BILL ANALYSIS
AB 2332
Page 1
Date of Hearing: April 6, 2010
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Mary Hayashi, Chair
AB 2332 (Eng) - As Introduced: February 19, 2010
SUBJECT : Contractors: licenses.
SUMMARY : Authorizes the Contractors State License Board (CSLB)
to suspend or deny a contractor's license to a licensee who
fails to resolve tax liabilities assessed by the Board of
Equalization (BOE).
EXISTING LAW authorizes CSLB to suspend or deny a contractor's
license to a licensee who fails to resolve tax liabilities
assessed by the Department of Industrial Relations (DIR), the
Employment Development Department (EDD), or the Franchise Tax
Board (FTB).
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "Current
law does not authorize BOE to request CSLB to suspend a
contractor's license for failure to pay any outstanding taxes,
penalties, interest, or fees. By authorizing BOE to request
CSLB to deny or suspend a contractor's license for failure to
resolve any outstanding final tax or fee liabilities, we would
place the agency on equal footing with FTB and EDD, in addition
to promoting joint enforcement action among the three tax
collection agencies."
Background . CSLB issues licenses to contractors who meet safety
and experience requirements within their field. There are more
than 316,000 licensed contractors in the state, in 43 different
licensing classifications. Current law authorizes CSLB to
suspend or deny a contractor's license to a licensee who has
unpaid tax liabilities with FTB, EDD, or DIR.
BOE currently has approximately 2,469 delinquent accounts for
construction contractors representing outstanding final tax
liabilities over $68 million. Current state law authorizes BOE
to use several collection tools to collect delinquent tax
liabilities, including the issuance of: orders to withhold
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funds to third parties in possession of the debtor's funds or
property; wage garnishments against the debtor; and, warrants
against the debtor to seize property. A BOE analysis states
that the suspension or denial of a contractor's license would be
used as a last resort for collecting tax liabilities.
Current state law also provides that an alcoholic beeverage
license may be suspended, or a vehicle dealer's license may be
revoked, for unpaid tax liabilities.
Support . According to the sponsor, BOE, this bill would
"provide an incentive for delinquent contractors to resolve
their outstanding liabilities. The use of this tool would place
BOE on equal footing with FTB and EDD, in addition to promoting
joint enforcement action among the three tax collection
agencies?. This new collection tool would be a last resort
measure to motivate the delinquent contractor to pay the tax due
or enter into an installment payment plan. Once payment has
been received or a payment arrangement approved, BOE would
notice CSLB to lift the suspension process."
According to CSLB, "[The Business and Professions Code]
authorizes CSLB to suspend the license of a licensee who has not
paid specified taxes or penalties (final liabilities). This
section of law clearly provides efficiencies relative to such
final liabilities since, subsequent to the exhaustion of appeal
rights, the regulatory agencies listed in the law can effectuate
a license suspension to encourage payment by a recalcitrant
license. During the month of February 2010, CSLB sent
suspension letters to 103 licensed entities for unsatisfied
liabilities owed to EDD, DIR, and FTB. The combined liabilities
underlying the license suspensions for [February] are more than
$2.5 million."
Oppose . According to the California Landscape Contractors
Association, "We do not condone non-payment of taxes by
licensees who have the financial ability to do so. However, our
members feel strongly that most licensed contractors who fail to
pay final tax liabilities are facing financial hardship as a
result of tough economic times and would gladly pay the tax
liability if they could. Suspension of a license is tantamount
to taking away their ability to earn a living. If the
contractor is close to bankruptcy, the suspension of his or her
license does not improve the chances of the tax agency recover
the amounts owed?. BOE and other tax agencies, including FTB,
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already have ample enforcement authority available to them to
collect from delinquent taxpayers. Among other actions, they
can garnish wages, seize real and personal property, and
withhold tax refunds."
Prior Legislation . AB 2282 (Eastin), Chapter 1386, Statutes of
1990, authorized CSLB to suspend or deny a contractor's license
for failure to resolve tax liabilities imposed by DIR, EDD, or
FTB.
REGISTERED SUPPORT / OPPOSITION :
Support
Board of Equalization (BOE) (sponsor)
Contractors State License Board (CSLB)
Opposition
California Landscape Contractors Association (CLCA)
Analysis Prepared by : Joanna Gin / B. & P. / (916) 319-3301