BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 211| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 211 Author: Hernandez (D) Amended: 9/3/13 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 SENATE FLOOR : 32-6, 5/28/13 AYES: Beall, Block, Calderon, Cannella, Corbett, Correa, De León, DeSaulnier, Emmerson, Evans, Galgiani, Hancock, Hernandez, Hill, Hueso, Jackson, Knight, Lara, Leno, Lieu, Liu, Monning, Nielsen, Padilla, Pavley, Price, Roth, Steinberg, Torres, Wolk, Wright, Yee NOES: Anderson, Fuller, Gaines, Huff, Walters, Wyland NO VOTE RECORDED: Berryhill, Vacancy ASSEMBLY FLOOR : Not available SUBJECT : Tax administration: disclosure of information: Franchise Tax Board and cities SOURCE : Author DIGEST : This bill extends the sunset to January 1, 2019, on CONTINUED SB 211 Page 2 the state-local tax sharing program; allows city officials 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 specified. Assembly Amendments change the author of the bill; delete the city "agent" as someone allowed to receive confidential information; and make technical and clarifying changes. 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 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 officials 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. CONTINUED SB 211 Page 3 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 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 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 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 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 9/11/13) CONTINUED SB 211 Page 4 California Municipal Revenue and Tax Association Cities of Arcadia, Big Bear Lake, Commerce, El Segundo, Fresno, Lakewood, Livermore, Los Angeles, Newport Beach, Oakland, Orange, Santa Ana, Santa Monica, and Sunnyvale OPPOSITION : (Verified 9/11/13) California Taxpayers Association ARGUMENTS IN SUPPORT : Proponents state that this bill "Clarifies that cities may contract with third party agents in pursuing such activities. Passage of this measure will continue to allow disclosure of limited confidential tax information for the specific purpose of enhancing local and state tax enforcement activities. This is an important tool that cities across California use for business license discovery efforts to identify businesses that are operating without a license." AB:ej 9/11/13 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED