Bill Text: CA SB1015 | 2011-2012 | Regular Session | Chaptered
Bill Title: Taxation: administration.
Spectrum: Unknown
Status: (Passed) 2012-06-27 - Chaptered by Secretary of State. Chapter 37, Statutes of 2012. [SB1015 Detail]
Download: California-2011-SB1015-Chaptered.html
BILL NUMBER: SB 1015 CHAPTERED
BILL TEXT
CHAPTER 37
FILED WITH SECRETARY OF STATE JUNE 27, 2012
APPROVED BY GOVERNOR JUNE 27, 2012
PASSED THE SENATE JUNE 27, 2012
PASSED THE ASSEMBLY JUNE 27, 2012
AMENDED IN ASSEMBLY JUNE 25, 2012
AMENDED IN ASSEMBLY JUNE 13, 2012
INTRODUCED BY Committee on Budget and Fiscal Review
FEBRUARY 6, 2012
An act to amend Section 706.070 of the Code of Civil Procedure,
and to amend Section 19266 of, and to repeal Part 18 (commencing with
Section 38001) of Division 2 of, the Revenue and Taxation Code,
relating to taxation, and making an appropriation therefor, to take
effect immediately, bill related to the budget.
LEGISLATIVE COUNSEL'S DIGEST
SB 1015, Committee on Budget and Fiscal Review. Taxation:
administration.
(1) Existing law authorizes the state to issue a withholding order
for taxes to collect a state tax liability, including any penalties,
accrued interest, and costs, in accordance with certain procedures.
Existing law defines "state tax liability" to mean an amount for
which the state has a state tax lien created pursuant to specified
provisions.
This bill would expand the definition of "state tax liability" to
also include any liability under the Personal Income Tax Law, the
Corporation Tax Law, or specified franchise and income tax provisions
that is due and payable and that is unpaid, as specified.
(2) Existing laws require the Franchise Tax Board to administer
specified taxes and collect those taxes from delinquent tax debtors
and requires the Franchise Tax Board, in coordination with financial
institutions doing business in this state, to operate a Financial
Institution Record Match System utilizing automated data exchanges to
the maximum extent feasible in order to allow the Franchise Tax
Board to match its list of delinquent tax debtors, as defined, with
the lists provided by the financial institutions. Existing law
authorizes the Franchise Tax Board to disclose specified taxpayer
information for purposes of data matching, and provides that the
specified use of certain data is a misdemeanor.
This bill would expand the definition of delinquent tax debtor to
include a person liable for specified taxes, fees, surcharges, debts,
penalties, interest, or other amounts required to be paid to the
State Board of Equalization or paid or referred to the Employment
Development Department, as provided. This bill would authorize the
State Board of Equalization and the Employment Development Department
to provide the Franchise Tax Board with information relating to
delinquent tax debtors, would allow that information to be used in
the collection of delinquent amounts under the Financial Institution
Record Match System (FIRM), and would require the State Board of
Equalization and the Employment Development Department to reimburse
the Franchise Tax Board for its costs in the implementation and
administration of FIRM.
By expanding the definition of an existing crime, this bill would
impose a state-mandated local program.
(3) Existing law has enacted the Multistate Tax Compact, which
contains provisions regarding state tax laws, forms the Multistate
Tax Commission, and requires the budget of the Multistate Tax
Commission to be funded by party states. Existing law provides that,
notwithstanding the provisions of the Multistate Tax Compact,
including a provision that would allow a taxpayer to apportion its
business income in accordance with a specified 3-factor formula,
business income derived from or attributable to sources both within
and without this state shall be apportioned between this state and
other states and foreign countries in accordance with a specified
4-factor formula based on the property, payroll, and sales within and
without this state, except that in the case of an apportioning trade
or business that derives more than 50% of its gross business
receipts from conducting one or more qualified business activities,
as defined, business income is apportioned in accordance with a
specified 3-factor formula. That law, for taxable years beginning on
or after January 1, 2011, allows a taxpayer to apportion its income
in accordance with a single sales factor formula, except as provided,
pursuant to an irrevocable annual election, as specified.
