BILL ANALYSIS �
Bill No: SB
1185
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Staff Analysis
SB 1185 Author: Price
As Amended: April 9, 2012
Hearing Date: April 24, 2012
Consultant: Art Terzakis
SUBJECT
Centralized Intelligence Partnership Act
DESCRIPTION
SB 1185 creates the "Centralized Intelligence Partnership"
as a clearinghouse for various agencies to come together to
exchange information necessary to prosecute violators
engaged in illegal activity as part of the underground
economy. Specifically, this measure:
1.Makes numerous legislative findings relative to the size
of the underground economy in California (estimated to be
between $60 billion and $140 billion) and its threat to
the health of the state's economy, business community,
workers and the stability and fairness of the tax base.
Also, declares legislative intent to enhance existing
efforts to combat the underground economy by
collaboration among state entities through the
Partnership.
2.Establishes the Partnership consisting of the following
state entities: the California Health and Human Services
Agency (HHS), the Department of Consumer Affairs (DCA),
the Department of Industrial Relations (DIR), the
Department of Insurance (DOI), the Department of Justice
(DOJ), the Department of Motor Vehicles (DMV), the
Employment Development Department (EDD), the Franchise
Tax Board (FTB), and the State Board of Equalization
(BOE). Also, grants the Partnership authority to hire an
administrator and staff.
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3.Empowers the Partnership to do all of the following to
combat illegal underground operations: (a) provide a
central intake process and organizational structure to
document, review, and evaluate data and complaints; (b)
establish a processing center to receive and analyze
data, share complaints, and research leads from the input
of each impacted agency; (c) provide participating and
nonparticipating agencies with value-added investigative
leads where collaboration opportunities exist for
felony-level criminal and civil investigations; (d)
provide that each participating and nonparticipating
agency retain jurisdictional authority over whether to
pursue partnership strategies or collaborative
investigative leads; and, (e) document and provide data
analysis, analytic data findings, referrals,
collaborative opportunities, outcomes, emerging evasion
trends, lessons learned, as well as additional
enforcement, administrative, and legislative
opportunities.
4.Establishes an advisory committee comprised of one
representative from each of the above-listed
participating entities, appointed by and serving at the
pleasure of the entity's head. The advisory committee
will provide guidance to, and advice on, the activities
and operations of the Partnership. The committee is also
tasked with deciding which agency shall house the
Partnership's processing center.
5.Allows duly authorized representatives of members of the
Partnership to exchange intelligence, data, documents,
information, complaints, or lead referrals for the
purpose of investigating illegal, underground operations.
Any member or ex-member of the Partnership, or any agent
employed by the Partnership, or any person who has
obtained such knowledge from any of the above, shall not
divulge or make known any information in a manner not
allowed by law. Information shall retain its
confidential status and shall remain subject to
specifically enumerated confidentiality statutes guiding
each agency.
6.Requires the Partnership to report on or before July 1,
2014, and annually thereafter, to the Legislature and
each participating member entity on its activities and
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accomplishments.
7.Also, requires the Partnership to report to the
Legislature on or before December 1, 2018 specifying: (a)
the number of leads or complaints received, (b) the
number of cases investigated and prosecuted through
criminal or civil action, and (c) recommendations for
modifying, eliminating, or continuing the operation of
the Partnership.
8.Sunsets the Partnership and this Act on January 1, 2020.
EXISTING LAW
Under existing law various joint agency enforcement efforts
have been undertaken to combat the underground economy,
including the creation of the Joint Enforcement Strike
Force in 1993 (codified in Section 329 of the Unemployment
Insurance Code) and the Economic and Employment Enforcement
Coalition (EEEC) in 2005. Effective January 2, 2012, the
EEEC was consolidated into the Department of Industrial
Relations as the newly formed Labor Enforcement Task Force.
Also, various individual agency efforts such as the BOE's
Statewide Compliance and Outreach Program and the
Contractor State License Board's Statewide Investigative
Fraud Team have been instituted. Additionally, EDD
operates the Questionable Employment Tax Practices Program,
initiated in 2007, which is a collaborative effort between
EDD and the Internal Revenue Service (IRS). A memorandum
of understanding between IRS and EDD provides for
information exchange.
Existing law generally prohibits unlawful disclosure or
inspection of any income tax return information except as
specified in law. Criminal sanctions, including possible
imprisonment for violation of income tax confidentiality,
apply to BOE personnel convicted of unlawful disclosure or
inspection of tax records. Other state agencies also have
statutes restricting use of information for administrative
purposes, and apply criminal misdemeanor or felony for
unauthorized uses.
