BILL ANALYSIS
SB 1494
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Date of Hearing: August 4, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 1494 (Committee on Revenue and Taxation) - As Amended: June
21, 2010
Policy Committee: Revenue and
Taxation Vote: 9-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires the Board of Equalization (BOE) to accept
registered warrants in lieu of cash payments for tax-related
obligations, and makes numerous other changes to the tax laws it
administers. Key provisions of the bill:
1)Require the BOE to accept a state-issued registered warrant as
a payment for any tax, surcharge, or fee obligation owed to
BOE, provided that the warrant has been issued directly to the
entity making the payment.
2)Adds a trustee to the list of persons who can file claims for
the parent-child and grandparent-grandchild "change in
ownership" exclusion claims on behalf of eligible transferors
and transferees, and authorizes a trustee to inspect otherwise
confidential claims for the exclusion previously filed.
3)Establish a general provision to preclude assessors from
revoking homeowners' exemptions for disaster-affected property
upon a declaration of disaster from the Governor, thereby
avoiding the need for special purpose legislation for each
individual disaster.
4)Extend the use of the existing assessment valuation
methodology for inter-county pipeline rights-of-way that is
otherwise scheduled to sunset on January 1, 2011.
5)Make numerous other changes that clarify existing law, delete
outdated provisions, and correct erroneous cross references in
existing law related to the taxes and fees the BOE
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administers.
FISCAL EFFECT
1)The provision requiring acceptance of registered warrants
would have unknown, potentially moderate impacts on the
state's cash flow situation.
a) The BOE currently has discretion to accept registered
warrants in lieu of cash payments, and in fact accepted $7
million in such warrants last year. The effect of this bill
would be to make a discretionary act mandatory, regardless
of the consequences for the state's cash-flow situation.
b) Any loss in cash payments resulting from acceptance of
IOUs will require the state to issue additional IOUs to
make up for the additional cash shortfalls that result. In
extreme circumstances (involving much larger issuances of
IOUs than in the past), the loss of cash could affect the
ability of the state to make priority payments for debt
service or other purposes.
2)The revenue and cost impacts of the remaining provisions are
negligible.
COMMENTS
1)Purpose. This bill, sponsored by the BOE, is intended to
improve the administration of property tax laws to help both
taxpayers and tax administration agencies and to codify BOE's
existing administrative practice and procedures related to the
transfer of real property from parents to children and to the
base year value transfers. According to the author, this
measure contains only items with universal agreement; items
that are controversial or problematic will be removed from the
bill.
2)Background - registered warrants . While most provisions of
this bill are technical and clarifying in nature, the
provision mandating acceptance by BOE of registered warrants
in lieu of cash represents a potentially significant change in
policy. In normal times, the state issues warrants to satisfy
its obligations to vendors, contractors, hospitals, workers,
and other entities. Warrants are the government equivalent of
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checks, and are issued by the Controller.
During periods of serious cash shortfalls, the state may have
to issue of registered warrants. This occurs when, after
ranking all of the state's obligations and setting aside all
money that must be set apart for higher ranking obligations,
the controller determines that there are insufficient funds to
pay a warrant. In this case, the warrant is registered, and
the state promises to pay the face value as soon as money is
available. Under the California Government Code, registered
warrants are legal investments for funds of all banks and are
negotiable instruments. Registered warrants bear interest at a
rate fixed by California law from the date of registration to
the date of maturity, or the date upon which the California
Treasurer advertises that they are payable upon presentation
if they bear no date of maturity.
Under current law, the Franchise Tax Board is required to
accept state-issued registered warrants in satisfaction of
taxpayer obligations to the state. In July, 2009, the Board of
Equalization voted to accept registered warrants in
satisfaction of obligations associated with tax programs it
administers. DMV and most other agencies, however, do not
accept registered warrants in lieu of cash. Also, AB 1506
(Anderson), currently in the Senate Appropriations Committee,
would require that all state agencies accept registered
warrants in lieu of cash, but only if the state controller
determines that their acceptance will not have negative
consequences for the state's cash-flow.
3)Trade-off . While addressing potential inequities related to
individuals that have received registered warrants and owe
money to the state, from a broader perspective, the main
effect of allowing payment with registered warrants is simply
to shift IOUs from one entity to another. Given the dire
circumstances leading to IOU issuance by the state, any
reduction in cash payments by one taxpayer will have to be
made up through additional state payments of registered
warrants to other entities. Given that the controller ranks
payments according to priorities, the additional warrants
will, by definition, go for higher priority payments. In
extreme circumstances, mandatory acceptance of IOUs by the BOE
could adversely affect the state's ability to make higher
priority payments.
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Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081