BILL ANALYSIS �
SB 1185
Page 1
Date of Hearing: July 3, 2012
Counsel: Sandy Uribe
ASSEMBLY COMMITTEE ON PUBLIC SAFETY
Tom Ammiano, Chair
SB 1185 (Price) - As Amended: May 29, 2012
SUMMARY : Creates the "Centralized Intelligence Partnership" as
a clearinghouse for multiple agencies to collaborate to
prosecute violators engaged in illegal activity as part of the
underground economy. Specifically, this bill :
1)Makes 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.
2)Defines "underground economy" as "the activities of
individuals, businesses, or other entities that knowingly and
intentionally use practices designed to conceal illegal or
fraudulent activities that negatively impact legitimate
businesses, workers, and consumers, as well as deprive the
state and local governments of vital resources."
3)Declares legislative intent to enhance existing efforts to
combat the underground economy by collaboration among state
entities through the newly-created Centralized Intelligence
Partnership (partnership).
4)Establishes the partnership as a pilot program.
5)Includes the Employment Development Department, Franchise Tax
Board, and State Board of Equalization in the partnership.
6)Allows the California Health and Human Services Agency,
Department of Consumer Affairs, Department of Industrial
Relations, Department of Insurance, Department of Justice, and
Department of Motor Vehicles to participate in the pilot
program in an advisory capacity to the partnership.
7)Requires each of the six advisory agencies to notify the
SB 1185
Page 2
appropriate taxing agency if a violation is discovered in the
normal course of investigation that would result in increased
tax revenues to the state.
8)Establishes an advisory committee to the partnership comprised
of one representative from each of three the participating
entities, appointed by and serving at the pleasure of the
entity's head, to provide guidance to and advice on the
activities and operations of the partnership. Also allows
each agency participating in an advisory capacity to provide a
representative to the advisory committee.
9)Requires the advisory committee to meet at least quarterly.
10)Tasks the advisory committee with deciding which agency shall
house the partnership's processing center.
11)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.
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.
12)Specifies that the scope of activities and projects to be
SB 1185
Page 3
undertaken shall be consistent with the amount of funds
appropriated by the Legislature.
13)Allows the partnership to hire an administrative staff.
14)Allows duly authorized representatives of members of the
partnership and the agencies participating in an advisory
capacity to exchange intelligence, data, documents,
information, complaints, or lead referrals for the purpose of
investigating illegal underground operations.
15)Prohibits 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, from divulging
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.
16)Requires the partnership to report on or before July 1, 2014,
and annually thereafter, to the Legislature and to each
participating-member entity on its activities and
accomplishments.
17)Requires the partnership to submit a report to the
Legislature on or before December 1, 2016, detailing the
number of leads or complaints it received, the number of cases
investigated or prosecuted either in civil or criminal court,
and any recommendations for modifying, eliminating, or
continuing operations of the partnership.
18)Sunsets the partnership on January 1, 2018, and repeals it as
of that date.
EXISTING LAW :
1)Provides that all property is taxable unless otherwise
provided by the California Constitution or the laws of the
United States. (Cal. Const., Art. XIII, sec. 1.)
2)Establishes the Board of Equalization (BOE) which administers
sales and use taxes, excise taxes, special taxes, and the
state's fee programs. (Cal. Const., Art. XIII, sec. 17.)
3)Allows taxes on or measured by income to be imposed on
SB 1185
Page 4
persons, corporations, or other entities as prescribed by law.
(Cal. Const., Art. XIII, sec. 26.)
4)Contains various provisions criminalizing tax evasion. �See
e.g. Revenue & Taxation Code Sections 7152-7153.5 (false and
fraudulent returns regarding sales and use taxes), 19701 et
seq. (income tax evasion).]
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Statement : According to the author, "I authored
Senate Bill 118 at the request of Chairman Jerome Horton to
combat the underground economy. According to the California
Chamber of Commerce the 'underground economy' is a term that
refers to individuals and businesses that deal in cash and/or
use other schemes to conceal their business activities. In
doing so, they escape their true tax liability,
responsibilities to employees, government licensing,
regulatory and taxing agencies. The underground economy hurts
legitimate businesses, creates an enormous tax gap and hurts
all California due to the loss of revenue. The Board of
Equalization (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. Given the need to
eliminate the underground economy in order to support
legitimate businesses and fund critical programs to improve
the quality of life for Californians this bill must be
immediately approved by the Legislature and Governor.
"SB 1185 will establish a Centralized Intelligence Partnership
in order to share information, resources and best practices to
reign in on the underground economy. While there have been
numerous efforts and attempts to reign in on the underground
economy they have not been successful because of the lack of
coordination and collaboration among state agencies. Combating
the underground economy is a difficult task and it takes
teamwork and the elimination of state agencies working only in
functional silos.
"The Centralized Intelligence Partnership would include the
following state entities: Board of Equalization, Franchise Tax
SB 1185
Page 5
Board, and the Employment Development Department. According to
the Board of Equalization's revenue estimate, with the
enactment of SB 1185, the Centralized Intelligence Partnership
will increase the BOE investigations of underground economy
activities by 120% of its 2010-2011 figures. In its first
year the Centralized Intelligence Partnership is estimated to
yield $26 million dollars in tax revenues for the state.
"SB 1185 is a win-win for California. This legislation
addresses the underground economy by establishing a
partnership among the state's three taxing agencies. Given
chronic budgets deficits the state faces on an annual basis we
must reign in on the underground economy that robs our state
if the vital resources needed to fund programs so that our
residents can thrive and prosper."
2)Argument in Support : According to the State Board of
Equalization (the sponsor of this bill), "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. 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 these 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. Additionally, despite
these current efforts, the State of California continues to
lose an estimated $8 billion in corporate, personal and sales
and use tax revenue due primarily to the underground economy.
"A collaborative, strategic, and focused effort to
comprehensively analyze available data and resources to combat
the underground economy would create a synergy among the
various enforcement agencies and address issues of impacted
California industries. This collaborative effort would
significantly increase the State's efficiency and
effectiveness in recapturing revenue lost to businesses
operating illegally in the State of California, thereby
contributing to a more robust legitimate economy."
REGISTERED SUPPORT / OPPOSITION :
Support
SB 1185
Page 6
State Board of Equalization (Sponsor)
California Association for Health Services at Home
California Building Industry Association
California Chamber of Commerce
California Grocers Association
California Health Care Institute
California Manufacturers and Technology Association
California Spa and Pool Industry Education Council
California Statewide Law Enforcement Association
California Taxpayers Association
City of Carson
City of Commerce
City of Culver City
City of Gardena
City of Hawthorne
City of Lakewood
City of Long Beach
City of South Gate
Culver City Chamber of Commerce
Fullerton Chamber of Commerce
Hawthorne Chamber of Commerce
Los Angeles Chamber of Commerce
Los Angeles Division of the League of California Cities
Microsoft
Motion Picture Association of America
Southwest California Legislative Council
Opposition
None
Analysis Prepared by : Sandy Uribe / PUB. S. / (916) 319-3744