BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 347
                                                                  Page  1

          Date of Hearing:   May 20, 2009

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Kevin De Leon, Chair

                      AB 347 (Block) - As Amended:  May 4, 2009 

          Policy Committee:                              Revenue and  
          Taxation     Vote:                            6-2

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  


          This bill authorizes the Board of Equalization (BOE) to impose a  
          25% penalty on any audit-related tax deficiency when a taxpayer  
          fails to furnish, within 30 days, information or documents  
          requested in writing by the board during an examination or audit  
          engagement, unless the failure is due to reasonable cause and is  
          not due to willful neglect.

           FISCAL EFFECT  

          1)Administrative costs to BOE to revise regulations and inform  
            taxpayers are minor and absorbable.

          2)Unknown, potentially significant (more than $1 million) in  
            penalties and accelerated collections due to more timely audit  
            compliance.

           COMMENTS  

           1)Purpose . This bill is sponsored by the BOE in order to make  
            its audit processes more timely and effective. In recent  
            years, the BOE states it has observed a notable increase in  
            the use of delaying tactics by taxpayers and/or their  
            representatives. They assert that this strategy slows the  
            audit process, negatively impacts the BOE's overall audit  
            program, and ultimately reduces revenues to the GF. The  
            proposed penalty is similar to the 25% that the Franchise Tax  
            Board (FTB) has been authorized to impose under state personal  
            income tax laws since 1943.









                                                                  AB 347
                                                                  Page  2

           2)Opponents  (including the California Bankers Association and  
            the Chamber of Commerce) state that comparisons to the FTB  
            penalty are inappropriate, since BOE taxpayer record requests  
            are more expansive and complicated than FTB's, often involving  
            extensive computerized records. They claim that many disputes  
            over audit requests are legitimate, to the extent that BOE's  
            audits sometimes involve "unfettered access to taxpayer  
            records, even when the taxpayer's own tax department has  
            restricted access based on security protocol."    

           Analysis Prepared by  :    Brad Williams / APPR. / (916) 319-2081