BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 364 (Yee)
Hearing Date: 05/26/2011 Amended: 05/03/2011
Consultant: Mark McKenzie Policy Vote: G&F 6-3
_________________________________________________________________
____
BILL SUMMARY: SB 364 would provide for the imposition of
penalties on businesses with more than 100 employees that claim
a business tax incentive enacted on or after January 1, 2012, if
the business experiences a 10% or more reduction in full-time
employees over the previous year. The bill defines "business
tax incentive" as either a sales and use tax exemption or
exclusion, or a personal or corporate tax credit based on
qualified wages or number of persons employed. Qualified
business taxpayers would be required to file annual reports
indicating the number of full-time equivalent employees for the
current and previous year, as specified. Failure to file the
employment information would result in an unspecified penalty.
Taxpayers experiencing a net decrease of 10% or more in
full-time equivalent employees from the previous year would pay
a penalty of $5,000 per employee lost over that threshold. The
bill limits the total amount of the penalty to the value of the
tax incentives claimed over the previous three years by that
taxpayer.
_________________________________________________________________
____
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Revenue clawback potential future revenue gains to the
extent General
that future tax incentives are enacted
and
penalties would apply.
FTB administration $150-$300 $24 General
(see staff comments)
BOE administration unknown administrative costs to
updateGeneral
forms and computer systems to capture
employment data. Also future audit costs
SB 364 (Yee)
Page 1
_________________________________________________________________
____
STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
SB 364 would apply penalties to taxpayers who claim business tax
incentives that are enacted on or after January 1, 2012, but
subsequently reduce their workforce. Staff notes that this
Legislature cannot affirmatively bind future ones under County
of Los Angeles v. State of California (1984) 153 Cal.App.3d 568,
573. SB 364 would therefore only apply contingently to future
measures since an author could simply waive this provision of
law. To the extent a future Legislature honors the bill's
provisions, however, there could be unknown and potentially
significant revenue gains by applying a penalty to specified
taxpayers that claim a benefit but fail to create jobs.
Neither the Franchise Tax Board (FTB) nor the Board of
Equalization (BOE) attribute a revenue impact to SB 364 because
any changes in revenue would be related to the enactment of a
future business tax incentive. BOE indicates that the bill
would result in unknown one-time administrative costs, while FTB
estimates a cost in the range of $150,000 to $300,000 in
one-time administrative costs related to this bill. These costs
would primarily be related to programming changes that are
necessary to track the employment information reported by
business taxpayers. FTB would also incur costs to develop new
reporting forms and procedures for collecting and storing the
data. Ongoing costs to key in taxpayer information on
employment and administer the program would be approximately
$24,000 annually.
Staff notes that the bill does not specify the penalties for
failure to file employment information. Staff recommends that
the bill be amended to fill in the blanks and specify an
appropriate penalty to ensure compliance with the reporting
requirement.
Proposed committee amendments would specify a penalty of $5,000
for failure to file employment information.
SB 364 (Yee)
Page 2