Taxable Talk

Lurching its' way through the Legislature is SB757, introduced by Christine Kehoe (D-San Diego). The bill has an innocuous title, "The Oil Conservation, Efficiency, and Alternative Fuels Act." It is an efficient bill—if passed, this analysis indicates that 80,000 jobs would leave California. Luckily, the Governator is likely to veto this legislation.

As the analysis (an article in the San Jose Business Journal) notes, just a few years ago a similar piece of legislation passed the Legislature. The one difference between the two bills is that the prior bill required a study. Both want a 15% reduction in fuel consumption. The study showed that any of the following could cause such a reduction:

- A $0.50/gallon increase in the gasoline tax
- Pay at the pump auto insurance, at $0.48/gallon
- A $0.02/mile driven tax
- A $3500/purchase tax on SUVs, mini-vans, and trucks

The bill is about to reach the Senate floor. If you're a Californian, tell your State Senator how you feel about the bill. Indeed, a look at the analysis provided by the Office of Senate Floor Analysis, including the list of supporting organizations (8), and the list of organizations in opposition (22), show that the usual suspects (Sierra Club, etc.) support the bill while business, agricultural, and taxpayer groups are against the bill.

In eWeek Magazine, the Florida Department of Revenue's (FDOR) computer system, "SUNTAX," is highlighted. The system is modern, integrated, and allows FDOR agents to quickly access records across the system. By all accounts, a successful project that replaced several antiquated systems. You can find the article here. (Note: Article is on page 34 of the pdf file—the file is the entire May 23rd issue.)

On the other hand, there's California's Franchise Tax Board (FTB). Now, some of the systems of the FTB are integrated; however, many are not. As I previously wrote in "Bad Paperwork from the FTB", I received a notice requiring my company to enroll in California's electronic payment system because estimated tax payments from my company have exceeded $20,000 or total tax liability exceeded $80,000. There is only one problem: Neither occurred.

So I telephoned the EPS office. They directed me to the payments office. When I finally spoke to someone who could access the cause of the problem, it appears that someone made a tax deposit into "my account" of over $200,000! When I explained that it wasn't me, they promised to get back to me.

Yesterday, I heard back from EPS. They agree that I probably didn't make the deposit and that my company need not enroll in EPS. ($200,000 of taxes is quite a bit more than what my company pays in annual California taxes.) But they couldn't figure out who made the deposit.

The good news is that the two departments within FTB talk to each other. The bad news is that they don't have access to all the records that they should.

For those of you in California, a warning. The Franchise Tax Board is having some computer issues, at least based on paperwork that my clients and I have recently received. One client recently received a two page bill from the FTB stating, on page 1, that they did not make certain required payments and owed around $1,500. They then listed, on page two, the total charges: over $80,000. When I called the FTB they couldn't figure out what was wrong (the $1,500 appears accurate, but why their computer is adding an additional $78,500 was a mystery).

Then I received a notice from the FTB requiring my company (Clayton Financial & Tax) to begin making electronic tax payments because estimated tax payments from my company have exceeded $20,000 or total tax liability exceeded $80,000. There's only one problem: neither happened. The FTB is investigating and promises to get back to me later this week. (At first glance, it appears someone else made a deposit to the FTB and used my corporation number.)

So what should you do when you get paperwork from the FTB (or the IRS) and it's wrong? First, let your tax preparer know! We have special phone numbers and usually deal with well trained staff at the tax agencies. My standard procedure is upon phone resolution to send a confirmation letter to the tax agency (using certified mail, return receipt requested). This puts into writing what we discussed on the phone.

But why spend the $4.24? Well, when it's a choice between $4.24 and $78,500.00, I know which number I'll choose.

Orange County Firefighters won their first court battle over an initiative (assuming no court losses, it will be on the June 2006 ballot) that would distribute about $80 million in taxes to firefighters that currently go to the Orange County Sheriff and the Orange County District Attorney's office. According to this story in the Orange County Register (one-time registration required), the sheriff's union will appeal. As an aside, firefighters for the Orange County Fire Authority are some of the best paid in the country. It doesn't take much thought to figure out why the firefighters want to pass this measure....

The IRS recently ruled that bonds, in order to be tax free, must be for "essential government functions" only. Bonds to help in the building of an Indian casino resort (at Fantasy Springs Casino near Palm Springs) didn't make the cut. The IRS is going to be going after the bondholders for taxes.

So what does our state legislature do? It passes, out of the Senate Revenue and Taxation Committee, SB995. This bill would grant Indian casinos tax exemption (for California tax returns) on such bonds.