BILL ANALYSIS Ó
AB 1277
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Date of Hearing: April 20, 2015
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Philip Ting, Chair
AB 1277
(Brough) - As Amended March 26, 2015
Majority vote. Fiscal committee.
SUBJECT: Tax administration: Taxpayers' Rights Advocate: levy
or notice to withhold: return of funds
SUMMARY: Increases the amount of levied funds the Taxpayers'
Rights Advocate (TRA) may order returned to a taxpayer upon a
finding that the levy or notice to withhold threatens the health
or welfare of the taxpayer or the taxpayer's family.
Specifically, this bill:
1)Increases, from $1,500 to $2,300, the amount of money the TRA
may order returned to a taxpayer under the following tax and
fee programs:
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a) The Sales and Use Tax Law;
b) The Use Fuel Tax Law;
c) The Alcoholic Beverage Tax Law;
d) The Energy Resources Surcharge Law;
e) The Emergency Telephone Users Surcharge Act;
f) The Hazardous Substances Tax Law;
g) The Integrated Waste Management Fee Law;
h) The Oil Spill Response, Prevention, and Administration
Fees Law;
i) The Underground Storage Tank Maintenance Fee Law; and,
j) The Diesel Fuel Tax Law.
2)Provides the TRA, for the first time, with comparable fund
return authority under both the Cigarette and Tobacco Products
Tax Law and the Fee Collection Procedures Law.
3)Provides that, on or before March 1, 2016, and on or before
March 1 each year thereafter, the State Board of Equalization
(BOE) shall adjust the maximum return amount for inflation, as
specified.
4)Authorizes the TRA to order amounts returned in the case of a
seizure of property resulting from a jeopardy assessment.
5)Limits the amount the TRA may release or return to $2,300,
indexed for inflation, in any monthly period.
EXISTING LAW:
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1)Authorizes the BOE's TRA to order, within 90 days of receiving
funds through a levy or notice to withhold, the return of up
to $1,500, upon a finding that the levy or notice to withhold
threatens the health or welfare of the taxpayer or the
taxpayer's family. Specifically, this authority currently
extends to the following tax and fee programs the BOE
administers:
a) The Sales and Use Tax Law;
b) The Use Fuel Tax Law;
c) The Alcoholic Beverage Tax Law;
d) The Energy Resources Surcharge Law;
e) The Emergency Telephone Users Surcharge Act;
f) The Hazardous Substances Tax Law;
g) The Integrated Waste Management Fee Law;
h) The Oil Spill Response, Prevention, and Administration
Fees Law;
i) The Underground Storage Tank Maintenance Fee Law; and,
j) The Diesel Fuel Tax Law.
1)Authorizes the TRA, under both the Cigarette and Tobacco
Products Tax Law and the Fee Collection Procedures Law, to
release a levy or notice to withhold upon a finding that the
levy or notice to withhold threatens the health or welfare of
the taxpayer or the taxpayer's family. Existing law, however,
does not authorize a hardship return of levied funds under
either the Cigarette and Tobacco Products Tax Law or the Fee
Collection Procedures Law.
FISCAL EFFECT: The BOE estimates annual revenue losses of
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approximately $4,600. Specifically, the BOE's staff analysis
notes, "BOE staff assumes the TRA will average a return of funds
about twice per year."
COMMENTS:
1)The author has provided the following statement in support of
this bill:
AB 1277 provides greater relief for taxpayers in dire
financial circumstances. This bill would increase the
amount of levied funds the Taxpayers' Rights Advocate is
allowed to order returned from $1,500 to $2,300 in cases
where the levy threatens the health or welfare of the
taxpayer, their spouse, and family. The amount has not
been adjusted since the authority was established in 1996.
[AB] 1277 relieves taxpayers in severe circumstances who
would otherwise be financially devastated by a levy.
2)This bill is sponsored by the BOE, which notes:
AB 1277 increases the levy amount the BOE's [TRA] is
authorized to return from $1,500 to $2,300 to adjust for
inflation and to provide a mechanism for future inflation
adjustments, and extends this authorization, even when a
jeopardy assessment has been issued. The bill also adds
levy return authority to the remaining BOE-administered tax
and fee programs that currently lack it.
3)BOE Member George Runner, who supports this bill, notes:
As an elected member of the Board, I frequently hear from
taxpayers, including many small business owners, who are
struggling to get back on their feet as a result of
California's economic downturn. When these taxpayers fall
behind on their tax payments, the state may issue a levy or
notice to withhold, which can sometimes negatively impact
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their ability to provide basic necessities for their
family.
4)The BOE notes the following in its staff analysis of this
bill:
a) The return of levied funds does not reduce the tax
liability : "The BOE is authorized to levy bank accounts to
collect delinquent amounts. Occasionally a taxpayer is
unable to contact the TRA to stop the funds from being
levied until after the BOE has seized the funds. In these
rare cases, levied funds are needed to cover the taxpayer's
basic living expenses. Only the TRA, and not the [BOE], is
allowed to order funds returned when the levy threatens the
health or welfare of the taxpayer or the taxpayer's
family."
