BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 442
                                                                  Page  1

          Date of Hearing:  June 10, 2013

                     ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
                                Raul Bocanegra, Chair

                    SB 442 (Wyland) - As Amended:  April 16, 2013

          Majority vote.  Fiscal committee.

           SENATE VOTE  :  32-0
           
          SUBJECT  :  State Board of Equalization:  erroneous charges

           SUMMARY :  Extends, from the Sales and Use Tax (SUT) Law to other  
          tax and fee programs, the ability of a taxpayer to file a  
          reimbursement claim with the State Board of Equalization (BOE)  
          for bank charges and other reasonable third-party check charge  
          fees incurred as a direct result of an erroneous processing or  
          collection action by the BOE.  Specifically,  this bill  :

          1)Adds erroneous processing and collection actions to the list  
            of BOE actions giving rise to a claim for reimbursement of  
            bank charges and third-party check charge fees incurred by a  
            taxpayer.

          2)Alters the deadline for filing reimbursement claims, by  
            requiring claims to be filed within 90 days of the date the  
            bank and third-party charges were incurred by the taxpayer,  
            instead of 90 days from the date of the erroneous BOE action.   


           EXISTING LAW  :

          1)Allows a taxpayer, under the SUT Law, to file a claim with the  
            BOE for reimbursement of bank charges and any other reasonable  
            third-party check charge fees incurred as a direct result of  
            an erroneous:

             a)   Levy or notice to withhold;

             b)   Processing action; or, 

             c)   Collection action.

          2)Allows a taxpayer, under various other BOE-administered tax  








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            and fee programs, to file a claim only for those charges or  
            fees incurred as a direct result of an erroneous levy or  
            notice to withhold.   

          3)Requires claims to be filed within 90 days of the erroneous  
            BOE action. 

           FISCAL EFFECT  :  The BOE estimates negligible revenues losses.  



           COMMENTS  :

          1)The author has provided the following statement in support of  
            this bill:

               The [BOE] collects sales and use tax, as well as special  
               taxes and fees. The BOE is tasked with undertaking  
               collection action on delinquent accounts, which includes  
               issuing a levy or notice to withhold and the seizure of  
               property, in order to satisfy the tax obligations of that  
               taxpayer.

               Current law allows the BOE to provide a reimbursement for  
               bank or third party charges associated with an erroneously  
               issued levy or notice to withhold, erroneous processing  
               action, or erroneous collection action.  This reimbursement  
               currently only applies to the sales and use tax and must be  
               filed within 90 days of the erroneous action by the [BOE].  
               Nearly identical provisions are contained in the other code  
               sections for special taxes and fees, except that they don't  
               expressly provide that a taxpayer may claim reimbursement  
               for bank and third party check charges due to an "erroneous  
               processing action or erroneous collection action."  

               There are documented cases where taxpayers are prevented  
               from filing a claim within 90 days of the erroneous action.  
                In one example, the BOE filed a levy in error, and the  
               taxpayer did not receive the BOE's Notice since it was sent  
               to an incorrect address. Additionally, the taxpayer's  
               financial institution delayed complying with the levy for  
               nearly three months, and notified the taxpayer of the levy  
               at the time. Since the taxpayer's first notification of the  
               levy came later than 90 days after the initial notice was  
               issued, which resulted in early withdrawal fees and bank  








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               processing [fees], the taxpayer was unable to file for a  
               claim with the BOE for reimbursement of bank charges.

               SB 442 would conform all special tax and fee laws  
               administered by the [BOE] by providing that in addition to  
               reimbursement of bank or third party check charges incurred  
               by a taxpayer as the direct result of an erroneous levy or  
               notice to withhold, a taxpayer may claim reimbursement due  
               to an erroneous processing action or erroneous collection  
               action by the BOE. 

               Additionally, SB 442 will provide a taxpayer 90 days from  
               the date the bank or third party charges were incurred to  
               file a reimbursement claim with the BOE, as opposed to 90  
               days from the BOE's erroneous action. 

               These changes to existing law [conform] the BOE's special  
               tax and fee programs to the sales and use tax program and  
               [allow] the BOE to fairly and equitably administer the  
               sales and use tax program and special tax and fee programs  
               under the variety of circumstances that could arise  
               following an erroneous levy or erroneous processing action  
               by the BOE.

          2)  Proponents of this bill note the following:

               It only is fair and equitable to reimburse taxpayers for  
               bank and third-party check charge fees when those charges  
               are a direct result of a BOE error, and are not due to any  
               fault of the taxpayer or feepayer.  The provisions in this  
               bill are consistent with the [SUT] Law, and the intent of  
               the original legislation that authorized the BOE to  
               reimburse taxpayers for such charges arising from BOE  
               errors.  Also, this bill parallels provisions in Revenue  
               and Taxation Code Section 21018 administered by the  
               Franchise Tax Board (FTB), which specifically allow  
               taxpayers to claim reimbursement for bank charges incurred  
               by taxpayers through similar types of FTB processing and  
               collection errors.  

