BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 658 HEARING: 6/27/12
AUTHOR: Calderon FISCAL: Yes
VERSION: 1/4/12 TAX LEVY: No
CONSULTANT: Grinnell
BOARD OF EQUALIZATION ADMINISTRATION
Makes technical, nonsubstantive changes to the Revenue and
Taxation Code.
Background and Existing Law
An "offer in compromise" is a way to resolve a tax
delinquency in which there is no dispute about the amount
owed, but the taxpayer cannot pay the full amount.
Negotiating an offer in compromise may allow a tax agency
to collect the maxi-mum amount feasible in a timely manner
without forcing a taxpayer into bankruptcy, which further
delays collection. Generally, once the tax agency
deter-mines that the liability is final, the taxpayer makes
an offer, which the agency then reviews to ensure that the
offer represents the maximum amount it can expect to
receive from the taxpayer in a reasonable period of time,
typically five to seven years.
The Legislature first allowed the Franchise Tax Board to
accept offers in com-promise (SB 94, Romero, 1999), then
later authorized the Board of Equalization (BOE) to do so
for final tax liabilities for owners of defunct businesses
under the Sales and Use Tax Law, the Use Fuel Tax Law, and
the Underground Storage Tank Maintenance Fee Law (AB 1458,
Kelley, 2002). The Legislature then extended the
authority for the BOE to make offers in compromise for
final tax liabilities under the Cigarette and Tobacco
Products Law, Alcoholic Beverage Tax Law, Timber Yield Tax
Law, Energy Resources Surcharge Law, Emergency Telephone
Users Surcharge Law, Hazardous Substances Tax Law,
Integrated Waste Man-agement Fee Law, Fee Collection
Procedures Law, Diesel Fuel Tax Law, and the Oil Spill
Response Prevention and Administration Fees law (AB 3076,
Committee on Revenue and Taxation, 2006).
AB 658 - 1/4/12 -- Page 2
In 2007, the Legislature expanded the program to allow BOE
to accept offers in compromise for businesses currently in
operation, as many taxpayers were sur-prised when BOE
audits uncovered transactions that the taxpayer didn't know
were taxable, so they never charged consumers the tax (AB
2047, Horton, 2008). Additionally, for many firms, paying
the entire liability would cause the business to close.
The bill allowed BOE to accept offers from operating firms
when:
The final tax liability arises from transactions
for which the BOE finds no evidence that the taxpayer
collected sales tax reimbursement or use tax,
The person liable is the successor to the business,
or
A consumer has a use tax liability.
Unfortunately, when the Legislature enacted AB 2047, the
measure included duplicative phrases, incorrect cross
references, and did not include identical language across
the fee programs.
Proposed Law
Assembly Bill 658 corrects a reference within the offers in
compromise program for cigarette and tobacco products to
correctly refer to paragraph (3) instead of paragraph (2),
and removes a duplicative phrase. The bill also corrects a
reference within the offers in compromise program in the
Underground Storage Tank Maintenance Fee Law to refer to
the correct section and delete reference to Article 2 of
Chapter 8, which doesn't exist. Lastly, the measure
applies language found in the laws guiding the offers in
compromise program for all other tax and fee programs into
a section of the Fee Procedures Collections Law where it
was accidentally excluded.
State Revenue Impact
BOE estimates that the bill has no revenue impact.
Comments
AB 658 - 1/4/12 -- Page 3
1. Purpose of the bill . The purpose of the bill is to
make technical and non-substantive changes to remove
duplicative wording and correct reference errors.
Assembly Actions
Assembly Revenue and Taxation Committee: 9-0
Assembly Appropriations Committee:17-0
Assembly Floor: 75-0
Support and Opposition (6/20/12)
Support : State Board of Equalization.
Opposition : Unknown.