This bill is part of the 2022 Cannabis Bills section of our ongoing update on California Cannabis Legislation – see the full California Cannabis Law Legislative Update which includes information on cannabis bills from other years.
SB 1496 (Cabrillo D) Taxation: tax, fee, and surcharge administration: insurance tax rates.
(1) The California Department of Tax and Fee Administration (CDTFA) administers various taxes, fees, and surcharges, including, among others, the Sales and Use Tax Law, the Motor Vehicle Fuel Tax Law, the Use Fuel Tax Law, the Cigarette and Tobacco Products Tax Law, the Timber Yield Tax Law, the Energy Resources Surcharge Law, the Emergency Telephone Users Surcharge Act, the Hazardous Substances Tax Law, the Integrated Waste Management Fee Law, the Oil Spill Response, Prevention, and Administration Fees Law, the Underground Storage Tank Maintenance Fee Law, the Diesel Fuel Tax Law, and various taxes and fees collected in accordance with the Fee Collections Procedures Law.
Existing law, the California Emergency Services Act, authorizes the Governor to proclaim a state of emergency when specified conditions of disaster or extreme peril to the safety of persons and property exist, and authorizes the Governor to exercise certain powers in response to that emergency, including, but not limited to, suspending specified statutes, ordinances, orders, regulations, or rules.
This bill would authorize the CDTFA, if the Governor issues a state of emergency proclamation, to extend the time, for a period not to exceed 3 months, for making any report or return or paying any tax, fee, or surcharge, as applicable, required under the laws administered by the department specified above for any person in an area identified in the state of emergency proclamation. The bill would additionally authorize the CDTFA to grant relief from specified penalties and interest under those laws during the period the state of emergency proclamation is effective. The bill would, however, authorize the CDTFA to make the extension or grant the relief only during the first 12 months following the issuance of the state of emergency proclamation or the duration of the state of emergency, whichever is less.
(2) Existing law, for purposes of the laws administered by the CDTFA described above, requires the CDTFA to refund the excess balance of a tax, fee, or surcharge, penalty, or interest that has been paid more than once or has been erroneously or illegally collected or computed, if the CDTFA makes a specified determination. Under those laws, if the amount is in excess of $50,000, or $15,000 for specified amounts under the Integrated Waste Management Fee Law, the CDTFA is required to make the determination public record 10 days prior to the effective date of the determination.
This bill would instead require the CDTFA to make the determination public record 10 days after the effective date of the determination. The bill, for purposes of the Integrated Waste Management Fee Law, would increase the amount for which the CDTFA is required to make the determination public record from $15,000 to $50,000.
(3) The Sales and Use Tax Law, the Use Fuel Tax Law, the Cigarette and Tobacco Products Tax Law, the Timber Yield Tax Law, the Emergency Telephone Users Surcharge Act, the Hazardous Substances Tax Law, the Integrated Waste Management Fee Law, the Oil Spill Response, Prevention, and Administration Fees Law, the Underground Storage Tank Maintenance Fee Law, the Diesel Fuel Tax Law, and various taxes and fees collected in accordance with the Fee Collections Procedures Law authorize the CDTFA to require persons, by notice of levy, to withhold credits or personal property belonging to a retailer or other person liable for taxes, fees, or surcharges, or penalties or interest, under those laws. Existing law authorizes the CDTFA to serve the notices of levy personally or by first-class mail.
This bill would additionally authorize the CDTFA to serve a notice of levy by electronic transmission or other electronic technology.
(4) The Sales and Use Tax Law, the Use Fuel Tax Law, the Cigarette and Tobacco Products Tax Law, the Alcoholic Beverage Tax Law, the Emergency Telephone Users Surcharge Act, the Oil Spill Response, Prevention, and Administration Fees Law, the Underground Storage Tank Maintenance Fee Law, the Diesel Fuel Tax Law, and various taxes and fees collected in accordance with the Fee Collections Procedures Law, until January 1, 2023, authorize the executive director and chief counsel of the Board of Equalization or the director of the CDTFA, as applicable, to compromise on a final tax, surcharge, or fee liability, as applicable, where the reduction of the tax, surcharge, or fee is $7,500 or less, as provided, regardless of whether the liabilities are generated from a business that has been discontinued or transferred or where the taxpayer or feepayer no longer has a controlling interest or association with a similar business as the transferred or discontinued business. After January 1, 2023, those laws authorize the director to accept an offer in compromise on a final tax, surcharge, or fee liability only if the business has been discontinued or transferred or whether the taxpayer or feepayer has a controlling interest or association with a similar business as the transferred or discontinued business. Under these laws, a taxpayer or feepayer is guilty of a felony if the taxpayer or feepayer conceals specified property or receives, withholds, destroys, mutilates, or falsifies specified items or makes a false statement related to the offer in compromise, as specified.
