BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 2439|
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THIRD READING
Bill No: AB 2439
Author: Eng (D)
Amended: 6/20/12 in Senate
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 5-3, 6/28/12
AYES: Wolk, DeSaulnier, Hernandez, Liu, Yee
NOES: Dutton, Fuller, La Malfa
NO VOTE RECORDED: Kehoe
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 47-24, 5/31/12 - See last page for vote
SUBJECT : Corporation taxes: disclosure
SOURCE : Alliance of Californians for Community
Empowerment California Tax Reform Association
Service Employees International Union, Local
721
DIGEST : This bill requires the Franchise Tax Board (FTB)
to publish a list of the 1,500 largest corporate taxpayers
and their tax liability.
ANALYSIS : Existing state and federal laws generally
prohibit unlawful disclosure or inspection of any income
tax return information. Existing state law (RTC section
19546) allows a committee of either house of the
Legislature to examine confidential taxpayer information.
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Criminal sanctions, including imprisonment, apply to FTB
personnel convicted of unlawful disclosure or inspection of
tax records. The FTB must notify a taxpayer if criminal
charges have been filed for willful unauthorized inspection
or disclosure of their tax data. However, FTB may publish
statistical data related to taxpayer information so long as
nothing specific to a single taxpayer is disclosed.
Notwithstanding these provisions, the Legislature directed
FTB to publish a list of the top 500 tax delinquencies over
$100,000 (AB 1418 (Horton), 2006 and AB 1424 (Perea),
2011).
Existing state law provides various tax credits designed to
provide incentives for taxpayers that incur certain
expenses, such as child adoption, or to influence behavior,
including business practices and decisions, such as
research and development credits and Geographically
Targeted Economic Development Area credits. The
Legislature typically enacts such tax incentives to
encourage taxpayers to do something but for the tax credit,
they would otherwise not do. Except for four industries
(agriculture, banking & finance, savings &loan and
extractive) California law allows multistate taxpayers to
choose which apportionment formula to use when paying
taxes: the four factor formula based on personnel, property
and double weighted sales or only on sales (single sales
factor).
Existing law also requires the Department of Finance to
annually publish a report detailing tax expenditures, and
relevant costs.
This bill requires the FTB to publish on its website a list
of the 1,500 largest corporate taxpayers filing a Form 10-K
with the U.S. Securities and Exchange Commission (SEC).
Notwithstanding any other provision of law, including
confidentiality requirements, the largest taxpayers shall
be measured by gross receipts minus returns and allowances.
The list shall include the name and tax liability of each
taxpayer and whether the taxpayer made an election to
apportion its income using only the sales factor (single
sales factor).
This bill requires that the determination for the list
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should be based on an original filed timely return and uses
the same criteria to include a taxpayer that is part of a
combined report (gross receipts minus allowances).
The list published on or before December 1, 2013, shall
reflect the tax liability as of October 1, 2013 for the
2010 and 2011 taxable years. Each subsequent annual list
shall reflect the tax liability for the taxable year that
closed two years before the publication of the list. For
two years after the list is published, FTB shall update the
list to reflect any changes of a taxpayer's tax liability.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/14/12)
Alliance of Californians for Community Empowerment
(co-source)
California Tax Reform Association (co-source)
Service Employees International Union, Local 721
(co-source)
American Federation of State, County, and Municipal
Employees
California Federation of Teachers
California Labor Federation
California National Organization for Women
California Nurses Association
California Partnership
Parent Voices
PICO California
Senior Action Network
Service Employees International Union, California
OPPOSITION : (Verified 8/14/12)
BIOCOM
California Aerospace Technology Association
California Bankers Association
California Chamber of Commerce
California Grocers Association
California Healthcare Institute
California Manufacturers and Technology Association
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California Retailers Association
California Taxpayers Association
California Water Association
Capital Area Transportation Authority
Council on State Taxation
Fullerton Chamber of Commerce
Securities Industry and Financial Markets Association
Silicon Valley Leadership Group
Southwest California Legislative Council
TechAmerica
TechNet
The California Railroad Association
ARGUMENTS IN SUPPORT : According to the author's office,
this bill will ask for the FTB to post one specific data
point on its website which corporations already have:
corporation taxes paid to California. It simply
disaggregates the amount already reported in their SEC 10-K
form to be California-specific.
This simple data is urgently needed for several reasons.
First, California recently made significant changes in its
corporation tax system, adopting "elective single sales
factor apportionment." This new system means that
corporations have a choice of how to apportion multi-state
income to California. The FTB has estimated that this
choice will cost the state nearly $1 billion annually,
beginning in tax year 2011. With this bill, we will be
able to accurately determine the distribution of benefits
and costs from this drastic change.
ARGUMENTS IN OPPOSITION : The opposition expresses
concerns that this bill will result in misleading
information that provides no context for a taxpayer's
disposition and will provide no objective evaluation of the
single sales factor. For many multi-state corporations,
their finality tax liability may not be resolved for years
after their return is actually filed so the information in
this bill may not be accurate. Furthermore, the opposition
states that breeching taxpayer confidentiality is punitive
to the individual taxpayer but will not provide further
information to the state to determine whether specific tax
policies made sense.
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ASSEMBLY FLOOR : 47-24, 5/31/12
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Butler, Charles
Calderon, Campos, Carter, Cedillo, Chesbro, Davis,
Dickinson, Eng, Feuer, Fong, Furutani, Gatto, Gordon,
Hall, Hayashi, Roger Hern�ndez, Hill, Huber, Hueso,
Huffman, Lara, Bonnie Lowenthal, Mitchell, Monning, Pan,
Perea, V. Manuel P�rez, Portantino, Skinner, Solorio,
Swanson, Torres, Wieckowski, Williams, Yamada, John A.
P�rez
NOES: Achadjian, Bill Berryhill, Conway, Cook, Donnelly,
Beth Gaines, Garrick, Grove, Hagman, Halderman, Harkey,
Jeffries, Jones, Knight, Logue, Ma, Miller, Morrell,
Nestande, Nielsen, Olsen, Silva, Smyth, Wagner
NO VOTE RECORDED: Buchanan, Fletcher, Fuentes, Galgiani,
Gorell, Mansoor, Mendoza, Norby, Valadao
AGB:d 8/14/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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