BILL ANALYSIS
AB 15
CONCURRENCE IN SENATE AMENDMENTS
AB 15 (Klehs) - As Amended: August 19, 1994
ASSEMBLY VOTE 77-0 ( May 13, 1993 ) SENATE VOTE 29-2 ( August 22, 1994 )
Original Committee Reference: REV. & TAX.
DIGEST
Existing law:
1) Provides that the Franchise Tax Board (FTB) administers the personal
š income tax and the bank and corporation franchise tax. Also, the FTB
administers the homeowners and renters property tax assistance
programs. Administrative responsibility for income tax withholding is
delegated by the FTB to the Employment Development Department. The
members of the FTB are the State Controller, the Director of Finance,
and the Chair of the Board of Equalization (BOE).
3) The BOE administers the state's other major taxes. Specifically, the
š board has responsibility for the state and local sales and use tax,
local transactions and use taxes, gasoline and other fuel taxes, the
alcoholic beverage tax, the insurance gross premiums tax, the cigarette
and tobacco products tax, hazardous waste taxes and fees, and other
limited taxes. The BOE also assesses the property of public utilities
and common carriers, and provides certain administrative and oversight
functions with respect to the local property tax.
The BOE comprises four elected members, one from each equalization
district and the State Controller. The board hears appeals relating to
all of the taxes it administers, as well as the taxes administered by
the FTB.
As passed by the Assembly, this bill:
1) Eliminated the FTB and assigned its present responsibilities to the BOE.
2) Specified that it would become operative on January 1, 1995.
The Senate amendments:
1) Change the operative date to January 1, 1996.
2) Require the BOE to submit a report to the Governor and Legislature on
the plan and progress of consolidation.
3) Specifies that the civil service staff of the FTB shall be transferred
š to the BOE in accordance with existing law.
FISCAL EFFECT
State: According to the Legislative Analyst's Office (LAO), "in the short
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run consolidation would probably require increases in state
expenditures." However, in the long run, the LAO believes that
"consolidation does offer opportunities for improvements in cost
effectiveness and productivity."
Local: None
COMMENTS
1) The bill is intended to achieve savings and administrative
simplification through combining the state's two major tax agencies
into a single, larger BOE. The resulting combined agency would easily
be the largest tax agency among the states, second only in size to the
Internal Revenue Service.
2) Proponents argue that a consolidated tax agency should be administered
by an elected body because they believe elected officials tend to be
more responsive to taxpayers than an appointed body.
On the other hand, the Legislative Analyst suggests that an executive
director appointed by the Governor and confirmed by the Legislature
would offer "the most clear-cut chain of command and the best
opportunity for effective leadership in the area of tax policy."
However, SB 1829 (Campbell), pending in the Senate, created a
Department of Revenue under the Governor along with a Board of Tax
Appeals failed passage in the Senate Appropriations Committee. Similar
proposals, SB 87 (Kopp) and SCA 5 (Kopp) have also failed passage.
3) Under the existing two tax agency system, personal income and bank and
corporation taxpayers who cannot resolve a tax issue with the FTB, can
appeal FTB's decision to the BOE. This independent review of taxpayer
appeals by a separate tax authority has generally been considered a
benefit to taxpayers.
On the other hand, taxpayer disputes related to sales tax and other BOE
administered taxes are also appealed to the BOE. Some have argued in
the past that having the BOE review its own staff decisions is not an
ideal appeals process.
By placing the administration of the state's income taxes directly
under the jurisdiction of the BOE, this measure eliminates the current
system's separate review process for income tax appeals. Should the
separate review process for income tax appeals be abolished? If the
two tax boards are combined, should a separate appeals process for
sales and income tax disputes be established?
FN 011901
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