Approval of a staff-developed wish list for the 2010-11 budget was the only significant development at the Franchise Tax Board's 9/9/09 meeting at its Butterfield Way headquarters. All told, the board approved requests totaling $17.4 million (the requests were approved on a 2-0 vote, with Finance Director Mike Genest abstaining).
Cal-Tax Chief Tax Consultant David R. Doerr raised concerns about one of the proposed budget augmentations: a proposal to spend $542,000 to target non-filers with dividend and interest income. To estimate total income of non-filers, staff proposes using a 10:1 ratio for interest and 12:1 for dividends. Mr. Doerr said this would be a public relations disaster for the board. He said many of the people the board would be targeting will be low-income seniors with no filing requirements. Many are living on interest and principal from savings. For a senior who gets $7,500 from a CD, the board would send a notice that he or she has taxable income of $75,000.
Mr. Doerr said that as people get older, they tend to get confused more often – and receipt of such a notice would cause major problems, including health problems and the need to spend scarce income to see an accountant. FTB staff said this would not occur, although it was not clear why.
Other staff budget proposals:
· $214,000 to target non-filers based on mortgage interest paid. Staff said people have income of eight times the amount of their mortgage payment. This means that if a person has a $1,500-a-month mortgage payment, FTB will assume he or she has an annual income of $144,000.
· $344,000 to increase compliance with non-resident withholding.
· $5.4 million to replace and extend limited-term positions to fund various compliance initiatives.
· $1 million to get additional information from the IRS Information Return Master File.
· $678,000 to expand the delinquency control program to include limited liability companies.
· $7,000 to fund the development of an "Enterprise to Data Revenue Project," which the FTB hopes to get out to bid in 2011. (This project, according to an FTB description, "offers opportunities to change FTB's landscape through an enterprise approach of data sharing and connecting IT systems through services resulting in significant revenue streams and cost savings."
· $172,000 to process tax refunds resulting from the Ventas limited liability case.
· $665,000 to implement legislation that created new costs for the agency.
The board also watched a short presentation on staff technology projects. Staff described how communications with taxpayers through electronic media have been increasing. A majority of returns are filed electronically, and 40 percent of payments are received electronically. (Cal-Tax: This is bad news for the U.S. Postal Service.)
Cal-TaxReports, September 14, 2009
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