BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 540 (Hertzberg) - Franchise Tax Board: Taxpayers' Rights
Advocate
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|Version: April 15, 2015 |Policy Vote: GOV. & F. 7 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: May 4, 2015 |Consultant: Robert Ingenito |
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This bill does not meet the criteria for referral to the
Suspense File.
Bill Summary: SB 540 would modify the Franchise Tax Board's
(FTB's) Taxpayer Advocate Equity Relief Program by (1) repealing
the sunset provision and (2) removing the current-law relief
amount limit.
Fiscal Impact:
FTB indicates that (1) any impacts to the staff of its
Taxpayer Right's Advocate would be minor and absorbable, and
(2) the bill would likely result in minor administrative
savings related to avoided litigation and appeals costs.
SB 540 (Hertzberg) Page 1 of
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The bill's impact to General Fund revenues is unknown, and
would depend upon the frequency and magnitude of future FTB
errors. However, based on historical experience, FTB
estimates minor revenue impacts (see Staff Comments).
Background: Under current law, the position of the Taxpayers'
Rights Advocate (Advocate) within FTB coordinates the resolution
of taxpayer complaints and problems. Current law provides the
Advocate with discretionary authority to abate penalties,
interest, fees, or additions to tax owed by a taxpayer as a
result of specified FTB errors or delays. The Advocate could
only provide relief if no part of the error or delay could be
attributable to the taxpayer, and when relief was not otherwise
available. Under current law, the Advocate relief provisions
will be repealed on January 1, 2016.
The total amount of relief that may be granted under the
Advocate's discretionary authority and the threshold for
approval are indexed annually for inflation. For tax year 2013,
total relief granted under the Advocate's discretionary
authority may not exceed $7,600, and relief in excess of $509
must be approved by FTB's Executive Officer.
Relief at any level requires a public record to be placed in the
office of FTB's Executive Officer that includes specified
information.
A refund may be paid as a result of the relief granted only if
the written claim for relief is received by the Advocate within
the applicable statute of limitations. Any decision for relief
is not subject to review in any administrative or judicial
proceeding and no other entity may participate in the grant or
denial of relief.
Proposed Law: This bill would remove the sunset provision and
the limit on the amount of relief that shall be granted.
Additionally, the bill would specify the retention period to be
at least one year for records of relief granted. The bill would
provide that the relief shall be granted by the Advocate in
coordination with FTB's Chief Counsel.
Staff Comments: This bill would continue to provide a process
for taxpayers to receive relief from penalties, interest, fees,
SB 540 (Hertzberg) Page 2 of
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or additional tax liabilities when those amounts are a direct
result of FTB errors or delays, and if relief of those charges
is not available elsewhere under existing law.
FTB notes that the Advocate exercised the authority to grant
relief on three occasions dating back to 2009. One instance
resulted in interest relief provided to a single taxpayer of
$2,100 related to a processing error of an individual return.
The second instance concerned interest totaling $1,800 that was
abated because of an unreasonable delay in issuing a bill as a
result of a technology upgrade. The third instance was
attributable to incorrect instructions in the Fiduciary tax
return booklet, which affected about 50 trusts that
inadvertently underpaid the Mental Health Services Tax for up to
four year each as a result of FTB's error. In this case, the
Advocate abated total interest of about $1.1 million. FTB could
not provide relief under the general interest abatement statutes
because the error was discovered before notifying taxpayers of
the error, but relief would have been available if FTB had
contacted taxpayers about the error. In a sense, the Advocate's
authority to refund interest in this case relieved FTB of the
administrative burden of notifying taxpayers of the error and
processing claims for reimbursement. The ultimate outcome of
providing relief would have been available in either case.
Based upon this experience, FTB anticipates that the authority
provided in this bill would result in a minor General Fund
impact. The actual impact is impossible to estimate because it
would be attributable to future errors and delays caused by FTB
and would depend upon the magnitude of any impacts on taxpayers
affected by those errors and delays.
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