BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1158|
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THIRD READING
Bill No: SB 1158
Author: Price (D)
Amended: As introduced
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 9-0, 4/11/12
AYES: Wolk, Dutton, DeSaulnier, Fuller, Hancock,
Hernandez, Kehoe, La Malfa, Liu
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Income taxes: administration
SOURCE : Jerome Horton, Chair of the State Board of
Equalization
DIGEST : This bill conforms state law to federal law,
allowing the Franchise Tax Board (FTB) to postpone certain
tax related deadlines for a period up to one year for
Governor-declared disasters, and abate interest to the
extent that the interest is attributable to FTB's delay in
mailing a notice of correspondence that requires a response
from the taxpayer affected by a presidentially declared
disaster or state emergency.
ANALYSIS : Federal law allows the Internal Revenue
Service to specify a period for up to one year to postpone
tax-related deadlines in the event of a President-declared
disaster or terrorist or military action that affects the
taxpayer. During that period, the taxpayer is eligible for
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later deadlines, as well as relief from any penalty,
interest, or addition to tax.
Currently, state law provides that a taxpayer that misses a
deadline for filing an income tax return, paying tax, or
filing a claim for refund is subject to penalties and
payment of interest, assessed by the FTB. However, FTB may
abate interest when an unreasonable delay occurs in the
administrative process is due to the tax agency's error or
delay. Additionally, FTB may also abate interest for
disaster victims if the tax agency extends the period for
any single taxpayer residing in a disaster area as declared
by the President of the United States or the Governor of
California. However, while penalty abatement is automatic,
FTB only abates interest in either case at its discretion,
and no specific authority exists to abate interest when the
delay is attributable to FTB sending a notice that requires
response from the taxpayer affected by the disaster.
Additionally, while state law conforms to federal law
relating to disaster-affected taxpayers when the President
declares a disaster, it does not provide similar authority
for FTB to postpone deadlines due to disasters declared by
the Governor, but not the President.
Generally, taxpayers may appeal FTB determinations of the
appropriate tax due to the State Board of Equalization
(BOE) once they have exhausted their administrative
remedies. Among the determinations, taxpayers denied
interest abatement due to FTB's error or delay may appeal
that determination to BOE.
This bill conforms state law to federal law, allowing FTB
to postpone deadlines for a period up to one year for
Governor-declared disasters, and abate interest to the
extent that the interest is attributable to FTB's delay in
mailing a notice of correspondence that requires a response
from the taxpayer affected by a disaster declared by either
the President or the Governor. This bill provides a
process for taxpayers to appeal FTB denials of requests for
interest abatement to BOE. Taxpayers must apply in
writing, and have 30 days to file an appeal for unpaid
interest, and 90 days for paid interest. The appeal
process mirrors existing law on BOE appeals for interest
abatement for errors made by FTB.
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This bill applies to taxable years starting on or after
January 1, 2013. This bill also corrects an erroneous
cross-reference.
Comments
According to the author, "SB 1158 is needed to provide
equitable treatment to 'all' taxpayers located in
presidentially or gubernatorially declared disaster areas."
Currently, only taxpayers who are "affected by the
disaster" can request abatement of interest. SB 1158
ensures that taxpayers who live in the disaster area but
who are "unaffected" by the disaster, can also request
abatement of interest when circumstances are beyond their
control and for which they are not responsible (i.e., the
FTB sends out delayed notices). During a
presidentially-declared disaster, the FTB routinely delays
billings, notices, and correspondence to affected taxpayers
in a disaster area. An FTB public service bulletin is
published to inform the public of the period of the
suspended notices and the counties affected by the
disaster. As a result of the delayed mailings to disaster
areas, many taxpayers in the area who are "unaffected" by
the disaster, but who are engaged in the tax audits,
protests, or appeals, suffer delays in these processes,
which ultimately could result in additional interest being
accrued. This bill gives the FTB the authority, in these
instances, to abate the interest.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 4/30/12)
Jerome Horton, Chair of the State Board of Equalization
(source)
AGB:kc 5/1/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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