This bill would repeal all provisions related to the Multistate
Tax Compact. This bill would find and declare that the doctrine of
election provides that an election affecting the computation of tax
must be made on an original timely filed return for the taxable
period for which the election is to apply and once made is binding,
and that the doctrine of election applies to any election that
affects the computation of tax, as specified, which does not
constitute a change in, but is declaratory of, existing law. This
bill would also provide that the repeal of the Multistate Tax Compact
in this bill shall not be construed to create any inference that a
change in interpretation with respect to the compact or any reference
to the compact prior to its repeal is implied by this bill.
(4) This bill would appropriate $1,000 from the General Fund to
the Franchise Tax Board for administrative costs.
(5) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
(6) This bill would declare that it is to take effect immediately
as a bill providing for appropriations related to the Budget Bill.
Appropriation: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 706.070 of the Code of Civil Procedure is
amended to read:
706.070. As used in this article:
(a) "State" means the State of California and includes any
officer, department, board, or agency thereof.
(b) "State tax liability" means an amount for which the state has
a state tax lien as defined in Section 7162 of the Government Code
excluding a state tax lien created pursuant to the Fish and Game
Code.
(c) For purposes of an earnings withholding order for taxes issued
by the Franchise Tax Board, "state tax liability" also includes any
liability under Part 10 (commencing with Section 17001), Part 10.2
(commencing with Section 18401), or Part 11 (commencing with Section
23001) of Division 2 of the Revenue and Taxation Code that is due and
payable within the meaning of subdivision (b) of Section 19221 of
the Revenue and Taxation Code, and unpaid. The amendments to this
section by the act adding this subdivision shall apply to any amount
that is unpaid on or after the effective date of that act, or any
amount that first becomes due and payable, and unpaid, after the
effective date of that act.
SEC. 2. Section 19266 of the Revenue and Taxation Code is amended
to read:
19266. (a) (1) The Franchise Tax Board, in coordination with
financial institutions doing business in this state, shall operate a
Financial Institution Record Match System utilizing automated data
exchanges to the maximum extent feasible.
(2) The Franchise Tax Board shall prescribe any rules and
regulations that may be necessary or appropriate to implement this
section. These rules and regulations shall include all of the
following:
(A) A structure by which financial institutions, or their
designated data-processing agents, shall receive from the Franchise
Tax Board the file or files of delinquent debtors that the
institution shall match with its own list of accountholders to
identify delinquent tax debtor accountholders at the institution.
(B) An option by which financial institutions without the
technical ability to process the data exchange, or without the
ability to employ a third-party data processor to process the data
exchange, may forward to the Franchise Tax Board a list of all
accountholders and their social security numbers or other taxpayer
identification numbers, so that the Franchise Tax Board shall match
that list with the file or files of delinquent tax debtors.
(C) Authority for the Franchise Tax Board to exempt a financial
institution from the requirements of this section if the Franchise
Tax Board determines that the financial institution participation
would not generate sufficient revenue to be cost effective for the
Franchise Tax Board.
(D) Authority for the Franchise Tax Board to temporarily suspend
the requirements of this section for a financial institution if the
financial institution provides the Franchise Tax Board with a written
notice from its supervisory banking authority that it is determined
to be undercapitalized, significantly undercapitalized, or critically
undercapitalized as defined by FDIC Regulation 325.103(b)(3), (4),
and (5) or NCUA Regulation 702.102. The notice provided pursuant to
this subparagraph shall be subject to the protections of Section
19542.
(b) The Financial Institution Record Match System shall not be
subject to any limitation set forth in Chapter 20 (commencing with
Section 7460) of Division 7 of Title 1 of the Government Code.
However, any use of the information provided pursuant to this section
for any purpose other than the collection of amounts identified in
paragraphs (1), (2), and (3) shall be a violation of Section 19542.
