BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 2375
                                                                  Page  1

          Date of Hearing:   May 5, 2010

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                   AB 2375 (Knight) - As Amended:  April 29, 2010 

          Policy Committee:                              Revenue and  
          Taxation     Vote:                            9-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill allows the Board of Equalization to waive a part or  
          all of interest due on late tax payments that are due to  
          "extraordinary circumstances."  Specifically, the bill:

          1)Requires that in order to receive the relief, the taxpayer  
            must make the delinquent payment, file a request for an oral  
            hearing, file a statement, under perjury, setting forth the  
            facts surrounding the claim, and provide other information  
            requested by the BOE.

          2)Defines "extraordinary circumstances" as death or serious  
            illness of the taxpayer or the taxpayer's next-of-kin, an  
            emergency as defined in the government code, or criminal  
            misconduct by a person, other than the taxpayer, that caused  
            the delinquency.

          3)Places an annual cap on interest cumulative waivers permitted  
            by this bill of $50,000.
           
          FISCAL EFFECT  

          Loss of GF interest revenues of up to $50,000 annually,  
          depending on the amount waived by the BOE.

           COMMENTS  

           Purpose  . This bill is intended to provide the BOE flexibility to  
          waive interest payments for late tax payments caused by  
          extraordinary circumstances. According to the BOE analysis, the  
          bill was prompted by a sales and use tax case that BOE heard at  








                                                                  AB 2375
                                                                  Page  2

          its December, 2009 public hearing.  In that case, the taxpayer's  
          bookkeeper altered the taxpayer's computerized accounting  
          records and embezzled a substantial amount of sales tax  
          reimbursement collected from the taxpayer's customers.  Although  
          the bookkeeper is currently serving a prison sentence, the  
          taxpayer remains liable for the tax and interest.  Even though  
          the taxpayer had an excellent record of paying sales and use  
          taxes, and acted swiftly upon learning of the embezzlement, the  
          fact that the taxpayer was the victim of a crime does not  
          provide a basis for relief under existing law.  

          There have been other extraordinary cases in the past where  
          charging interest on a late payment has seemed severe.  For  
          example, there have been situations in which taxpayers had  
          documented medical emergencies or family deaths that occurred  
          the day the returns were due, and even though the returns were  
          filed only a day or two late, monthly interest was still  
          imposed.  
           Analysis Prepared by  :    Brad Williams / APPR. / (916) 319-2081