          3)The BOE, which is sponsoring this measure, notes the following  
            in its staff analysis of this bill:

              a)   Erroneous collection or processing action  :   
               "Occasionally, an erroneous BOE action results in a  








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               taxpayer incurring charges and fees unrelated to a BOE levy  
               or notice to withhold.  Existing special tax and fee laws  
               only allow reimbursement due to an erroneous levy or notice  
               to withhold.  Accordingly, existing law prohibits  
               reimbursement for an erroneous processing action or  
               erroneous collection action by the BOE.  An erroneous  
               processing or collection action occurs when the BOE  
               double-debits a taxpayer's bank account and erroneously  
               credits the electronic payment to another taxpayer's  
               account.  The double-payment results in insufficient funds,  
               which in-turn leads to overdraft bank fees.  Existing  
               special tax and fee laws authorize the BOE to reverse the  
               erroneous debit; however, the laws do not expressly  
               authorize reimbursement of the charges and fees incurred."

              b)   Stringent filing deadline  :  "Sometimes taxpayers are  
               unable to file a claim within 90 days from the erroneous  
               BOE action date.  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.  This bill revises the basis of  
               the 90-day reimbursement claim filing deadline from the  
               erroneous BOE action date to the date the taxpayer incurs  
               the bank and third-party charges.  This change provides a  
               dependable measure to ensure a taxpayer receives at least  
               one of the two action notices: either the BOE notice, or  
               the bank or third-party notice of action.  Had this  
               timetable been in law for the previously cited taxpayer,  
               the taxpayer would have met the reimbursement claim  
               deadline since the 90-day clock started ticking when the  
               bank levied the taxpayer's account."

          4)Committee Staff Comments:

              a)   What does this bill do?  :  This bill adds erroneous BOE  
               processing and collection actions to the list of BOE  
               actions giving rise to a taxpayer's claim for reimbursement  








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               of bank charges and third-party check charge fees incurred.  
                Currently, a taxpayer can only seek reimbursement  
               following erroneous processing or collection actions under  
               the SUT Law.  This bill would simply extend this authority  
               to other tax and fee programs the BOE administers.

               In addition, this bill would alter the deadline for filing  
               a reimbursement claim, by requiring claims to be filed  
               within 90 days of the date the bank and third-party charges  
               were incurred by the taxpayer, instead of 90 days from the  
               date of the erroneous BOE action.  

              b)   Proposed technical amendments  :  Committee staff suggests  
               the following technical amendments to this bill:

               i)     On page 3, in line 22, strike "for reimbursement"  
                 and insert "or reimbursed";

               ii)    On page 3, strike lines 27-29, and insert "(1) The  
                 erroneous levy or notice to withhold, erroneous  
                 processing action, or erroneous collection action was  
                 caused by board error.";   

               iii)   On page 4, in line 17, strike "for reimbursement"  
                 and insert "or reimbursed"; 

               iv)    On page 5, in line 12, strike "for reimbursement"  
                 and insert "or reimbursed"; 

               v)     On page 6, in line 7, strike "for reimbursement" and  
                 insert "or reimbursed"; 

               vi)    On page 7, in line 2, strike "for reimbursement" and  
                 insert "or reimbursed";

               vii)   On page 7, in line 37, strike "for reimbursement"  
                 and insert "or reimbursed";

               viii)  On page 8, in line 33, strike "for reimbursement"  
                 and insert "or reimbursed";

               ix)    On page 9, in line 28, strike "for reimbursement"  
                 and insert "or reimbursed";

               x)     On page 9, in line 35, strike "resulted from" and  








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                 insert "was caused by";

               xi)    On page 9, in line 40, strike "that was";

               xii)   On page 10, in line 1, strike "The requirement of  
                 this paragraph" and insert "This provision";

               xiii)  On page 10, in line 23, strike "to" and insert "by";  


               xiv)   On page 10, in line 24, strike "for reimbursement"  
                 and insert "or reimbursed";

               xv)    On page 11, in line 19, strike "for reimbursement"  
                 and insert "or reimbursed"; and, 

               xvi)   On page 12, in line 14, strike "for reimbursement"  
                 and insert "or reimbursed".  

           
          REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          State Board of Equalization (sponsor) 
          California Taxpayers Association
           
            Opposition 
           
          None on file

           Analysis Prepared by  :  M. David Ruff / REV. & TAX. / (916)  
          319-2098