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AB 2201
THIRD READING
Bill No:
Author:
Introduced:
Vote:
AB 2201
Brough (R), et al.
2/18/16
21
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 6/8/16
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 76-0, 4/28/16 (Consent) - See last page for vote
SUBJECT: State Board of Equalization: administration: interest
SOURCE: Board of Equalization
DIGEST: This bill reenacts the Board of Equalization’s authority to calculate
interest on a daily, not monthly, basis for tax and fee payments made one business
day late under specified circumstances.
ANALYSIS:
Existing law:
1) Creates the five-member Board of Equalization (BOE), composed of four
members elected by district and the State Controller, to equalize rates and
assessment practices among counties.
2) Charges BOE with administering the Sales and Use Tax, locally-imposed
transactions and use taxes, several excise taxes, and more than 30 other fee
programs.
3) Imposes penalties generally equal to 10 percent of the tax due, plus monthly,
simple interest calculated beginning on the due date and ending on the date it
was paid, when taxpayers pay taxes or fees after the due date.
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4) Requires, generally, BOE to calculate interest on a per-month basis, so one
month’s interest is charged for each month or fraction of a month that a
payment is late.
5) Allows BOE to relieve the taxpayer of penalties when they find that the
person's failure to make a payment in a timely manner was due to reasonable
cause and circumstances beyond the person's control, and occurred
notwithstanding ordinary care and the absence of willful neglect.
6) Restricts BOE from waiving interest only in cases where the late payment was
due to an error or unreasonable delay caused by BOE employees.
This bill:
1) Allows BOE to compute interest at the modified adjusted daily rate for
payments made one day after the due date, but only when meeting as a public
body, and taking into account all facts and circumstances, determine that it is
inequitable to compute interest on a monthly basis. BOE must also have
granted relief from all penalties that applied to that payment, and the person
must have filed a request for an oral hearing before BOE.
2) States that its change to interest calculation does not apply to payments made
pursuant to deficiency determinations, determinations where no return is filed,
or jeopardy determinations.
3) Defines several terms, and sets forth a method to calculate daily interest.
4) Applies its change to the Sales and Use Tax, Motor Vehicle Fuel Tax, Use Fuel
Tax, the Gross Premiums Tax, Cigarette Tax, Alcoholic Beverages Tax, Energy
Resources Surcharge, Emergency Telephone Users Surcharge, Prepaid Mobile
Telephony Services Surcharge, Integrated Waste Management Fee,
Underground Storage Tank Fee, Fee Procedures Collections Law, and Diesel
Fuel Tax.
Background
Until recently, the Legislature allowed BOE to instead charge interest at the
modified adjusted daily rate when (SB 1028, Correa, Chapter 316, Statues of
2010):
 BOE, meeting as a public body, taking into account all facts and circumstances,
determines that it is inequitable to compute interest on a monthly basis,
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 The payment or prepayment was one business day late,
 BOE granted relief from all penalties that applied to that payment, and
 The person files a request for an oral hearing before BOE.
SB 1028 applied to the Sales and Use Tax, Motor Vehicle Fuel Tax, Use Fuel Tax,
the Gross Premiums Tax, Cigarette and Tobacco Products Tax, Alcoholic
Beverages Tax, Energy Resources Surcharge, Emergency Telephone Users
Surcharge, Hazardous Substances Tax, Prepaid Mobile Telephony Services
Surcharge, Integrated Waste Management Fee, Oil Spill Fee, Underground Storage
Tank Fee, Diesel Fuel Tax, as well as the statute used to collect many other fees,
the Fee Procedures Collections Law. However, SB 1028 sunset on January 1,
2016, so today, BOE must charge a full month’s interest for payments and
prepayments made one day after the due date. BOE wants to reenact this authority.
For many years, BOE administrative policy allowed a one-day grace period when a
payment was postmarked one day late. However, during a policy review, BOE
counsel opined that no legal authority supported the grace period, so BOE ended it,
until the Legislature enacted AB 1638 (Assembly Committee on Revenue and
Taxation, Chapter 929, Statutes of 1999). AB 1638 allows BOE to establish a
uniform policy to accept payments as timely when the payment or document’s
envelope or delivery document’s stamped cancellation mark shows a date after the
statutory due date, which uniform BOE policy implements to allow acceptance of
payments postmarked one day after the due date. However, because this authority
applied only to payments made by mail or commercial delivery service, late
electronic payments are not eligible for the one-day grace period, which can create
hardships due to mandatory electronic payment requirements imposed by state law
on taxpayers with average monthly sale and use tax liability of $10,000 or more (or
special tax liability of $20,000 or more). This bill reenacts SB 1028’s extension of
the grace period to electronic payments made to BOE, similar to practices used by
the Franchise Tax Board and Employment Development Department.
While SB 1028 contained a five-year sunset, this bill does not contain one. BOE
states that it granted 122 interest relief claims in the past three years, ranging from
$14.59 to $17,620.85.
FISCAL EFFECT: Appropriation: No
SUPPORT: (Verified 6/28/16)
Fiscal Com.:
Yes
Local: No
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Board of Equalization (source)
Board of Equalization Member Fiona Ma
California Chamber of Commerce
California Taxpayers Association
OPPOSITION: (Verified 6/28/16)
None received
ARGUMENTS IN SUPPORT: According to the author, “AB 2201 reinstates
expired provisions to allow Members of the State Board of Equalization to have
flexibility to address the inequity of applying an entire month’s interest to an
electronic tax payment that is paid one day late, due to reasonable circumstances.
It is unfair to charge a month’s worth of interest on tax liabilities that are just one
day late often because they posted after the financial system stops processing them
on the due date. This bill allows the BOE to continue a practice that provides
reasonable relief for taxpayers.”
ASSEMBLY FLOOR: 76-0, 4/28/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow,
Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,
Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Dodd, Eggman, Frazier,
Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,
Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández,
Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
Maienschein, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte,
O'Donnell, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk,
Williams, Wood, Rendon
NO VOTE RECORDED: Chávez, Daly, Mathis, Olsen
Prepared by: Colin Grinnell / GOV. & F. / (916) 651-4119
6/29/16 15:46:01
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