Hertzberg seeks permanent extension to taxpayer relief program

by John | April 8, 2015 5:00 am

Robert_HertzbergAs California taxpayers brace for another round of tax increases this session, they’ve found an unlikely ally in the state Legislature.

State Senator Bob Hertzberg, D-Van Nuys, who has ruffled the feathers of taxpayer groups with his proposal for a $10 billion sales tax on services[1], has introduced legislation to aid taxpayers in their battle with the state tax agency. Senate Bill 540 would extend and make permanent the Franchise Tax Board’s Taxpayer Advocate Relief Program, which has helped taxpayers obtain speedy tax relief since 2009.

Under current law, the Taxpayers’ Rights Advocate relief program is set to sunset on January 1, 2016. Hertzberg’s office says that would dissolve much-needed protections and benefits afforded to taxpayers.

Taxpayer Advocate offers free help to taxpayers

Back in 1988, the California Legislature enacted the “Katz-Harris Taxpayers’ Bill of Rights Act[2],” which among other provisions, created the position of Taxpayers’ Rights Advocate. Since that time, state taxpayer advocates have provided free assistance to taxpayers and businesses struggling to comply with the state’s complicated tax code.

“We help taxpayers who have been unable to resolve their tax problems through normal channels,” the Taxpayers’ Rights Advocate at the Franchise Tax Board explains on its website[3]. “Our goal is to protect your rights and ensure that your tax problems are handled promptly and fairly.”

Although the office has assisted taxpayers for more than two decades, for much of its history, the office has lacked the power to issue refunds or waive penalties — even when the tax agency was clearly in the wrong. That’s why in 2008, the Assembly Committee on Revenue and Taxation, under then-Assemblyman Charles Calderon, amended the[4] state Taxpayers’ Bill of Rights Act to give the office the authority to waive penalties, fees, additional taxes or interest when there was an error by the Franchise Tax Board[5].

The bill was extremely limited in scope and only applied in cases in which there was either:

  1. Erroneous action or inaction by the FTB in processing documents or payments;
  2. Unreasonable FTB delays; or
  3. Erroneous written advice that does not otherwise qualify for relief.

According to a 2012 legislative analysis[6], “The advocate could only provide relief if no part of the error or delay could be attributable to the taxpayer, and when relief is not otherwise available.”

Sunset date on taxpayer assistance

If there weren’t enough caveats and limitations to that original legislation, Assembly Bill 3078[7] also included an automatic sunset date on January 1, 2012, which was later extended another four years with subsequent legislation[8] in 2011.

Rather than extend the sunset date again, Hertzberg believes it’s time to make the tax relief program permanent. His office points to multiple cases in which taxpayer advocates have helped deliver speedy tax relief to taxpayers. In one case, 50 taxpayers received $1.1 million in tax relief due to bad advice contained in tax form instructions. Other taxpayers have received thousands of dollars worth in forgiven interest because of cases involving erroneous actions by the Franchise Tax Board.

affhousing“This program allows the Taxpayer Advocate to abate a taxpayer’s penalties, interest, and fees that occur because of erroneous actions by the Franchise Tax Board’s staff,” said Ray Sotero, Hertzberg’s communications director. “This bill would make improvements to the current program by removing a burdensome application process for taxpayers, removing the dollar limitation on the abatement amount, and by clarifying that the Chief Counsel approves each request.”

One improvement proposed by Hertzberg is the elimination of the $7,500 cap on the amount of relief that may be granted. In lieu of a limit, the bill requires the chief counsel and executive officer to sign-off on claims of more than $500. Those claims, which would include an explanation of the agency’s mistake, would be public records retained[9] by the tax agency for a year.

Senate Bill 8: Hertzberg’s plan for sales tax on services

Hertzberg’s proposal to provide tax assistance may come as a surprise to many taxpayer groups. As CalWatchdog.com has previously reported[10], the former Speaker of the Assembly has introduced Senate Bill 8, which would extend the state’s sales tax to services. The new tax on services would generate $10 billion in revenue by applying the sales tax to accountants, lawyers, hair stylists and yoga instructors.

money_ball“Taxing services is a bad idea for California,” Jon Coupal, president of the Howard Jarvis Taxpayers Association, wrote in opposition[11] to Hertzberg’s sales tax on services. “First, such a levy would have a depressing effect on California’s service economy. It is a simple fact of economics that when you tax something you get less of it.”

Hertzberg says the changing global economy requires a reevaluation of what’s considered subject to sales and use taxes. He believes California needs a permanent solution to raise revenue when Proposition 30, a temporary sales and income tax increase of $7 billion passed by voters in 2012, begins to expire next year.

Unlike the sales tax on services, Hertzberg’s legislation to permanently extend the taxpayer relief program is expected to sail through the Legislature.

For any taxpayers in need of assistance, the Taxpayers’ Rights Advocate has more information on its website[12], where you can also obtain a copy of “Your Rights as a Taxpayer[13].”

  1. $10 billion sales tax on services: http://calwatchdog.com/2015/01/21/hertzberg-proposes-10-billion-sales-tax-on-services/
  2. Katz-Harris Taxpayers’ Bill of Rights Act: http://www.leginfo.ca.gov/cgi-bin/displaycode?section=rtc&group=21001-22000&file=21001-21028
  3. explains on its website: https://www.ftb.ca.gov/aboutFTB/Taxpayer_Advocate/index.shtml
  4. amended the: http://leginfo.ca.gov/pub/07-08/bill/asm/ab_3051-3100/ab_3078_bill_20080925_chaptered.html
  5. error by the Franchise Tax Board: https://www.ftb.ca.gov/Archive/Law/legis/08legchng/LC_AB3078_0808.pdf
  6. 2012 legislative analysis: http://leginfo.ca.gov/pub/11-12/bill/asm/ab_2651-2700/ab_2686_cfa_20120815_135618_sen_floor.html
  7. Assembly Bill 3078: http://leginfo.ca.gov/pub/07-08/bill/asm/ab_3051-3100/ab_3078_bill_20080925_chaptered.html
  8. subsequent legislation: http://leginfo.ca.gov/pub/11-12/bill/asm/ab_2651-2700/ab_2686_bill_20120917_chaptered.html
  9. public records retained: http://leginfo.ca.gov/pub/15-16/bill/sen/sb_0501-0550/sb_540_bill_20150226_introduced.htm
  10. previously reported: http://calwatchdog.com/2015/01/21/hertzberg-proposes-10-billion-sales-tax-on-services/
  11. wrote in opposition: http://www.hjta.org/california-commentary/tax-reform-this-isnt/
  12. information on its website: https://www.ftb.ca.gov/aboutFTB/taxpayer_advocate/index.shtml?WT.mc_id=Contact_Info_Advocate_Info
  13. Your Rights as a Taxpayer: https://www.ftb.ca.gov/forms/misc/4058B.pdf

Source URL: https://calwatchdog.com/2015/04/08/hertzberg-seeks-permanent-extension-to-taxpayer-relief-program/