BILL ANALYSIS
AB 1580
Page 1
Date of Hearing: September 9, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 1580 (Committee on Revenue and Taxation) - As Amended:
September 1, 2009
Policy Committee: Revenue and
Taxation Vote: 6-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill conforms selected provisions of California personal
and corporate income tax laws to changes in federal changes that
have occurred since January 1, 2005.
FISCAL EFFECT
As shown in the accompanying table, the bill will result in a
decrease in tax revenues and offsetting increases in interest
and penalties. The net impact is estimated by FTB to be a gain
of $2.6 million in 2008-09, $4.6 million in 2009-10, $13 million
in 2010-11 and $21 million in 2011-12.
Summary of AB 1580 Fiscal Impact
(In millions of dollars)
------------------------------------------------------------------
|Date of Federal | 2008-09 | 2009-10 | 2010-11 | 2011-12 |
|Changes | | | | |
|------------------+----------+-----------+-----------+------------|
| | | | | |
|------------------+----------+-----------+-----------+------------|
| 2005 Tax | 0| -3.530| -2.720| -2.720|
|Revenues | | | | |
|------------------+----------+-----------+-----------+------------|
| 2005 Penalty | 0| 0| 0| 0|
|and Interest | | | | |
|------------------+----------+-----------+-----------+------------|
| | | | | |
|------------------+----------+-----------+-----------+------------|
| 2006 Tax | 0| 7.232| 5.242| 5.465|
AB 1580
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|Revenues | | | | |
|------------------+----------+-----------+-----------+------------|
| 2006 Penalty | 0| .400| .200| .200|
|and Interest | | | | |
|------------------+----------+-----------+-----------+------------|
| | | | | |
|------------------+----------+-----------+-----------+------------|
| 2007 Tax | 0| .793| .688| 1.758|
|Revenues | | | | |
|------------------+----------+-----------+-----------+------------|
| 2007 Penalty | 2.600| 10.300| 14.200| 17.650|
|and Interest | | | | |
|------------------+----------+-----------+-----------+------------|
| | | | | |
|------------------+----------+-----------+-----------+------------|
| 2008 Tax | 0| -14.023| -7.864| -5.136|
|Revenues | | | | |
|------------------+----------+-----------+-----------+------------|
| 2008 Penalty | | 3.400| 3.250| 3.650|
|and Interest | | | | |
|------------------+----------+-----------+-----------+------------|
| | | | | |
|------------------+----------+-----------+-----------+------------|
|Grand Total | 2.600| 4.572| 12.996| 20.867|
|------------------+----------+-----------+-----------+------------|
| Tax Revenues | 0| -9.528| -4.654| -0.633|
|------------------+----------+-----------+-----------+------------|
| Penalty and | 2.600| 14.100| 17.650|21.500 |
|Interest | | | | |
------------------------------------------------------------------
SUMMARY (Continued)
Specifically, this bill:
1)Extends, through 2012, provisions allowing taxpayers to
exclude indebtedness on their principal residence discharged
by a lender from their gross income.
2)Increases, from 14 years to 18 years, the age of minor
children whose unearned income is taxed based on their
parents' tax rate.
3)Increases penalties for erroneous refund claims and for
failure to file partnership and S-corporation returns.
AB 1580
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4)Indexes to inflation the gross income limitations on certain
retirement savings incentives.
5)Lengthens, from 18 to 36 months, the period after taxes are
due in which the FTB may contact taxpayer's regarding tax
deficiencies and still collect interest on unpaid balances.
6)Modifies rules involving contributions to funds to cover
nuclear facilities' decommissioning costs.
7)Reduces age for early withdrawal penalties for public safety
employees and excludes from gross income reimbursements
received by volunteer emergency personnel.
8)Includes numerous other conforming changes affecting pension
withdrawals of public safety employees, and pension relief for
members of the military.
COMMENTS
1)Purpose . According to the author's office, the bill is
intended to conform State Law to numerous changes in federal
law that have occurred in recent years, thereby simplifying
the preparation of California income tax returns. FTB
indicates that conforming to federal tax law is generally
desirable because it makes the state tax system less confusing
for the taxpayer and easier for the FTB to administer. In
addition, increased conformity makes it easier for FTB to use
federal information and audit results to verify that taxpayers
are paying the proper amount of tax, which eliminates the
need for the taxpayer to submit the same information to both
the IRS and the FTB.
2 Background . Although there are many exceptions, California's
personal income tax and corporation tax laws are generally
patterned after federal law. The state generally does not
automatically conform to federal law. Rather, in most cases,
state legislation is needed to conform to federal law changes.
In the 1980s through the early 1990s, the state enacted
conformity legislation almost every year. However, since the
mid-1990s, state conformity has taken place less frequently -
in 1997, 1998, 2001, and 2005. Over the past four years,
significant differences have emerged between state and federal
AB 1580
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law. The lack of conformity can be attributed to several
factors, some involving fiscal concerns, and others involving
policy related issues. This measure would sharply narrow
differences between state and federal law, although lack of
conformity would remain in certain areas, such as tax
treatment of health savings accounts and accelerated
depreciation for various business investments.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081