BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 540|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
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THIRD READING
Bill No: SB 540
Author: Hertzberg (D)
Amended: 4/15/15
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/22/15
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach,
Pavley
SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/4/15
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen
SUBJECT: Franchise Tax Board: Taxpayers' Rights Advocate
SOURCE: Author
DIGEST: This bill repeals the sunset provision and removes the
relief amount limit for the Taxpayer Advocate Equity Relief
Program (Program).
ANALYSIS:
Existing law:
1)Authorizes the Taxpayers' Rights Advocate to resolve taxpayer
issues identified by the Franchise Tax Board (FTB), and to
grant relief from penalties, fees, or interest attributable to
any of the following:
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Erroneous action or erroneous inaction by FTB in
processing documents filed or payments made by taxpayers.
Unreasonable delay caused by FTB.
Erroneous written advice that does not qualify for
relief under the Chief Counsel's authority.
1)Allows the Taxpayers' Rights Advocate to grant relief only in
situations where no significant aspect of the error is
attributable to the taxpayer and relief is unavailable under
any other statute or regulation.
2)Allows a maximum relief amount of $7,600, and relief in excess
of $509 must be approved by FTB's Executive Officer.
3)Sunsets on January 1, 2016.
This bill:
1)Removes the sunset provision and the limit on the amount of
relief that shall be granted.
2)Specifies the retention period to be at least one year for
records of relief granted.
3)Allows the Taxpayers' Rights Advocate to grant relief in
coordination with FTB's Chief Counsel.
Comments
The Taxpayers' Rights Advocate. In 1988, the Katz-Harris
Taxpayers' Bill of Rights Act codified many existing FTB
administrative procedures and clarified the rights of California
taxpayers. It also established the position of a Taxpayers'
Rights Advocate to provide specified protections for taxpayers,
including a resolution of taxpayer complaints and problems. On
July 30, 1996, the federal Taxpayer Bill of Rights was passed,
and later, California followed by enacting the Taxpayers'
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Rights: Conformity Legislation. A few years later, the
California Legislature created the Taxpayers' Bill of Rights Act
of 1999, further increasing protection of taxpayers' rights.
The Taxpayers' Rights Advocate reports directly to the FTB's
Executive Officer. The Taxpayers' Rights Advocate or his/her
designee coordinates the resolution of taxpayer complaints and
problems, and, if appropriate, may postpone enforcement action
while the case is under review. In 2008, the Legislature
temporarily provided the Taxpayers' Rights Advocate with the
discretionary authority to grant relief to taxpayers under
limited circumstances. Specifically, beginning in
January 1, 2009, the Taxpayers' Rights Advocate was allowed to
provide relief from penalties, fees, additions to tax, or
interest imposed on a taxpayer because of erroneous actions or
inactions of the FTB.
Is the Taxpayers' Rights Advocate's permanent authority
justified? FTB notes that, in the absence of the Taxpayers'
Rights Advocate's authority to grant relief, eligible taxpayers
do have other avenues for obtaining relief from penalties, fees,
additions to tax or interest. For example, taxpayers may appeal
to the State Board of Equalization, file a lawsuit for refund of
taxes with a court, or file a claim with the Victim Compensation
and Government Claims Board for refund of tax or losses caused
by the action or inaction of a state agency. However, in those
cases, the taxpayers most likely will have to incur additional
costs, which may exceed the amount of penalties, interest, or
other additions to tax. FTB argues that the Taxpayers' Rights
Advocate has prudently applied the discretionary authority and
it is time to re-enact the law without the sunset provision.
Use of the Program. Since the enactment of the law on January
1, 2009, there have been three occurrences where the Taxpayers'
Rights Advocate exercised its authority and provided relief to
taxpayers. These occurrences are described below:
Interest was abated in the amount of $2,100 for a taxpayer
because of an erroneous action of processing the taxpayer's
return.
Interest was abated in the amount of $1,800 for a taxpayer
because of an unreasonable delay in issuing a bill because of
a technology upgrade.
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Interest totaling $1.1 million was abated for a group of 50
taxpayers including multiple years because of erroneous
written advice contained in the California Fiduciary tax form
instructions. The relief granted to each taxpayer was below
the statutory limit.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee, FTB
anticipates that the authority provided in this bill will result
in a minor General Fund impact. The actual impact is impossible
to estimate because it will be attributable to future errors and
delays caused by FTB and will depend upon the magnitude of any
impacts on taxpayers affected by those errors and delays.
SUPPORT: (Verified5/5/15)
California Taxpayers Association
Franchise Tax Board
OPPOSITION: (Verified5/5/15)
None received
ARGUMENTS IN SUPPORT: According to the author, "Filing taxes
can be challenging; it's even more frustrating for individuals
who fall victim to administrative errors and delays from the tax
collection agency. SB 540 improves the Taxpayers' Rights
Advocate program at the California Franchise Tax Board (FTB).
This program allows the Taxpayer Advocate to abate a taxpayer's
penalties, interest, and fees that occur because of erroneous
actions by the Franchise Tax Board's staff. Legislation created
this program in 2009 and it is set to expire on January 1, 2016.
SB 540 would make improvements to the current program by
removing a burdensome application process for taxpayers,
removing the dollar limitation on the abatement amount, and by
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clarifying that the Chief Counsel approves each request. SB 540
will extend and make permanent this valuable taxpayer relief
program."
Prepared by: Myriam Bouaziz / GOV. & F. / (916) 651-4119
5/6/15 17:02:38
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