BILL ANALYSIS �
AB 2688
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 2688 (Revenue and Taxation Committee)
As Amended August 6, 2012
Majority vote
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|ASSEMBLY: |73-0 |(May 10, 2012) |SENATE: |37-0 |(August 22, |
| | | | | |2012) |
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Original Committee Reference: REV. & TAX.
SUMMARY : Enacts one technical proposal sponsored by the State
Board of Equalization (BOE) and one technical proposal sponsored
by the California Assessors' Association.
The Senate amendments :
1)Revise the definition of an "air taxi" to mean aircraft used
by an air carrier that does not utilize aircraft with a
maximum passenger capacity of more than 60 seats (instead of
30) or a maximum payload capacity of more than 18,000 pounds
(instead of 7,500) in air transportation. The carrier must
also hold a certificate of public convenience and necessity or
other economic authority issued by the United States (U.S.)
Department of Transportation or its successor.
2)Delete the BOE-sponsored provisions relating to bullion and
coins, erroneous charges, and the Transactions and Use Tax
(TUT) Law.
EXISTING LAW :
1)Relieves retailers from sales and use tax (SUT) liability on
transactions that were reported on a retailer's SUT return,
but which were subsequently found to be worthless and written
off for income tax purposes. If a retailer is not required to
file income tax returns, the law allows a bad debt deduction
if the amount is charged off in accordance with generally
accepted accounting principles.
2)Provides that, in the case of accounts held by a lender, a
retailer or lender who makes a proper election, shall be
entitled to a deduction or refund of the SUT that the retailer
has previously reported and paid if the following conditions
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are met:
a) No deduction was previously claimed or allowed on any
portion of the accounts;
b) The accounts have been found worthless and written off
by the lender;
c) The contract between the retailer and the lender
contains an irrevocable relinquishment of all rights to the
account from the retailer to the lender; and,
d) The party electing to claim the deduction or refund
files a claim in a manner prescribed by the BOE.
AS PASSED BY THE ASSEMBLY , this bill:
1)Provided that, for purposes of the SUT Law's "bad debt"
deduction and refund provisions, a proper election shall be
established when the retailer that reported the tax and the
lender prepare and retain an election form, signed by both
parties, designating which party is entitled to claim the
deduction or refund.
2)Changed, from September 1 to October 1, the date by which the
BOE must annually adjust the monetary value threshold for
sales of monetized bullion, non-monetized gold or silver
bullion, and numismatic coins to be considered "bulk" sales
qualifying for a statutory SUT exemption.
3)Amended two sections of the TUT Law as a housekeeping matter.
Specifically, amended Revenue and Taxation Code Sections 7261
and 7262 to conform to changes implemented by AB 686
(Huffman), Chapter 176, Statutes of 2011, which decreased the
rate at which a city or county may levy, increase, or extend a
TUT from 0.25% (or a multiple thereof) to a rate of 0.125% (or
a multiple thereof).
4)Granted the BOE discretion to extend the 90-day filing period
for claims seeking reimbursement of bank charges and
third-party check charge fees incurred by a taxpayer as the
direct result of an erroneous BOE action.
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5)Added erroneous processing and collection actions to the list
of BOE actions giving rise to a claim for reimbursement of
bank charges and third-party check charge fees incurred by a
taxpayer.
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS :
Worthless accounts : The BOE notes the following in its staff
analysis of this bill:
The purpose of this revision is to address an unintended
consequence that has resulted in situations where the
lenders have failed to file properly completed election
forms when claiming the deduction or refund. In such
cases, the claim for deduction or refund is not considered
valid. Currently, staff allows the claimant to prepare and
file a proper election form after the claim for deduction
or refund is filed, but will not consider the claim valid
until such time as the election form is filed (see
Regulation 1642 (i)(5)(F), which interprets and explains
these provisions). Consequently, if an election form is not
filed by the lender within the general limitations period
for which a claim for refund or credit may be accepted as
timely under the law, the BOE is barred from accepting the
claim for deduction or refund for those periods that fall
outside the statute of limitations for filing refund claims
pursuant to Section 6902 (even if the claim itself was
filed within the limitations period). Consequently, staff
has disallowed otherwise valid claims for deductions or
refunds by lenders for periods beyond the limitations
period.
This bill would delete the requirement that the election
form be prepared and retained prior to claiming a deduction
or refund. Therefore, the date of filing of a proper
election will have no affect on the date of filing of the
claim for a deduction or refund. Even where the lender
files a proper election form outside the limitations
period, the timeliness of the claim will still be
determined by the date of filing of the claim itself.
Air taxis : This provision, sponsored by the California
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Assessors' Association, amends the statutory definition of an
"air taxi" to conform to federal regulations. The proposal also
requires specified air carriers to hold a certificate of public
convenience and necessity or other economic authority from the
U. S. Department of Transportation, replacing an outdated
reference to the Federal Aviation Administration.
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098
FN: 0004559