BILL ANALYSIS                                                                                                                                                                                                    �



                                                                  AB 2758
                                                                  Page  1

          Date of Hearing:   May 14, 2014

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

           AB 2758 ( Committee on Revenue & Taxation) - As Amended:  April  
                                      10, 2014

          Policy Committee:                              Revenue &  
          Taxation     Vote:                            9-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              No

           SUMMARY  

          This bill modifies the priority of payments for use and income  
          tax such that the qualified use tax liability a taxpayer reports  
          on an acceptable tax return will be paid with moneys remitted by  
          that taxpayer before income tax liability, applicable to  
          purchases of tangible personal property made on or after January  
          1, 2014, in taxable years beginning on or after January 1, 2014.

           FISCAL EFFECT  

          1)Potential minor costs to the Franchise Tax Board (FTB) to  
            update its forms and systems, likely offset, at least in part,  
            by cost savings to the Board of Equalization (BOE), which will  
            no longer be required to send use tax shortage notices in many  
            cases (see Comment 2).

          2)FTB estimates decreases to GF revenues collected by the FTB of  
            $60,000, $40,000, and $30,000 in FY 2014-15, FY 2015-16, and  
            FY 2016-17, respectively.  These revenue decreases would be  
            offset, at least in part, by increases to GF, other state  
            fund, and local revenues collected by the BOE.

           COMMENTS  

          1)  Purpose.   According to the BOE, this bill would reduce  
            taxpayer confusion and create efficiencies within FTB and BOE.  
             The BOE claims the current payment order, which requires tax  
            payments to be applied first to FTB taxes, interests, and  
            penalties has resulted in considerable taxpayer confusion in  
            situations where a taxpayer fails to remit the proper amount  








                                                                  AB 2758
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            on its tax return.

          2)  Background.   The BOE indicated taxpayers occasionally make  
            underreporting errors or file late and incur penalty and  
            interest charges, resulting in a payment shortage.  Current  
            law requires the FTB to apply the amount paid, including the  
            amount the taxpayer designated for use tax, first to the  
            amounts owed to the FTB.  In these instances, the taxpayer  
            will receive a tax shortage notice from the BOE with an added  
            penalty for late payment of underpaid use tax.  The taxpayer  
            may also receive a tax shortage notice from the FTB if there  
            is further outstanding liability to the FTB.  In either case,  
            taxpayers are often frustrated by receiving a BOE tax shortage  
            notice for the use tax, with an added penalty for late  
            payment, when they believed the use tax was already timely  
            paid to the FTB.

           Analysis Prepared by  :    Joel Tashjian / APPR. / (916) 319-2081