BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1028|
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THIRD READING
Bill No: SB 1028
Author: Correa (D)
Amended: As introduced
Vote: 21
SENATE REVENUE & TAXATION COMMITTEE : 5-0, 4/14/10
AYES: Wolk, Walters, Alquist, Ashburn, Padilla
SUBJECT : State Board of Equalization: administration:
interest
SOURCE : State Board of Equalization
DIGEST : This bill allows the Board of Equalization to
impose interest on a daily basis on a late payment, or late
prepayment, of a tax, fee or surcharge provided the late
payment or prepayment is only one day late.
ANALYSIS : Existing law imposes penalties and interest on
persons who pay their tax and fee obligations after the due
date. The penalty is 10 percent of the tax, plus monthly,
simple interest on those unpaid taxes from the date the tax
was due to the date it was paid. In the case of a late
prepayment, the law imposes a six-percent penalty. As of
January 1, 2010, the interest rate for late payments is
seven percent. Interest accrues on any unpaid tax on a
monthly basis regardless if the payment is late three days
or 29 days. In other words, if a taxpayer is three days
late on a tax payment interest accrues for the entire
month, not for just the three days.
CONTINUED
SB 1028
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Existing law authorizes the Board of Equalization (BOE) to
relieve a late payment penalty when the Board finds that
the taxpayer's failure to make a timely payment was due to
reasonable cause and circumstances beyond the person's
control.
Existing law, generally, does not allow the BOE to relieve
accrued interest on late payments. However, the BOE may
relieve interest in cases of a disaster or where the
failure to pay the tax in a timely manner was due to an
unreasonable error or delay by a BOE employee.
Additionally, existing law authorizes the BOE to deem
timely tax payments sent via the United States Postal
Service or through a bona fide commercial delivery service
if those payments are one day late, thereby relieving the
taxpayer of the monthly interest.
This bill:
1. Authorizes the BOE to modify, after meeting as a public
body and taking into account all facts and
circumstances, the method of computing interest on a
late payment, or prepayment, of a tax, fee, or surcharge
by accruing interest on a daily basis, instead of
monthly, provided:
A. The payment or prepayment of the tax was made
one, and only one, day after the date the tax or
prepayment was due.
B. The person was granted relief from all
penalties that applied to that payment of tax or
prepayment.
C. The person files a request for an oral hearing
before the BOE.
2. Disallows the modification of interest computation for
any payment made pursuant to a deficiency determination,
a determination where no return has been filed, or a
jeopardy determination. Furthermore, the bill defines
"modified adjusted daily rate" in accordance with the
definition of "adjusted rate per annum" as defined by
SB 1028
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Revenue and Taxation Code divided by 365.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
The BOE estimates that this bill results in a revenue loss
of less than $10,000 annually.
SUPPORT : (Verified 5/5/10)
Board of Equalization (source)
Cal-Tax
California Chamber of Commerce
California Business Properties Association
California Manufacturers and technology Association
Michelle Steel, Board Member, Third District, Board of
Equalization
ARGUMENTS IN SUPPORT : According to the author's office,
this bill gives the BOE authority to mpose only one day's
interest on a payment made only one day late, in special
circumstances and on a case-by-case basis. This bill is
intended to encourage timely payments of taxes, fees and
surcharges while providing taxpayers with fairness and
relief in specified circumstances.
DLW:do 5/5/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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