BILL ANALYSIS
AB 2666
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Date of Hearing: May 12, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2666 (Skinner) - As Amended: April 27, 2010
Policy Committee: Revenue and
Taxation Vote: 6-3
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill requires taxpayers filing business returns to submit
various information on tax expenditures, which would then be
accessible to the public through a state web-site. Specifically,
the bill:
1)Requires taxpayers to include information regarding the amount
of tax expenditures and various job information related to the
business.
2)Requires taxpayers to a sign a certification, under penalty of
perjury, that the information is true and correct and contains
no knowing misrepresentation.
3)Require the FTB to capture this information and, by March 30,
2012, and each March 30th thereafter, transmit this
information to the Office of the Chief Information Officer
(OCIO). The OCIO would then be required to develop a
searchable database accessible on its public internet website.
4)Establishes a penalty of one percent of the tax expenditures
claimed for each failure to file the required information.
FISCAL EFFECT
1)Given the large number of returns and tax expenditures covered
by the bill, it will result in large one-time and ongoing
costs for reprogramming, testing, taxpayer notices, additional
data collections, auditing, and reporting. The magnitude is
unknown, but could easily exceed $500,000 annually.
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2)One-time costs of $70,000 and ongoing costs of $15,000 to OCIO
to develop and maintain database of tax expenditures.
3) Unknown, potentially substantial revenues related to failure
to file penalties.
COMMENTS
1)Background . Tax expenditure is a term used to describe tax
credits, deductions, exclusions, and other deviations from the
basic tax system that are intended to achieve various policy
objectives. Examples of recently enacted tax expenditures
include a small business hiring credit, a home purchase
credit, a film credit, and a carry-back of net operating
losses. Various advocates of tax reform assert that tax
expenditures often fail to achieve their stated purpose and,
unlike direct expenditure programs, not subject to annual
budget scrutiny. Because of this, a tax expenditure is to
remain in effect whether or not it is accomplishing its stated
purpose.
2)Rationale . According to the author, this bill is intended to
bring needed transparency and accountability to corporate tax
expenditures. She notes that, while the federal lawmakers
have access, albeit limited, through the SEC filings, to some
information on corporate profits, federal corporate taxes
paid, and some tax credits claimed, almost no public
information is available to state legislators regarding
state-level information.
3)Key issues . As currently amended, the bill raises major
privacy and implementation concerns. Since it applies to all
forms of businesses and all tax expenditures, the bill appears
to require any individual with business to report all tax
expenditures claimed on return, including those that have
nothing to do with business activity, such as dependent
credits or charitable contribution deductions. The
Legislature may wish to consider whether the bill should be
narrowed considerably to encompass just publicly traded
corporations (which are already required to divulge
significant information in SEC filings), and to narrow the tax
expenditures to selected business deductions and credits taken
that were designed to accomplish a specific purpose.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081
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