BILL ANALYSIS �
AB 1044
Page 1
Date of Hearing: May 27, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1044 (Butler) - As Amended: May 11, 2011
Policy Committee: Revenue and
Taxation Vote: 9-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill revises the statutory provisions that allow any
taxpayer named as a payee on a registered warrant (RW) to
satisfy their liability for certain taxes by issuing a check in
an amount no greater than the RW. Specifically, this bill:
1)Expands the provisions to cover taxes, fees, and surcharges
required to be remitted to the State Board of Equalization
(BOE).
2)Provides that liabilities may be satisfied by submitting the
original RW, signed on the reverse side by the payee and
endorsed as payable to the agency to which the liability is
owed.
3)Requires that BOE can only accept a RW if the Controller
approves the acceptance according to criteria designed to
protect the state's cash position and ensure that the state
does not incur any net costs.
FISCAL EFFECT
BOE notes that this bill would have no impact on state and local
revenues, as well as any special fund revenues. However,
because payment of taxes, fees, and surcharges using a
registered warrant would require the warrant to be held until
the warrant redemption date, there could be a reduction of cash
receipts.
COMMENTS
AB 1044
Page 2
1)Purpose. The author states that the bill is sponsored by the
BOE to codify the BOE's current administrative practice of
accepting registered warrants as payment for tax and fee
liabilities. Current law requires the Franchise Tax Board to
accept payment by registered warrants from a taxpayer.
However, BOE is not required to accept registered warrants,
but is not prohibited from doing so. Having clear statutory
authorization to accept registered warrants would eliminate
any future ambiguity and, given that the fiscal situation of
the state may necessitate further use of registered warrants,
it will be clear that the BOE is required to accept them as
payment.
This change would eliminate ambiguity and allow BOE staff to
immediately implement plans to accept and process any
registered warrants and thereby avoid any future uncertainty
on whether an outstanding liability may be satisfied in that
manner.
2)Background. In normal times, the state issues warrants to
satisfy obligations to vendors, contractors, hospitals,
workers, and other entities. Warrants are the government
equivalent of checks, and are issued by the State Controller.
During periods of serious cash shortfalls, however, the state
may have to issue RWs. 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 State
Controller determines that there are insufficient funds to pay
a warrant. In such cases, a warrant is registered, and the
state promises to pay the face value as soon as money is
available. RWs bear interest at a fixed rate. For the RWs
issued in 2009, the interest rate, set by the Pooled Money
Investment Board was 3.75% per year.
3)Prior legislation. SB 1494 (Committee on Revenue and
Taxation), Chapter 654, Statutes of 2010, contained multiple
provisions including RW provisions identical to those in the
introduced version of this bill, prior to the addition of
amendments intended to safeguard the state's cash position.
SB 1494 was referred to the Assembly Appropriations
Committee's suspense file where the RW provisions were struck
from the bill.
4)There is no registered opposition to this bill.
AB 1044
Page 3
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081