BILL ANALYSIS Ó
AB 1856
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Date of Hearing: April 11, 2016
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Sebastian Ridley-Thomas, Chair
AB 1856
(Dababneh) - As Amended April 6, 2016
SUBJECT: Excise taxes: claim for refund: timely filed claims
SUMMARY: Allows a single claim for refund to be deemed as
timely for all prior overpayments made within the claim's
statute of limitations, and for all subsequent installment
payments related to the claim, in cases where the amount of tax,
surcharge, or fee determined has not been paid in full.
Specifically, this bill:
1)Provides that for cases in which the amount of tax, surcharge,
or fee determined has not been paid in full, a properly filed
claim for refund shall be deemed timely for all overpayments
within its statute of limitations, and for all subsequent
payments applied to that determination.
2)Defines "amount of tax determined", "amount of surcharge
determined", and "amount of fee determined" as the amount of
tax, surcharge, or fee, and any interest or penalty, imposed
with respect to a single determination.
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3)Provides that the provisions of this bill only apply to claims
for refund filed on or after its effective date.
4)Applies to payment or prepayment of tax, fee, or surcharge
imposed pursuant to the Sales and Use Tax (SUT) Law, the Use
Fuel Tax Law, the Cigarette and Tobacco Products Tax Law, the
Alcoholic Beverage Tax Law, the Energy Resources Surcharge
Law, the Emergency Telephone Users Surcharge Act, the
Hazardous Substances Tax Law, the Integrated Waste Management
Fee Law, the Oil Spill Response, Prevention, and
Administration Fees Law, the Underground Storage Tank
Maintenance Fee Law, and the Diesel Fuel Tax Law, and for
taxes and fees imposed in accordance with the Fee Collection
Procedures Law.
EXISTING LAW:
1)Authorizes the Board of Equalization (BOE) to compute and
determine the amount of SUT or other special taxes and fees
required to be paid, and impose interest and penalties on that
amount, when:
a) The BOE is not satisfied with a taxpayer's filed return;
b) The taxpayer does not file a return; or,
c) The BOE believes the collection of tax, surcharge, or
fee will be jeopardized by delay.
2)Requires the BOE to give taxpayers a written notice of its
deficiency determination, determination where no return has
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been filed, or jeopardy determination.
3)Allows a taxpayer to appeal a determination and put a stay on
collections by filing a petition for redetermination within 30
days (10 days for jeopardy determinations) of being served a
determination notice. If a petition for redetermination is
not filed within that period, the determination becomes final.
4)Allows a taxpayer who misses the redetermination filing
deadline to appeal the determination by paying the liability
and then filing a claim for refund.
5)Allows a taxpayer to submit a written claim for refund that
must state the specific grounds on which the claim is founded.
In order for the claim to be valid, the claim must be filed
within a specific statute of limitations:
a) Three years from the due date of the return for the
period for which the claimed overpayment was made;
b) Six months from the date of the claimed overpayment;
c) Six months from the date the determination became final,
for a payment made pursuant to a determination.
d) Three years from the date the BOE collected an
involuntary payment by the use of enforcement procedures,
such as levies or liens.
6)Provides that the BOE will not take action on a claim for
refund until the full liability determined to be due is paid.
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7)Authorizes the BOE to enter into a written installment payment
agreement for the full payment of a liability over an agreed
period.
8)Requires the Franchise Tax Board (FTB) to toll the statute of
limitations if it receives a claim for refund that is
otherwise valid, except that payment of the entire tax
assessed or asserted has not been made. No credit or refund
may be issued by FTB for any payment made more than seven
years before the date that full payment of the tax is made.
FISCAL EFFECT: Unknown
COMMENTS:
1)Author's Statement : The author provided the following
statement in support of this bill:
This bill allows a taxpayer making installment tax payments
to file a single claim for refund to cover the period.
Taxpayers who have entered into an installment payment plan
often mistakenly believe they need only file one claim for
refund at the conclusion of the payment plan, rather than
filing claims for refund for each payment within six months
after the date of payment. This proposal is prompted by
several cases in which the taxpayer was barred by the
statute of limitations from recovering all the installment
payments made to the BOE even though the determination was
either cancelled or reduced to an amount less than the
total payments received. In each case, the taxpayer did
not file a timely petition for redetermination, made
multiple payments for one liability, but did not file
refund claims for each installment payment. AB 1856 will
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provide equitable relief for taxpayers who would be barred
from receiving a refund for one or more installment
payments because they did not file a timely claim for
refund for each individual payment.
