BILL NUMBER: AB 2638	AMENDED
	BILL TEXT

	AMENDED IN SENATE  JUNE 11, 2012
	AMENDED IN ASSEMBLY  APRIL 17, 2012
	AMENDED IN ASSEMBLY  MARCH 28, 2012

INTRODUCED BY   Assembly Member Eng

                        FEBRUARY 24, 2012

   An act to amend Sections 13305 and 13308 of, and to add Section
13305.5 to, the Government Code, relating to state government.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2638, as amended, Eng. State government: fiscal affairs.
   Existing law requires the Department of Finance to report annually
to the Legislature with regard to tax expenditures, as defined.
Existing law requires the report to include specified information.
   This bill would require the report to include, if available,
anticipated revenue loss pursuant to the final fiscal committee
analysis of the act that established the tax expenditure, adjusted
for inflation.
   At the time of the submission of the Governor's Budget to the
Legislature, existing law requires the Director of Finance to submit
to the Legislature total recommended state General Fund expenditures
and estimated state General Fund revenues, as specified.
   This bill would require the report to include, for each tax
expenditure exceeding $5,000,000 in annual cost, an estimate of the
loss of revenue due to the tax expenditure in the upcoming fiscal
year. At that time, the bill would also require the State Board of
Equalization and the Franchise Tax Board to submit to the Department
of Finance and the Legislature a report on the fiscal and tax effect
of tax expenditures from sales and use tax, personal income tax, and
corporation tax  with   that have  an
annual revenue loss of at least $5,000,000, as specified.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 13305 of the Government Code is amended to
read:
   13305.  (a) The department shall provide an annual report to the
Legislature on tax expenditures by no later than September 15 of each
year. The report shall include each of the following:
   (1) A comprehensive list of tax expenditures exceeding five
million dollars ($5,000,000) in annual cost.
   (2) The statutory authority and year of enactment for each credit,
deduction, exclusion, exemption, or any other tax benefit as
provided by state law.
   (3) A description of the legislative intent for each tax
expenditure, if the act adding or amending the expenditure contains
legislative findings and declarations of that intent, or that
legislative intent is otherwise expressed or specified by that act.
   (4) The sunset date of each credit, deduction, exclusion,
exemption, or any other tax benefit as provided by state law, if
applicable.
   (5) A brief description of the beneficiaries of the credit,
deduction, exclusion, exemption, or other tax benefit as provided by
state law.
   (6) An estimate or range of estimates for the state and local
revenue loss for the current fiscal year and the two subsequent
fiscal years. For sales and use tax expenditures, this would include
partial tax exemptions and all other tax expenditures when the State
Board of Equalization has obtained that information.
   (7) For personal income tax expenditures, the number of taxpayers
affected and returns filed, as applicable, for the most recent tax
year for which full year data is available.
   (8) For corporation tax and sales and use tax expenditures, the
number of returns filed or business entities affected, as applicable,
for the most recent tax year for which full year data is available.
   (9) A listing of any comparable federal tax benefit, if any.
   (10) A description of any tax expenditure evaluation or
compilation of information completed by any state agency since the
last report made under this section.
   (11) If available, anticipated revenue loss pursuant to the final
fiscal committee analysis of the act that established the tax
expenditure, adjusted for inflation.
   (b) For purposes of this section, "tax expenditure" means a
credit, deduction, exclusion, exemption, or any other tax benefit as
provided for by the state.
   (c) This section shall become operative on January 1, 2007.
  SEC. 2.  Section 13305.5 is added to the Government Code, to read:
   13305.5.  (a) At the time of the submission of the Governor's
Budget pursuant to Section 12 of Article IV of the California
Constitution, within the first 10 days of each calendar year, the
State Board of Equalization and the Franchise Tax Board shall submit
to the Department of Finance and the Legislature a report on the
fiscal and tax effect of tax expenditures from sales and use tax,
personal income tax, and corporation tax. The report shall be limited
to tax expenditures with an annual revenue loss of at least five
million dollars ($5,000,000). To the extent allowed under federal
law, the report shall include the most recent data to characterize
the economic, tax, and demographic profile of claimants, including,
but not limited to, the following:
   (1) An estimate or range of estimates for the state and local
revenue loss for the current fiscal year and the two subsequent
fiscal years. For sales and use tax expenditures, this shall include
partial tax exemptions and all other tax expenditures when the State
Board of Equalization has obtained that information.
   (2) If available, anticipated revenue loss pursuant to the final
fiscal committee analysis of the act that established the tax
expenditure, adjusted for inflation.
   (b) (1) For sales and use tax expenditures, the report shall
identify to the extent possible, at a minimum, the revenue loss, for
the most recent  tax   fiscal  year for
which full year data is available, and estimated revenue loss for the
current state fiscal year and subsequent fiscal year by industry
code.
   (2) The report shall also include the following information for
each of those tax expenditures:
   (A) For the most recent  taxable   fiscal
 year for which a full year of data is available, average,
median, highest, and lowest amounts claimed, by taxpayer 
liability   total gross sales  .
   (B) For the most recent  taxable   fiscal
