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
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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.