BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2201|
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THIRD READING
Bill No: AB 2201
Author: Brough (R), et al.
Introduced:2/18/16
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 6/8/16
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach,
Pavley
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 76-0, 4/28/16 (Consent) - See last page for
vote
SUBJECT: State Board of Equalization: administration:
interest
SOURCE: Board of Equalization
DIGEST: This bill reenacts the Board of Equalizations authority
to calculate interest on a daily, not monthly, basis for tax and
fee payments made one business day late under specified
circumstances.
ANALYSIS:
Existing law:
1)Creates the five-member Board of Equalization (BOE), composed
of four members elected by district and the State Controller,
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Page 2
to equalize rates and assessment practices among counties.
2)Charges BOE with administering the Sales and Use Tax,
locally-imposed transactions and use taxes, several excise
taxes, and more than 30 other fee programs.
3)Imposes penalties generally equal to 10 percent of the tax
due, plus monthly, simple interest calculated beginning on the
due date and ending on the date it was paid, when taxpayers
pay taxes or fees after the due date.
4)Requires, generally, BOE to calculate interest on a per-month
basis, so one month's interest is charged for each month or
fraction of a month that a payment is late.
5)Allows BOE to relieve the taxpayer of penalties when they find
that the person's failure to make a payment in a timely manner
was due to reasonable cause and circumstances beyond the
person's control, and occurred notwithstanding ordinary care
and the absence of willful neglect.
6)Restricts BOE from waiving interest only in cases where the
late payment was due to an error or unreasonable delay caused
by BOE employees.
This bill:
1)Allows BOE to compute interest at the modified adjusted daily
rate for payments made one day after the due date, but only
when meeting as a public body, and taking into account all
facts and circumstances, determine that it is inequitable to
compute interest on a monthly basis. BOE must also have
granted relief from all penalties that applied to that
payment, and the person must have filed a request for an oral
hearing before BOE.
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2)States that its change to interest calculation does not apply
to payments made pursuant to deficiency determinations,
determinations where no return is filed, or jeopardy
determinations.
3)Defines several terms, and sets forth a method to calculate
daily interest.
4)Applies its change to the Sales and Use Tax, Motor Vehicle
Fuel Tax, Use Fuel Tax, the Gross Premiums Tax, Cigarette Tax,
Alcoholic Beverages Tax, Energy Resources Surcharge, Emergency
Telephone Users Surcharge, Prepaid Mobile Telephony Services
Surcharge, Integrated Waste Management Fee, Underground
Storage Tank Fee, Fee Procedures Collections Law, and Diesel
Fuel Tax.
Background
Until recently, the Legislature allowed BOE to instead charge
interest at the modified adjusted daily rate when (SB 1028,
Correa, Chapter 316, Statues of 2010):
BOE, meeting as a public body, taking into account all facts
and circumstances, determines that it is inequitable to
compute interest on a monthly basis,
The payment or prepayment was one business day late,
BOE granted relief from all penalties that applied to that
payment, and
The person files a request for an oral hearing before BOE.
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SB 1028 applied to the Sales and Use Tax, Motor Vehicle Fuel
Tax, Use Fuel Tax, the Gross Premiums Tax, Cigarette and Tobacco
Products Tax, Alcoholic Beverages Tax, Energy Resources
Surcharge, Emergency Telephone Users Surcharge, Hazardous
Substances Tax, Prepaid Mobile Telephony Services Surcharge,
Integrated Waste Management Fee, Oil Spill Fee, Underground
Storage Tank Fee, Diesel Fuel Tax, as well as the statute used
to collect many other fees, the Fee Procedures Collections Law.
However, SB 1028 sunset on January 1, 2016, so today, BOE must
charge a full month's interest for payments and prepayments made
one day after the due date. BOE wants to reenact this
authority.
For many years, BOE administrative policy allowed a one-day
grace period when a payment was postmarked one day late.
However, during a policy review, BOE counsel opined that no
legal authority supported the grace period, so BOE ended it,
until the Legislature enacted AB 1638 (Assembly Committee on
Revenue and Taxation, Chapter 929, Statutes of 1999). AB 1638
allows BOE to establish a uniform policy to accept payments as
timely when the payment or document's envelope or delivery
document's stamped cancellation mark shows a date after the
statutory due date, which uniform BOE policy implements to allow
acceptance of payments postmarked one day after the due date.
However, because this authority applied only to payments made by
mail or commercial delivery service, late electronic payments
are not eligible for the one-day grace period, which can create
hardships due to mandatory electronic payment requirements
imposed by state law on taxpayers with average monthly sale and
use tax liability of $10,000 or more (or special tax liability
of $20,000 or more). This bill reenacts SB 1028's extension of
the grace period to electronic payments made to BOE, similar to
practices used by the Franchise Tax Board and Employment
Development Department.
While SB 1028 contained a five-year sunset, this bill does not
contain one. BOE states that it granted 122 interest relief
claims in the past three years, ranging from $14.59 to
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$17,620.85.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
SUPPORT: (Verified6/28/16)
Board of Equalization (source)
Board of Equalization Member Fiona Ma
California Chamber of Commerce
California Taxpayers Association
OPPOSITION: (Verified6/28/16)
None received
ARGUMENTS IN SUPPORT: According to the author, "AB 2201
reinstates expired provisions to allow Members of the State
Board of Equalization to have flexibility to address the
inequity of applying an entire month's interest to an electronic
tax payment that is paid one day late, due to reasonable
circumstances. It is unfair to charge a month's worth of
interest on tax liabilities that are just one day late often
because they posted after the financial system stops processing
them on the due date. This bill allows the BOE to continue a
practice that provides reasonable relief for taxpayers."
ASSEMBLY FLOOR: 76-0, 4/28/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,
Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper,
AB 2201
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Dababneh, Dahle, Dodd, Eggman, Frazier, Beth Gaines,
Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,
Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger
Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey,
Levine, Linder, Lopez, Low, Maienschein, Mayes, McCarty,
Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell,
Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Rendon
NO VOTE RECORDED: Chávez, Daly, Mathis, Olsen
Prepared by:Colin Grinnell / GOV. & F. / (916) 651-4119
6/29/16 15:46:01
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