BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 1277 (Brough) - Tax administration: Taxpayers' Rights
Advocate: levy or notice to withhold: return of funds
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|Version: April 29, 2015 |Policy Vote: GOV. & F. 7 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: July 6, 2015 |Consultant: Robert Ingenito |
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This bill does not meet the criteria for referral to the
Suspense File.
Bill
Summary: AB 1277 would (1) increase the amount that the Board of
Equalization's (BOE's) Taxpayer Rights' Advocate can return to
taxpayers, and (2) allow the increased amount to grow in the
future, in line with inflation.
Fiscal
Impact:
Relative to current law, this measure would result in a
maximum first-year revenue loss of $800 each time the
Taxpayer Rights Advocate were to order levied funds
returned to taxpayers. The $800 maximum per-case revenue
AB 1277 (Brough) Page 1 of
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loss would increase in the out-years to reflect inflation;
thus, it would likely grow by two to three percent
annually. Based on this assumption, the annual maximum
per-case revenue loss would be about $1,300 by 2025-26.
Background: The California Constitution establishes BOE as a five-member
board composed of (1) four members elected by each district, and
(2) the State Controller. Currently, BOE administers more than
30 tax and fee programs, including the sales and use tax, excise
taxes, special taxes, and several of the State's fee programs.
As part of its tax administration duties, when a taxpayer's
voluntary compliance does not occur, BOE initially attempts to
collect unpaid amounts due by sending the taxpayer a series of
notices. Collectors then attempt to contact the taxpayer by
telephone. Should these attempts prove unsuccessful, BOE then
begins collections actions, which can include levies, wage
garnishments, warrants for collection, or license suspension, as
determined by collections staff. A notice of levy requires a
financial or other institution to place a hold on the taxpayer's
assets, 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.
Additionally, BOE can 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.
BOE's Taxpayer Rights Advocate (TRA), among other duties, has
authority to help taxpayers, including staying actions by BOE
where taxpayers have suffered irreparable loss as a result of
BOE staff actions. Like the counterparts at the Internal
Revenue Service and the Franchise Tax Board, the 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 all taxes, but unlike
the other two, may also return up to $1,500 in previously
AB 1277 (Brough) Page 2 of
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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:
This bill would do all of the following:
Increase from $1,500 to $2,300, in any monthly period,
the amount of levied funds that BOE's TRA may return when
the levy threatens the health or welfare of the taxpayer or
the taxpayer's family.
Direct BOE to annually adjust the $2,300 threshold for
inflation.
Conform the Cigarette and Tobacco Products Tax Law and
the Fee Collection Procedures Law to also allow the return
under those laws, thus giving the TRA the same authority
for all taxes and fees administered by BOE.
Allow 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.
Related
Legislation:
AB 1222 (Bloom, 2013-14) contained provisions
substantially similar to this bill. AB 1222 was
substantially amended in the Senate, and the TRA-related
provisions were removed.
AB 2249 (Bloom, 2013-14) contained provisions
substantially similar to this bill. The bill was not heard
AB 1277 (Brough) Page 3 of
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in a committee.
Staff
Comments: The maximum $1,500 amount that the TRA can return to
taxpayers has not been adjusted since 1996. However, information
provided by BOE indicates that, with respect to returning funds
to a taxpayer, (1) the TRA uses the authority that this bill
proposes to expand approximately once per year, and (2) the TRA
has never been constrained by the $1,500 cap in current law.
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