BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 1044 HEARING: 6/29/11
AUTHOR: Butler FISCAL: Yes
VERSION: 5/11/11 TAX LEVY: No
CONSULTANT: Miller
REGISTERED WARRANTS
Allows holders of registered warrants to remit the warrants
for payment of tax liability.
Background and Existing Law
In general, 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 "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 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.
For personal income and corporates taxes, existing law
allows any taxpayer named as a payee on a registered
warrant to satisfy their liability for certain taxes by
issuing a check in an amount no greater than the registered
warrants, exclusive of any interest thereon. In such
cases, the state may not present the check for payment
until the registered warrants is payable upon its
presentation to the State Treasurer. Any taxpayer who
submits a check may not receive any interest on the
registered warrants. Existing law provides that in the
event a tax liability is paid with a registered warrant
that is redeemable at the time the tax liability is paid,
specified interest shall be credited to the taxpayer's
account.
Proposed Law
AB 1044 -- 5/11/11 -- Page 2
Assembly Bill 1044 revises the statutory provisions related
to registered warrants by expanding them to cover taxes,
fees, and surcharges required by the Board of Equalization.
The bill only allows the BOE to accept a registered
warrants if the Controller determines that acceptance will
not: (1) Jeopardize the state's ability to issue regular
warrants for education programs, debt service, state
payroll, pensions, In-Home Supportive Services, Medi-Cal
providers, or any other payment required by federal law,
the California Constitution, or a court order; and, (2)
Result in a net cost to the state, as defined.
AB 1044 also provides that liabilities may be satisfied by
submitting the original registered warrants, signed on the
reverse side by the payee and endorsed as payable to the
agency to which the liability is owed.
State Revenue Impact
FTB and BOE estimate that this bill will have no effect on
revenues or costs.
Comments
1. Purpose of the bill . According to the author's office:
"Current law requires the Franchise Tax Board (FTB) to
accept state issued registered warrants as payment for
personal income taxes and bank and corporation taxes. By
giving the Board of Equalization (BOE) the exact same
authority as the FTB, California taxpayers will be able to
pay their tax obligations with registered warrants. As
there is no law requiring the BOE to accept registered
warrants, the bill will provide clear statutory authority
for the BOE to accept them. It's simply tax fairness."
2. Are all kinds of money good money ? This bill treats
registered warrants like cash for the purpose of paying tax
liabilities at both the BOE. The FTB already has this
option for tax liabilities. Requiring departments to
accept registered warrants in lieu of cash payments could
defeat the purpose of issuing IOUs. The state only issues
registered warrants in cash flow crises and has only
happened twice in modern history. To the extent that the
state accepts warrants in lieu of taxes, the state will
AB 1044 -- 5/11/11 -- Page 3
have to issue more warrants to the substitute for that
cash. The Committee may wish to consider if using
registered warrants in the way AB 1044 suggests will
exacerbate the state's cash flow problems.
3. Related legislation . SB 120 (Anderson) requires a
state agency, upon the Controller making a specified
determination, to accept a registered warrant issued by the
Controller for payment of any state obligation. This bill
is in the Assembly.
Assembly Actions
Assembly Revenue & Taxation Committee: 9-0
Assembly Appropriations Committee:17-0
Assembly Floor: 77-0
Support and Opposition (6/23/11)
Support : Board of Equalization (sponsor); Controller John
Chaing..
Opposition : Unknown.