Chapter 1 General Government - The California Performance Review

conducted a new tax amnesty program, “Project Pay Up,” from March 11 to March 31,2004. This process allowed a three-week window for payment (minus penalty andinterest) and collected more than $300 million dollars. 7• New York conducted a tax amnesty program between November 2002 and January2003, targeting income, withholding, corporate and other designated taxes. New Yorkwaived penalties plus a portion of interest—and collected $582.7 million in grossrevenue, including $82.9 million in new revenues. 8California has conducted several targeted tax amnesty programs over the years, but nothingbroad-based since Fiscal Year 1984–1985. 9 According to the Los Angeles T imes, a recent taxamnesty program targeting only Californians using illegal tax shelters “has shaped up tobecome one of the most clever budget moves since the state’s finances went into free fall.” 10The state has raised more than $1.3 billion from this program to date.Assemblymember Judy Chu introduced Assembly Bill 2203 (Taxation: Amnesty) in the currentlegislative session to waive penalties (only to increase them later) for taxpayers who pay backtaxes plus interest for tax years prior to the year starting January 1, 2003. The bill proposes atwo-month amnesty period that ends no later than June 2005. FTB estimates AB 2203 wouldgenerate $885 million in gross tax revenues and increased penalties and interest over fouryears. 11The chart below shows FTB’s fiscal analysis of AB 2203. 12 The bill was initially drafted to waiveboth penalties and interest on individual and corporate taxes but was amended in April todelete the waiver of interest due to related, anticipated reductions in expected net revenues. 13Estimated Revenue Impact of AB 2203 for Tax ReportingEnding On or Before January 1, 2003 14(dollars in thousands)Fiscal Year 2004–05 2005–06 2006–07 2007–08 TotalTotal Gross Revenue $600,000 $85,000 $105,000 $95,000 $885,000Collections Absent –380,000 –75,000 –40,000 –15,000 –510,000Amnesty Attributable toAmnesty ParticipantsLess One-Time Admin Cost –10,000 –10,000Total Net Revenue $210,000 $10,000 $65,000 $80,000 $365,0008 Issues and Recommendations