; and,
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 timeframe specified by the FTB.
EXISTING LAW :
1)Authorizes FTB to permit tax officials of a city to enter into
a reciprocal tax sharing information agreement with FTB, as
specified. The information that may be furnished to a city's
tax officials is subject to the following limitations:
a) The city is only authorized to receive information
related to taxpayers operating within the city and who
report income from a trade or business to the FTB;
b) The information is limited to a taxpayer's name,
address, social security or taxpayer identification number,
and business activity code;
c) 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,
d) The information provided to a city's tax officials is
subject to R&TC Section 19542, which makes it a misdemeanor
to disclose confidential tax information. Specifically,
the information may only be used for the city's tax
enforcement, or as otherwise authorized by state or federal
law.
SB 211
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2)Provides that any information, other than the limited type of
tax information specified above, may be requested by a city's
tax officials by affidavit.
3)Provides that the information available from cities to the FTB
is limited to the following:
a) The name of business if it is a corporation,
partnership, or limited liability company, or the owner's
name if it is a sole proprietorship;
b) Business mailing address;
c) Federal employer identification number, if applicable,
or the business owner's social security number;
d) Standard Industry Classification Code or North American
Industry Classification System Code;
e) Business start date;
f) City number; and,
g) Ownership type.
4)Provides for the automatic repeal of the tax information
sharing program on January 1, 2014.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, this measure would result in revenue gains of
approximately $1.5 million in 2014-15, and $4.5 million in
2015-16. FTB states it currently has reciprocal agreements with
102 cities and its costs to administer the program are about
$700,000 annually.
COMMENTS :
1)The author states, "SB 211 would extend the sunset date
currently in statute until January 1, 2019 to ensure the
continuity of a proven cost effective tax data sharing program
and would preserve the revenue benefit to the state and
participating cities."
2)Program background : As noted in the FTB's staff analysis of
SB 211
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this bill, "FTB compiles information from many sources
including employers, financial institutions, and federal and
state entities for purposes of ensuring compliance with the
state's income tax laws. When the FTB receives information
indicating that a tax return should be filed for a taxable
year, but has no record of a return, the FTB may contact the
taxpayer to request that the taxpayer file a return or explain
why no return is required. When a taxpayer is required to file
a return, but fails to do so, the FTB is authorized to assess
tax based on reported and estimated income from all available
sources." Additionally, "FTB uses data obtained from cities
to ensure compliance with state income tax requirements;
cities use data obtained from the FTB to ensure compliance
with city business tax requirements."
The program authorizes the FTB to enter into agreements with
cities to exchange tax data. These agreements can either
require the cities to reimburse the FTB's costs for providing
the data, or allow for a waiver of the FTB's costs if the
cities agree to provide their tax data at no cost to FTB.
Cities providing tax data to the FTB without also receiving
tax data from the FTB are required to be reimbursed by the FTB
at a maximum rate of $1 per usable record. The FTB can only
provide tax information that contains an address within the
city's jurisdiction. The information is limited, unless
agreed to otherwise, to the taxpayer's name, taxpayer's
address, taxpayer's social security number or taxpayer
identification number, and the principal business activity.
This bill would extend the sunset date on the reciprocal
sharing of tax information between the FTB and a city's tax
official until January 1, 2019.
3)Safeguard standards : The codification of existing safeguard
practices will help ensure that tax information data remains
free of data breaches. However, because these standards are
already being utilized, codifying the standards in law may not
actually provide any additional security.
4)Related legislation :
SB 1036 (Cedillo), introduced in the 2009-10 legislative
session, would have allowed local cities to share taxpayer
information with third party agents. SB 1036 failed to pass
SB 211
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out of the Assembly Revenue and Taxation Committee.
SB 1146 (Cedillo), Chapter 345, Statutes of 2008, extended the
authority of the FTB to disclose limited confidential tax
information to city tax officials, and allowed a city that
administers a business tax to provide specific data to the FTB
upon request and authorized cities to exchange data with the
FTB in lieu of obtaining mandated cost reimbursement.
SB 1374 (Cedillo), Chapter 513, Statutes of 2006, extended the
FTB's authority to disclose limited confidential tax
information to city tax officials until 2011.
AB 63 (Cedillo), Chapter 915, Statutes of 2001, authorized the
FTB to disclose limited confidential tax information to city
tax officials in order to enhance the enforcement of an
existing city business tax law.
Analysis Prepared by : Carlos Anguiano / REV. & TAX. / (916)
319-2098
FN: 0002219