BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |AB 1856 |Hearing |6/15/16 |
| | |Date: | |
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|Author: |Dababneh |Tax Levy: |No |
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|Version: |4/6/16 |Fiscal: |No |
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|Consultant|Bouaziz |
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Excise taxes: claim for refund: timely filed claims
Allows a taxpayer making installment payments on an outstanding
liability on taxes administered by the Board of Equalization
(BOE) to file a single claim for refund to cover all prior
overpayments and all subsequent overpayments.
Background
State law provides that when a taxpayer overpays a tax,
interest, fee, or penalty to BOE, he or she must file a claim
for refund within a specified period to recover amounts
overpaid. The law requires a claim for refund to be in writing
and state the specific grounds for the claim.
Under existing Sales and Use Tax Law, a claim for refund must be
filed within the latest of the following periods:
Three years from the due date of the return for the
period for which the claimed overpayment was made;
Six months from the date of the (claimed) overpayment;
Six months from the date a determination (billing)
became final; or
Three years from the date BOE collected an involuntary
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payment by the use of enforcement procedures, such as
levies or liens.
State law provides that any taxpayer who wants to protest a
notice of determination must file a petition for redetermination
within 30 days of the determination becoming final. The only
recourse for taxpayers who miss a 30-day deadline to file a
formal protest of an audit determination is to pay the tax owed
and file a claim for refund. A claim for refund is only valid
for payments made 6 months before the claim is submitted.
Similar statutes cover the Use Fuel Tax, Cigarette and Tobacco
Products Tax, Alcoholic Beverage Tax, Energy Resources
Surcharge, Emergency Telephone Users Surcharge, Hazardous
Substance Tax, Integrated Waste Management Fee, Oil Spill
Response, Prevention, and Administration Fees, Underground
Storage Tank Fee, Fee Collections Procedures, and Diesel Fuel
Tax Laws.
State law allows a taxpayer that is making installment payments
on an outstanding income tax liability to the Franchise Tax
Board to file a single claim for refund to cover the entire
repayment period. AB 1856 seeks to also allow a taxpayer to
file a single claim for refund to cover the entire repayment
period for liabilities owed to BOE
Proposed Law
Assembly Bill 1856 allows a taxpayer making installment payments
on an outstanding liability on taxes administered by BOE to file
a single claim for refund to cover all prior overpayments and
all subsequent overpayments.
AB 1856 applies to refunds under the Sales and Use Tax Law, Use
Fuel Tax, Cigarette and Tobacco Products Tax, Alcoholic Beverage
Tax, Energy Resources Surcharge, Emergency Telephone Users
Surcharge, Hazardous Substance Tax, Integrated Waste Management
Fee, Oil Spill Response, Prevention, and Administration Fees,
Underground Storage Tank Fee, Fee Collections Procedures, and
Diesel Fuel Tax Laws.
State Revenue Impact
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According to BOE, this bill results in unknown revenue loss due
to refunds currently barred by statute.
Comments
1. Purpose of the bill. According to the author, "This bill
allows a taxpayer making installment tax payments to file a
single claim for refund to cover the period. Taxpayers who have
entered into an installment payment plan often mistakenly
believe they need only file one claim for refund at the
conclusion of the payment plan, rather than filing claims for
refund for each payment within six months after the date of
payment. This proposal is prompted by several cases in which
the taxpayer was barred by the statute of limitations from
recovering all the installment payments made to the BOE even
though the determination was either cancelled or reduced to an
amount less than the total payments received. In each case, the
taxpayer did not file a timely petition for redetermination,
made multiple payments for one liability, but did not file
refund claims for each installment payment. AB 1856 will
provide equitable relief for taxpayers who would be barred from
receiving a refund for one or more installment payments because
they did not file a timely claim for refund for each individual
payment."
2. Issue at hand. In the case when a taxpayer does not believe
sales tax is due, but BOE has determined otherwise and issues a
billing for an amount due, the taxpayer may protest and submit a
petition for redetermination. If the taxpayer fails to submit a
petition for redetermination, BOE puts the taxpayer into
repayment, who must then submit a monthly installment payment to
BOE to satisfy the amount due. However, a taxpayer may only
submit a claim for refund for payments made during a six month
period before submitting the claim. Thus, a taxpayer would have
to file a new claim every six months until the repayment period
is over. According to BOE, in some instances the taxpayer is
not aware of the requirement to file multiple refund claims
throughout the repayment period. Instead, the taxpayer believes
that they may file a single refund claim to recover the entire
amount. If the taxpayer files the claim after the first
payment, the taxpayer may only recover the first payment. In
instances where the taxpayer waits until the final payment has
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been made to file a refund claim, the statute of limitations
prevents the taxpayer from recovering all of their payments and
they are only allowed the last 5-6 payments at most.
3. Example taxpayer. Sunnyside Produce does not remit sales
tax to BOE on all squash sold because Sunnyside Produce does not
believe that squash is subject to sales tax under California
law. However, BOE does believe squash sales are subject to
sales tax and sends Sunnyside Produce a determination of $2,400.
Sunnyside Produce waits 35 days to file a petition for
redetermination. Because the petition for redetermination is
filed after the 30-day deadline, BOE puts Sunnyside Produce into
repayment. Sunnyside Produce has to pay $100 a month for two
years while the appeal goes through the process. Sunnyside
Produce submits a claim for refund after making 6 payments.
After the end of the payment period, Sunnyside Produce wins the
appeal. However, Sunnyside Produce is only refunded $600,
because a claim for refund is only valid for payments made 6
months before the claim is submitted. Sunnyside Produce has
overpaid $1,800 to BOE, and would only be able to recover
another 6 months of payments if Sunnyside Produce submits an
additonal refund claim. Under AB 1856, the initial claim would
have allowed Sunnyside Produce to recover the entire $2,400.
Assembly Actions
Assembly Revenue and Taxation 9-0
Assembly Appropriations 16-0
Assembly Floor 76-0
Support and
Opposition 6/9/16)
Support : Board of Equalization; California Taxpayers
Association.
Opposition : Unknown.
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