Legislative Session Wrap-Up – November 2015

Posted on November 2, 2015 · Posted in CSEA Society News, Industry News, Latest Updates

11/2/15 – Legislative Session Wrap-Up

By Jennifer Tannehill and Scarlett Vanyi, CAE

Thanks to your support, CSEA is able to be a proactive force in the State Capitol. Over the last few months, there was a flurry of action on bills leading right up to the end of the Legislative Session on September 11th at midnight. Then the Governor had until October 11th to sign or veto the hundreds of bills on his desk – several of which impact EAs.

CSEA’s legislative program, led by the CSEA Legislative Affairs Committee and advocates at Aaron Read & Associates, ended the session with all four CSEA-supported bills passing the Legislature and three of four being signed by the Governor, thereby becoming law.

  • AB 557 (Irwin, D-Thousand Oaks) Nonprofit corporations: Dissolution
  • SB 35 (Wolk, D- Napa) Income and Corporation Taxes: Deductions: Disaster Relief
  • AB 154 (Ting, D- San Francisco) Federal Conformity

CSEA also supported AB 99 (Perea, D-Fresno) that provided an income tax exclusion for Mortgage Debt Forgiveness to conform with the federal exclusion. CSEA fought for this bill, and others like it in prior years. CSEA put its support behind AB 99, helping it pass the Legislature by lobbying staff, committee consultants, and legislators and providing testimony in support of the bill in legislative committees. We successfully communicated the need for the bill to the Legislature, and the legislators agreed and the bill passed.

CSEA strongly urged the Governor to sign this bill: filing a letter of support, working with the Governor’s staff and launching a “Call to Action” asking CSEA Members to urge the Governor to sign the bill. Unfortunately, despite these efforts, the Governor vetoed the bill on October 10, 2015 due to cost.

Our legislative program is an enormous benefit to CSEA Members and the industry. CSEA has tracked more than 100 bills impacting EAs and taxpayers just this year, staying on top of legislation to ensure CSEA Members are aware of bills that will impact the work you do every day. Our legislative team has:

  • Analyzed, monitored, supported and opposed legislation with letters, meetings with decision makers, and testimony in legislative hearings;
  • Provided legislators and staff with an understanding of the EA profession and issues of importance to EAs and the clients they serve;
  • Built relationships with other tax related groups, legislators, staff and Administration officials in the State Capitol; and
  • Bolstered CSEA’s credibility as America’s Tax Experts in California.

Following is a full report of CSEA sponsored, supported, and opposed bills.

CSEA Sponsored Bill

AB 871 (Brown, D-San Bernardino) – Statement of Information (SOI) Filing Date Proposal

This bill would change the SOI filing date from the date an entity was formed, to a date based on the federal filing date requirement for each entity type. By streamlining the SOI filing dates there will be less confusion as to when the SOI is due. Standardizing the due dates will increase filing compliance and prevent businesses from becoming suspended and suffering the consequences of a suspended status.

CSEA staff and lobbyist Jennifer Tannehill accompanied CSEA Legislative Affairs Committee Vice Chair Joyce Cheng, EA to the Assembly Committee on Banking and Finance hearing on April 20, 2015 to provide testimony as sponsor of the bill. The bill passed 11-0 and moved on to the Assembly Committee on Appropriations. The Appropriations Committee placed a $2 million price tag on the bill and attempted to send the bill to the Suspense File. Last year, the bill was held on the Suspense File and had great opposition from the Secretary of State’s (SOS) office.

This year, we’re excited about our working relationship with the new SOS on this matter. Assemblywoman Brown pulled the bill from the hearing so it would not go to the Suspense File, where many bills are held due to cost and die. By pulling the bill we saved it from the Suspense File. AB 871 is a two-year bill and will begin moving again in January. Since the SOS is working with us and has maintained a neutral position on the bill, we are working to negotiate amendments with the SOS that will allow the bill to be implemented effectively. Our discussions with the SOS continue on this issue and we are pleased there is a desire by all to address the SOI issue for taxpayers.

CSEA Supported Bills

AB 99 (Perea, D-Fresno)Personal Income Tax: Income Exclusion: Mortgage Debt Forgiveness

This bill would have extended the tax relief on forgiven mortgage debt by conforming California law to federal law. The Personal Income Tax Law provides for modified conformity to specified provisions of federal income tax law relating to the exclusion of the discharge of qualified principal residence indebtedness, if that debt is discharged after January 1, 2007, and before January 1, 2014. The federal Tax Increase Prevention Act of 2014 extended the provisions to debt that is discharged before January 1, 2015. This bill would conform to the federal extension.

The estimated cost for 2014-15 fiscal year is $47 million and $5 million in 2015-16. CSEA worked with the author to keep the bill moving quickly through the legislative process hoping taxpayers who received mortgage debt forgiveness could file returns reflecting the exclusion and not owe thousands of dollars in taxes based on income they did not receive. While this bill passed the Legislature, the Governor vetoed the bill on October 10, 2015.

STATUS: Vetoed.

