BILL ANALYSIS
AB 2038
Page 1
Date of Hearing: May 19, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2038 (Eng) - As Amended: April 27, 2010
Policy Committee: Revenue and
Taxation Vote: NA
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill provides, from January 1, 2012 until January 1, 2016,
the authority for the Franchise Tax Board (FTB) and state
governmental licensing entities to suspend state occupational
and professional licenses because of unpaid income tax
liabilities. Specifically, the bill:
1)Requires that once all due process provisions have been
satisfied and a delinquent tax liability becomes final, the
FTB is required to mail a preliminary notice of suspension to
the licensee at least 60 days before the suspension takes
effect.
2)Provides discretionary authority to state governmental
licensing entities, including the Contractors' State License
Board, to withhold issuance or renewal of the license of an
applicant or to suspend the license of a licensee that is on a
certified list provided by the FTB.
3)Establishes a process for the FTB to subsequently suspend the
license in the event the licensing entity fails to do so
within 90 days of receiving the certified list.
4)Requires that the suspensions or revocations end once the
taxpayer pays his or tax liabilities, or enters into an
agreement with the FTB. Also authorizes FTB to provide
exceptions, through a hearing process, for financial hardship.
FISCAL EFFECT
1)The FTB estimates the bill would result in a GF revenue gain
AB 2038
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of $8.7 million in 2010-11 and $18.5 million in 2011-12
through 2014-15 (all numbers accrued).
2)FTB estimates one-time administrative costs of $2.4 million in
2010-11 to develop the program and ongoing costs of about $1.1
million for mailing notices and responding to taxpayer
inquiries (GF).
3)Unknown, potentially significant costs to licensing entities
to comply with bill's requirements (special funds.).
COMMENTS
1)Background . Existing law provides that if a taxpayer has
delinquent tax amounts owed, a statutory tax lien
automatically arises for that amount. The FTB is authorized to
use several collections tools to recover delinquent taxes,
including an order-to-withhold issued to third parties of
payments due to the delinquent taxpayer, a warrant to seize
property, and wage garnishments. Existing law also authorizes
the Contractor's State License Board to suspend a license or
to refuse the issuance of a license if a licensee has failed
to resolve all outstanding final liabilities, including taxes
and fees, and permits the disclosure of certain information
from the licensing agency to the FTB. Existing law also
authorizes licensing agencies to deny and suspend licenses for
failure to pay court-ordered child support debt.
2)Rationale . Proponents (the Franchise Tax Board and the
California Tax Reform Association) assert that current state
law lacks an effective method to collect taxes from an
individual licensed to engage in an occupation or profession
operating on a cash basis. This gives the individual failing
to pay taxes an unfair competitive advantage over his or her
taxpaying counterparts.
3)Opponents (California Landscape Contractors Association and
the California Taxpayer's Association) argue that the
suspension of professional and occupational licenses would
impede taxpayers' ability to earn a living, since those
licenses would provide the taxpayers with the income necessary
to pay their tax debts.
4)Related Legislation . This bill is similar to several measures
that have been introduced, but never enrolled, over the past
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three years, including AB 8 X8 (Budget Committee), SB 8 X8
(Budget and Fiscal Review), AB 19 X3 (Evans) and SB 17 X3
(Ducheny) from 2009, and AB 484 (Eng) from 2009 and AB 1925
(Eng) from 2008. One key respect in which the current measure
differs from previous legislation is that it places the
primary responsibility for the suspension with the licensing
agencies instead of the FTB. This is meant to address one of
the concerns raised by opponents to the earlier measures.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081