BILL ANALYSIS �
SB 1185
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Date of Hearing: August 8, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 1185 (Price) - As Amended: May 29, 2012
Policy Committee: Revenue and
Taxation Vote: 8-0
Public Safety 6-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill establishes a multiagency partnership (Partnership)
consisting of the Employment Development Department (EDD), the
Franchise Tax Board (FTB) and the State Board of Equalization
(BOE), to collaborate in combating illegal underground
operations, as specified. Specifically, this bill:
1)Establishes the Partnership in state government as a pilot
program and in addition to EDD, FTB and BOE, allows other
specified agencies to participate in the pilot program in an
advisory capacity.
2)Requires the Partnership to carry out specified activities to
combat illegal underground operations.
3)Provides that information exchanged pursuant to this act shall
retain its confidential status and shall remain subject to the
confidentiality provisions contained in various specified code
sections.
4)Establishes an advisory committee to the Partnership composed
of representatives of the member agencies to provide advice on
the activities and operations of the Partnership.
5)Provides that, on or before July 1, 2014, and annually
thereafter, the Partnership shall report on its activities and
accomplishments to the Legislature and each entity in the
Partnership.
6)Requires the Partnership to submit to the Legislature on or
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before December 1, 2016, a report on the pilot program that
includes the following information:
a) The number of leads or complaints received by the
Partnership.
b) The number of cases investigated or prosecuted through
civil action or criminal prosecution.
c) Recommendations for modifying, eliminating, or
continuing the pilot program.
7)Sunsets the act's provisions on January 1, 2018.
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FISCAL EFFECT
1)Unknown future revenue gains, potentially tens of millions of
dollars annually beginning in 2014-15 (General Fund), related
to enforcement actions and increased tax collections. For
example BOE estimates increased sales tax revenues of $15
million once there is full implementation. Additional
revenues could be expected from collections of other fees and
taxes. A portion of the revenue gains could be offset by
revenue losses to the extent partnership activities supplant
existing revenue-generating enforcement efforts among the
participating entities.
2)Expected costs for the three participating agencies total at
least $500,000, rising to $1 million as the partnership
becomes fully operational.
COMMENTS
1)Purpose . The author states SB 1185 was introduced at the
request of BOE Chairman Jerome Horton to combat the
underground economy. The author notes the underground economy
hurts legitimate businesses, creates an enormous tax gap and
hurts all California due to the loss of revenue. BOE
estimates the State of California loses about $8 billion
dollars annually in tax revenue due to the underground
economy.
The author explains that SB 1185 will establish a centralized
intelligence partnership in order to share information,
resources and best practices to reign in the underground
economy. The author argues while there have been numerous
efforts and attempts to reign in the underground economy they
have not been successful because of the lack of coordination
and collaboration among state agencies.
2)Support . Proponents, including the California Taxpayers
Association state the presence of an underground economy in
California not only threatens the economic vitality of the
businesses who comply with sound business practices and
policies but also allows dangerous criminal activity to
continue and flourish, posing significant safety and economic
challenges to the welfare of our communities.
3)Existing efforts .
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a) Joint Enforcement Strike Force on the Underground
Economy. In 1993, Governor Wilson signed Executive Order
W-66-93, which established the Joint Enforcement Strike
Force on the Underground Economy, which was subsequently
codified in 1995. The Strike Force, chaired by the EDD
director, is responsible for developing and sharing
information necessary to combat the underground economy.
The Strike Force also works to improve the coordination of
enforcement activities, and to develop methods to target
the enforcement resources of participating agencies. The
Strike Force is empowered to form joint enforcement teams
when appropriate to utilize the investigative and
enforcement capabilities of the Strike Force's members.
In addition to the EDD, the Strike Force's formal
membership is comprised of the Department of Consumer
Affairs, the Department of Industrial Relations and the
Department of Insurance. The FTB, the BOE and the
Department of Justice are each encouraged, under existing
law, to participate in the Strike Force's activities. The
Strike Force is required to report to the governor and the
Legislature annually regarding its activities.
b) The Labor Enforcement Task Force . The Department of
Industrial Relations also works to combat the underground
economy in California through its Labor Enforcement Task
Force. In this joint effort between state agencies and
affected communities, information and resources are shared
to ensure workers receive proper payment of wages and are
provided a safe working environment. In addition, the
Labor Enforcement Task Force works to ensure that
California receives all employment taxes, fees, and
penalties due from employers. The Labor Enforcement Task
Force is comprised of the Labor and Workforce Development
Agency, the Department of Industrial Relations, the EDD,
the Contractor's State Licensing Board, the California
Department of Insurance, the BOE, the Bureau of Automotive
Repair and the Attorney General.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081
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