(1) Delinquent amounts due the board, as imposed under Part 1
(commencing with Section 6001), Part 1.5 (commencing with Section
7200), Part 1.6 (commencing with Section 7251), Part 1.7 (commencing
with Section 7280), Part 3 (commencing with Section 8601), Part 3.5
(commencing with Section 9401), Part 6 (commencing with Section
11201), Part 13 (commencing with Section 30001), Part 14 (commencing
with Section 32001), Part 18.5 (commencing with Section 38101), Part
19 (commencing with Section 40001), Part 20 (commencing with Section
41001), Part 22 (commencing with Section 43001), Part 22.5
(commencing with Section 44000), Part 23 (commencing with Section
45001), Part 24 (commencing with Section 46001), Part 26 (commencing
with Section 50101), Part 30 (commencing with Section 55001), or Part
31 (commencing with Section 60001).
(2) Delinquent amounts due the Employment Development Department,
as imposed under the Unemployment Insurance Code, or other debts or
penalty assessments referred to the Employment Development Department
for collection.
(3) Delinquent franchise or income tax or other debts referred to
the Franchise Tax Board for collection, as imposed under Part 5
(commencing with Section 10701), Part 10 (commencing with Section
17001), Part 10.2 (commencing with Section 18401), or Part 11
(commencing with Section 23001).
(c) (1) To effectuate the Financial Institution Record Match
System, financial institutions subject to this section shall provide
to the Franchise Tax Board on a quarterly basis the name, record
address, and other addresses, social security number or other
taxpayer identification number, and other identifying information for
each delinquent tax debtor, as identified by the Franchise Tax Board
by name and social security number or other taxpayer identification
number, who maintains an account at the institution.
(2) The first data file created by the Franchise Tax Board for
purposes of matching tax debtor records to financial institution
accountholder records shall be limited to 600,000 tax debtor records.
The number of tax debtor records included in a subsequent data file
created by the Franchise Tax Board may be increased by no more than
600,000 tax debtor records greater than the number of tax debtor
records included in the immediately preceding data file until all
eligible tax debtor records are included in the data match file.
(d) Unless otherwise required by law, a financial institution
furnishing a report or providing information to the Franchise Tax
Board pursuant to this section shall not disclose to a depositor or
an accountholder, or a codepositor or coaccountholder, that the name,
address, social security number or other taxpayer identification
number, or other identifying information of that delinquent tax
debtor has been received from or furnished to the Franchise Tax
Board.
(e) A financial institution shall incur no obligation or liability
to any person arising from any of the following:
(1) Furnishing information to the Franchise Tax Board as required
by this section.
(2) Failing to disclose to a depositor or accountholder that the
name, address, social security number or other taxpayer
identification number, or other identifying information of that
delinquent tax debtor was included in the data exchange with the
Franchise Tax Board required by this section.
(3) Any other action taken in good faith to comply with the
requirements of this section.
(f) The Franchise Tax Board may institute civil proceedings to
enforce this section.
(g) Any financial institution that willfully fails to comply with
the rules and regulations promulgated by the Franchise Tax Board for
the administration of delinquent tax collections, unless it is shown
to the satisfaction of the Franchise Tax Board that the failure is
due to reasonable cause, shall be assessed a penalty upon notice and
demand of the Franchise Tax Board and collected in the same manner as
tax. The penalty imposed under this section shall be in an amount
equal to fifty dollars ($50) for each record not provided, but the
total imposed on that financial institution for all such failures
during any calendar year shall not exceed one hundred thousand
dollars ($100,000).
(h) For purposes of this section:
(1) "Account" means a demand deposit account, share or share draft
account, checking or negotiable withdrawal order account, savings
account, time deposit account, or money market mutual fund account,
regardless of whether the account bears interest.
(2) "Financial institution" means:
(A) A depository institution, as defined in Section 1813(c) of
Title 12 of the United States Code.
(B) An institution-affiliated party, as defined in Section 1813(u)
of Title 12 of the United States Code.
(C) A federal credit union or state credit union, as defined in
Section 1752 of Title 12 of the United States Code, including an
institution-affiliated party of a credit union, as defined in Section
1786(r) of Title 12 of the United States Code.
(D) A benefit association, insurance company, safe deposit
company, money-market fund, or similar entity authorized to do
business in this state.
(3) "Delinquent tax debtor" means any of the following:
(A) Any person liable for any tax, fee, or surcharge amounts, and
any penalty, interest, or other amounts required to be paid to the
board, where the liability remains unpaid after 30 days from demand
for payment by the board, and the person is not making current timely
installment payments on the liability under an installment payment
agreement as provided by law.
