BILL ANALYSIS Ó
AB 279
Page A
ASSEMBLY THIRD READING
AB
279 (Dodd)
As Introduced February 11, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+--------------------+----------------------|
|Revenue & |6-3 |Ting, Dababneh, |Brough, Patterson, |
|Taxation | |Gipson, Roger |Wagner |
| | |Hernández, Mullin, | |
| | |Quirk | |
| | | | |
|----------------+------+--------------------+----------------------|
|Appropriations |16-1 |Gomez, Bigelow, |Wagner |
| | |Bloom, Bonta, | |
| | |Calderon, Chang, | |
| | |Daly, Eggman, | |
| | |Gallagher, Eduardo | |
| | |Garcia, Holden, | |
| | |Jones, Quirk, | |
| | |Rendon, Weber, Wood | |
| | | | |
| | | | |
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SUMMARY: Expands the existing tax data-sharing program between
the Franchise Tax Board (FTB) and cities to include counties.
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Specifically, this bill:
1)Authorizes FTB to permit tax officials of any county to enter
into a reciprocal agreement with the FTB to obtain tax
information from the FTB, as specified.
2)Limits the information that may be furnished by the FTB to a
county to a taxpayer's name, address, Social Security or
taxpayer identification number, and principal business activity
code.
3)Specifies that a county is only authorized to receive
information related to taxpayers who operate within the
jurisdictional boundaries of the county or city and county and
report income from a trade or business to the FTB.
4)Prohibits any person other than an employee of the taxing
authority of a county from receiving or using tax information
received from the FTB.
5)Requires the tax information to be utilized by a county in a
form and manner as required by the FTB in order to safeguard the
information.
6)Provides that the tax information furnished to tax officials of
a county is subject to Revenue and Taxation Code Section 19542,
which makes it a misdemeanor to disclose confidential tax
information. Specifically, the information may only be used for
the county's or city and county's tax enforcement, or as
otherwise authorized by state or federal law.
7)Provides that any information, other than the limited type of
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tax information specified above, may be requested by a county's
tax officials by affidavit.
8)Requires a county that either assesses a business tax or
requires a business license to submit to FTB, upon request,
certain specified information collected by the county in the
course of administering its business tax or business license
program. Also, requires a city to submit the same information
collected in the course of administering the city's business
license program. This information shall be furnished to FTB at
a time and in the form that the FTB prescribes.
9)Provides that no reimbursement is required by this bill because
the only costs that may be incurred by a local agency or school
district will be incurred because this bill creates a new crime
or infraction, as provided.
10)Becomes effective and operative on January 1, 2016.
FISCAL EFFECT: According to the Assembly Appropriations
Committee:
1)Minor and absorbable administrative costs to FTB.
2)Estimated General Fund revenue gains of $80,000, $500,000, and
$800,000 in Fiscal Year (FY) 2015-16, FY 2016-17.
COMMENTS:
1)Author's Statement. The author has provided the following
statement in support of this bill:
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AB 279 is a modest extension to an existing program. By
granting approval for information sharing agreements
between the FTB and counties, counties will be able to
more efficiently collect back taxes.
2)Arguments in Support. According to the Humboldt County Board of
Supervisors and the California Association of County Treasurers
and Tax Collectors that, given "the inextricable financial ties
between counties and the state, it seems a logical and efficient
addition to the statute to permit county tax collectors and
their state counterpart to closely coordinate and share
information, so as to ensure timely, efficient and accurate tax
collection." The proponents believe that the enhanced
information sharing between counties and the state "would be
mutually beneficial" and will "maximize tax collection dollars
from those taxpayers and businesses" that owe money either to
the state or a county."
3)Program Background. The current tax-sharing information program
authorizes the FTB to enter into agreements with cities to
exchange tax data. As noted in the FTB's staff analysis of this
bill, these agreements can either require a city to reimburse
the FTB's costs for providing the data or allow for a waiver of
the FTB's costs if the city agrees to provide its tax data at no
cost to FTB. Cities providing tax data to the FTB without also
receiving tax data from the FTB are required to be reimbursed by
the FTB at a maximum rate of $1 per usable record. The FTB can
only provide tax information that contains an address within the
city's jurisdiction. The information is limited, unless agreed
to otherwise, to the taxpayer's name, taxpayer's address,
taxpayer's Social Security or taxpayer identification number,
and the principal business activity. The program on the
reciprocal sharing of tax information between the FTB and a
city's tax official was originally enacted by the Legislature in
2008 and subsequently extended until January 1, 2019.
