BILL ANALYSIS Ó
AB 154
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Date of Hearing: May 27, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
154 (Ting) - As Amended May 20, 2015
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|Policy |Revenue and Taxation |Vote:|6 - 0 |
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Urgency: Yes State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill makes omnibus conformity changes to the Revenue and
Taxation Code in two areas:
1)Changes the state's general specified date of conformity to
federal income tax laws from January 1, 2009, to January 1,
2015, for taxable years beginning on or after January 1, 2015,
thereby generally conforming to many changes to federal income
tax law during that six-year period, but subject to certain
exceptions; and
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2)Generally conforms the state's net operating loss rules to
federal income tax law, allowing corporations expecting a net
operating loss carryback to extend the time for payment of
taxes for the preceding taxable year.
FISCAL EFFECT:
1)Potentially significant GF costs to Franchise Tax Board (FTB)
to administer the changes to forms, procedures, and systems.
2)The two provisions in this bill have offsetting revenue
impacts:
a) Estimated GF revenue increases of $15.2 million, $16.0
million, and $17.2 million in FY 2015-16, FY 2016-17, and
FY 2017-18, respectively, for the conforming changes
contained in provision 1 above; and
b) Estimated GF revenue decreases of $12.0 million, $8.0
million, and $3.0 million in FY 2015-16, FY 2016-17, and FY
2017-18, respectively, for the conforming changes contained
in provision 2 above.
As a result, estimated net GF revenue impacts are increases of
$3.2 million, $8.0 million, and $14.2 million in FY 2015-16,
FY 2016-17, and FY 2017-18, respectively.
COMMENTS:
1)Purpose. According to the author, this bill conforms state
tax law to federal tax law, easing tax preparation for
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taxpayers and administration for FTB. This bill is intended
to narrow the differences between state and federal tax law,
and includes tax relief for members of the US armed forces,
businesses, and certain individual taxpayers.
Proponents argue non-conformity is a leading cause for state
taxpayer error and noncompliance, citing an independent FTB
Taxpayers' Rights Advocate's 2014 report to the legislature.
Proponents further maintain the conformity in this bill will
reduce the number of adjustments and different methodologies
required for state tax returns, reducing penalties and
interest assessments.
2)Of Harmony and Policy. When changes are made to the federal
income tax law, state law does not automatically adopt those
changes. Instead, legislation is required to conform, either
in the form of individual tax bills relating to specific
changes or omnibus "conformity" bills that conform to federal
law as of a certain date, subject to specific exceptions.
In the 1980s and early 1990s, state conformity legislation was
relatively routine and enacted almost every year. Since that
time, however, conformity legislation has become less
frequent, and occasionally more contentious, with the last
occurring in 2010. Businesses generally prefer conformity to
federal tax laws because it reduces their state tax compliance
costs, and practitioners argue nonconformity increases
individual state tax reporting errors. Conformity also
reduces administrative burdens for state agencies, allowing
them to rely on federal data, audits, case law, and
regulations to inform state actions.
Conformity often has a significant impact on state revenue,
and as a result can be contentious. Both the state and
federal governments use tax policy to influence taxpayer
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behavior through the use of credits, deductions, and
exemptions, and there may be instances where the policies
advocated at the state and federal levels do not align. In
addition, certain federal policies may be advanced through
deficit spending, which the state cannot do. The Legislature
may need to be mindful of certain fiscal effects that would
not otherwise create concern in the US Congress when
considering conformity legislation.
Analysis Prepared by:Joel Tashjian / APPR. / (916)
319-2081