BILL ANALYSIS Ó
SB 526
Page 1
Date of Hearing: August 3, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
SB 526
(Fuller) - As Amended January 13, 2016
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|Policy |Revenue and Taxation |Vote:|8 - 0 |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill modifies the Administration Franchise and Income Tax
Law (AFITL) to allow a court, in a proceeding for the
dissolution of marriage, to modify the amount an individual is
responsible for on a tax liability. Specifically, this bill:
1)Authorizes a court to relieve a spouse of joint and several
liability for the tax on income earned by, or subject to the
exclusive management and control of, the spouse, in certain
SB 526
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conditions.
2)Increases the amount of gross income and the amount of tax
liability to which a court order can apply without a tax
revision clearance certificate from the Franchise Tax Board
(FTB). Specifically, the amount of gross income is increased
from $150,000 to $200,000, and the amount of tax relief is
increased from $7,000 to $10,000. These two thresholds will be
adjusted for inflation starting on January 1, 2018.
FISCAL EFFECT:
The fiscal effects of this bill are unknown and impossible to
calculate. While this bill does not change the amount of tax
liability owed to the state, it could reduce collections by
concentrating tax liability among one spouse rather than
proportionally. For every $1 million granted in tax relief, an
estimated $60,000 in GF revenue would be lost.
COMMENTS:
1)Background. Under both federal and state law, spouses who file
a joint tax return are individually responsible for the
return's accuracy and for the full tax liability for that tax
year. This concept, referred to as "joint and several
liability," can inequitably impact one spouse in particular
circumstances. Because spouses can occasionally misrepresent
tax information on a joint return without the knowledge of the
other spouse, federal law allows an innocent spouse to qualify
for relief under specified circumstances, to which California
generally conforms.
SB 526
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2)Purpose. According to supporters, SB 526 will help state tax
agencies honor a divorce agreement that assigns tax liability
as part of the process of dividing assets and liabilities.
Supporters point out that the Board of Equalization (BOE)
regularly hears income tax case appeals where a spouse has
requested that the BOE enforce the terms of a divorce decree
and assign a tax liability to the spouse who has agreed to pay
it. In these cases, the FTB assigned a tax liability to both
spouses despite an agreement in the divorce proceedings to
allocate payment of the tax liability differently.
Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081