BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 1326 (Harman) - Tax administration
Amended: April 17, 2012 Policy Vote: G&F 9-0
Urgency: No Mandate: No
Hearing Date: April 30, 2012
Consultant: Mark McKenzie
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 1326 would require specified state tax agencies
to focus information technology (IT) efforts on developing a
web-based portal that virtually consolidates the agencies,
providing an integrated interface for taxpayers.
Fiscal Impact:
Unknown, likely major General Fund costs to FTB, BOE, and
EDD, potentially in the range of $10 million, to make
coordinated IT improvements to each agency's independent
systems to virtually consolidate the agencies, providing
self-service access with a single logon that allows for an
integrated interface. (see staff comments)
Unknown, potentially significant future costs pressures to
consolidate forms, applications, and other documents.
Background: The California Constitution establishes the Board of
Equalization (BOE) as a five-member board comprised of the State
Controller and four elected members. The BOE administers sales
and use taxes and various state tax and fee programs. The BOE
also adjudicates tax disputes and appeals. Retailers collect
sales taxes from customers purchasing tangible personal
property, and generally remit those taxes to the BOE on a
quarterly basis.
The Employment Development Department (EDD) administers the
collection, accounting, and audit functions of California's
payroll tax programs, including the Unemployment Insurance and
State Disability Insurance programs. Businesses are generally
required to register with EDD. Employers collect and deposit
personal income taxes withheld from employee wages with EDD,
along with amounts for Unemployment Insurance (UI), Employment
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Training Taxes, and State Disability Insurance (SDI). Federal
schedules determine when employers make Personal Income Tax and
SDI payments, while UI and ETT payments are made quarterly.
Each quarter, the taxpayer files a form to reconcile these
deposits with actual taxes due.
The Franchise Tax Board (FTB) is a three-person board comprised
of the State Controller, Director of the Department of Finance,
and Chair of the BOE. FTB administers the Personal Income Tax
and Corporation Tax Law, and collects debts on behalf of state
and local agencies. FTB may issue forms necessary to administer
the taxes. Employees and others receiving payments reconcile
amounts previously withheld with actual tax due when filing
their annual tax returns with FTB.
Proposed Law: SB 1326 would require BOE, FTB, and EDD to
collaborate and focus current and future IT efforts to develop a
single web-based portal that enables taxpayers to do the
following through a single self-service logon point:
Electronically submit returns, forms, or other information
Remit amounts due
Determine account balances and tax due dates
Identify the status of an appeal
Claim a refund
Request relief from interest or penalties
Access any other information the agencies deem helpful to
help taxpayers comply with the state's tax laws.
The bill would also require these agencies to consolidate forms,
applications, and other documents to reduce or eliminate
duplicate submission of information by taxpayers, but only upon
a joint determination by the agencies of a need to improve
cost-effective service to taxpayers, and upon appropriation by
the Legislature.
Staff Comments: The BOE, FTB, and EDD have a history of working
cooperatively to increase efficiencies and ease taxpayer burden,
including a current working group that has been formed to
identify specific incremental processes and functions that
present opportunities for efficiencies, considering all
practical aspects and costs. The three entities have also
partnered with the Internal Revenue Service to form the
California Fed State Partnership to streamline and improve
taxpayer resources and educational programs. One result of the
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partnership was the development of the California Tax Service
Center website, www.taxes.ca.gov , which is a one-stop tax
assistance site for California taxpayers that provides general
information about the various tax programs as well as links to
appropriate forms, information, requirements, and payment
options located on the BOE, FTB, EDD, and IRS websites. This
website does not currently provide taxpayers with single logon
access to individual accounts and records.
SB 1326 would require BOE, FTB, and EDD to conduct a coordinated
information technology project that would virtually consolidate
the agencies through a web portal that provides an integrated
interface with each of the agencies through a single logon
access. Costs to implement an information technology project of
this nature and magnitude are unknown, but likely major, perhaps
in the range of $10 million cumulatively. While none of the
affected agencies are able to provide a detailed cost analysis
at this time that enumerates the scope of duties for each
agency, the following provides some sense of the potential scale
of costs:
The initial BOE analysis of this bill indicates that, although
a detailed cost estimate is pending, major costs of over $1
million would be incurred to develop and implement a
comprehensive virtual website relating to current system
design modifications, software, and hardware. A more recent
BOE analysis indicates that costs to coordinate with FTB and
EDD to develop a plan to create a single web-based portal that
virtually consolidates the agencies would be absorbable, but
the current version of the bill is not limited to the
development of a plan.
FTB indicates that costs to implement the bill are currently
unknown, but potentially significant. Actual costs would
depend upon the scope, roles, and duties of each entity.
Staff notes that even if FTB's scope were limited to making
necessary programming updates to its IT systems, costs could
be significant.
EDD estimates one-time startup costs of $6.8 million and
annual ongoing costs of $657,000 to develop and administer the
web portal, which includes costs for staffing and programming,
costs to implement an outreach program for employers, and
costs to enhance the existing security solution Oracle
Identity Management environment to enable a single logon for
taxpayers.
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In addition, SB 1326 would require FTB, BOE, and EDD to
consolidate forms, applications, and other documents. However,
these activities would only occur following a joint
determination by the agencies that a need exists to improve
cost-effective service to taxpayers, and an appropriation by the
Legislature. The bill would therefore impose unknown, but
likely significant cost pressures on BOE, FTB, and EDD to
perform these functions.