BILL ANALYSIS                                                                                                                                                                                                    

                            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                   


          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  

          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  

          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. 


          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  

           Opposition  :  None received.