(B) Any person liable for any amounts required to be paid to the
Employment Development Department or for any debts or penalty
assessments referred to the Employment Development Department for
collection and the person is not making current timely installment
payments on the liability under an approved installment payment
agreement as provided by law.
(C) Any person liable for any income or franchise tax or other
debt referred to the Franchise Tax Board for collection as imposed
under Part 5 (commencing with Section 10701), Part 10 (commencing
with Section 17001), Part 10.2 (commencing with Section 18401), or
Part 11 (commencing with Section 23001), including tax, penalties,
interest, and fees, where the tax or debt, including the amount, if
any, referred to the Franchise Tax Board for collection remains
unpaid after 30 days from demand for payment by the Franchise Tax
Board, and the person is not making current timely installment
payments on the liability under an agreement pursuant to Section
19008.
(i) A financial institution shall be reimbursed by the Franchise
Tax Board for actual costs incurred to implement the provisions of
this section. Upon receipt of an invoice from the financial
institution, cost reimbursement by the Franchise Tax Board shall be
limited to the following:
(1) For one-time startup costs of a financial institution, no more
than two thousand five hundred dollars ($2,500).
(2) For data matching costs of a financial institution, other than
one-time startup costs, no more than two hundred fifty dollars
($250) per calendar quarter.
(j) The first data exchange for purposes of matching tax debtor
records to financial institution accountholder records shall occur no
earlier than April 1, 2012.
(k) This section shall be operative 120 days after the effective
date of the act adding this section and shall apply with respect to
persons that are delinquent tax debtors on and after that date.
(1) Notwithstanding any other provision of law, on or after
January 1, 2013, and on a quarterly basis thereafter, the board and
the Employment Development Department shall, in the format and manner
specified by the Franchise Tax Board, provide their respective
delinquent tax debtor information to the Franchise Tax Board for
inclusion in the Financial Institutions Records Match System.
(2) The Franchise Tax Board shall include the delinquent tax
debtor information provided by the board and the Employment
Development Department in its data file used to match delinquent tax
debtor records to financial institution accountholder records.
(3) The Franchise Tax Board shall provide the board or the
Employment Development Department, as applicable, with any matched
financial institution accountholder record information resulting from
the delinquent tax debtor information provided by the board or the
Employment Development Department.
(4) The board and the Employment Development Department shall
reimburse the Franchise Tax Board for any costs incurred by the
Franchise Tax Board related to the implementation and administration
of this section with respect to delinquent tax debtors described in
subparagraph (A) or (B), respectively, of paragraph (3) of
subdivision (h).
SEC. 3. Part 18 (commencing with Section 38001) of Division 2 of
the Revenue and Taxation Code is repealed.
SEC. 4. The Legislature finds and declares the following:
(a) The doctrine of election (see generally Pacific Nat. Co. v.
Welch (1938) 304 U.S. 191), provides that an election affecting the
computation of tax must be made on an original timely filed return
for the taxable period for which the election is to apply and once
made is binding.
(b) The doctrine of election described in subdivision (a) applies
to any election that affects the computation of tax under Part 10
(commencing with Section 17001), Part 10.2 (commencing with Section
18401), and Part 11 (commencing with Section 23001) of Division 2 of
the Revenue and Taxation Code, unless otherwise provided.
(c) Subdivision (b) does not constitute a change in, but is
declaratory of, existing law.
SEC. 5. The repeal of Part 18 (commencing with Section 38001) of
Division 2 of the Revenue and Taxation Code in Section 3 of this act
shall not be construed to create any inference that a change in
interpretation with respect to that part, or any reference to that
part, prior to its repeal is implied by this act.
SEC. 6. There is hereby appropriated one thousand dollars ($1,000)
from the General Fund to the Franchise Tax Board for administrative
costs.
SEC. 7. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.
SEC. 8. This act is a bill providing for appropriations related to
the Budget Bill within the meaning of subdivision (e) of Section 12
of Article IV of the California Constitution, has been identified as
related to the budget in the Budget Bill, and shall take effect
immediately.
