BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1580 (Calderon)
Hearing Date: 08/27/2009 Amended: 08/18/2009
as proposed to be amended
Consultant: Mark McKenzie Policy Vote: Rev&Tax 5-2
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BILL SUMMARY: AB 1580 would generally conform California
personal income tax, corporation tax, and administration of
franchise and income tax laws to federal income tax laws as set
forth in the Internal Revenue Code (IRC) as of January 1, 2009.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11
2011-12 Fund
2008-09
2005 Tax Revenue Totals $3,530 $2,720 $2,720 General
2005 Penalty and Interest $0 $0 $0 General
2005 Grand Totals $3,530 $2,720 $2,720 General
2006 Tax Revenue Totals ($7,232) ($5,242) ($5,465) General
2006 Penalty and Interest ($400) ($200) ($200) General
2006 Grand Totals ($7,632) ($5,442) ($5,665) General
2007 Tax Revenue Totals ($793) ($688) ($1,758) General
2007 Penalty and Interest ($2,600)
($10,300)($14,200) ($18,250) General
2007 Grand Totals ($2,600)
($11,093)($14,888) ($20,008) General
2008 Tax Revenue Totals $14,023) $7,864 $5,136 General
2008 Penalty and Interest ($3,400) ($3,250)
($3,650) General
2008 Grand Totals $10,623 $4,614
$1,486General
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(2005, 2006, 2007, 2008 combined)
Combined Tax Revenue Total $9,528 $4,654 $633 General
Combined Penalty/Interest ($2,600)
($14,100)($17,650) ($22,100) General
Conformity grand totals ($2,600) ($4,572)
($12,996)($21,467) General
*Note: figures in parentheses represent revenue gains
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STAFF COMMENTS:
AB 1580 would conform California law to many of the federal
income tax law changes made over the past four years by changing
the specified date in statute from January 1, 2005 (existing
law), to January 1, 2009 (this bill), for taxable years
beginning on or after January 1, 2009. Changing the specified
date automatically conforms state law to all changes from
January 1, 2005, through December 31, 2008 to IRC sections that
have been previously incorporated by reference. In addition,
the bill makes numerous changes to specifically not conform to
or modify certain items in the IRC.
Page 2
AB 1580 (Calderon)
Staff notes that complete tables of the conformity decisions may
be found in the Senate Revenue and Taxation Committee's analysis
of this bill. Full descriptions of each of the conformity items
in this bill are included in the Franchise Tax Board's (FTB's)
2005, 2006, 2007, and 2008 annual "Summary of Federal Income Tax
Changes" reports to the Legislature.
Staff notes that AB 115 (Klehs), Chapter 691, Statutes of 2005,
was California's last federal conformity bill. AB 1561
(Calderon), which would have conformed state law to federal
income tax law changes up through December 31, 2007, failed
passage on the Senate Floor last year on a vote of 24-16. That
bill would have resulted in an increase in state tax revenue,
which requires approval by two-thirds vote. AB 1580 is the most
recent attempt to ease the hardship on taxpayers and
practitioners by bringing the federal and state tax codes closer
together.
Proposed amendments would make several technical changes
suggested by the Franchise Tax Board, add double-jointing
language to SB 401 (Wolk) and AB 692 (Calderon) to avoid
chaptering out conflicts, and make one substantive change that
would increase the adjusted gross income thresholds for
taxpayers that are subject to penalties related to the erroneous
refund provisions. This bill would conform, with modifications,
to a federal provision that imposes a 20 percent penalty on
erroneously claimed refunds, unless the taxpayer shows a
reasonable basis for the refund (Public Law 110-28 of 2007).
The current bill is modified to provide that the penalty would
not apply to individuals with adjusted gross income on the
original return of less than $150,000, in the case of a married
filing joint or surviving spouse, and $75,000 in any other case.
Proposed amendments would increase the income thresholds for
application of the penalty to $250,000 and $125,000,
respectively. FTB indicates that changing the income thresholds
would have a minimal impact on penalty revenues, resulting in a
potential decrease in the penalty revenues related to this
provision by 1-2 percent. Most erroneous refund claims are from
business entities with higher adjusted gross incomes.