BILL ANALYSIS �
AB 2453
Page A
Date of Hearing: May 7, 2012
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
AB 2453 (Block) - As Amended: March 19, 2012
Majority vote.
SUBJECT : State Board of Equalization: administration:
petition for redetermination
SUMMARY : Extends, from 30 days to 60 days, the time period for
filing a petition for redetermination. Specifically, this bill :
1)Allows any person against whom a determination is made to
petition for a redetermination within 60 days of being served
with notice of the determination, instead of the 30-day period
prescribed by existing law.
2)Applies to determinations made under the:
a) Sales and Use Tax Law;
b) Motor Vehicle Fuel Tax Law;
c) Use Fuel Tax Law;
d) Cigarette and Tobacco Products Tax Law;
e) Alcoholic Beverage Tax Law;
f) Timber Yield Tax Law;
g) Energy Resources Surcharge Law;
h) Emergency Telephone Users Surcharge Act;
i) Hazardous Substances Tax Law;
j) Integrated Waste Management Fee Law;
aa) Oil Spill Response, Prevention, and Administration Fees
Law;
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bb) Underground Storage Tank Maintenance Fee Law;
cc) Fee Collection Procedures Law;
dd) Diesel Fuel Tax Law; and,
ee) Laws governing the taxation of insurers.
EXISTING LAW allows certain taxpayers against whom a
determination or deficiency assessment is made to petition for a
redetermination within 30 days after service of notice.<1> If a
petition for redetermination is not filed within the 30-day
period, the determination becomes final and due and payable.
FISCAL EFFECT : The State Board of Equalization (BOE) notes that
the precise revenue impact of this bill is indeterminable.
Nevertheless, this bill would result in the following revenue
effects:
1)To the extent taxpayers choose to pay their tax or fee
liability on the 60th day following the issuance of a
determination, this will result in the accrual of an
additional month of interest. This could result in a
potential revenue gain to the state.
2)Conversely, this measure would also extend the time period
during which BOE staff could not collect amounts for
determinations by an additional 30 days. Historically,
delaying collection activity can negatively impact the BOE's
ability to collect all or part of the tax, and therefore,
delaying collection activity could result in a revenue loss.
3)The state may be delayed in receiving payments of liabilities
until the 60th day. This could result in an unknown,
potentially negative impact to the state's cash-flow
situation.
COMMENTS :
1)The author has provided the following statement in support of
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<1> According to the author's office, the period for filing a
petition for redetermination was extended from 15 days to 30
days in 1943.
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this bill:
BOE taxpayers are primarily business owners, including
small business owners that hold a permit or license with
the BOE and file tax returns. For some of these business
owners, current law does not allow ample time to develop
and prepare their petitions. Should a business owner
decide to hire a tax professional to represent him or her,
a 60-day deadline will give him or her more time to gather
documents and consult with their representative.
Especially in the current economic crisis, business owners
need all the help they can get to keep their businesses
afloat. Allowing for a longer period to file a petition
will enable business owners to better clarify and
substantiate their appeal.
2)Proponents state:
Under existing law, if a taxpayer misses the petition
filing deadline, the only way to appeal an assessment is to
pay the tax or fee in full and file a claim for refund,
which can be a financial hardship for many taxpayers.
Allowing more time will help taxpayers to better clarify
and substantiate their positions, as the existing 30-day
time frame is often insufficient time to formulate all the
reasons a taxpayer may disagree with an auditor's findings.
For example, a taxpayer may need to determine if the
auditor missed relevant facts, whether the auditor allowed
an adjustment for bad debts or returned merchandise, or may
need to consult a tax professional. All of these tasks
take time, and 30 days is simply not enough in many cases.
3)The BOE notes the following in its staff analysis of this
bill:
a) Sponsor and purpose : "This bill is sponsored by the
BOE, upon unanimous consent of all Members of the BOE, for
purposes of extending the deadline for filing a petition
for redetermination from 30 days to 60 days from the date
the notice of determination or notice of deficiency
assessment is issued. For some taxpayers, current law does
not allow ample time to develop and prepare their
petitions. Allowing for a longer period to file a petition
will enable taxpayers to better clarify and substantiate
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their position. In addition, the 60-day period is
consistent with the filing period utilized by the Franchise
Tax Board (FTB). To the extent that the time frame for
protesting an amount due is the same between the two major
tax agencies, the less confusion there might be where
someone could think that they have 60 days to protest a BOE
audit because that was the amount of time they had the last
time they had an FTB audit, and they fail to carefully read
the BOE notice."
