SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
Bill No:
Author:
Version:
Consultant:
AB 279
Dodd
2/11/15
Grinnell
Hearing Date:
Tax Levy:
Fiscal:
6/17/15
No
Yes
TAX ADMINISTRATION: DISCLOSURE OF INFORMATION: FRANCHISE TAX
BOARD AND CITIES AND COUNTIES
Extends the state-local tax information sharing program to counties, and to a city and county.
Background and Existing Law
Existing state and federal laws generally prohibits disclosure or inspection of any income tax
return information. Criminal sanctions, including imprisonment, apply to FTB personnel
convicted of unlawful disclosure or inspection of tax records. The Franchise Tax Board (FTB)
must notify a taxpayer if criminal charges have been filed for willful unauthorized inspection or
disclosure of their tax data.
Tax information sharing between the state and local agencies dates back to 1984, when FTB first
sponsored legislation mandating California cities to annually report information obtained from
businesses they licensed. FTB used the information to identify new businesses that were
obtaining local business licenses and paying business license taxes, but may not have been filing
state income tax returns. While the program generated revenue, the Legislature repealed the
program in 1999 because the cost of state reimbursed mandate claims from local agencies grew
too large, making the program no longer worth its cost.
In 2001, the Legislature reenacted the program, but in the reverse: it allowed city tax officials to
obtain state income tax information subject to a written agreement between FTB and the taxing
authority of a city to assist in enforcing its business license taxes (AB 63, Cedillo, 2001). FTB
charged cities for its costs for collecting and sending the information. The Legislature extended
the program in 2006 until 2011 (SB 1374, Cedillo). In 2008, the Legislature again extended the
program until 2014, but instead of paying for the information, allowed cities to offset costs by
entering into a reciprocal agreement to provide its business license tax information to FTB (SB
1146, Cedillo). The Legislature again extended the program until January 1, 2019 (SB 211,
Price, 2013).
Under the program, FTB may give a city information limited to a taxpayers’ name, address,
social security or taxpayer identification number, and business activity code. However, city
officials may request additional information by affidavit, so long as they notify the person whose
information is the subject of the request, and provide them a copy of the affidavit. Only city
employees may use the tax information provided to the city, and they can only use it for tax
collection purposes. The program applies criminal sanctions in current law to any unlawful
inspection or disclosure.
AB 279 (Dodd) 2/11/15
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As a condition of participation, city officials must:
 Complete a data exchange security questionnaire before the data exchange,
 Direct tax officials to agree to on-site reviews from FTB as a condition of participation,
 Complete FTB disclosure training,
 Have all employees who receive the information sign a confidentiality statement
acknowledging their awareness of data security requirements, and penalties for unlawful
disclosure.
Additionally, city tax officials must notify FTB within 24 hours of any suspected instance of
unlawful inspection or disclosure, and destroy an individual record in a manner to make them
unreadable and unusable. Before FTB incurs any cost, cities must consent to fund FTB’s firstyear costs as a condition of any agreement to share the information, and deposit amounts equal to
those costs with FTB. However, FTB may waive any reimbursement if a city enters into a
reciprocal agreement. Counties don’t generally license as many businesses as cities do, but
given cities’ success collecting unpaid tax as a result of FTB information, counties would like to
be authorized to participate in the tax information sharing program too.
Proposed Law
Assembly Bill 279 extends the state-local tax information sharing program to allow a county,
and a city and county, to enter into a reciprocal agreement to share tax information with FTB.
State Revenue Impact
According to FTB, AB 279 results in revenue gains of $80,000 in 2015-16, $500,000 in 2016-17,
and $800,000 in 2017-18, as a result of FTB receiving information regarding non-filers from
counties.
Comments
1. Purpose of the bill. According to the author, “AB 279 is a modest extension to an existing
program. By granting approval for information sharing agreements between the FTB and
counties, counties will be able to more efficiently collect back taxes.”
2. Information security. The FTB has maintained the integrity of taxpayer information since the
inception of the tax-sharing information program. Any improper usage or disclosure of this
information carries certain civil and criminal liabilities. In 2013, the Legislature modified the
program to, among other things; create additional safeguards to protect taxpayer information
from unauthorized disclosure. Currently, every reciprocal agreement must include provisions
ensuring that taxpayer data is safeguarded. The city must complete and submit a Safeguard
Questionnaire to the FTB to ensure that the data is used only for the tax administration within the
city, and destroy the data as mandated after three years. In addition, only city employees named
in the confidentiality statement may have access to the data and each of those employees must
complete an annual City Business Tax Disclosure training.
3. Get some. FTB states that it currently has a reciprocal agreement with 102 cities in
California, which costs $718,000 annually. The following cities reported the following revenue
amounts due to the program:
 City of Los Angeles ($13.9 million)
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City of San Diego ($1.1 million)
City of Newport Beach ($360,000)
City of Oakland ($260,000)
City of Menlo Park ($172,000)
City of Concord ($154,000)
City of Sunnyvale ($131,000)
Assembly Actions
Assembly Floor
Assembly Appropriations
Assembly Revenue and Taxation
67-9
16-1
6-3
Support and Opposition (6/11/15)
Support: California Association of County Treasurer-Tax Collectors, California State
Association of Counties, El Dorado County Board of Supervisors, Mono County Board of
Supervisors, Humboldt County Board of Supervisors, Rural County Representatives of
California.
Opposition: Unknown.
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