BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 2195
                                                                  Page  1

          Date of Hearing:   May 5, 2010

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                    AB 2195 (Silva) - As Amended:  April 21, 2010

          Policy Committee:                              Revenue and  
          Taxation     Vote:                            9-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill codifies existing case law and Board of Equalization  
          (BOE) practices by providing, for purposes of the taxes and fees  
          administered by the BOE, that the BOE has the burden of proof,  
          by clear and convincing evidence, when claiming intent to evade  
          or fraud by a taxpayer in a civil proceeding.

           FISCAL EFFECT 

          The bill codifies current administrative practices, and thus  
          does not have a measurable impact on revenues or costs to BOE.

           COMMENTS  

           1)Purpose  . This bill is intended to transfer the burden of proof  
            to the BOE for sustaining penalties for intent to evade or  
            fraud in civil cases.

           2)Background  .  Existing state law generally imposes the burden  
            of proof on the taxpayer for most items where the taxpayer  
            disputes a proposed assessment or claims a refund of tax.   
            Exceptions to this general burden of proof standard exist in  
            cases involving civil penalties and criminal convictions. With  
            regard to taxes administered by the FTB, the state conforms to  
            federal law and regulations relating to income taxes, which  
            place the burden of proof on the tax collection agency to  
            sustain a civil penalty in tax related cases.  Similarly the  
            BOE, through regulation, has applied the same standard to  
            civil penalties related to taxes that it administers. It has  
            done so since January 2003, following a 9th circuit court of  
            appeals ruling that found clear and convincing evidence must  








                                                                  AB 2195
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            be shown to establish civil tax fraud under California law.  
           
             The original version of this bill would have transferred the  
            burden of proof from the taxpayer to the FTB and BOE in all  
            tax administrative tax proceedings, resulting in significant  
            reductions in revenue collections. The amended version narrows  
            the transfer to just cases involving civil proceedings for BOE  
            administered taxes involving claims of intent-to-evade or  
            fraud. Given the measure is consistent with current BOE and  
            FTB practices, it will have no impact on current burden of  
            proof standards in cases before either agency.
               
             Analysis Prepared by  :    Brad Williams / APPR. / (916)  
            319-2081