BILL ANALYSIS Ó AB 1245 Page 1 Date of Hearing: April 15, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 1245 (Cooley) - As Amended April 6, 2015 ----------------------------------------------------------------- |Policy |Insurance |Vote:|11 - 1 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill requires employers to file Unemployment Insurance (UI)-related data and taxes electronically by January 1, 2017 or 2018, depending on employer size, while allowing the Employment Development Department (EDD) discretion to grant specified AB 1245 Page 2 exemptions from the new requirements. It also applies existing penalty structures to failures to comply with new electronic reporting and funds transfer requirements. FISCAL EFFECT: This bill should not result in net costs to EDD, and should result in savings, as explained below. 1)EDD estimates about $7.6 million in savings due to operational efficiencies when this bill is fully implemented, which would allow resources to be redirected to other workload. 2)EDD expects to incur higher licensing fees for customer authentication software associated with more system users, but states the information technology infrastructure is in place to fully support electronic filing by all employers, and the large cost savings from operational efficiencies dwarfs cost increases from slightly higher fees. 3)Minor potential penalty revenues, dependent on compliance with the new requirements. Also, approximately $800,000 in increased interest is expected from receiving more timely taxes via electronic funds transfer. COMMENTS: 1)Purpose. According to the author, AB 1245 would phase in over a two-year period the required use of electronic filing for all California employers to submit returns and remit payments to the Employment Development Department (EDD). The author contends electronic filing for employers would increase AB 1245 Page 3 efficiencies for both EDD and for the employer community 2)Background. Businesses are required to file wage and tax information with, and remit payroll taxes to, EDD. Approximately 35 percent of employers are currently enrolled in e-Services for Business and are reporting wages and paying taxes electronically. The remaining employers, or about 610,000 employers, still report wages and pay taxes by paper. There is no registered opposition to this bill. Analysis Prepared by:Lisa Murawski / APPR. / (916) 319-2081