BILL ANALYSIS
SENATE REVENUE & TAXATION COMMITTEE
Senator Lois Wolk, Chair
AB 1530 - Skinner
Amended: June 14, 2010
Hearing: June 23, 2010 Fiscal: Yes
SUMMARY: Allows FTB to Collect Restitution Orders in the
Same Way that it Collects Tax Liabilities
EXISTING LAW authorizes the Franchise Tax Board (FTB)
to administer the Personal Income Tax Law and Corporation
Tax Law. FTB may refer cases for criminal prosecution for
certain offenses, and the court may require the
restitution, for the following crimes:
Failure to file returns
Forging a spouse's signature
False, fraudulent, or deceptive conduct
Tax evasion
Conversion of a taxpayer refund by a tax
preparer
Employer's failure to collect or deposit
tax
EXISTING LAW further authorizes FTB to file an action
in civil court for a civil judgment under the Code of a
Civil Procedure.
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EXISTING LAW allows the Franchise Tax Board (FTB) to
collect criminal restitution fines under the Court Ordered
Debt (COD) program, in addition to fines, state or local
penalties, forfeitures, in amounts that exceed $100 in the
aggregate and are more than ninety days delinquent to the
Franchise Tax Board (FTB) (AB 3343, Hannigan, 1994), and
subsequently expanded and extended (SB 246, Escutia, 2004).
Restitution orders must be imposed by a governmental
entity that:
Is authorized to collect on behalf of the
state or victim.
Is responsible for distributing the
restitution order collections
Ensures that it coordinates with any
other related collection activities that may
occur during that debt.
EXISTING LAW allows FTB to collect these amounts using
wage garnishments, bank levies, and Notices of State Tax
Liens when an amount is due and payable, and the taxpayer
has not paid. Garnishments and levies are treated like
warrants issued as part of the civil process.
EXISTING LAW establishes a priority for payment of
debts when multiple debts are owed by the same taxpayer and
are collected by the FTB. In order:
1. Child Support Delinquencies
2. Payment of taxes, additions to
tax, penalties and interest,
3. Delinquent wages
4. Delinquent Vehicle License Fees
5. Amounts due under the COD
program
6. Amounts referred for collection
under the Cal-OSHA targeted inspection
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program.
7. Delinquent penalties collected
for the Department of Industrial Relations
8. Delinquent fees collected for
the Department of Industrial Relations
9. Delinquencies referred by the
Student Aid Commission
THIS BILL allows FTB to collect restitution orders,
fines, penalties, or any other amounts awarded to FTB by a
court of competent jurisdiction in criminal proceedings in
the same way that it collects tax liabilities, although the
inclusion of fines, penalties, or any other amounts awarded
to FTB by the courts was erroneously included in the draft,
and will be removed to conform with the Author's intent
(See Comment D). The measure specifies that the provisions
to the Personal Income Tax Law, the Administration of the
Franchise and Income Tax Law, the Taxpayers' Bill of
Rights, and the Corporation Tax Law shall apply to amounts
collected under this bill, unless a conflict exists.
THIS BILL allows taxpayers to designate voluntary
restitution payments as the taxpayer designates, but no
refund or credit is allowed.
THIS BILL provides that for all amounts authorized to
be collected before, on, or after January 1, 2011:
Interest accrues for the above
collections at the greater rate of restitution
orders (10% per year) or tax penalties, which are
computed according to a statutory formula.
Collection amounts are not bound by
statutes of limitation.
FTB may file Notices of State Tax Lien at
any time until the amount is paid in full.
FTB may retain an amount to compensate
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for its investigatory costs out of the
restitution amount.
FISCAL EFFECT:
FTB estimates increases collections of $50,000 in
2009-10, $100,000 in 2010-11, and $100,000 in 2011-12.
COMMENTS:
A. Purpose of the Bill
The author provides the following statement:
AB 1530 is sponsored by the Franchise Tax Board.
This bill would provide the FTB express authority to
collect orders of restitution awarded to the
department in criminal proceedings in the same manner
as tax debts. Authorizing the FTB to use its
efficient electronic tax collection tools would
improve the process of collecting orders of
restitution awarded to the FTB and ensure prompt
follow up on debts by allowing the tax collection
system to monitor accounts for assets that could lead
to satisfaction of the debt. Orders of restitution
consist primarily of the taxes, penalties, and
interest owed to the FTB and should be collected as
such.
B. The Long Arm of the Law
FTB provides the following background on AB 1530:
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"The FTB can seek restitution for economic losses incurred
as a result of a crime. The order of restitution provides
that the FTB (as a victim of the crime) receive restitution
of the FTB's economic loss from a person convicted of a
crime. The FTB's economic loss in these situations is the
amount of state income tax (including applicable penalties,
interest and costs of investigation or prosecution) that
the person failed to pay as a result of the crime for which
the person is guilty. Because an order of restitution is
not specifically a tax or a tax penalty, when awarded in
any criminal case, the FTB's administrative tax collection
tools are unavailable for use in collecting restitution
orders owed to the FTB.
Currently, the FTB could collect its orders of restitution
either through the existing COD provisions in the Revenue
and Taxation Code or as a civil money judgment using
collection remedies available under the Code of Civil
Procedure. The FTB does not use COD to collect its orders
of restitution for the following reasons:
The billing notices that the FTB issues to
taxpayers owing both tax and restitution would be
inaccurate because the balances are maintained on two
separate systems that do not communicate in either
billing or collection processes. The average balance
due for an order of restitution is substantially
larger and more complex, thereby requiring higher
levels of collection expertise to resolve than the
average COD account that relies primarily on automated
processes.
The COD system does not assess interest--the client
agency that refers the debt to the FTB for collection
provides updates for accrued interest. Restitution
orders accrue interest until paid.
When the FTB collects an order of restitution as a civil
money judgment, the FTB must use the collection remedies
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available to any creditor under the Code of Civil
Procedure, which are generally time consuming and
cumbersome. The statutory procedures for obtaining levies
can delay the collection of the order of restitution, and
the FTB must rely on the availability of external resources
to collect amounts owed as a civil money judgment. In
general, depending on the nature of the assets involved,
the civil process can take anywhere from 90 days to one
year from the date of seizure to the date of the auction to
complete.
FTB Investigations estimates that orders of restitution are
received in approximately 40 criminal cases annually with
an estimated value of $15 million.
C. Reach Out and Touch Someone
Not only does FTB enforce California's Personal Income
and Corporation Tax laws, FTB also enforces collections on
behalf of state and local agencies separate from its child
support enforcement duties. FTB collects 1.1 million
restitution orders referred from 43 counties. FTB issues a
preliminary notice to the debtor, the collects the amount
in the same way that FTB collects delinquent personal
income taxes, often garnishing wages and bank levies.
After the Legislature expanded the program in 2004, FTB
implemented the Court Ordered Debt Expansion project to
develop and implement a scalable debt collection and
billing system, and finished the program last year. FTB
hopes the improved system to handle eight million cases
from 190 different courts.
D. A Little Bit Less
At the hearing, the Author will offer amendments to
limit FTB's powers granted by this bill solely to criminal
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restitution, and not to fines, penalties, or any other
amounts awarded to FTB by the Courts.
Support and Opposition
Support:Franchise Tax Board (sponsor)
Oppose:None received.
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Consultant: Colin Grinnell