BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 540  


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          Date of Hearing:  August 19, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          SB 540  
          (Hertzberg) - As Amended July 15, 2015


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          |Policy       |Revenue and Taxation           |Vote:|9 - 0        |
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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:


          This bill extends indefinitely the Franchise Tax Board (FTB)  
          Taxpayers' Rights Advocate Equity Relief Program, increases the  
          maximum annual taxpayer relief amount from $7,500 to $10,000,  
          indexes that amount to inflation, and makes other minor and  
          technical changes relating to the administration of the program.


          FISCAL EFFECT:


          1)Minor and absorbable administrative costs to FTB to continue  
            program; possible cost savings if equitable relief actions  








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            help reduce cases that would otherwise result in appeal or  
            litigation.


          2)Impact to General Fund revenues will depend on the frequency  
            and magnitude of FTB errors, and is therefore unknown.   
            Historical experience suggests, however, that overall revenue  
            impact will be minor.


          COMMENTS:


          1)Purpose.  According to the author, filing taxes is  
            challenging, and administrative errors and delays are  
            particularly frustrating for taxpayers.  Supporters argue the  
            FTB Taxpayers' Rights Advocate is necessary to relieve  
            erroneously assessed penalties, fees, additions to tax, and  
            interest, and the state should be held accountable for causing  
            those errors and delays.  Supporters contend this program does  
            not result in significant costs to the state, even if the cap  
            is raised, because of strict standards under which the program  
            can grant refunds.


          2)The Taxpayers' Rights Advocate.  The FTB Taxpayers' Rights  
            Advocate was created in 1988 and its statutory authority has  
            been updated several times since.  Beginning January 1, 2009,  
            the Advocate has been able to provide relief from penalties,  
            fees, additions to tax, or interest, subject to concurrence  
            from the Chief Counsel for relief in excess of $500.  In 2012,  
            the Legislature imposed a $7,500 cap on the program and  
            extended authorization until January 1, 2016.  According to  
            FTB, there have been three instances since January 1, 2009 in  
            which relief was granted, two of which were under $2,500.  The  
            final instance involved $1.1 million in relief to 50 taxpayers  
            for multiple years because of erroneous advice contained in  
            fiduciary tax form instructions.









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          3)Alternative Remedies.  Absent the Advocate, taxpayers can  
            still obtain relief from penalties, fees, additions to tax,  
            and interest via appeal to the Board of Equalization or filing  
            suit for refund with a court.  In those cases, however, the  
            taxpayer will likely incur additional costs seeking the  
            refund, which may exceed the eventual refund amount.


          Analysis Prepared by:Joel Tashjian / APPR. / (916)  
          319-2081