BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
SB 582 (Knight) - Tax Information: Administration
Amended: April 18, 2013 Policy Vote: G&F 7-0
Urgency: No Mandate: No
Hearing Date: May 23, 2013 Consultant: Robert Ingenito
SUSPENSE FILE.
Bill Summary: SB 582 would require the Franchise Tax Board
(FTB), the Board of Equalization (BOE) and the Employment
Development Department (EDD) to conduct a feasibility study on
the development of a single internet portal that virtually
consolidates the agencies to enable online, self-service access
through a single logon for taxpayers.
Fiscal Impact:
Unknown costs to the tax agencies (likely greater than
$50,000 General Fund) to prepare the feasibility study.
Preparing a feasibility study report (FSR) typically costs a
state department about $250,000.
Unknown, likely major General Fund cost pressures to FTB,
BOE, and EDD, potentially in the range of $10 million, to
make coordinated IT improvements to each agency's
independent systems to virtually consolidate the agencies,
providing self-service access with a single logon that
allows for an integrated interface.
Unknown, potentially significant future costs pressures to
consolidate forms, applications, and other documents.
Background: The California Constitution establishes the Board of
Equalization (BOE) as a five-member board comprised of the State
Controller and four elected members. The BOE administers the
sales and use tax and about 30 other state tax and fee programs.
The BOE also adjudicates tax disputes and appeals. Retailers
collect sales taxes from customers purchasing tangible personal
property, and generally remit those taxes to the BOE on a
quarterly basis.
The Employment Development Department (EDD) administers the
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collection, accounting, and audit functions of California's
payroll tax programs, including the Unemployment Insurance and
State Disability Insurance programs. Businesses are generally
required to register with EDD. Employers collect and deposit
personal income taxes withheld from employee wages with EDD,
along with amounts for Unemployment Insurance (UI), Employment
Training Taxes, and State Disability Insurance (SDI). Federal
schedules determine when employers make Personal Income Tax and
SDI payments, while UI and ETT payments are made quarterly.
Each quarter, the taxpayer files a form to reconcile these
deposits with actual taxes due.
The Franchise Tax Board (FTB) is a three-person board comprised
of the State Controller, Director of the Department of Finance,
and Chair of the BOE. FTB administers the Personal Income Tax
and Corporation Tax Law, and collects debts on behalf of state
and local agencies. FTB may issue forms necessary to administer
the taxes. Employees and others receiving payments reconcile
amounts previously withheld with actual tax due when filing
their annual tax returns with FTB.
Proposed Law: SB 582 would require BOE, FTB, and EDD to
collaborate and focus current and future IT efforts to conduct a
feasibility study to develop a single web-based portal that
enables taxpayers to do the following through a single
self-service logon point:
Electronically submit returns, forms, or other information
Remit amounts due
Determine account balances and tax due dates
Identify the status of an appeal
Claim a refund
Request relief from interest or penalties
Access any other information the agencies deem helpful to
help taxpayers comply with the state's tax laws.
The bill would also require these agencies to consolidate forms,
applications, and other documents to reduce or eliminate
duplicate submission of information by taxpayers, but only upon
a joint determination by the agencies of a need to improve
cost-effective service to taxpayers, and upon appropriation by
the Legislature.
Staff Comments: The BOE, FTB, and EDD have a history of working
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cooperatively to increase efficiencies and ease taxpayer burden,
including a current working group that has been formed to
identify specific incremental processes and functions that
present opportunities for efficiencies, considering all
practical aspects and costs. The three entities have also
partnered with the Internal Revenue Service to form the
California Fed State Partnership to streamline and improve
taxpayer resources and educational programs. One result of the
partnership was the development of the California Tax Service
Center website, www.taxes.ca.gov , which is a one-stop tax
assistance site for California taxpayers that provides general
information about the various tax programs as well as links to
appropriate forms, information, requirements, and payment
options located on the BOE, FTB, EDD, and IRS websites. This
website does not currently provide taxpayers with single logon
access to individual accounts and records.
SB 582 would require BOE, FTB, and EDD to conduct a feasibility
study related to coordinated information technology project that
would virtually consolidate the agencies through a web portal
that provides an integrated interface with each of the agencies
through a single logon access. The costs to implement the bill
are unknown, but potentially significant. FSRs typically cost
around $250,000.
Costs to actually implement an information technology project of
this nature and magnitude are unknown, but likely major, perhaps
in the range of $10 million cumulatively. While none of the
affected agencies are able to provide a detailed cost analysis
at this time that enumerates the scope of duties for each
agency, the following information (provided with respect to a
similar bill from last session, AB 1326, Harman) provides some
sense of the potential scale of costs:
The initial BOE analysis indicated that major costs of over $1
million would be incurred to develop and implement a
comprehensive virtual website relating to current system
design modifications, software, and hardware
FTB indicated that costs to implement that bill were unknown,
but potentially significant. Actual costs would depend upon
the scope, roles, and duties of each entity. Staff notes that
even if FTB's scope were limited to making necessary
programming updates to its IT systems, costs could be
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significant.
EDD estimated one-time startup costs of $6.8 million and
annual ongoing costs of $657,000 to develop and administer the
web portal, which includes costs for staffing and programming,
costs to implement an outreach program for employers, and
costs to enhance the existing security solution Oracle
Identity Management environment to enable a single logon for
taxpayers.
In addition, as noted above, SB 582 would require FTB, BOE, and
EDD to consolidate forms, applications, and other documents.
However, these activities would only occur following a joint
determination by the agencies that a need exists to improve
cost-effective service to taxpayers, and an appropriation by the
Legislature. The bill would therefore impose unknown, but
likely significant cost pressures on BOE, FTB, and EDD to
perform these functions.