BILL ANALYSIS Ó SB 540 Page 1 Date of Hearing: August 19, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair SB 540 (Hertzberg) - As Amended July 15, 2015 ----------------------------------------------------------------- |Policy |Revenue and Taxation |Vote:|9 - 0 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- 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 SB 540 Page 2 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. SB 540 Page 3 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