This bill would instead authorize the executive director and chief counsel or director, as applicable, to compromise all final tax, surcharge, or fee liability, as applicable, regardless of the amount. The bill would extend the repeal date for the above provisions regarding an offer in compromise for a final tax, surcharge, or fee liability regardless of whether the business has been discontinued or transferred or whether the taxpayer or feepayer has a controlling interest or association, as specified, to January 1, 2028. The bill, by extending the repeal date, would expand the scope of an existing crime, thereby imposing a state-mandated local program.
(5) The Sales and Use Tax Law, the Use Fuel Tax Law, the Cigarette and Tobacco Products Tax Law, the Energy Resources Surcharge Law, the Emergency Telephone Users Surcharge Act, the Hazardous Substances Tax Law, the Integrated Waste Management Fee Law, the Oil Spill Response, Prevention, and Administration Fees Law, the Underground Storage Tank Maintenance Fee Law, the Diesel Fuel Tax Law, and various taxes and fees collected in accordance with the Fee Collections Procedures Law authorize the CDTFA to release or subordinate a lien if the CDTFA makes specified determinations, including that the release or subordination will be in the best interest of the state and the taxpayer.
This bill would additionally authorize the CDTFA to release or subordinate a lien if the CDTFA determines that the release or subordination will be in the best interest of the state and another person that is not the taxpayer but that holds an interest with the taxpayer in the property that is subject to the lien.
(6) Under the Sales and Use Tax Law, the CDTFA, in its discretion, may relieve all or any part of the interest imposed on a person by that law under certain circumstances, including where failure to pay use tax on a vehicle or vessel registered with the Department of Motor Vehicles was the direct result of an error by that department in calculating the use tax.
This bill would instead authorize relief where failure to pay sales or use tax was the direct result of an error or delay by a state agency in collecting sales or use tax on behalf of the CDTFA.
(7) Under the Fee Collections Procedures Law, if at any time within 3 years after any person is delinquent in the payment of any amount required to be paid, as specified, or within 10 years after the last recording or filing of a notice of state tax lien, the CDTFA or its authorized representative is authorized to issue a warrant for the enforcement of any liens and for the collection of any amount required to be paid to the state, as specified. Existing law requires the warrant to be directed to any sheriff or marshal and authorizes the department to pay or advance to the sheriff or marshal the same fees, commissions, and expenses for their services as are provided by law for similar services pursuant to a writ of execution.
This bill would additionally require the warrant to be directed to, and would authorize the CDTFA to pay or advance fees, commissions, and expenses to, the Department of the California Highway Patrol.
(8) The Sales and Use Tax Law, with respect to specified vehicles sold at retail by a licensed dealer, as defined, requires the dealer to pay the applicable sales tax and use tax under the Transactions and Use Tax Law to the Department of Motor Vehicles acting for and on behalf of the CDTFA, as specified. That law requires specified newly licensed dealers to comply beginning January 1, 2021, and all other dealers to comply by January 1, 2023.
This bill would authorize the CDTFA to delay the compliance schedule for specified dealers that are required to comply by January 1, 2023, to January 1, 2026, if certain conditions are met.
(9) This bill would also make various technical changes to each of these laws by updating references to the State Board of Equalization to instead refer to the CDTFA.
(10) Existing law authorized the Franchise Tax Board, prior to December 31, 2005, to disclose returns and return information to federal agencies, as provided.
This bill would repeal that provision.
(11) Existing law defines who is a peace officer and specifies the powers of peace officers. Under existing law, specified categories of people, including a person employed by the State Board of Equalization, Investigations Division, are not peace officers but are authorized to exercise the powers of arrest of a peace officer and the power to serve warrants, as specified, if they receive a course in the exercise of those powers.
This bill would remove persons employed by the State Board of Equalization, Investigations Division from the categories of people who are not peace officers but are authorized to exercise the powers of arrest of a peace officer and the power to serve warrants, as specified. The bill would add to the classification of persons who are not peace officers but who are authorized to exercise the powers of arrest of a peace officer and the power to serve warrants a person employed by the CDTFA who is designated by the department’s director, provided that the person’s primary duty is the enforcement of laws administered by the department.
