BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 2332|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 2332
Author: Eng (D)
Amended: As introduced
Vote: 21
SENATE BUS., PROF. & ECON. DEV. COMM. : 4-1 (FAIL), 6/21/10
AYES: Negrete McLeod, Calderon, Florez, Yee
NOES: Aanestad
NO VOTE RECORDED: Wyland, Correa, Oropeza, Walters
SENATE BUS., PROF. & ECON. DEV. COMMITTEE : 5-2, 6/28/10
AYES: Negrete McLeod, Calderon, Corbett, Florez, Yee
NOES: Aanestad, Correa
NO VOTE RECORDED: Wyland, Walters
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 48-28, 6/2/10 - See last page for vote
SUBJECT : Contractors: licenses
SOURCE : Board of Equalization
DIGEST : This bill authorizes the Contractors State
License Board to suspend or deny a contractor license to a
licensee who fails to resolve tax liabilities assessed by
the Board of Equalization.
ANALYSIS :
CONTINUED
AB 2332
Page
2
Existing law :
1. Licenses and regulates more than 300,000 contractors
under the Contractors State License Law by the
Contractors State License Board (CSLB) within the
Department of Consumer Affairs (DCA). The CSLB is under
the direction of the registrar of contractors
(Registrar)
2. Authorizes CSLB to suspend or deny a contractor license
to a licensee who fails to resolve all outstanding final
liabilities, which include taxes, additions to tax,
penalties, interest, and any fees that may be assessed
by the CSLB, the Department of Industrial Relations
(DIR), the Employment Development Department (EDD), or
the Franchise Tax Board (FTB).
3. Provides that until the debts are satisfied, the
qualifying person and any other personnel of record
named on a license that has been suspended under this
section shall be prohibited from serving in any capacity
that is subject to licensure under this chapter, but may
be permitted to act as a nonsupervising employee.
4. Provides that the any other license with any of the same
personnel of record that have been assessed an
outstanding liability under these provisions shall be
suspended until the debt has been satisfied or until
that person has been disassociated from that license.
5. Specifies that the license suspension or denial shall be
applicable only if the CSLB has mailed a notice of the
action at least 60 days prior to the suspension or
denial date to the licensee.
6. Authorizes the Registrar to suspend a contractor license
for any "unsatisfied final judgment that is
substantially related to the construction activities of
a licensee ? or to the qualifications, function, duties
of the license."
This bill authorizes the CSLB to additionally suspend or
deny a contractor license to a licensee who fails to
AB 2332
Page
3
resolve all outstanding final liabilities, which include
taxes, additions to tax, penalties, interest, and any fees
that may be assessed by the BOE.
Background
CSLB issues licenses to contractors who meet safety and
experience requirements within their field, as well as home
improvement salespersons. There are more than 316,000
licensed contractors in the state in 43 different licensing
classifications. In addition to educating consumers about
contractors and construction law, the CSLB administers
examinations to test prospective licensees, issues
licenses, investigates complaints against licensed and
unlicensed contractors, issues citations, suspends or
revokes licenses, and seeks administrative, criminal, and
civil sanctions against violators. 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.
According to BOE, there are currently approximately 2,469
BOE 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 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.
AB 2282 (Eastin), Chapter 1386, Statutes of 1990,
authorizes the CSLB to suspend or refuse to issue or renew
a contractor's license, upon notification, for failure to
resolve outstanding final liabilities imposed by the DIR,
EDD, and FTB. According to the sponsor, the purpose of
this bill is to establish joint enforcement action among
the three agencies in order to enforce collection of taxes
and compliance within the law.
In 1993, by Executive Order, the Joint Enforcement Strike
Force (JESF) was established to combat the underground
economy. The JESF is comprised of several agencies
including the CSLB, DIR, EDD, FTB, and BOE. Reports
AB 2332
Page
4
indicate that the underground economy imposes burdens on
businesses that comply with the law and properly pay their
tax obligations. The BOE argues that while these agencies
have authority to enforce liens and warrants to collect
outstanding liabilities, these collection tools are
ineffective on taxpayers who primarily operate on a cash
basis because current information on their assets or income
is unavailable.
