BILL ANALYSIS
SENATE REVENUE & TAXATION COMMITTEE
Senator Lois Wolk, Chair
AB 852 - Fong
Amended: July 1, 2009
Hearing: July 8, 2009 Fiscal: Yes
SUMMARY: Allows Assessors to Require Taxpayers to Submit
Personal Property Statements Electronically
EXISTING LAW (California Constitution) provides that
all property is taxable unless explicitly exempted by the
Constitution or federal law, and imposes property tax on
all taxable real and personal property. The Constitution
provides that taxation of real property (structures affixed
to the ground, etc.) is limited to the 1975 valuation
adjusted for new construction plus an annual inflation
factor of no more than 2%. When a change in ownership takes
place, real property is valued at full market value as of
the year the transaction takes place.
EXISTING LAW requires taxpayers with any taxable
personal property exceeding $100,000 in value must file a
property statement with assessors each year before May 7th,
and assessors must send property statements to taxpayers
required by law to submit the statement. Unlike real
property, assessors revalue personal property each year,
generally using the property's acquisition cost. Any
person owning property with an aggregate cost of below
$100,000 must submit a signed property statement upon
request of the assessor. The Board of Equalization (BOE)
prescribes the content of personal property statements, and
taxpayers must supply the required information under
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penalty of perjury. Taxpayers may submit personal property
statements electronically. Taxpayers filing a late
statement face a penalty of 10% of the tax due.
EXISTING LAW (California Constitution) creates BOE and
empowers it to oversee county assessors, and "equalize"
county assessment practices. As part of this
responsibility, BOE issues and updates the Assessors'
Handbook, which provides uniform guidance to California's
58 County Assessors. Thus far, neither the Assessors'
Handbook nor any other BOE advice provides standardized
equipment category codes.
THIS BILL allows Assessors to require taxpayers to
submit property statements under the following conditions:
The taxpayer submits the statement in a
form of Internet media and pursuant to methods
specified by the Assessors and BOE.
The taxpayer submits the statement with
an electronic signature verified by procedures
set forth by the Assessors and BOE.
The assessor must notify the taxpayer of
the electronic filing requirement. However, the
taxpayer need not comply until the year after
notification.
The value of the taxpayer's personal
property exceeds $100,000
THIS BILL allows the assessor to exempt from the
electronic filing requirement a taxpayer who demonstrates
that the requirement places an undue burden on his or her
business.
THIS BILL additionally requires BOE, in consultation
with the California Assessors' Association and
representatives of taxpayers to adopt equipment category
codes for electronically filed property statements by
January 1, 2011, and for taxpayers to use those codes after
January 1, 2012.
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FISCAL EFFECT:
According to BOE, AB 852 does not impact state
revenues or costs.
COMMENTS:
A. Purpose of the Bill
According to the Author, "AB 852 directs the Board of
Equalization to adopt equipment category descriptions, in
consultation with assessors and taxpayers, and allows an
assessor to require a business to file electronically.
This bill will provide incentives to assessors and
businesses to make the necessary transitions in their
electronic processing systems such that Business Property
Statements can be filed and accepted electronically
statewide. AB 853 will decrease the amount of paper
filings, which in turn will reduce human errors and costs
associated with postage, processing, and data entry."
B. Mother May I?
According to tax enforcement agencies, mandatory
electronic filing results in lower costs of processing tax
forms, and helps provide technologically savvy taxpayers
with a less costly and easier way of filing required forms
and paying taxes. State law now requires taxpayers with
estimated payments above $20,000 or total payments above
$80,000 to submit payments electronically; taxpayers face a
penalty of 1% of the tax due for failing to file
electronically, although FTB may grant a waiver upon
request by the taxpayer (AB 1839, Committee on Budget,
2008). FTB estimated cost savings of $4 million in the
first year of implementation, growing to $9 million in
future years.
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The Legislature first allowed assessors to accept
personal property statements in 2002 (SB 2092, Committee on
Revenue and Taxation), and seeks to make electronic filing
of the statements mandatory with this measure. However,
one universal axiom of tax policy posits that taxpayers
will not comply with a requirement unless specific
penalties apply for non-compliance, borne out in recent
years in California in both the tax amnesty program,
voluntary compliance initiative for abusive tax shelters
and the recently enacted corporate understatement penalty,
both of which produced estimates far in excess of
estimates. While existing law levies a general 10% penalty
for failing to timely file a personal property statement,
AB 852 contains no specific penalty for taxpayers failing
to file electronically after the assessor requires the
taxpayer to do so after following the measure's directions.
The Committee may wish to consider allowing assessors to
add a penalty for taxpayers failing to file electronically
in addition to the existing penalty to ensure the
efficiencies electronic filing promises are realized.
C. Amendments Needed
In an inadvertent drafting mistake, the most recent
amendments delete the bill's previous specificity regarding
the beginning date of the assessors' notification of the
electronic filing requirement. To remedy this problem, the
Committee should adopt the following amendment:
On Page 5, Line 10, before (5), insert: "The one
year period to comply with all existing filing
requirements and deadlines with paper filings
authorized pursuant to subparagraph (A) shall begin on
the date the notification required by this paragraph."
Additionally, as much as the Legislature desires state
agencies to timely implement its initiatives, occasionally
they do not do so, or only act after specified deadlines.
Because AB 852 requires taxpayers to comply with the new
equipment categories after BOE publishes the codes, and
fiscal stress upon the state forcing agencies to reduce
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staff and services, the measure should include a safety
valve providing that taxpayers need not comply with them
should BOE fail to publish the codes.
On Page 6, line 18, insert: "Taxpayers shall not be
penalized for failing to use the equipment category
codes specified in paragraph (1) if BOE fails to
publish the codes on or before the date specified in
(1)."
Support and Opposition
Support:California Assessors' Association
Oppose:None received
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Consultant: Colin Grinnell