BILL ANALYSIS Ó SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: SB 442 HEARING: 4/10/13 AUTHOR: Wyland FISCAL: Yes VERSION: 2/21/13 TAX LEVY: No CONSULTANT: Miller STATE BOARD OF EQUALIZATION: ERRONEOUS CHARGES Conforms the special taxes at the BOE to all other taxes and extends the reimbursement claim beyond 90-days for reasonable cause. Background and Existing Law Under existing law, the Board of Equalization (BOE) may seize the property of a delinquent taxpayer or issue a levy or notice to withhold to satisfy the tax obligations of a delinquent taxpayer. Taxpayers may file a reimbursement claim with the BOE for bank chargers or any other reasonable third party charges and fees only when they are the direct result of an erroneous processing or collection action. Other BOE-administered special tax and fee laws contain identical provisions, except they don't authorize a taxpayer to claim charge or fee reimbursement due to a BOE "erroneous processing action" or "erroneous collection action." All relevant statutes require a taxpayer to file a claim within 90 days from the date of BOE's erroneous action. The statutes require the BOE to respond within 30 days from the date it receives the claim. Proposed Law Senate Bill 442 conforms relevant special tax and fee law bank charge reimbursement provisions to the Sales and Use Tax Law to allow taxpayer fee and charge reimbursement due to an erroneous processing action or erroneous collection action by the BOE. The relevant special tax and fee laws include: Use Fuel Tax Law, Cigarette and Tobacco Products SB 442 -- 2/21/13 -- Page 2 Tax Law, Alcoholic Beverage Tax Law, Energy Resources Surcharge Act, Emergency Telephone Users Surcharge Law, Hazardous Substances Tax Law, Integrated Waste Management Fee Law, Oil Spill Response, Prevention, and Administration Fees Law, Underground Storage Tank Maintenance Fee Law, Fee Collection Procedures Law, and Diesel Fuel Tax Law. In addition, this bill authorizes the BOE to extend the reimbursement claim filing date beyond 90 days for reasonable cause as determined by the BOE. State Revenue Impact According to the BOE, the costs associated with this bill would be absorbable. Comments 1. Purpose of the bill . This bill is sponsored by the BOE to provide taxpayers with relief from charges and fees incurred due to an erroneous BOE collection or processing action. In one example, the BOE filed an erroneous levy and sent the taxpayer's Notice of Levy to an incorrect address. Additionally, the taxpayer's financial institution delayed compliance with the levy for nearly three months. As a result, the financial institution sent the first levy notice to the taxpayer about three months from the erroneous BOE action date. The erroneous levy resulted in early withdrawal fees and bank processing fees. The taxpayer failed to meet the 90-day reimbursement claim deadline due to the delayed levy notice. Existing law required the BOE to deny the claim even though the taxpayer met all other conditions. 2. More or less authority ? In the recent California Appellate Court case, City of Palmdale v. State Board of Equalization , 2012 Cal.App. LEXIS 610, the Court provides a condemning indictment of BOE's performance in the case, faulting them "for rendering a decision without due regard for the statutory and constitutional laws that govern its decision-making." The Court held that, "To vacate the judgment and reinstate [BOE's] decision would not only imply the agency acted properly, it would also undermine the effectiveness of the judgment in exposing [BOE's] SB 442 -- 2/21/13 -- Page 3 deficiencies in handling the administrative appeal." The trial court's judgment found that BOE's decision granting the City of Pomona's petition for a reallocation of local sales tax required "express findings and a discussion of the evidence supporting them." However, BOE did "not even hint at the reasons for [its] decision" and, as a result, the trial court was "forced into unguided and resource-consuming explorations . . . ." In refusing to vacate the trial court's judgment, the Court of Appeal noted that, under BOE's decision, the City of Los Angeles stands to lose $2.32 million in tax revenues and that cities and their residents "have a right to know why a city is losing or gaining millions in local sales tax revenues, that is, a right to know the [BOE's] grounds for reallocating those taxes." The Court also noted: As recited in the judgment, the [BOE]: (1) failed to understand that it must explain the basis of its decisions; (2) paid little attention to its statutory authority, or lack thereof, to apply regulations retroactively; (3) appeared unconcerned with the principles of due process; (4) was oblivious to the inequities of considering an appeal filed eight years after the Board Management decision; and (5) ignored the requirements of the Administrative Procedure Act. When a tax agency makes a mistake, the taxpayer should be reimbursed as the conforming amendments in SB 442 make possible. However, The Committee may wish to consider granting any further discretion-even something as minor as proposed in SB 442-to the BOE given such an indictment. Support and Opposition (4/4/13) Support : Board of Equalization; California Taxpayers Association. Opposition : None received.