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Pro-Taxpayer Legislation Advances

A key Senate tax committee today voted 9-0 to advance legislation I am sponsoring to empower California’s tax agencies to better assist struggling taxpayers.

The bill will help California’s job creators who are survivors of the worst economic downturn since the Great Depression and give tax agencies the needed flexibility to deal fairly with taxpayers who are victims of California’s economy.

More specifically, Senate Bill 228 (Wyland) would permit the Board of Equalization, Franchise Tax Board and State Controller to “withdraw” a lien when a taxpayer pays an outstanding liability in full—removing the lien from the taxpayer’s credit record.

Under current law, when a taxpayer falls behind on payments, California’s tax agencies may place a lien on that taxpayer’s personal property.

Once a taxpayer pays the outstanding liability in full, California tax agencies may “release” the lien. However, the release does not remove the lien from a taxpayer’s credit record, and it may remain there for up to 10 years.

The bill’s author, Senator Mark Wyland (R-Carlsbad), described the measure as a “pro-consumer, pro- small business bill that conforms state tax law procedures to what the IRS has been doing for some time now.”

Since 2001 the IRS has had the authority to withdraw liens in some cases. In February of this year the IRS changed its rules to help struggling taxpayers by withdrawing any fully paid tax lien upon request from the taxpayer, instead of merely releasing it.

Due to the down economy the Board of Equalization has issued an increasing number of liens – more than 14,000 in the 2009-10 fiscal year. The Board typically releases only about 3,000 liens a year.

The bill has received support from the Howard Jarvis Taxpayers Association and the California Tax Reform Association.

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