 year for which a full year of data is available, amounts
claimed and, as of the time the report is prepared, amounts
disallowed.
   (C) Where deemed appropriate by the State Board of Equalization,
citations of academic studies pertaining to the tax expenditure or
similar tax expenditures.
   (D) Usage data, where available, for the same or similar tax
expenditures adopted by other states with similar economics, business
entity types, and tax laws.
   (E) Any other distinguishing tax characteristics, including, but
not limited to, other tax expenditures claimed.
   (3) The State Board of Equalization shall report the information
required under paragraphs (1) and (2) only to the extent that the
board is in possession of that information. The information may
reflect board staff estimates or taxpayer's self-reported data.
   (c) (1) For personal income tax expenditures and corporation
income and franchise tax expenditures, the report shall identify, at
a minimum, the revenue loss, to the extent possible for each
expenditure, for the most recent taxable year for which a full year
of data is available, the current fiscal year, and the budget year,
in the following categories:
   (A) By the adjusted gross income of the claimants.
   (B) By the tax liability of the taxpayer.
   (C) By region.
   (D) By industry code.
   (2) The report shall also include the following information for
each of those tax expenditures:
   (A) For the most recent taxable year for which a full year of data
is available, average, median, highest, and lowest amounts claimed
by taxpayer bracket.
   (B) For the most recent taxable year for which a full year of data
is available, amounts claimed and, as of the time the report is
prepared, amounts disallowed.
   (C) Where deemed appropriate by the Franchise Tax Board, citations
of academic studies pertaining to the tax expenditure or similar tax
expenditures.
   (D) Usage data, where available, for the same or similar tax
expenditures adopted by other states with similar economies, business
entity types, and tax laws or the federal government.
   (E) Any other distinguishing tax characteristic, including, but
not limited to, other tax expenditures claimed.
   (d) When filing the report required in subdivisions (b) and (c),
the State Board of Equalization and the Franchise Tax Board shall
provide sufficient data to support a subsequent analysis of the
revenue loss of the tax expenditure.
   (e) For purposes of this section, "tax expenditure" means a
credit, deduction, exclusion, exemption, or any other tax benefit as
provided for by the state.
  SEC. 3.  Section 13308 of the Government Code is amended to read:
   13308.  (a) (1) At the time of the submission of the Governor's
Budget pursuant to Section 12 of Article IV of the California
Constitution, within the first 10 days of each calendar year, or as
soon thereafter as feasible, the Director of Finance shall submit to
the Legislature total recommended state General Fund expenditures and
estimated, including any proposed, state General Fund revenues that
shall include the following:
   (A) The five-year capital infrastructure plan required by Section
13102.
   (B) An estimate of the total General Fund resources, including any
proposed resources, available for the state General Fund
expenditures recommended for the budget year and the three fiscal
years following the budget year.
   (C) A projection of anticipated state General Fund expenditures
recommended for the budget year and, for the three fiscal years
following the budget year, the changes in those expenditure amounts
that would likely result from changes in population, caseload, and
similar factors.
   (D) For each tax expenditure exceeding five million dollars
($5,000,000) in annual cost, an estimate of the loss of revenue due
to the tax expenditure in the upcoming fiscal year. For purposes of
this subparagraph, "tax expenditure" means a credit, deduction,
exclusion, exemption, or any other tax benefit as provided for by the
state.
   (2) To the extent possible, the total resources and expenditures
provided pursuant to subparagraphs (B) and (C) of paragraph (1) shall
be accompanied by the projections applicable to the budget year from
the previous four enacted Budget Act projections.
   (3) The information provided pursuant to subparagraphs (B) and (C)
of paragraph (1) shall be updated as soon as feasible after both the
submission pursuant to subdivision (e) of this section and upon
enactment of the Budget Act.
   (b) The Director of Finance shall provide to the Legislature, on
or before February 1 of each year, all proposed statutory changes, as
prepared by the Legislative Counsel, that are necessary to implement
the Governor's Budget, as described in subdivision (a) of Section
13337.
   (c) The Director of Finance shall provide to the Legislature, on
or before April 1 of each year, all proposed adjustments to the
Governor's Budget except as specified by subdivisions (d) and (e).
   (d) The Director of Finance shall provide to the Legislature, on
or before May 1 of each year, all proposed adjustments to the
Governor's Budget in appropriations for capital outlay.
   (e) The Director of Finance shall provide to the Legislature, on
or before May 14 of each year, all of the following:
   (1) An estimate of General Fund revenues for the current fiscal
year and for the ensuing fiscal year.
   (2) Any proposals to reduce expenditures to reflect updated
revenue estimates.
   (3) All proposed adjustments to the Governor's Budget that are
necessary to reflect updated estimates of state funding required
pursuant to Section 8 of Article XVI of the California Constitution,
or to reflect caseload enrollment or population changes.
   (f) The Director of Finance may authorize suspension for the
current fiscal year of any provision of this section not sooner than
30 days after notification in writing of the necessity therefor to
the chairperson of the committee in each house that considers the
State Budget and the Chairperson of the Joint Legislative Budget
Committee.