The California Constitution establishes the BOE as a
five-member board composed of four members elected by each
district plus the State Controller. Currently, BOE
administers sales and use taxes, excise taxes, special
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taxes, and the state's fee programs. Retailers collect
sales taxes from customers when they purchase tangible
personal property, and remit those taxes quarterly to BOE.
Existing law provides for the Franchise Tax Board (FTB), a
three-person board comprised of the State Controller,
Director of the Department of Finance, and Chair of the
BOE, to primarily administer the Revenue and Taxation Code.
Existing law provides for the California Employment
Development Department (EDD) to administer the Unemployment
Insurance Fund, the Disability Insurance Fund, and the
Employment Training Fund, and to collect deposits from
employers for these funds as well as personal income tax
withholding.
Existing law provides for the Department of Insurance (DOI)
to administer and collect the Gross Premiums Tax, assessed
on insurance companies.
Existing law establishes the Department of Motor Vehicles
(DMV) to administer and collect vehicle license and
registration fees, regulate the sale of vehicles, and
protect consumers purchasing vehicles.
Existing law establishes the Department of Industrial
Relations (DIR) to regulate workforce safety, administer
the worker's compensation program, and enforce most labor
laws.
Existing law provides for the Department of Justice (DOJ)
to adequately and uniformly enforce the state's laws, and
represent the people of the State of California in legal
matters.
Existing law establishes the Department of Consumer Affairs
(DCA) and its member bureaus, boards, and commissions
generally serve to protect California consumers, regulating
business and professional categories, including barbers and
cosmetologists, dentists, and contractors, among others.
Existing law provides for the Health and Human Services
Agency (HHS) which oversees departments that provide
Medi-Cal and In-Home Supportive Services, among others.
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BACKGROUND
Purpose of SB 1185: The author's office states that this
measure, sponsored by the BOE, is intended to create a
multi-agency collaboration, known as the Centralized
Intelligence Partnership, to combat the illegal underground
economy by creating a centralized intake center for the
collection, review and analysis of information related to
complaints, prosecutions, and arrests pertaining to illegal
underground operations. The measure would require that the
participating state entities share pertinent information
and data with each other.
The author's office emphasizes that the underground economy
is a threat to the health of California's economy, its
business community, its workers, consumers and the
stability and fairness of the tax base. The author's
office notes that while there are several different
entities and task forces currently working on various
aspects of the underground economy, no one entity is
responsible for coordinating those efforts. As a result,
there is a lack of synergy in the collection and analysis
of data and in the development of strategic and focused
investigation and prosecution efforts.
The author's office points out that the "underground
economy" refers to those individuals and businesses that
deal in cash and/or use other schemes to conceal their
activities, identities, and true tax liabilities from
government licensing, regulatory, and taxing agencies. The
author's office states that activities that occur in the
underground economy include the sale or transfer of illegal
goods, such as pirated music or movies, counterfeit
pharmaceutical drugs, vitamins, wine, clothing,
accessories, weapons, tax evasion or fraud, and untaxed
tobacco products or alcohol.
The author's office states that the underground economy
hurts legitimate businesses, creates an enormous tax gap
and harms all Californians due to the loss of revenue. The
BOE estimates that the State of California losses about $8
billion dollars annually in tax revenue due to the
underground economy - this revenue is needed to fund
critical programs such as education, public safety,
infrastructure and social services.
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Staff Comments: According to the BOE, revenue increases of
$15 million will be associated with cooperative enforcement
activities that allow BOE to expand its capabilities to
larger cases that provide higher cost recovery per
investigative hour. However, BOE estimates between
$250,000 and $1 million in costs to provide its pro-rata
share of the staff for the central intake center and
investigators assigned to the Partnership.
SUPPORT: As of April 20, 2012:
Board of Equalization (sponsor)
California Association for Health Services at Home
California Building Industry Association
California Chamber of Commerce
California Grocers Association
California Healthcare Institute
California Manufacturing and Technology Association
California Spa & Pool Industry Educational Council
California Statewide Law Enforcement Association
California Taxpayers Association
City of Carson
City of Gardena
City of Hawthorne
City of South Gate
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(Support - continued)
Construction Industry Legislative Council
Culver City Chamber of Commerce
Fullerton Chamber of Commerce
Los Angeles Area Chamber of Commerce
Southwest California Legislative Council
OPPOSE: None on file as of April 20, 2012.
FISCAL COMMITTEE: Senate Appropriations Committee
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