Concerns raised over taxpayer disclosure bill

taxesA bill that recently passed the state Assembly would make it easier to disclose confidential tax information and harass businesses, warn Republican legislators. But Assemblyman Mike Gipson, D-Carson, the author of Assembly Bill 567, asserts that his measure simply increases government transparency in property filings.

AB567 “would allow the Board of Equalization and the local county assessor to disclose that a legal entity change in ownership statement has been filed or that the BOE has determined that the property requires a reassessment under legal entity change in ownership law,” said Gipson on his website.

Currently the BOE is prohibited from providing change in property ownership information to the public, according to the bill’s legislative analysis.

That’s despite the fact that “in recent years, media reports of the disparate consequences of reassessing property owned by legal entities and property owned by individuals have resulted in an increasing number of inquiries from the public whether specific sales, mergers, acquisitions, and buyouts reported by media trigger the reassessment of a legal entity’s real estate holdings,” the analysis said.

The bill also allows the disclosure if the change in ownership filing was prompted by the Franchise Tax Board based on information collected from the taxpayer’s state income tax return.

The analysis by Oksana Jaffee said that the disclosure would be “very limited”:

It does not require a disclosure of any factual information reported on the taxpayer’s state income tax return, such as the amount of gross receipts or sales, gross profit, the amount of credit carryovers, income subject to apportionment, or the amount of each individual credit claimed on the tax return.


Furthermore, no actual information reported on a CIO [change in ownership] statement, other than the fact that the statement has been filed, may be disclosed to the public. Detailed financial information reported in the state income tax return or CIO statement will remain confidential.

Currently it’s difficult to find out about a change in property ownership because “discovery relies heavily on self-reporting, which does not always result in 100 percent compliance,” the analysis said. It quotes the BOE’s analysis that “delayed transparency undermines the public trust in the current property tax system as it applies to legal entity changes in ownerships and fuels the perception that laws are inequitable and should be changed.”

Jaffee’s analysis concludes with an argument for AB567:

Transfers of real property are recorded and are already public information. Thus, it is unclear why a disclosure of the mere fact of filing a CIO statement by a legal entity, or the fact that the filing was prompted by the information collected by the FTB, would undermine public trust or should remain confidential.

Gipson made his case for the bill on the Assembly floor May 28:

AB567 will increase accountability in assessed property values by allowing the State Board of Equalization to provide timely and basic information to the public. Right now the county assessors are required to make public reassessed property values on the assessed role.


However, when a business files paperwork to trigger reassessment, the State Board of Equalization is required to keep information confidential – I want to underscore confidential – even though this information will eventually be made public by current law today.


As a result, when the public calls upon the State Board of Equalization to ask about specific sales or merger, the State Board of Equalization cannot provide any information. AB567 will allow the State Board of Equalization to disclose only the necessary paperwork as filed and triggered by the reassessment.


What will be shared by AB567 is actually less than what is required to be disclosed by the county assessor’s office today. This modest bill will improve communication between the public and the State Board of Equalization, and help ensure our tax laws are fairly applied to the public’s benefit.

Assemblyman Phil Ting, D-San Francisco, also spoke in favor of the bill:

As a former assessor I dealt with this issue very specifically. Often times when there are changes of ownerships that happen, they are reported on your tax returns, which obviously are delayed for a year. That information is then transferred from the Franchise Tax Board to the BOE, and doesn’t get to the county assessor, it could be, for almost two years.


So that information, which is actually public information necessary for us to make sure that assessments are done properly, aren’t getting to the county assessors in a timely fashion. This will help increase transparency, help speed it up. It does not impact privacy at all. This is public information and it will just get to the right source at the right time.

But Republicans who spoke against the bill don’t consider it so benign. Assemblyman Travis Allen, R-Huntington Beach said:

Very simply, according to the author, the purpose of the bill is to allow anyone who believes that a possible change in ownership has occurred to call the Board of Equalization and inquire about the ownership of a property. And after the BOE receives the inquiry and finds that this entity has not filed a certain form, the BOE can then request that entity to file the form and then evaluate whether or not a change in ownership has occurred.


I know that sounds a little complex. But essentially what that means is that anybody can call up the BOE and potentially harass a business. And the reason they would be doing this is potentially to get them to pay higher taxes. This opens itself to potential abuse. The implementation could cause problems in California.

Assemblyman Donald Wagner, R-Irvine, agrees that AB567 will open up businesses to harassment:

You get to go and say to the BOE, “Hey, I think there was change in ownership in this business.” Maybe that business is a competitor of yours. Maybe that business has got some information that would otherwise appear on these forms that you’d like to dig into and find out about maybe for your own competitive purposes, maybe for nefarious purposes, maybe for purposes of harassing the business.


You don’t even need a good faith belief to make the allegation, as I understand the bill as it is in print, to require the form to be filed. So now your competitor is filing forms with the BOE, public forms with the BOE. The board is now tasked with evaluating whether or not there’s been a change in ownership when perhaps there’s been absolutely no underlying transaction whatsoever.


Why do this? You do this to harass other businesses, you do this maybe because you’re trolling for a lawsuit. You do this for all sorts of reasons that, rightly as the law exists today, you can’t do. So there’s no evidence in the hearing that I sat through that this is a great big problem and lots of businesses are escaping change of ownership filing requirements.


Every small business in the state has had enough of our forms. This is one more form from what is merely a fishing expedition and absolutely no explanation of the problem we are trying to solve. Let’s not go there. This is an easy no vote.

The bill passed 47-29 along party lines in the Assembly and will next be considered by the Senate. The California Taxpayers Association and a coalition of business groups sent an opposition letter to the Senate Governance and Finance Committee on June 1. It states:

There is no valid reason to begin violating taxpayers’ fundamental protection of keeping their tax information confidential. The bill would deteriorate taxpayer privacy by allowing confidential tax information to be released to the public; and would allow the information to be released without tax officials first making a proper determination regarding a property owner’s taxes.


This bill would not promote “transparency,” because no public interest would be served by allowing tax officials to release confidential tax information regarding changes in ownership. In fact, an erosion of trust would occur, as the public is acutely aware that tax agencies currently must safeguard their tax information, and this bill would break that trust.


Oftentimes, no change-in-ownership statement is filed because no change in ownership occurred. In these cases, what purpose is served in disclosing to the public that no form was filed?


More and more tax information that should remain confidential is indiscriminately made available to the public. The benefits to be derived from such disclosures are speculative at best, and do not warrant taking the risk of inaccuracies or other adverse consequences that may undermine public confidence in the tax system.

The bill will next be considered by the Senate Rules Committee for assignment to a policy committee.

Related Articles

CA taxes, mandates boost unemployment

  “California raised a bunch of taxes this year. Its economy hasn’t collapsed.” So read the snarky headline accompanying a

Debate on lead ammo ban defies political stereotypes

  A bill to ban lead ammunition in California has sparked a heated debate among environmentalists, conservationists, hunters and sportsmen.

Rex Hime paves way for split rolls

Steven Greenhut: Rex Hime is president of the California Business Properties Association, a trade group representing commercial property owners, and