BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |AB 279 |Hearing | 6/17/15 |
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|Author: |Dodd |Tax Levy: |No |
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|Version: |2/11/15 |Fiscal: |Yes |
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|Consultant|Grinnell |
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TAX ADMINISTRATION: DISCLOSURE OF INFORMATION: FRANCHISE TAX
BOARD AND CITIES AND COUNTIES
Extends the state-local tax information sharing program to
counties, and to a city and county.
Background and Existing Law
Existing state and federal laws generally prohibits disclosure
or inspection of any income tax return information. Criminal
sanctions, including imprisonment, apply to FTB personnel
convicted of unlawful disclosure or inspection of tax records.
The Franchise Tax Board (FTB) must notify a taxpayer if criminal
charges have been filed for willful unauthorized inspection or
disclosure of their tax data.
Tax information sharing between the state and local agencies
dates back to 1984, when FTB first sponsored legislation
mandating California cities to annually report information
obtained from businesses they licensed. FTB used the
information to identify new businesses that were obtaining local
business licenses and paying business license taxes, but may not
have been filing state income tax returns. While the program
generated revenue, the Legislature repealed the program in 1999
because the cost of state reimbursed mandate claims from local
agencies grew too large, making the program no longer worth its
cost.
AB 279 (Dodd) 2/11/15 Page 2
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In 2001, the Legislature reenacted the program, but in the
reverse: it allowed city tax officials to obtain state income
tax information subject to a written agreement between FTB and
the taxing authority of a city to assist in enforcing its
business license taxes (AB 63, Cedillo, 2001). FTB charged
cities for its costs for collecting and sending the information.
The Legislature extended the program in 2006 until 2011 (SB
1374, Cedillo). In 2008, the Legislature again extended the
program until 2014, but instead of paying for the information,
allowed cities to offset costs by entering into a reciprocal
agreement to provide its business license tax information to FTB
(SB 1146, Cedillo). The Legislature again extended the program
until January 1, 2019 (SB 211, Price, 2013).
Under the program, FTB may give a city information limited to a
taxpayers' name, address, social security or taxpayer
identification number, and business activity code. However,
city officials may request additional information by affidavit,
so long as they notify the person whose information is the
subject of the request, and provide them a copy of the
affidavit. Only city employees may use the tax information
provided to the city, and they can only use it for tax
collection purposes. The program applies criminal sanctions in
current law to any unlawful inspection or disclosure.
As a condition of participation, city officials must:
Complete a data exchange security questionnaire before
the data exchange,
Direct tax officials to agree to on-site reviews from
FTB as a condition of participation,
Complete FTB disclosure training,
Have all employees who receive the information sign a
confidentiality statement acknowledging their awareness of
data security requirements, and penalties for unlawful
disclosure.
Additionally, city tax officials must notify FTB within 24 hours
of any suspected instance of unlawful inspection or disclosure,
and destroy an individual record in a manner to make them
unreadable and unusable. Before FTB incurs any cost, cities
must consent to fund FTB's first-year costs as a condition of
any agreement to share the information, and deposit amounts
equal to those costs with FTB. However, FTB may waive any
AB 279 (Dodd) 2/11/15 Page 3
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reimbursement if a city enters into a reciprocal agreement.
Counties don't generally license as many businesses as cities
do, but given cities' success collecting unpaid tax as a result
of FTB information, counties would like to be authorized to
participate in the tax information sharing program too.
Proposed Law
Assembly Bill 279 extends the state-local tax information
sharing program to allow a county, and a city and county, to
enter into a reciprocal agreement to share tax information with
FTB.
State Revenue Impact
According to FTB, AB 279 results in revenue gains of $80,000 in
2015-16, $500,000 in 2016-17, and $800,000 in 2017-18, as a
result of FTB receiving information regarding non-filers from
counties.
Comments
1. Purpose of the bill . According to the author, "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. Information security . 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. The city must complete and submit
a Safeguard Questionnaire to the FTB to 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.
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3. Get some . FTB states that it currently has a reciprocal
agreement with 102 cities in California, which costs $718,000
annually. The following cities reported the following revenue
amounts due to the program:
City of Los Angeles ($13.9 million)
City of San Diego ($1.1 million)
City of Newport Beach ($360,000)
City of Oakland ($260,000)
City of Menlo Park ($172,000)
City of Concord ($154,000)
City of Sunnyvale ($131,000)
Assembly Actions
Assembly Floor 67-9
Assembly Appropriations 16-1
Assembly Revenue and Taxation 6-3
Support and
Opposition (6/11/15)
Support : California Association of County Treasurer-Tax
Collectors, California State Association of Counties, El Dorado
County Board of Supervisors, Mono County Board of Supervisors,
Humboldt County Board of Supervisors, Rural County
Representatives of California.
Opposition : Unknown.
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