Welcome back, California businesses and local agencies! In our last post, we discussed Assembly Bill 52 (AB 52) and its new tax credit for manufacturing and R&D equipment.
Today, let’s turn our attention to another important piece of legislation: Assembly Bill 2854 (AB 2854). This bill aims to bring more transparency and accountability to how local agencies handle sales and use tax rebates. Let’s dive into what AB 2854 entails and how it could impact you.
What’s AB 2854 All About?
A Quick Overview
AB 2854, introduced by Assembly Member Grayson, adds Section 7213 to the Revenue and Taxation Code. This bill requires local agencies to publicly disclose any agreements involving the rebating of sales and use tax revenue. The goal is to ensure local agencies are accountable for how they handle these tax rebates.
Key Points to Know:
- Transparency Requirements:
- Local agencies must publish detailed information about rebated sales and use tax revenues on their websites by April 30 each year.
- This includes information about the parties involved in the rebate agreements, the amounts rebated, and the terms of the agreements.
- Reporting Obligations:
- Local agencies that have not engaged in any tax rebate agreements must report this to the state by April 30 and are exempt from the posting requirement.
- Penalties for Non-Compliance:
- Local agencies that fail to meet these requirements can face substantial penalties, ranging from $1,000 to $4,000 per day, depending on the duration of non-compliance.
How Does AB 2854 Work?
Detailed Information Requirements
By April 30 each year, local agencies must report the following to the California Department of Tax and Fee Administration (CDTFA):
- Names of all parties to the rebate agreement.
- Total dollar amounts of rebated sales and use tax revenues for the fiscal year and cumulatively.
- Key dates, including the agreement’s execution and termination dates.
- Percentages of sales and use taxes used to determine the rebate amounts.
Website Posting
Local agencies must make this information easily accessible on their websites. A direct hyperlink to this information should be visible on the home page. If the agency already maintains a page for economic development subsidies, they can include the rebate information there.
Penalties for Non-Compliance
If a local agency fails to submit or publish the required information, the CDTFA will issue a notice, allowing 45 days for compliance. Extensions of 30 days can be granted under specific circumstances. Failure to comply within the given timeframe can result in penalties of $1,000 per day for the first 180 days and $4,000 per day for the next 185 days.
What Does This Mean for Local Agencies and Businesses?
Transparency and Accountability
AB 2854 aims to enhance transparency and accountability in how local agencies handle tax rebate agreements. This transparency helps ensure that tax revenues are used responsibly and can build trust between local agencies and their communities.
Compliance and Documentation
Local agencies need to establish robust processes for documenting and reporting any tax rebate agreements. This is crucial to avoid penalties and ensure compliance with AB 2854.
Impact on Businesses
For businesses, this increased transparency can provide clearer insights into how local agencies are supporting economic development through tax rebates. This can be particularly useful for businesses looking to engage with local governments or understand the financial incentives available in different regions.
Real-World Example
Let’s Illustrate:
Imagine a local agency enters into a rebate agreement with a retailer, agreeing to rebate 20% of the sales tax collected to support the retailer’s expansion. Under AB 2854, the local agency must report this agreement, detailing the amounts rebated and making this information publicly accessible. If the agency fails to comply, they could face penalties of up to $4,000 per day after the initial compliance period.
AB 2854 is a significant step towards greater transparency and accountability in how local agencies manage sales and use tax rebates. By requiring detailed reporting and public disclosure, this bill ensures that these financial arrangements are clear and accessible to all stakeholders.
Got Questions?
Curious about how AB 2854 could impact your local agency or business? Schedule a call with us here.
Stay Informed
Stay tuned for more updates as AB 2854 progresses. Don’t forget to check out our previous post on AB 52 and keep an eye out for future legislative updates. If you need personalized advice or have any questions, don’t hesitate to reach out!