AB 154 (Ting, D-San Francisco)Federal Conformity

California has been out of conformity with federal tax laws since 2009 and each year that goes by makes compliance with the tax system more confusing and difficult. According to the author’s office, the bill is “intended to narrow differences between state and federal law and provide relief to members of the United States Armed Forces, businesses, and individual taxpayers.” The bill specifically addresses conformity on: taxing of Homeowner Assistance Payments to members of the armed forces; the tax treatment of the annual fee on branded prescriptions as it applies to manufacturers and importers; and NOL carryback procedures. The changes result in an increase in revenue to the state and required a two-thirds vote of the Legislature in order to pass. CSEA worked with a coalition supporting the bill and worked to get enough votes to get it passed. The bill was enrolled on September 2, 2015, approved by the Governor and chaptered on September, 30, 2015.

STATUS: Chaptered, takes effect immediately.

AB 557 (Irwin, D-Thousand Oaks)Nonprofit Corporations: Dissolution: Surrender

This bill streamlines the dissolution process for nonprofit corporations. There is a significant problem with nonprofit corporations filing incorporation papers with the SOS, and then failing to launch or continue operations. This leads to the entity failing to remain up-to-date on filing and tax requirements.

The SOS and Franchise Tax Board (FTB) estimate that there are close to 60,000 nonprofits currently in their systems that would be eligible for the administrative dissolution process established under AB 557. This bill creates a streamlined administrative dissolution process for nonprofits that have been suspended for at least 48 continuous months after proper notice has been served. This new process will allow FTB and SOS to dissolve nonprofits that have been sitting inactive on the “books.” AB 557 successfully passed the Assembly unanimously. The bill then went to the Senate, passed Senate Banking Committee and then sat pending with the Senate Appropriations Committee, on the Suspense File. The bill passed the Senate late August and was presented to the Governor on September 3, 2015. The Governor approved the bill and it was then chaptered on September 30, 2015.

STATUS: Chaptered, takes effect January 1, 2016.

SB 35 (Wolk, D-Napa)Income and Corporation Taxes: Deductions: Disaster Relief: Counties of Napa, Solano, and Sonoma

On September 1, 2015 Governor Jerry Brown signed SB 35, a bill that provides relief to those affected by the 2014 Napa earthquake. This CSEA-supported bill also resolves a long-standing issue of bureaucratic delays, providing relief to disaster victims in the future. Similar to the federal process, Californians will now automatically be able to claim the deduction, instead of having to wait for the Legislature to pass a bill specific to each disaster. Due to a California law that required a governor-declared disaster to be supported by follow-up legislation, August 2014 Napa earthquake victims were unable to apply losses to their tax returns filed in the previous year. This resulted in delayed tax refunds that could have been used to help with the immediate rebuild and recovery from the disaster.

The Legislature has enacted identical treatment for almost every significant disaster that has occurred in California for the last 25 years. These bills have usually passed long after the tax filing deadline and taxpayers impacted by the disaster have had to file amended returns. CSEA has repeatedly brought this issue forward, including most recently at the 2014 FTB Taxpayers’ Bill of Rights Hearing. SB 35 solves this issue by providing for an automatic deduction when a state of emergency is called by the Governor, for taxable years beginning on or after January 1, 2014. CSEA is thrilled that the signing of this bill will remove a legislative hurdle for you and your disaster affected clients.

STATUS: Chaptered, takes effect immediately.

CSEA Opposed Bill

SB 8 (Hertzberg, D-Van Nuys)Taxation: Tax on Specified Services – The Upward Mobility Act

The bill’s author maintains that the bill would enhance the state’s business climate, incentivize entrepreneurship and business creation by evaluating the corporate tax, and would examine the impacts of a lower and simpler personal income tax. The State Board of Equalization issued an estimation of potential revenue to be derived from taxation of currently non-taxable services, determining that if the tax on services in all sectors was levied at a rate of 8.4 percent, this would result in a $122.63 billion revenue increase.

CSEA joined 48 other associations and industry representatives in a coalition opposing the bill with success. The bill has not had a committee hearing and is on hold in the Senate. The bill as currently written exempts healthcare and education services, would maintain all other tax rates at least until over $10 billion in new revenue is collected, and outlines how the $10 billion increase would be allocated.

It is unlikely the bill could pass the Legislature as written without extensive opposition. Bills which increase taxes require a two-thirds vote in the Legislature. That means that two-thirds of the legislators in each house and on each committee must vote to support the bill. CSEA advocates don’t believe the votes are there for this bill to pass as written, and the author has stated that the bill is not worth doing if it doesn’t increase taxes. Knowing this, it is likely the bill will be the basis for a ballot initiative in 2016.

STATUS: Held in Senate Governance and Finance Committee.

The CSEA legislative bill list, history, analyses and more is available on the CSEA website at www.csea.org/advocacy.

Jennifer Tannehill is a legislative advocate for Aaron Read & Associates. She has more than twenty years of experience, having served two governors and six legislators in several capacities. In addition to her experience in both houses of the legislature and the governor’s office, Jennifer has served candidates for office as an account manager for a prominent political fundraising team, giving her insider knowledge of Sacramento and a broad perspective of state government and politics.

Scarlett D. Vanyi, CAE is the Executive Vice President of California Society of Enrolled Agents. She holds a Bachelor’s of Science Degree in Organizational Behavior & Leadership from the University of San Francisco and is designated as a Certified Association Executive (CAE) from the American Society of Association Executives. Ms. Vanyi has more than 20 years of experience in the nonprofit association and legislative advocacy arenas and has expertise across a wide array of nonprofit management disciplines.