2)Arguments in Support : The sponsor of this bill, the BOE,
states:
This single claim for refund would toll the statute of
limitations as of the timely filing of a refund claim on
the first payment and would cover all subsequent payments
applied to that determination. Taxpayers do not understand
why they must file a refund claim for each individual
payment. Despite the BOE's letters and publications
instructing taxpayers to file a protective refund claim for
each individual payment, some taxpayers still fail to do
so.
3)Parameters of This Bill : This bill is not intended to apply
in all instances of unpaid or underpaid tax, surcharge, or
fee, but specifically in instances when a taxpayer, most often
after a BOE audit finding that the taxpayer has not paid or
owes additional taxes, surcharges or fees, files an appeal of
that determination. If the taxpayer does not agree with the
determination of taxes due, the taxpayer can appeal by either
filing a timely petition for redetermination (which stays
collection), or paying the amount due and filing a claim for
refund. This bill is intended to apply in the latter
instance.
It is important to note that a claim for refund must be filed
within specific time limits established by statute to be
valid. If the taxpayer pays the amount of tax determined to
be due in full immediately prior to filing the claim for
refund, it is deemed timely because it is filed within six
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months from the date of the claimed overpayment. However, if
the taxpayer is paying the amount of tax determined to be due
under an installment payment agreement, a claim for refund
cannot cover an amount not actually paid at the time the claim
is filed. In this instance, the claim for refund is only
associated with the partial payment with which it is filed.
Since the BOE review process may take several years, unless
each installment payment made by the taxpayer is accompanied
by a refund claim, in most cases, the taxpayer only
remembering again at the conclusion of his or her installment
plan to file a refund claim would likely have run out the
statute of limitations to be eligible for a full refund if
ultimately granted by the BOE - the taxpayer would only be
eligible for a refund on payments made within the last six
months and payments made within the statute of limitations of
any previously filed claim. For example, if a taxpayer paid
$100 per month for three years before filing a refund claim
that is ultimately granted, the taxpayer could only receive
$600 back despite being owed $3,600. In order to receive the
full refund, the taxpayer would have to file six claims for
refund every six months. As such, this bill is intended to
streamline the process by which a taxpayer who overpaid a
determination of tax due via installment payments can remain
eligible for a full refund if one is eventually owed.
4)How Far Back ? The purpose of a statute of limitations is to
reduce the complexity of defending actions after a substantial
period of time has elapsed and to ensure that taxes can be
administered efficiently. Most importantly, this bill
provides that a properly filed claim for refund shall be
deemed timely for all prior payments made within its statute
of limitations, and all subsequent installment payments
related to the claim. Accordingly, this bill does not allow a
taxpayer to retroactively become eligible for refunds for
which the statute of limitations has expired, but simply
provides that one filed claim is sufficient to cover all
payments moving forward. The taxpayer must still pay the
entire liability determined to be due before the BOE can grant
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or deny the claim for refund.
The BOE states that despite its warnings to taxpayers to file
multiple claims for refund to cover all installment payments
until the entire liability determined to be due is paid, many
fail to do so because they mistakenly believe they need only
need to file one claim for refund at the conclusion of the
payment plan. In order for this bill's provisions to have its
intended effect, taxpayers must be advised to a file a claim
for refund within the first six months of beginning their
installment payments. Utilizing the previous example, under
the provisions of this bill, a taxpayer who paid $100 per
month for three years before filing a refund claim that is
ultimately granted could still only receive $600 back despite
being owed $3,600. In order to receive the full refund, the
taxpayer must file a claim for refund within six months of his
or first installment payment. It is unclear how many
taxpayers would be affected by this bill because the BOE does
not track the number of refund claims associated with
installment payments for determinations that were eventually
reduced or cancelled on appeal.
5)Prior Legislation : AB 1115 (Committee on Revenue and
Taxation), Chapter 920, Statutes of 2001 allowed a taxpayer
that is making installment payments on an outstanding income
tax liability to file a single claim for refund to cover the
period, amongst other provisions.
REGISTERED SUPPORT / OPPOSITION:
Support
AB 1856
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Board of Equalization (Sponsor)
California Taxpayers Association
Opposition
None on file
Analysis Prepared by:Irene Ho / REV. & TAX. / (916) 319-2098