"The BOE's TRA bases the decision to return levied funds
upon a taxpayer's reasonable documentation and financial
condition disclosure. Typically the taxpayer completes a
BOE financial statement with accompanying documents to
substantiate income and expenses. Since California is a
community property state, the BOE requests information
about total household income and expenses."
b) Basis for the suggested increase : "The increase from
$1,500 to $2,300 is based on the accumulated California
inflation factor from the date [R&TC] Section 7094 was
first effective, on January 1, 1996, to the present. This
measure also provides a mechanism for future inflation
adjustments."
"The amount returned may not cover a taxpayer's monthly
living expenses, but a reasonable increase in the funds
returned will help a taxpayer provide for his or her family
when the need arises. The incremental inflationary
adjustment ensures that the amount returned will keep pace
with the cost of living."
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5)Committee Staff Comments
a) General background : In 1988, the Legislature enacted
the Harris-Katz California Taxpayers' Bill of Rights
(Harris-Katz). That legislation was designed to "ensure
that the rights, privacy, and property of California
taxpayers are adequately protected during the process of
the assessment and collection of taxes." [Revenue and
Taxation Code (R&TC) Section 7081.] Among its many
provisions, Harris-Katz directed the BOE to establish the
position of the TRA. (R&TC Section 7083.) The TRA is
charged with facilitating the resolution of taxpayer
complaints, including complaints alleging unsatisfactory
treatment by BOE employees. (Id.)
Harris-Katz also added R&TC Section 7094, which authorized
the TRA to order the release of a levy upon finding that
the levy threatens the health or welfare of the taxpayer or
the taxpayer's family. The BOE notes that this provision
placed no limitation on the time for requesting a release
or the amount of money that could be released.
In 1995, SB 718 (Committee on Revenue and Taxation) amended
R&TC Section 7094 to read as it does today. Among other
things, SB 718 authorized the TRA to order, within 90 days
of receiving funds through a levy or notice to withhold,
the return of up to $1,500, upon a finding that the levy or
notice to withhold threatens the health or welfare of the
taxpayer or the taxpayer's family. It is difficult to
divine the Legislature's intent in providing the TRA this
expanded authority given that SB 718 was an omnibus tax
bill with multiple provisions. Nevertheless, the BOE has
previously noted the following:
Although the available legislative history does not
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explain the rationale for the dollar threshold, the
statute itself seems to suggest that the Legislature
attempted to strike a balance between the expanded
power to return funds and the potential revenue
impact.
b) Accounting for inflation : This bill would increase,
from $1,500 to $2,300, the amount of money the TRA may
order returned to a taxpayer under numerous
BOE-administered tax and fee programs. The BOE notes that
this increase is designed to account for inflation from the
date R&TC Section 7094 became effective to today. This
bill would also provide a mechanism for future inflation
adjustments.
c) Related legislation :
i) AB 1222 (Bloom), of the 2013-14 Legislative Session,
contained provisions substantially similar to this bill.
AB 1222 passed out of this Committee by a vote of 8-0 and
passed the Assembly Floor by a vote of 75-0. AB 1222 was
substantially amended in the Senate, however, and the
TRA-related provisions were removed.
ii) AB 2249 (Bloom), of the 2013-14 Legislative Session,
contained provisions substantially similar to this bill.
AB 2249 was referred to this Committee and was never
heard.
d) Jeopardy assessments : Current law specifically provides
that the TRA's release and return authority does not apply
to the seizure of any property as a result of a jeopardy
assessment. Unlike the prior legislation noted above, this
bill would explicitly authorize the TRA to order amounts
returned in the case of a seizure of property resulting
from a jeopardy assessment.
A jeopardy assessment is issued when collection of the amount
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due is jeopardized by delay. Such assessments are due and
payable immediately and are subject to all collection actions as
of the date they are served. The BOE notes, "Because a jeopardy
assessment is indicative of collection being in jeopardy if
delayed, collection offices must give priority to these cases
and take all appropriate collection actions, including the
seizure of personal property."
It is not entirely clear to Committee staff why this bill is
seeking to extend the TRA's return authority to cases where
property has been seized as a result of a jeopardy assessment.
Committee staff questions whether such authority may
inadvertently undermine the state's efforts to collect some of
its hardest to collect debts. The Committee may wish to
consider amendments either striking the return authorization for
jeopardy assessments or clarifying that amounts may be returned
only if collection of the amount due is no longer in jeopardy.
REGISTERED SUPPORT / OPPOSITION:
Support
State Board of Equalization (Sponsor)
BOE Member George Runner
California Taxpayers Association
Opposition
AB 1277
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None on file
Analysis Prepared by:M. David Ruff / REV. & TAX. / (916)
319-2098