BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 526|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
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UNFINISHED BUSINESS
Bill No: SB 526
Author: Fuller (R) and Runner (R)
Amended: 1/13/16
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 6-0, 4/29/15
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Pavley
NO VOTE RECORDED: Moorlach
SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/28/15
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen
SENATE FLOOR: 39-0, 6/2/15
AYES: Allen, Anderson, Bates, Beall, Berryhill, Block,
Cannella, De León, Fuller, Gaines, Galgiani, Glazer, Hall,
Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Lara, Leno,
Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Moorlach,
Morrell, Nguyen, Nielsen, Pan, Pavley, Roth, Runner, Stone,
Vidak, Wieckowski, Wolk
NO VOTE RECORDED: Jackson
ASSEMBLY FLOOR: 78-0, 8/11/16 (Consent) - See last page for
vote
SUBJECT: Personal income taxes: joint returns: court
orders: relief from liability
SOURCE: Board of Equalization Member George Runner
DIGEST: This bill allows a court as part of a proceeding for
the dissolution of a marriage to revise the person responsible
for tax on income earned by his or her spouse or under their
exclusive management and control under specified circumstances.
SB 526
Page 2
Assembly Amendments delete the bill's provisions directing the
Franchise Tax Board (FTB) to consider the terms of a divorce
settlement when determining whether to grant equitable relief on
a taxpayer's own income, and instead allow a court as part of a
proceeding for the dissolution of a marriage to revise the
person responsible for tax on income earned by his or her spouse
or under their exclusive management and control.
ANALYSIS:
Existing law:
1)Requires spouses and registered domestic partners (RDPs)
filing as "married filing jointly" to be individually
responsible for the return's accuracy and the tax liability,
regardless of the amount of income each spouse generates,
often called "joint and several" liability.
2)Empowers courts to revise liabilities in a proceeding for the
dissolution of the marriage under specified circumstances, so
long as the court order:
a) Separately states the income tax liabilities for the
taxable years for which revision of tax liability is
granted.
b) Does not revise a tax liability that has been fully paid
prior to the effective date of the order; however, any
unpaid amount may be revised.
c) Becomes effective when FTB is served with or
acknowledges receipt of the order.
SB 526
Page 3
3)Provides that court orders revising liabilities are only
effective if the gross income reportable on the return exceeds
$150,000, or the amount of liability exceeds $7,500, unless a
tax revision certificate is obtained from FTB and filed with
the court.
4)Does not allow a court to relieve a spouse of tax liability on
income that he or she earns or has exclusive management and
control over.
This bill:
1)Allows a court to revise the individual responsible for all or
part of the liability as part of a proceeding for dissolution
of the marriage so long as the overall liability is not
reduced.
2)Increases the threshold for the order to be effective from
$150,000 in gross income to $200,000, or $7,500 in liability
to $10,000, and indexes both amounts for changes in inflation
as measured by the California Consumer Price Index.
3)Provides that any court order revising the individual
responsible for tax liability on income earned by or subject
to the exclusive management and control of that spouse shall
not be effective if:
a) The individuals filing the joint return transfer assets
or liabilities between themselves for the principal purpose
of avoidance of the payment of tax or as part of a
fraudulent scheme by those individuals, or
b) The liability is uncollectible, and within three years
of the date the court order is effective, the spouse
obligated to pay that liability under the court order files
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Page 4
for bankruptcy and discharges the liability in bankruptcy,
or becomes a nonresident.
4)Applies to court orders served or acknowledged on or after the
bill's effective date.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Assembly Appropriations Committee, 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.
SUPPORT: (Verified8/12/16)
Board of Equalization Member George Runner (source)
Board of Equalization Member Fiona Ma
OPPOSITION: (Verified8/12/16)
None received
ARGUMENTS IN SUPPORT: According to the author, "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
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Page 5
liability to both spouses despite an agreement in the divorce
proceedings to allocate payment of the tax liability
differently."
ASSEMBLY FLOOR: 78-0, 8/11/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, 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,
Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine,
Linder, Lopez, Maienschein, Mathis, Mayes, McCarty, Medina,
Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,
Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Rendon
NO VOTE RECORDED: Roger Hernández, Low
Prepared by:Colin Grinnell / GOV. & F. / (916) 651-4119
8/12/16 13:23:54
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