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AB 545 Requests UC Regents Review of Tax Expenditures

Assessment looks at total loss to the General Fund as a result of tax expenditures allowed to taxpayers

By Chris Micheli, February 11, 2021 7:26 am

On February 10, Assemblyman Bill Quirk (D-Hayward) introduced Assembly Bill 545 to have the University of California conduct research on California’s tax expenditures. The bill would add Section 42 to the Revenue and Taxation Code.

AB 545 would request the Regents of the University of California to perform a comprehensive assessment of major tax expenditures. Because of the UC’s constitutional autonomy, the Legislature can only ask the UC Regents to do something, rather than mandate them.

AB 545 provides the its use of the term “major tax expenditure” is the same as found in Revenue and Taxation Code Section 41. However, Section 41 defines “tax expenditure” as a credit, deduction, exclusion, exemption, or any other tax benefit as provided for by the state. It does not use the term “major tax expenditure.”

Assuming the UC Regents adopt a resolution to apply this research request to the university, a research center on a UC campus would present a comprehensive, peer-reviewed assessment of major tax expenditures to the Legislature no later than July 1, 2023.

AB 545 would authorize the Franchise Tax Board and the California Department of Tax and Fee Administration to provide taxpayer information to the University of California to the extent the university needs access to this type of information to perform the requested research, so long as any individually identifiable information submitted must be compiled in an aggregate or anonymized manner to preserve confidentiality.

The scope of the comprehensive assessment is required to include, but is not limited to, the following:

  • A description of the legislative intent for each tax expenditure, if the act adding or amending the expenditure contains legislative findings and declarations of that intent or that legislative intent is otherwise expressed or specified by that act.
  • A brief description of the beneficiaries of the tax expenditure.
  • The number of returns filed or business entities affected, as applicable, for the most recent tax year for which full year data is available.
  • A listing of any comparable federal tax benefit.
  • A description of any recent prior tax expenditure evaluation or compilation of information completed by any state agency.
  • Total loss to the General Fund dollars as a result of tax expenditures allowed to taxpayers.
  • The economic, social, environmental, or any other impact of the tax expenditure to the State of California using metrics that the University of California deems appropriate for the tax expenditure.
  • Options for modifying the tax expenditure to improve its effectiveness or to reduce its costs to the General Fund.

In addition, by January 1, 2024, University of California would be required to provide a report to the Legislature that compiles all of its recommendations regarding major tax expenditures and submit the report to specified policy and budget committees. Thereafter, the Senate and Assembly policy committees would be required to hold a joint public hearing on the report by August 15 of the second year of the legislative session.

AB 545 is expected to be heard in its first policy committee in late March.

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