b) The additional days would allow taxpayers more time to
consider their options : "As previously stated, taxpayers
are informed of the 30-day period to file a timely petition
at various steps during the audit process. However, due to
a number of circumstances, taxpayers may be delayed in
getting started. Perhaps the person responsible for
preparing the petition may be away on a vacation or
business trip or out sick. Further, due to the current
economic crisis, many taxpayers have been forced to lay off
employees. Consequently, the remaining employees may have
to perform additional duties. A taxpayer's bookkeeper who
prepares the returns may also have to answer telephones or
process sales orders, which could result in him or her
having less time to work on the petition. For small
businesses with only a few employees, a 30-day period may
not allow sufficient time to file a petition.
In addition, when preparing their petition, taxpayers also
may wish to research applicable statutes, regulations, and
audit procedures. Some taxpayers may wish to consult a tax
professional. Should a taxpayer decide to use a tax
professional, they will need to give them sufficient lead
time to meet the 30-day deadline. These are some of the
reasons why taxpayers could use more than 30 days to file."
c) Provisions would conform to the FTB's deadline for
filing an appeal : "Current state income tax law, under
Revenue and Taxation Code �Section] 19041, provides that,
within 60 days after the mailing of each notice of proposed
assessment, a taxpayer may file with the FTB a written
protest against the proposed deficiency assessment,
specifying in the protest the grounds upon which it is
based. If a taxpayer disagrees with a notice of proposed
assessment, they can file a protest within 60 days of the
date shown on the notice. This bill conforms to the FTB's
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appeal process by allowing 60 days to protest a liability."
4)Committee Staff Comments
a) Overview of existing law : If the BOE determines that a
taxpayer has underpaid taxes or fees, the BOE issues a
Notice of Determination (for most tax programs) or a Notice
of Deficiency Assessment. Taxpayers against whom a
determination is made may petition for a redetermination
within 30 days after service of notice. If a petition for
redetermination is not filed within this 30-day period, the
determination becomes final. Moreover, if a taxpayer
misses the filing deadline, the only statutorily prescribed
method for appealing the liability is for the taxpayer to
pay the tax in full and file a claim for refund.<2>
b) Are taxpayers provided adequate notice of this 30-day
filing window? : BOE notes in its staff analysis that,
before a determination is even issued, the taxpayer is
informed of the 30-day deadline for filing a petition for
redetermination. Specifically, the BOE notes, "During the
exit conference, the auditor . . . explains the steps
involved in filing a timely petition. In addition, the
auditor provides the taxpayer with a copy of BOE
Publication 17, Appeals Procedures Sales and Use Taxes and
Special Taxes, which more fully explains the appeals
process." In addition, the notice of determination itself
informs the taxpayer of the 30-day deadline for filing a
petition for redetermination.
"In spite of the BOE's verbal communications,
correspondence, and publications instructing taxpayers to
file any petition for redetermination within the 30-day
deadline, taxpayers still fail to do so. Some taxpayers
have argued that the 30-day period does not provide
adequate time to prepare a petition. The BOE notes, "Even
though the petition may be in the form of a simple letter
or a taxpayer may use BOE-416 form, Petition for
Redetermination, the BOE's instructions state that the
petition must include a description of the protested
item(s) and the specific reasons for disagreeing with the
auditor's findings."
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<2> In its staff analysis of this bill, the BOE notes that it
may, at its discretion, accept a late petition as an
"administrative protest."
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c) Taxpayers already possess the ability to file "skeleton"
petitions to preserve their rights : Even though BOE
instructions state that petitions should include specific
reasons for disagreeing with the auditor's findings,
current BOE practice allows taxpayers to file a "skeleton"
petition within the 30-day window to preserve their protest
rights. This "skeleton" petition need only note that the
taxpayer disagrees with the auditor's findings. This
"skeleton" petition may then be amended to state additional
grounds for relief at any time prior to the date on which
the BOE issues its order or decision on the petition.
Thus, Committee staff questions whether it makes sense to
extend the statutory deadline to allow taxpayers more time
to "substantiate their positions."
REGISTERED SUPPORT / OPPOSITION :
Support
State Board of Equalization (sponsor)
BOE Member George Runner
California Taxpayers Association
Opposition
None on file
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098