BILL ANALYSIS                                                                                                                                                                                                    �




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair


          SB 1419 (Correa) -BOE: discharge from accountability.
          
          Amended: May 15, 2012           Policy Vote: G&F 8-0
          Urgency: No                     Mandate: No
          Hearing Date: May 24, 2012      Consultant: Mark McKenzie
          
          SUSPENSE FILE. 

          
          Bill Summary: SB 1419 would authorize the Board of Equalization 
          (BOE) to forgive an outstanding tax liability that is deemed 
          uncollectable if the taxpayer meets at least two of four 
          specified conditions.  

          Fiscal Impact: BOE estimates that the annual revenue loss would 
          be less than $227,000 annually (General Fund).

          Background: Existing law authorizes the Franchise Tax Board 
          (FTB) to forgive an outstanding tax liability if it is deemed 
          uncollectable and at least one of the following conditions is 
          met:
                 The liability is for an amount of less than $500.
                 The liable person has been deceased for more than four 
               years and there is no active probate for that person.
                 FTB has determined that the taxpayer has a permanent 
               financial hardship.
                 The liability has been unpaid for more than 30 years.

          Both the BOE and FTB follow the same procedures for discharging 
          a debt and removing it from accounts receivable when the agency 
          is unable to collect the debt, or the collection of the 
          liability is non cost effective.  Unlike FTB, however, BOE does 
          not have the authority to extinguish a tax liability that is 
          discharged after being deemed uncollectable.  The tax debt is 
          removed from the accounts receivable, but the taxpayer liability 
          cannot be extinguished.

          Proposed Law: SB 1419 would authorize BOE to release a person 
          from liability for the payment of any tax, fee, or other 
          liability deemed uncollectable, and extinguish that liability if 
          at least two of the following conditions are met:
                 The liability is for an amount of less than $500.








          SB 1419 (Correa)
          Page 1


                 The liable person has been deceased for more than four 
               years and there is no active probate for that person.
                 FTB has determined that the taxpayer has a permanent 
               financial hardship, as defined.
                 The liability has been unpaid for more than 30 years.

          Staff Comments: According to the Delinquent Account Report 
          prepared by the Department of Finance, the BOE discharged 6,805 
          accounts receivable on average per year from fiscal years 
          2006-07 through 2008-09 that were worth an average of $81.5 
          million per year.  SB 1419 would only allow BOE to extinguish 
          the liability for those accounts that meet two of the specified 
          criteria.  Based on collections experience, BOE estimates 
          revenue losses would be a maximum of approximately $227,000 
          annually, and likely substantially less.