Heads up, tax scofflaws. Next week (Feb. 1), the state embarks on its first general tax amnesty in 20 years, allowing individuals and businesses to pay back taxes or taxes on unreported income without fear of state penalties or prosecution.
State officials have factored $500 million to $600 million in revenues from the amnesty into the current fiscal year’s budget. Any shortfall would be carried over into the 2005-06 budget, which already faces an $8.1 billion deficit.
State Assemblywoman Judy Chu, D-Pasadena, who authored the amnesty law last year, said the projection is only a fraction of the estimated $6.5 billion that California individuals and businesses owe in unpaid taxes including $2.4 billion from small businesses and $1 billion from corporations.
Similar amnesties in New York, New Jersey and Illinois have each brought more than $500 million, she said.
One potential hitch: state tax collectors will share information about those who file during the amnesty period with the Internal Revenue Service.
“We do have an exchange of information agreement with the IRS,” said Denice Azimi, spokeswoman for the state Franchise Tax Board.
In recent months, the IRS has been going after individuals who have attempted to use questionable tax shelters. Azimi said it’s possible that some of those who come forward with the state could end up paying hefty penalties to the IRS.
Chu said many of those people will eventually be found out anyway. “There is more advantage to saving money in penalties on the state front than risking penalties from both the state and the feds,” she said.
Chu said she thinks the amnesty program will bring in more than expected, pointing out that a separate state amnesty program last year was projected to bring in $90 million. Instead, the final figure was $1.2 billion.
“My guess is that $600 million will be way too low a figure,” she said.
Chamber Changes
The new year brings several changes to the Los Angeles Area Chamber of Commerce.
Attorney George Kieffer confidante of both L.A. Mayor James Hahn and California Gov. Arnold Schwarzenegger has stepped down from his two-year stint as chairman of the 90-member chamber board. Architecture and design executive Chris Martin succeeds him.
Also on Feb. 1, chamber president Rusty Hammer returns to his post on a part-time basis after a 15-month absence while he battled a rare form of leukemia. He said last week that the disease is in remission, though he’s had to deal with serious complications.
During his absence, many of the duties of chamber leadership fell to Kieffer and Martin.
Kieffer stepped up the chamber’s political involvement, taking early stands on controversial issues. The chamber supported last year’s statewide open primary initiative (which was defeated) and called for reform of the way the state draws its political district boundaries.
The chamber also suggested splitting up the various components to the Los Angeles International Airport overhaul plan, a concept that was ultimately adopted by L.A. City Councilwoman Cindy Miscikowski. And it helped garner support for business tax reform, which finally materialized after 11 years of debate and studies.
Martin said much of the focus will be on redistricting reform and finding ways to fund and build more moderate-income housing. “The city of Los Angeles and the region as a whole is failing its citizens in this area of housing. That needs to change,” Martin said.
More Toll Roads?
The Reason Foundation, an L.A.-based privatization think tank, issued a study last week calling for the construction of a $3 billion “toll tunnel” through the San Gabriel Mountains and the adding of toll lanes on several regional freeways.
In past years, such ideas might have been laughed at or shrugged off. But the Reason Foundation has wielded considerable influence with the Schwarzenegger administration. One of its top officials, George Passantino, chaired Schwarzenegger’s California Performance Review, which last year issued a controversial 2,500-page report outlining what it claimed were billions of dollars in savings for state government. Several Reason Foundation proposals found their way into the review, which the state Legislature will consider in coming months.
The toll road concept still faces significant hurdles. State officials are still smarting from a backlash against toll lanes on the Riverside (91) Freeway connecting Riverside and Orange counties. When it was revealed that the California Department of Transportation agreed not to make any improvements to the freeway as part of a “non-compete clause” with the toll lane operators, elected officials in both counties protested and the venture was aborted.
Robert Poole, the Reason Foundation’s transportation director, said no such clauses would be included in any future toll road agreements.
Staff reporter Howard Fine can be reached by phone at (323) 549-5225, ext. 227, or by e-mail at
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