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FTB compiles information from many sources including employers,
financial institutions, and federal and state entities for
purposes of ensuring compliance with the state's income tax
laws. When the FTB receives information indicating that a tax
return should be filed for a taxable year and has no record of a
return, the FTB may contact the taxpayer to request that the
taxpayer file a return or explain why no return is required.
When a taxpayer is required to file a return and fails to do so,
the FTB is authorized to assess tax based on reported and
estimated income from all available sources. Additionally, FTB
may use data obtained from cities to ensure compliance with
state income tax requirements. In turn, cities use data
obtained from the FTB to ensure compliance with city business
tax requirements.
4)What Does This Bill Do? This bill would extend the application
of the current tax-sharing information program, with all of the
existing requirements and limitations, to counties by
authorizing the FTB to enter into a reciprocal agreement with a
county or city or county.<1> According to the author, counties
will use this information to identify delinquent taxpayers,
unclaimed property, and businesses that are located within the
county's jurisdiction. In return, the FTB would receive
information identifying businesses that are licensed within the
counties. This information, consistent with the existing
program, would include the names and residences of business
owners, federal employer identification numbers or Social
Security numbers, and industry classification codes. This
county data arguably would help FTB to identify self-employed
individuals who are not filing required individual and business
entity income tax returns. This bill would also require a city
----------------------------
<1>
Currently, San Francisco is the only designed "city and county"
in California.
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to share with the FTB additional information collected in the
course of the city's administration of its business license
program.
5)The Reason for the Bill. The author believes that this bill is
needed to help both counties and the FTB to collect delinquent
taxes from individuals and businesses. Apparently, while not as
common, "many counties license businesses to operate in
unincorporated territory." Similar to cities, those counties
are faced with a problem of identifying parties responsible for
paying the local business taxes. According to the author, this
bill is needed to provide counties "with a defined methodology
to collect identifying information so that they may recover the
taxes." The State would also benefit from the expanded
information sharing program by receiving additional information
regarding the businesses that are licensed by counties, and not
cities.
6)Increased Security Risk: In July 2013, the Office of the
Attorney General released the first report detailing 131 data
breaches that occurred in 2012. The breaches compromised the
personal information of 2.5 million Californians.<2> Out of the
131 breaches, state government held responsibility for 8%.<3>
In October 2014, the Office of the Attorney General issued its
second report on data breach. Thus, in 2013, Attorney General
Office received information on 167 data breaches, affecting
personal information of more than 18.5 million California
residents, constituting a 28% increase over the 131 breaches
reported in 2012.<4> According to the report, errors were
responsible for 53 breaches or 18% of the total. The government
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<2> Data Breach Report 2012, Kamala D. Harris, Attorney General,
California Department of Justice, July 1, 2013.
<3> For example, the California Department of Social Services lost
a computer storage device containing information on 845,000
parents, children, and caregivers.
<4> Data Breach Report 2013, Kamala D. Harris, Attorney General,
California Department of Justice, October, 2014.
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sector accounted for 19% of this type of breach.
The report recommends that the California Legislature consider
amending the breach notice law to strengthen the substitute
notice procedure, clarify the roles and responsibilities of data
owners and data maintainers, and require a final breach report
to the Attorney General. The 2013 report also recommended that
government agencies and companies offer mitigation products like
credit monitoring services or a security freeze when such
incidents occur.
7)How is the Taxpayer Information Protected in the Existing
Program? The FTB has maintained the integrity of taxpayer
information since the inception of the tax-sharing information
program. Any improper usage or disclosure of this information
carries certain civil and criminal liabilities. In 2013, the
Legislature modified the program to, among other things, create
additional safeguards to protect taxpayer information from
unauthorized disclosure. Currently, every reciprocal agreement
must include provisions ensuring that taxpayer data is
safeguarded. Thus, the city must complete and submit a
Safeguard Questionnaire to the FTB, ensure that the data is used
only for the tax administration within the city, and destroy the
data as mandated after three years. In addition, only city
employees named in the confidentiality statement may have access
to the data and each of those employees must complete an annual
City Business Tax Disclosure training.
Expanding the number of entities and people eligible to receive
confidential taxpayer information, however, may increase the
likelihood of data breaches. Even though certain penalties
apply to local cities and agents under current law, those
penalties do little for taxpayers who must spend time and money
rectifying actual and potential identity theft.
8)The Operative Date. This bill will become operative and
effective on January 1, 2016. Should it become law, the FTB
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will be able to start entering into reciprocal agreements with
counties on that date.
Analysis Prepared by:
Oksana Jaffe / REV. & TAX. / (916) 319-2098 FN:
0000353