BILL ANALYSIS
AB 2440
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 2440 (Klehs)
As Amended August 14, 2006
Majority vote
-----------------------------------------------------------------
|ASSEMBLY: |47-32|(May 31, 2006) |SENATE: |28-9 |(August 22, |
| | | | | |2006) |
-----------------------------------------------------------------
Original Committee Reference: JUD.
SUMMARY : Makes individuals and business entities that knowingly
assist child support obligors evade their child support debt
liable, as specified. Specifically, this bill :
1)Declares the intent of the Legislature that an estimated $19
billion is owed in unpaid child support and that the failure to
pay support subjects children to poverty.
2)Makes any person or business entity that knowingly assists a
child support obligor to escape, evade or avoid paying
court-ordered child support liable for three times the value of
the assistance provided, up to a maximum of the entire child
support debt. Requires any funds collected to be paid to the
obligee, but do not reduce the obligor's unpaid child support
obligation
3)Defines "knowing assistance" as:
a) With actual knowledge of the child support obligation,
helping to hide or transfer assets of the obligor. This
provision does not apply to a financial institution unless
the institution has actual knowledge of the child support
obligation and, with that knowledge assists the obligor, as
specified;
b) If the individual or entity knew or should have known of
the child support obligation, hiring or engaging the child
support obligor as an employee or independent contractor and
failing to timely report the hire to Employment Development
Department (EDD) as required; or,
c) If the individual or entity knew or should have known of
the child support obligation, when engaged in a trade or
AB 2440
Page 2
business paying wages to the obligor that are not reported to
EDD as required, including payment in cash, via barter or
trade.
The Senate amendments reduce the liability from 10 times the
amount of assistance provide to three times the amount, change the
liability from joint and several, exempted financial institutions,
as specified, and require either actual knowledge of the child
support obligation or that the individual or entity knew or should
have known of that obligation, as specified.
EXISTING LAW :
1)Governs the collection of child support.
2)Requires employers to file with EDD a report, within 20 days of
the hiring, of any new employee hired who works in California
and to whom the employer anticipates paying wages. Requires
each service recipient to file with EDD a report of any service
provider (i.e., independent contactor) engaged by the service
recipient within 20 days of either paying them at least $600 or
agreeing to pay them at least $600, whichever comes first.
3)Makes fraudulent, under the Uniform Fraudulent Transfer Act, a
transfer by a debtor with intent to hinder, delay or defraud any
creditor of the debtor or without receiving a reasonably
equivalent value in exchange for the transfer.
4)Makes an employer who willfully fails to withhold child support
pursuant to a valid earnings assignment liable for the support
not withheld and forwarded.
AS PASSED BY THE ASSEMBLY , this bill made liability joint and
several with the child support obligor and set liability at 10
times the assistance provided, up to a maximum of the entire child
support debt. The bill also did not have a specific exemption for
financial institutions and did not specifically require specified
knowledge for liability purposes.
FISCAL EFFECT : None
COMMENTS : This bill seeks to both improve child support
collections and help curtail the underground economy by making any
person or business entity that knowingly assists a child support
obligor evade his or her responsibility liable for three times the
AB 2440
Page 3
value of the assistance provided, up to the total amount of the
child support debt. Under this bill, "knowingly assists" is
defined to include: 1) with actual knowledge of the child support
obligation, helping to hide or transfer assets, as specified; 2)
if the individual or entity knew or should have known of the child
support obligation, hiring the child support obligor as an
employee or independent contractor and failing to timely report
the hire to EDD; or, 3) if the individual or entity knew or should
have known of the child support obligation, when engaged in a
trade or business, paying wages to the obligor that are not
reported to EDD, such as payment in cash, or via barter or trade.
The author believes this bill is necessary to help get child
support to needy children and thus help children avoid poverty.
Additionally, this bill could help reduce the underground economy:
The underground economy not only is illegal but hurts
California and many Californians in variety of ways; one
such atrocity is evading child support obligations.
According to The National Center for Policy Analysis,
"Economists estimate that as many as 25 million
Americans earn a large part of their income from
underground activities". . . . The Employment
Development of California estimates that in California
the underground economy generates $60 to $140 billion.
In terms of tax revenue this is over $3 billion each
year the State is losing. . . . The underground
economy causes law abiding business to pay higher taxes
and expenses, and puts the employees of underground
employers in danger because their working conditions may
not meet legal standards and they might not be receiving
legally mandated wages and benefits. Additionally, by
not having their earnings reported parents who owe child
support avoid having to pay it, because it appears to
the government they have no income from which they could
pay their child support.
Analysis Prepared by : Leora Gershenzon / JUD. / (916) 319-2334
FN: 0016225