BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1277| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1277 Author: Brough (R), et al. Amended: 4/29/15 in Assembly Vote: 21 SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 6/24/15 AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8 ASSEMBLY FLOOR: 74-0, 5/22/15 (Consent) - See last page for vote SUBJECT: Tax administration: Taxpayers' Rights Advocate: levy or notice to withhold: return of funds SOURCE: Board of Equalization DIGEST: This bill increases the amount the Board of Equalization's (BOE's) Taxpayer Rights' Advocate can return to taxpayers, including jeopardy determinations, and allows maximum return amounts to grow in the future according to inflation. ANALYSIS: Existing law: AB 1277 Page 2 1) Directs BOE to administer 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. 2) Provides that BOE also administer the Cigarette and Tobacco Products Tax Law, and other fee programs by applying the provisions of the Fee Collections Procedures Law, including the California Tire, Covered Electronic Waste Recycling, Fire Prevention, Marine Invasive Species, Water Rights Fees, Lumber Products Assessment, and the Natural Gas Surcharge. 3) Requires BOE to establish the Office of Taxpayer Rights Advocate (TRA) to facilitate the resolution of taxpayer complaints including any tax or feepayer complaints regarding unsatisfactory treatment of taxpayers by board employees, and stay actions where taxpayers have suffered or will suffer irreparable loss as the result of those actions. 4) Directs TRA to report directly to the executive officer of the BOE. 5) Permits BOE to impose a notice to withhold or levy to collect delinquent taxes, which requires a financial or other institution to place a hold on the taxpayer's income or assets held by that institution, and then remit the tax or fee due to BOE out of these funds. 6) Requires BOE to send a copy of the notice of levy to the taxpayer. 7) Allows BOE to make a "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 AB 1277 Page 3 authorized and necessary to collect the determined liability, including a notice to withhold or levy. 8) Allows TRA to order the release of a notice to withhold or levy 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 12 tax laws. 9) Allows TRA to 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 does not have this authority under the Cigarette and Tobacco Products Tax Law and the Fee Collections Procedures Law. 10)Does not allow TRA to return or release funds collected or property seized as a result of jeopardy determinations. This bill: 1) Allows TRA to return funds collected under a notice of levy or withholding under the Cigarette and Tobacco Products Tax Law and the Fee Collections Procedures Law. 2) Increases from $1,500 to $2,300 the amount of funds collected under a notice of levy or withholding the TRA may return on a monthly basis under all 12 tax laws. 3) Directs BOE to increase the $2,300 maximum amount annually according to inflation under all 12 tax laws. 4) Permits TRA to return or release funds collected as a result of jeopardy determinations under all 12 laws if the TRA finds collecting the assessment is no longer in jeopardy. Comments AB 1277 Page 4 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 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 allows 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, this bill allows funds that would be spent on public services to be sent to the delinquent taxpayer instead. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No SUPPORT: (Verified7/15/15) Board of Equalization (source) Board of Equalization Member George Runner California Taxpayers Association OPPOSITION: (Verified7/15/15) None received ARGUMENTS IN SUPPORT: 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 AB 1277 Page 5 established in 1996. AB 1277 relieves taxpayers in severe circumstances who would otherwise be financially devastated by a levy." ASSEMBLY FLOOR: 74-0, 5/22/15 AYES: Achadjian, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Wilk, Williams, Wood, Atkins NO VOTE RECORDED: Alejo, Jones, O'Donnell, Olsen, Waldron, Weber Prepared by:Colin Grinnell / GOV. & F. / (916) 651-4119 7/15/15 15:00:35 **** END ****