BILL ANALYSIS �
AB 2014
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Date of Hearing: April 28, 2014
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Raul Bocanegra, Chair
AB 2014 (Alejo) - As Amended: April 8, 2014
Majority vote. Fiscal committee.
SUBJECT : Taxation: undocumented immigrants
SUMMARY : Directs the Franchise Tax Board (FTB) to advertise the
availability of filing a state income tax return using an
individual taxpayer identification number (ITIN) by a California
resident who is not eligible to receive a social security number
(SSN). Specifically, this bill :
1)Contains the following legislative findings:
a) The full recovery of the California economy depends upon
the continued residence and employment of all current and
future members of the state workforce, whether currently
employed or in the process of training for future
employment;
b) The removal of residents and employees, who are free of
any serious criminal history or criminal misconduct, from
the state during this time of economic recovery is
disruptive of the nascent recovery, and separates and
disrupts families and community, with significant secondary
effects on the state economy and the state education
system;
c) The Legislature recognizes and acknowledges the federal
government's exclusive authority in the area of immigration
regulation, including the determination of enforcement
priorities and the granting of discretionary relief on an
individual or class wide basis;
d) The failure of the Congress to act on much-needed
federal legislation to provide relief from deportation and
a pathway to citizenship for those millions of undocumented
persons who have resided peacefully in California and other
states for many years, raising families, paying taxes, and
contributing to our economy and society, has perpetuated a
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structural problem in our state economy, with too many
workers intimidated from playing a complete role in our
social and economic development by the lack of legal
protection occasioned by their status;
e) Despite these impediments, many undocumented workers
have endeavored year after year to file California state
income tax returns using an ITIN; and,
f) Encouraging those who are not eligible to receive a SSN
to file a California state income tax return using an ITIN
is in the best interest of the state, its economy, and its
tax laws.
2)Provides that it shall be unlawful for any FTB employee or any
other employee of any state or local government agency to
reveal the identity of any natural person who has filed a
California state income tax return using an ITIN absent a
court order or statutory authorization.
3)Provides that this prohibition shall not apply in cases where
the FTB has cause to believe the person has a SSN or is
eligible for a SSN and is fraudulently filing a California
state income tax return using an ITIN for purposes unrelated
to the person's ineligibility to receive a SSN.
4)Requires the FTB to do both of the following:
a) Collaborate with the Department of Justice to draft any
necessary regulations relating to the administration of the
above provisions; and,
b) Undertake any enforcement action to ensure that the
confidentiality of information regarding a natural person
who has filed a California state income tax return using an
ITIN is maintained to the maximum extent possible.
5)Requires the FTB to issue a receipt or proof of filing to a
taxpayer filing California state income tax returns using an
ITIN for returns filed for taxable years beginning on or after
January 1, 2014.
6)Requires the FTB to submit an annual report to the Legislature
and Governor that includes:
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a) The number of natural persons who have filed California
state income tax returns using ITINs;
b) The aggregate taxable income reported by all of those
persons; and,
c) The aggregate amount of income tax paid by all of those
persons with respect to the immediately preceding taxable
year.
7)Directs the Governor, on or after July 1, 2015, to submit, as
a ministerial act on behalf of the state, a request to the
President asking that the President direct the Department of
Homeland Security, the United States Immigration and Customs
Enforcement (ICE), and other relevant federal agencies not to
expend resources in the interior of the State of California on
the apprehension, detention, or removal of any person deemed
to be removable, other than by virtue of a serious or violent
felony, unless the person meets one of the priority
enforcement criteria set forth in the then-existing ICE policy
on civil immigration enforcement.
8)Requires this request to include this bill's legislative
findings.
9)Requires this request to be renewed annually until the federal
government enacts legislation addressing the status of
undocumented persons who have lived continuously and without
significant criminal history in California and other states.
10)Directs the Governor, on or after July 1, 2015, as a
ministerial act on behalf of the state, to request that the
President provide any available waivers, exemptions, or
authorizations to provide relief from removal for any persons
who have filed a California state income tax return using an
ITIN and who can demonstrate that filing by presenting a
receipt or proof of filing and who do not fall within any of
the priority enforcement criteria set forth in the
then-existing ICE policy on civil immigration enforcement.
11)Requires this secondary request to recite this bill's
legislative findings.
12)Requires this secondary request to be renewed annually until
the federal government enacts legislation addressing the
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status of undocumented persons who have lived continuously and
without significant criminal history in California and other
states.
EXISTING FEDERAL LAW :
1)Regulates immigration pursuant to the Immigration and
Nationality Act (INA), which governs the rights, duties, and
obligations associated with being an alien in the U.S. The
INA also governs issues such as length of stay, and specifies
which aliens may become legal citizens.
2)Provides, per Presidential directive, that individuals who
demonstrate that they meet specified criteria will be
eligible, on a case by case basis, for deferred action with
respect to deportation.
EXISTING STATE LAW :
1)Establishes the FTB and prescribes its various powers and
duties regarding, among other things, the administration of
the state's Personal Income Tax Law.
2)Requires that an income tax return be filed by every
individual with income exceeding specified amounts.
3)Allows an income tax return to be filed with the FTB using an
ITIN.
4)Provides that the Governor is the sole official organ of
communication between the state and the government of any
other state or of the United States.
5)Allows the disclosure of taxpayer and return information when
specifically authorized by statute. Generally, disclosure to
other state tax agencies and federal tax agencies is
authorized for tax administration purposes only.
FISCAL EFFECT : None. Specifically, the FTB notes, "Current law
allows taxpayers to file a state income tax return utilizing an
ITIN, therefore, this bill would not impact the state's income
tax revenue."
