BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 2009 HEARING: 6/11/14
AUTHOR: Weber FISCAL: Yes
VERSION: 4/10/14 TAX LEVY: No
CONSULTANT: Bouaziz
STATE BOARD OF EQUALIZATION: MANAGED AUDIT PROGRAM
Authorizes a managed audit program for various tax and fee
programs administered by the Board of Equalization.
Background and Existing Law
State law provides for a managed audit program under the
Sales and Use Tax (SUT) Law. If the State Board of
Equalization (BOE) determines that a taxpayer's account is
eligible for the program and the taxpayer agrees to
participate, the taxpayer examines its own books, records,
and equipment to determine if it has any unreported tax
liability for the audit period, in compliance with the
managed audit instructions provided by the BOE. Upon
completion of the managed audit and verification by the
BOE, interest on any unpaid liability is computed at
one-half the rate that would otherwise by imposed for
liabilities covered by the audit period.
Proposed Law
Assembly Bill 2009 authorizes a voluntary managed audit
program for the Motor Vehicle Fuel Tax Law, Use Fuel Tax
Law, Cigarette and Tobacco Products Tax Law, Alcoholic
Beverage Tax Law, Energy Resources Surcharge Law, Emergency
Telephone Users Surcharge Act, Hazardous Substances Tax
Law, Integrated Waste Management Fee Law, Oil Spill
Response, Prevention, and Administration Fees Law,
Underground Storage Tank Maintenance Fee Law, Fee
Collection Procedures Law, and Diesel Fuel Tax Law.
AB 2009 provides that a taxpayer's account is eligible for
the managed audit program only if the taxpayer meets all of
the following criteria:
AB 2009 -- 04/10/14 -- Page 2
The taxpayer's business involves few or no
statutory exemptions;
The taxpayer's business involves a single or small
number of clearly defined taxability issues;
The taxpayer agrees to participate in the managed
audit program; and,
The taxpayer has the resources to comply with the
managed audit instructions provided by the BOE.
The BOE must identify all of the following if it selects a
taxpayer's account:
The audit period covered by the managed audit;
The types of transactions covered by the managed
audit;
The specific procedures that the taxpayer is to
follow in determining any liability;
The records to be reviewed by the taxpayer;
The manner in which the types of transactions are
to be scheduled for review;
The time period for completion of the managed
audit;
The time period for the payment of the liability
and interest;
The bill requires a participating taxpayer to examine its
books and records to determine if it has any unreported tax
liability for the audit period, and to make available to
BOE for verification all computations and books and records
examined. Upon completion verification, the BOE can only
charge interest on any unpaid liability at one-half the
rate that would otherwise be imposed for liabilities
covered by the audit period.
State Revenue Impact
The BOE estimates that this bill would result in a net
annual revenue gain of approximately $249,207.
Comments
1. Purpose of the bill . According to the author, "Managed
audits are essentially supervised self-audits. Under the
existing MAP, the BOE is authorized to determine which
AB 2009 -- 04/10/14 -- Page 3
taxpayer accounts are eligible to participate in a MAP and
to enter into MAP Participation Agreements with eligible
taxpayers. The auditor provides written and oral
instructions to enable eligible taxpayers to perform audit
verification and prepare working paper schedules necessary
to complete certain portions of the audit. These audits
are advantageous for both tax payers and the BOE by
limiting disruption to a taxpayer's business activities
while also allowing the BOE to reallocate audit resources
to conduct more audits. BOE staff has also found that
taxpayers who participate in the MAP develop a better
understanding of the laws that affect them and are able to
report tax liability more accurately. By extending the
authority of MAP to special tax and fee programs, this bill
will allow greater access to an already successful
program."
2. What is the managed audit program ? The SUT Law's
managed audit program allows eligible taxpayers to conduct
a self-audit under the BOE's supervision. The taxpayer
must have sufficient resources to comply with the BOE's
managed audit instructions. From the BOE's perspective,
the benefits of the managed audit program include the
ability to redirect staff resources to more complex,
revenue-generating activities. At the same time, the BOE
notes that the program leads to earlier resolution of
taxability issues and fewer protested audits. Eligible
taxpayers, in turn, can reduce some of the business
disruption associated with traditional audits, and gain
valuable knowledge regarding how to comply properly with
the SUT Law. Taxpayers who successfully complete a managed
audit verified by the BOE receive a break on any interest
due.
Assembly Actions
Assembly Committee on Revenue and Taxation:9-0
Assembly Appropriations Committee: 17-0
Assembly Floor: 78-0
Support and Opposition (06/05/14)
Support : California Board of Equalization; California
AB 2009 -- 04/10/14 -- Page 4
Chamber of Commerce; California Taxpayers Association.
Opposition : None received.