Existing Authority to Suspend a License for an Unsatisfied
Final Judgment . Business and Professions Code Section
7071.17, as described in existing law, #6, above,
authorizes the Registrar to suspend a contractor's license
for any "unsatisfied final judgment that is substantially
related to the construction activities of a licensee or to
the qualifications, function, duties of the license."
Prior to introducing this bill, BOE discussed with CSLB
staff the possibility of using this authority to address
contractors who owe taxes to the BOE. However, BOE staff
and CSLB believe that the BOE's perfected lien procedure
does not appear to be comparable to a final judgment since
the taxpayer may challenge the assessment upon which the
lien is based by filing a claim for refund after the tax
has been paid. Therefore, the CSLB would require the BOE
to submit an abstract of judgment relating to the
contractor as a condition for the registrar to initiate the
proceeding to suspend the license under Section 7071.17.
While both CSLB and BOE staff believed that the BOE Section
7071.17 could work to request the CSLB to suspend a
contractor license, the procedure used pursuant to Section
7071.17 would be extremely cumbersome for both agencies and
would require that BOE obtain an abstract of judgment and
file that judgment with CSLB.
Ultimately, both BOE and CSLB agreed that amending Section
7145.5 to also include the Board of Equalization (as is
proposed in this bill) is a more expeditious alternative.
Prior Legislation
AB 2282 (Eastin), Chapter 1386, Statutes of 1990,
authorizes CSLB to suspend or deny a contractor's license
for failure to resolve tax liabilities imposed by DIR, EDD,
AB 2332
Page
5
or FTB.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/4/10)
Board of Equalization (source)
Contractors State License Board
California Tax Reform Association
OPPOSITION : (Verified 8/4/10)
Department of Consumer Affairs
ARGUMENTS IN SUPPORT : This bill is sponsored by the
Board of Equalization, in order to authorize the BOE to
request the CSLB to deny or suspend a contractors license
for failure to resolve any outstanding final tax or fee
liabilities. This bill gives the BOE the same tools as
DIR, FTB and EDD for collecting money owed to the state.
According to the sponsor, there is $68 million in
outstanding taxes and penalties owed by construction
contractors to the state of California. Current law does
not give the BOE the authority to request that the CSLB
suspend the license of a contractor who has outstanding tax
liabilities. The DIR, the Franchise Tax Board (FTB) and
the Employment Development Department (EDD) have this
authority.
ARGUMENTS IN OPPOSITION : DCA opposes the bill stating
that California loses millions of dollars annually as a
result of uncollected tax liabilities that apply to
licensed contractors; however, the DCA believes that
causing licensees of the CSLB to face suspension of their
license for failure to file tax liabilities due to the BOE
would lead to those individuals practicing without a
license, which would promote an underground economy as well
as harm consumers. This bill denies these license holders
the ability to earn a living and make it more difficult to
repay their debts to the BOE as they would no longer be
allowed to practice, according to DCA. Furthermore, DCA
argues, no other Californian is currently denied the
ability to practice his or her profession for failure to
AB 2332
Page
6
pay taxes due to the BOE and it would be unfair to apply
this to contractors alone.
ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Bass, Beall, Block, Blumenfield,
Bradford, Brownley, Buchanan, Caballero, Charles
Calderon, Carter, Chesbro, Coto, Davis, De La Torre, De
Leon, Eng, Evans, Feuer, Fong, Fuentes, Furutani,
Galgiani, Hall, Hayashi, Hernandez, Hill, Huffman, Jones,
Bonnie Lowenthal, Ma, Mendoza, Monning, Nava, V. Manuel
Perez, Portantino, Ruskin, Salas, Saldana, Skinner,
Solorio, Swanson, Torlakson, Torres, Torrico, Yamada,
John A. Perez
NOES: Adams, Anderson, Bill Berryhill, Blakeslee, Conway,
Cook, DeVore, Emmerson, Fletcher, Fuller, Gaines,
Garrick, Gilmore, Hagman, Harkey, Huber, Jeffries,
Knight, Logue, Miller, Nestande, Niello, Nielsen, Norby,
Silva, Smyth, Tran, Villines
NO VOTE RECORDED: Tom Berryhill, Lieu, Audra Strickland,
Vacancy
JJA:do 8/17/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****