COMMENTS :
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1)The author has provided the following statement in support of
this bill:
AB 2014 creates an incentive for those California residents
who are not eligible for a social security number to file
state income taxes. This proposal will help generate state
revenue and could potentially provide relief from
deportation to undocumented immigrants that live peacefully
in California contributing to our economy and society.
2)Proponents of this bill note the following:
My organization and our community strongly support [AB
2014] because it establishes a framework for California
undocumented taxpayers that through the use of the federal
ITIN (to file state and federal tax returns) will emerge
from the shadows and contribute to our state.
[. . .]
Under [AB 2014] more than 1 million new taxpayers could
surface, generating resources that can be used to invest in
items like education, law enforcement, and health services.
[AB 2014] is needed now more than ever as it is clear that
Congressional action to legalize the undocumented community
is stalled. California should take the lead with state
action continuing the noteworthy trend began over recent
years with measures like the California Dream Act, Drivers
License Act, and the Trust Act.
3)The FTB notes the following administrative concerns in its
staff analysis of this bill:
a) "Because current law already allows an individual to
file a return using an SSN or ITIN, it is unclear if the
bill's definition of an "individual taxpayer identification
number" is meant to have a different meaning. Clarity is
necessary before the department could implement this bill."
b) "The term "undertake any enforcement action", is
undefined in the bill. The absence of a definition to
clarify this term could lead to disputes with taxpayers and
would complicate the administration of this bill."
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c) "The bill adds unique disclosure provisions that:
duplicate protections that are already in
statute,
conflict with statutes that authorize
disclosure and sharing of tax information with state
and federal agencies, and
waive disclosure provisions when the FTB
has cause to believe the number was used
fraudulently, which may violate current disclosure
statutes."
a) "This bill would require the FTB to collaborate with the
DOJ to prescribe regulations. Existing law provides the
FTB the authority to prescribe regulations; additionally,
the need for collaboration with the DOJ is unclear."
b) "Personal income tax returns may be filed, with
extension, until October 15. The department generally
processes returns within six months of receipt. If the
author's intent is to have each report contain complete
information for the taxable year, the due date of the
report should be changed."
1)Committee Staff Comments:
a) Overview of existing law : Upon the creation of the
Social Security Administration, SSNs were assigned to
American citizens beginning in 1936. In the 1960s, federal
agencies began adopting the SSN as a governmental
identifier, and federal and state government use of the SSN
for recordkeeping purposes greatly increased.
The Internal Revenue Service issues an ITIN to individuals
who are required to have a U.S. taxpayer identification
number to file a federal personal income tax return, but
who are ineligible to obtain a SSN. Specifically, the ITIN
is a nine-digit number that always begins with the number
"9". California uses the SSN and the ITIN for
recordkeeping of individual income tax accounts in
conformity with federal law. Thus, current state law
allows a taxpayer to file an income tax return with the FTB
using either a SSN or an ITIN.
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b) What would this bill do ? This bill would require the
FTB to advertise the availability of filing a state income
tax return using an ITIN by a California resident who is
not eligible to receive a SSN. In addition, the FTB would
be required to issue a receipt or proof of filing to any
taxpayer who files using an ITIN.
In this manner, this bill seeks to increase tax compliance
by encouraging undocumented immigrants to file a California
income tax return and pay any corresponding tax liability.
This bill further creates a mechanism whereby these
tax-paying undocumented immigrants would potentially be
shielded from federal immigration enforcement.
Specifically, this bill would require the Governor to
petition the President for "any available waivers,
exemptions, or authorizations" to provide relief from
removal for those who have filed a California income tax
return using an ITIN. It appears that this request would
effectively seek the federal government to exercise
prosecutorial discretion with respect to immigrants who
voluntarily satisfy their income tax obligations.
c) Prosecutorial discretion : According to its Director,
ICE is confronted with more administrative violations than
its resources can address, and thus, must regularly
exercise prosecutorial discretion in the ordinary course of
immigration enforcement. "Prosecutorial discretion" is
"the authority of an agency charged with enforcing a law to
decide to what degree to enforce the law against a
particular individual." (ICE letter, p.2.) Thus, on June
15, 2012, the Department of Homeland Security announced
that, effective immediately, certain young people who were
brought to the U.S. as young children, do not present a
risk to national security or public safety, and who meet
several key criteria would be considered for relief from
removal or from entering into removal proceedings.
Specifically, those who demonstrate that they meet these
criteria are now eligible to receive "deferred action" for
a period of two years, subject to renewal, and will be
eligible to apply for work authorization.
d) A meaningful promise ? As noted above, this bill would
direct the Governor to petition the President for
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preferential treatment of those undocumented immigrants who
voluntarily comply with their tax filing obligations.
However, there is obviously no guarantee that President
Obama, or any succeeding President, would heed the call to
take such action. Thus, the Committee may wish to consider
the potential repercussions of encouraging undocumented
immigrants to effectively "come out of the shadows" before
any assurance is provided regarding the treatment they will
receive at the hands of federal authorities.
e) Is mandatory direction needed ? It is unclear to
Committee staff why legislation is required directing the
Governor, as a ministerial act, to make this request. If
the current Governor were inclined to take this approach,
could he not do so in the absence of legislation?
Moreover, this bill further requires the Governor to
continue making such a request annually until the federal
government enacts legislation "addressing the status" of
undocumented persons. It is unclear to Committee staff how
this determination would be made and by whom.
REGISTERED SUPPORT / OPPOSITION :
Support
California-Mexico Project
Central American Resource Center
El Reportero
Greater Los Angeles Collective Alliance
Latina / Latino Roundtable
Mexican American Legal Defense and Educational Fund
William C. Vel�squez Institute
Opposition
None on file
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098