BILL ANALYSIS Ó
AB 576
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CONCURRENCE IN SENATE AMENDMENTS
AB 576 (V. Manuel Pérez)
As Amended September 6, 2013
Majority vote
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|ASSEMBLY: |75-3 |(May 30, 2013) |SENATE: |38-0 |(September 12, |
| | | | | |2013) |
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Original Committee Reference: PUB. S.
SUMMARY : Establishes a pilot program to create the "Revenue
Recovery and Collaborative Enforcement Team" consisting of
specified agencies to collaborate in combating criminal tax
evasion associated with the underground economy.
The Senate amendments:
1)Delete the provision requiring the team to report on its
accomplishments and activities to the Legislature and to
participating agencies by July 1, 2015, and annually
thereafter.
2)Change the participation of the Employment Development
Department (EDD) from an advisory capacity to a member of the
enforcement team.
3)Require that the pilot program be operated using existing
funding of the Department of Justice (DOJ), the Franchise Tax
Board (FTB), the State Board of Equalization (BOE), and EDD;
and prohibit the team from requesting additional funding until
after makings its report to the Legislature.
EXISTING LAW :
1)Provides that all property is taxable unless otherwise
provided by the California Constitution or the laws of the
United States.
2)Establishes the BOE which administers sales and use taxes,
excise taxes, special taxes, and the state's fee programs.
3)Allows taxes on or measured by income to be imposed on
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persons, corporations, or other entities as prescribed by law.
4)Contains various provisions criminalizing tax evasion.
AS PASSED BY THE ASSEMBLY, this bill :
1)Made legislative findings relative to uncollected taxes in
California (estimated to be $9 billion annually) associated
mostly with underreported or unreported taxes related to
underground economic activities and its threat to the health
of the state's economy, business community, and workers.
2)Recognized that while the Labor Enforcement Task Force and
Joint Enforcement Strike Force work to combat the underground
economy, these programs focus on labor violations and often
overlook criminal tax evasion.
3)Declared legislative intent to enhance existing efforts to
combat criminal tax evasion associated with the underground
economic activities by collaboration among state entities
through the newly-created "Revenue Recovery and Collaborative
Enforcement Team" (team) by focusing on the criminal and civil
prosecution of those who operate in the underground economy
and flagrantly violate tax laws.
4)Established the team as a pilot program.
5)Included the FTB, DOJ, and State BOE in the team.
6)Allowed the California Health and Human Services Agency,
Department of Consumer Affairs, Department of Industrial
Relations, Department of Insurance, Employment and Development
Department, and Department of Motor Vehicles to participate in
the pilot program in an advisory capacity to the team.
7)Required the team to meet as needed, but at least quarterly.
8)Required participating agencies to do all of the following to
combat criminal tax evasion associated with the underground
economy:
a) Develop a plan for a central intake process and
organizational structure to document, review, and evaluate
data and complaints.
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b) Evaluate the benefits of 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
investigative leads where collaboration opportunities exist
for felony-level criminal and civil investigations.
9)Allowed duly authorized team members and representatives of
the other participating agencies to exchange intelligence,
data, documents, information, complaints, or lead referrals
for the purpose of investigating criminal tax evasion
associated with underground economic activities.
10)Prohibited any member or ex-member of the team, any agent
employed by a member agency, or any person who has obtained
such knowledge from any of the above agencies or persons, 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.
11)Required the team to report on or before July 1, 2015, and
annually thereafter, to the Legislature and to each
participating agency on its activities and accomplishments.
12)Required the team to submit a report to the Legislature on or
before December 1, 2017, 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 team.
13)Sunset the partnership on January 1, 2019, and repeals it as
of that date unless a later-enacted statute extends it.
FISCAL EFFECT : According to the Senate Appropriations
Committee:
1)BOE, FTB, and DOJ indicate minor and absorbable costs.
2)Unknown future revenue gains, potentially in the low millions
of dollars annually (General Fund), related to the pilot
project's enforcement actions and increased tax collections.
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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.
3)Significant cost pressures to hire additional administrative,
investigative, and enforcement staff among the participating
state entities upon full implementation of the Partnership
(General Fund). These costs would likely be mitigated and
perhaps completely offset by future revenue gains resulting
from increased enforcement activities (See Senate
Appropriations Committee's staff comments).
COMMENTS : According to the author, "At a time when California
has been reducing and in some cases eliminating funding for
vital public services, it is estimated the state loses up to $8
billion a year in tax revenue due to the effects of the state's
prolific underground economy, currently valued at between $60
and $140 billion. While the impact of the underground economy on
the state is extensive, the state lacks a coordinated effort
among its various agencies to tackle the underground economy
"AB 576 will address the problem by establishing a California
Intelligence Partnership between nine state agencies to enable
the sharing of information and investigate leads.
"A collaborative, strategic, targeted and focused effort to
combat the underground economy would create a synergy among the
various enforcement agencies, increasing the state's
effectiveness in recapturing revenue lost to businesses
operating illegally in the State of California.
"As such, AB 576 will create a Centralized Intelligence
Partnership (CIP) between nine member agencies including the
Board of Equalization, the Franchise Tax Board, the Employment
Development Department and California Department of Justice.
Each duly authorized representative of the partnership would be
allowed to exchange intelligence, data, documents, information,
complaints, or lead referrals for the purpose of investigating
illegal, underground operations. Information obtained by the
CIP would retain its confidential status and would be subject to
all the existing confidentiality statutes guiding each agency."
Please see the policy committee analysis for a full discussion
of this bill.
AB 576
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Analysis Prepared by : Sandy Uribe / PUB. S. / (916) 319-3744
FN: 0002669