(12) The Control, Regulate and Tax Adult Use of Marijuana Act of 2016 (AUMA), an initiative measure approved as Proposition 64 at the November 8, 2016, statewide general election, authorizes a person who obtains a state license under AUMA to engage in commercial adult-use cannabis activity pursuant to that license and applicable local ordinances. The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), among other things, consolidates the licensure and regulation of commercial medicinal and adult-use cannabis activities. AUMA authorizes the Legislature to amend the act to further the purposes and intent of the act with a 2/3 vote of the membership of each house of the Legislature, except as provided.
Existing law authorizes any peace officer or employee of the State Board of Equalization who is granted limited peace officer status to enter any place, as described, to conduct inspections. Existing law authorizes the CDTFA or a law enforcement agency to seize cannabis or cannabis products that a licensee or any other person possesses, stores, owns, or has made a retail sale of, without evidence of tax payment or not contained in secure packaging. Existing law provides that seized cannabis or cannabis products shall be deemed forfeited within 7 days, as specified.
This bill would, commencing January 1, 2023, remove the authority of the CDTFA or a law enforcement agency to seize cannabis or cannabis products that are without evidence of tax payment. The bill would continue to authorize the CDTFA or a law enforcement agency to seize cannabis or cannabis products not contained in secure packaging. The bill would additionally authorize the CDTFA or a law enforcement to seize cannabis or cannabis products possessed, stored, owned, or sold by an unlicensed person or that were not reported in the track and trace system, as specified. The bill would provide that seized cannabis or cannabis products are deemed forfeited, as specified. The bill would make technical changes by updating references to the Board of Equalization to instead refer to the CDTFA.
Existing law requires the CDTFA to administer and collect specified cannabis taxes according to specified procedures. Existing law requires certain persons whose estimated fee liability under specified provisions averages $20,000 or more per month remit amounts due by electronic funds transfer, as specified. Existing law excludes, until January 1, 2022, cannabis licensees and a person required to pay or collect specified cannabis taxes from this requirement.
This bill would instead apply the above-described exclusion from on or after January 1, 2022.
Existing law also requires persons required to remit by electronic funds transfer but remit fees by other means to pay a penalty of 10% of the fees incorrectly remitted. Existing law provides that cannabis licensees that failed to remit amounts due by means of electronic funds transfer on and after January 1, 2022, and before a specified operative date, are not subject to or are relieved of any penalties for that failure to remit amounts due by electronic funds transfer.
This bill would extend the relief from penalty due to the failure to remit amounts due by electronic funds transfer until before January 1, 2023.
Under the Sales and Use Tax Law and Fee Collection Procedures Law, it is unlawful for the CDTFA and specified persons and state agencies, as applicable, to make known in any manner certain feepayer or taxpayer information, permit certain information to be seen or examined, except as provided, or retain certain information, as applicable.
This bill would, notwithstanding those prohibitions, require the CDTFA to disclose certain information of a person registered with the CDTFA to collect and remit the cannabis excise tax. The bill would require the CDTFA to disclose to state and local law enforcement agencies, upon written request, any and all information collected under the Sales and Use Tax Law and collected by the CDTFA, as specified, regarding a person required to collect and remit the cannabis excise tax. The bill would require state and local enforcement agencies that receive that information to access and use the information only to the extent necessary to carry out the functions and duties of the agency, among other things. The bill would also authorize the CDTFA to share information with a licensing authority pursuant to a memorandum of understanding, as deemed necessary by the department.
This bill would declare that it furthers the purposes and intent of AUMA.
(13) Existing insurance tax laws imposes a tax upon insurers based upon a percentage of gross premiums, as specified. Those laws provide that in the case of an insurer not transacting title insurance in this state, the basis of the tax is, in respect of each year, the amount of gross premiums, less return premiums, received in that year by the insurer regarding its business in this state.
This bill would provide that for annuity policies or contracts that constitute qualified funding assets, as described, the gross premiums tax rate for premiums received for those annuity policies and contracts is 0% for premiums received on or after January 1, 2023.
(14) This bill would incorporate additional changes to Section 830.11 of the Penal Code proposed by SB 1498 to be operative only if this bill and SB 1498 are enacted and this bill is enacted last.
(15) This bill would incorporate additional changes to Section 41100 of the Revenue and Taxation Code proposed by SB 1496 to be operative only if this bill and SB 1496 are enacted and this bill is enacted last.
(16) Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.
This bill would make legislative findings to that effect.
(17) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Read more about California Cannabis Legislation – see the full California Cannabis Law Legislative Update.
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