BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |AB 1277 |Hearing | 6/24/15 |
| | |Date: | |
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|Author: |Brough |Tax Levy: |No |
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|Version: |4/29/15 |Fiscal: |Yes |
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|Consultant|Grinnell |
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TAX ADMINISTRATION: TAXPAYERS' RIGHTS ADVOCATE: LEVY OR
NOTICE TO WITHHOLD: RETURN OF FUNDS
Increases amount BOE's Taxpayer Rights' Advocate can return to
taxpayers, and allows amounts to grow in the future according to
inflation.
Background and Existing Law
The State Board of Equalization (BOE) administers the Sales and
Use Tax Law, Use Fuel Tax Law, Alcoholic Beverage Tax Law,
Energy Resources Surcharge Law, Emergency Telephone Users
Surcharge Law, Hazardous Substances Tax Law, Integrated Waste
Management Fee Law, Oil Spill Response, Prevention, and
Administration Fees Law, Underground Storage Tank Maintenance
Fee Law, and Diesel Fuel Tax Law. In addition, BOE operates
other fee programs such as the Ballast Water, California Tire,
Covered Electronic Waste Recycling, Fire Prevention, Marine
Invasive Species, and Water Rights Fees, as well as the Natural
Gas Surcharge, which are governed by the Fee Procedures
Collections Law.
BOE first attempts to voluntarily collect unpaid taxes or fees
due under the above program by sending the taxpayer two to four
notices. Collectors then attempt to contact the taxpayer by
phone. Should these attempts be unsuccessful, BOE then begins
collections actions such as levies, wage garnishments, warrants
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for collection, or license suspension, as determined by
collections staff. One of BOE's most effective collections
procedures is the notice of levy, which requires a financial
institution or other institution to place a hold on the
taxpayer's assets held by that institution, and then remit the
tax or fee due to BOE out of the taxpayer's funds. BOE sends a
copy of the notice of levy to the taxpayer.
BOE can also make "jeopardy determination" if it believes that
collection will be impacted by delay. A jeopardy determination
is due and payable upon service of the notice to the taxpayer,
and BOE may immediately take all actions authorized and
necessary to collect the determined liability. Taxpayers have
ten days to petition for redetermination or pay the tax or fee
due prior to the determination becoming final.
Similar to its counterparts in the Internal Revenue Service and
the Franchise Tax Board, the Taxpayers' Rights Advocate (TRA)
Office in the Board of Equalization (BOE) helps taxpayers to (1)
resolve a matter outside normal channels, (2) provide
information regarding a particular set of circumstances, (3)
identify rights violations in the audit, and (4) assist in
property tax areas. TRA facilitates communication between
taxpayers, BOE, and county staff to eliminate potential
misunderstandings. TRA's vision is to "be the clear and trusted
voice of reason and fairness when resolving issues between
taxpayers and the government," and its mission "to positively
affect the lives of taxpayers by protecting their rights,
privacy, and property during the assessment and collection of
taxes." TRA reports directly to the Executive Director, and is
separate from other BOE offices and programs. When taxpayers
complain about the BOE, TRA has direct access to all BOE
documents and staff involved in the taxpayers' issues, and acts
as a liaison between taxpayers and BOE. If TRA disagrees with
BOE staff and is unable to resolve the situation satisfactorily,
the issue is elevated to the Executive Director for resolution.
TRA has specific powers to help taxpayers, including staying
actions by BOE where taxpayers have suffered irreparable loss as
a result of BOE staff actions. Like its counterparts at IRS and
FTB, TRA may order the release of a levy or notice to withhold
within 90 days if the TRA finds that the levy threatens the
taxpayer's health or welfare or that of his or her family for
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all taxes, but unlike the other two, may also return up to
$1,500 in previously collected funds to the taxpayer upon a
finding that the levy threatens the taxpayer's health or
welfare. However, TRA cannot return jeopardy determinations.
Neither the release nor the return affects tax due.
Proposed Law
Assembly Bill 1277 increases from $1,500 to $2,300 the amount of
levied funds the TRA may return on a monthly basis when the levy
threatens the health or welfare of the taxpayer or the
taxpayer's family. The bill conforms the Cigarette and Tobacco
Products Tax Law and the Fee Collection Procedures Law to also
allow the return under those laws. The measure directs BOE to
annually adjust the $2,300 threshold for inflation for all
taxes. Additionally, the measure allows the TRA to return
levied funds in the case of a seizure or property resulting from
a jeopardy assessment if the TRA finds collecting the assessment
is no longer in jeopardy.
State Revenue Impact
According to BOE, AB 1277 results in revenue losses of $4,600
annually.
Comments
1. Purpose of the bill . According to the author, "AB 1277
provides greater relief for taxpayers in dire financial
circumstances. This bill would increase the amount of levied
funds the Taxpayers' Rights Advocate is allowed to order
returned from $1,500 to $2,300 in cases where the levy threatens
the health or welfare of the taxpayer, their spouse, and family.
The amount has not been adjusted since the authority was
established in 1996. AB 1277 relieves taxpayers in severe
circumstances who would otherwise be financially devastated by a
levy."
2. Priorities . Tax collection relies on tangible penalties for
non-compliance; without enforcement, taxpayers in our largely
self-assessed tax system would only remit money to the
government out of generosity. While a notice of levy is a
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particularly harsh collections mechanism, this step is only
taken against taxpayers with delinquent tax debts who have
failed to pay taxes or fees due under the law, and ignored prior
voluntary collections efforts. AB 1277 would allow the TRA to
return these previously collected funds if it threatens the
health or welfare of the taxpayer or the taxpayer's family,
meaning that the state is providing the delinquent taxpayer a
temporary loan, when the taxpayer could instead use a credit
card, personal loan, or other method to meet living expenses.
While the return of levied funds doesn't absolve the debt, the
measure would allow funds that would be spent on public services
to be sent to the delinquent taxpayer instead. It is unclear
why the state to provide support for delinquent taxpayers who
may have access to other forms of credit.
3. Necessary ? According to BOE, TRA uses the authority
expanded by AB 1277 approximately once per year. Additionally,
no example exists of a case where TRA wanted to return more
funds to a taxpayer that met the criteria, but were limited by
the cap the bill hikes. The Committee may wish to consider
whether there's a sufficient problem that makes enacting AB 1277
necessary.
4. Related legislation . Earlier this year, the Committee
approved SB 540 (Hertzberg), which removed the sunset provision
authorizing FTB's taxpayer rights' advocate, and eliminating the
ceiling on tax relief the advocate could grant.
Assembly Actions
Assembly Floor 74-0
Assembly Appropriations 17-0
Assembly revenue and Taxation 7-0
Support and
Opposition (6/16/15)
Support : Board of Equalization, California Taxpayers
Association, BOE Member George Runner.
Opposition : Unknown.
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