BILL ANALYSIS
AB 2676
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Date of Hearing: May 19, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2676 (Ma) - As Amended: April 27, 2010
Policy Committee: Revenue and
Taxation Vote: 6-3
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill makes permanent the use-tax reporting line currently
found on state personal income tax returns and makes several
other changes relating to tax laws administered by the BOE.
Specifically, the bill:
1)Makes permanent the separate line on the state personal income
tax return for reporting use tax obligations.
2)Provides that officers, partners, managers, or other
responsible persons are liable for unpaid sales and use tax
liabilities of closely held corporations or LLCs that have
been suspended. Extends similar provisions to other taxes and
fees administered by the Board of Equalization (BOE).
3)Allows the BOE to use the new employee registry information
maintained by the Employment Development Department (EDD) for
tax enforcement purposes.
FISCAL EFFECT
1)The extension of the use tax line on the personal income tax
return will result in $11 million annually in use tax
collections ($7 million GF and $3 million to special funds and
local funds) beginning 2010-11.
2)Other provisions will result in about $1.5 million annual gain
to the state ($500,000 GF and $1 million special and local
funds).
COMMENTS
AB 2676
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1)Purpose . The bill is sponsored by the BOE and is intended to
improve compliance, administration, and collections of the
taxes it administers.
2)Background - use tax payment line on income tax returns .
Legislation passed in 2003 -- SB 1009 (Alpert), Chapter
718/2003-- requires FTB to include a separate line on its
personal income tax returns for the 2003 through 2009 tax
years, which enables consumers and businesses to declare and
pay use tax liabilities owed to BOE. Use tax obligations
reported and paid through this program are currently about $10
million. This bill makes the use tax line a permanent feature
of the income tax return.
3)Background - personal liability for certain business taxes
owed . Currently corporate officers, partners, managers, and
other responsible persons are shielded from personal liability
when a closely held corporation or LLC is found to owe use
taxes or has failed to remit sales taxes that it has collected
from its customers. However, in cases where a corporation is
suspended, BOE, by regulation, seeks reimbursement from the
company's responsible persons. The BOE regulation does not
extend to responsible persons of closely held LLCs. It also
does not apply in cases involving motor vehicle fuel or other
taxes owed to the BOE.
This bill (a) places in statute the current BOE regulation
pertaining to responsible persons of corporations, (b) extends
its application to closely held LLCs, and to liabilities for
other taxes administered by the BOE. The bill also provides
that the personal liability will cease if the corporation or
LLC has taken actions necessary to revive the corporate or LLC
status within 60 days of the suspension.
4)Background - EDD new employee registry . Existing law requires
employers to report information on newly hired or rehired
employees who work in this state to the EDD within 20 days
following the date the employee is hired. This EDD report is
generally referenced as the "new employee registry." Current
law specifies that the employee registry information may only
be used for programs administered by the EDD, FTB, public
assistance programs, worker's compensation programs, and
enforcement of child support obligations. This bill extends
the authorization to the BOE for tax collection and
AB 2676
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enforcement purposes.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081