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
SB 540
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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.
SB 540
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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