BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1548|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
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|327-4478 | |
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THIRD READING
Bill No: SB 1548
Author: Wyland (R)
Amended: 5/8/12
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 8-0, 4/25/12
AYES: Wolk, Dutton, DeSaulnier, Fuller, Hancock,
Hernandez, Kehoe, La Malfa
NO VOTE RECORDED: Liu
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Board of Equalization: offer in compromise
SOURCE : Board of Equalization
DIGEST : This bill extends the sunset, from January 1,
2013 to January 1, 2018, on the Board of Equalizations
(BOE) authority to accept offers in compromise from firms
currently in operation.
ANALYSIS : The Legislature first allowed the Franchise
Tax Board to accept offers in compromise (SB 94, Chesbro,
Chapter 931, Statutes of 1999), then later authorized the
Board of Equalization to do so for final tax liabilities
for owners of defunct businesses under the Sales and Use
Tax Law, the Use Fuel Tax Law, and the Underground Storage
Tank Maintenance Fee Law (AB 1458, Kelley, Chapter 152,
Statutes of 2002). The Legislature then extended the
authority for the BOE to make offers in compromise for
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final tax liabilities under the Cigarette and Tobacco
Products Law, Alcoholic Beverage Tax Law, Timber Yield Tax
Law, Energy Resources Surcharge Law, Emergency Telephone
Users Surcharge Law, Hazardous Substances Tax Law,
Integrated Waste Management Fee Law, Fee Collection
Procedures Law, Diesel Fuel Tax Law, and the Oil Spill
Response Prevention and Administration Fees law (AB 3076,
Assembly Revenue and Taxation Committee, Chapter 364,
Statutes of 2006).
Under the BOE and Franchise Tax Board (FTB) programs, the
taxpayer must establish that the amount offered in payment
is the most that can be expected to be paid or collected
and they do not have reasonable prospects of acquiring
increased income or assets that would enable them to
satisfy a greater amount of the tax liability than the
amount offered. BOE and FTB can reestablish the final tax
liability should the taxpayer have sufficient annual income
during the succeeding five-year period following the date
of the compromise. When BOE and FTB determine that a
taxpayer concealed assets or falsified, withheld,
destroyed, or mutilated any book, document, or record
relating to their financial condition, they may reestablish
all compromised liabilities and the taxpayer may be found
guilty of a felony crime, fined up to $50,000, and
imprisoned.
In 2007, the Legislature expanded the program to allow BOE
to accept offers in compromise for businesses currently in
operation, as many taxpayers were surprised when BOE audits
uncovered transactions that the taxpayer didn't know were
taxable, so they never charged consumers the tax (AB 2047,
Horton, Chapter 222, Statutes of 2008).
This bill extends the sunset, from January 1, 2013 to
January 1, 2018, on the BOE's authority to accept offers in
compromise from firms currently in operation. This bill
applies to the Sales and Use Tax Law, Cigarette and Tobacco
Products Law, Use Fuel Tax Law, Alcoholic Beverage Tax Law,
Emergency Telephone Users Surcharge Law, Fee Collection
Procedures Law, Diesel Fuel Tax Law, and the Oil Spill
Response Prevention and Administration Fees law.
Comments
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When the Senate Revenue and Taxation Committee, the
predecessor to the Senate Governance and Finance Committee,
approved AB 2047 in 2008, it inserted a sunset to review
the authority granted by the bill to accept offers from
firms still in operation. According to BOE, they have
accepted a total of eight offers from firms that were not
defunct when they made the offer, seven of which are still
in operation. The total amount collected was $532,668,
and the BOE forgave approximately $357,000 when accepting
those offers.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to BOE, SB 1548 results in revenue increases of
$286,034 per year.
SUPPORT : (Verified 5/8/12)
Board of Equalization (source)
BOE Member George Runner
California Chamber of Commerce
California Growers Association
California Taxpayers' Association
Grass Valley/Nevada Chamber of Commerce
Industry Manufacturing Council
Laguna Beach Chamber of Commerce
Los Angeles Area Chamber of Commerce
National Federation of Independent Business
Orange Chamber of Commerce
ARGUMENTS IN SUPPORT : According to the author's office,
"Offer in Compromise �OIC] programs are mechanisms that
government agencies use to help taxpayers settle
outstanding tax liabilities that they could not pay in full
without having to declare bankruptcy. The goal of
establishing an OIC program is to incentivize taxpayers to
negotiate with the government agency to pay a reduced
amount to settle their tax liability. This approach allows
the taxpayer to keep their business open, which creates
further economic development. At the same time, OIC
programs increase the likelihood that tax liabilities will
be collected, even if for a reduced amount. Both the
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Internal Revenue Service (IRS) and the California Franchise
Tax Board (FTB) operate OIC programs for both taxpayers and
businesses."
AGB:nl 5/9/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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