Franchise Tax Board

FTB Begins Process of Requesting More State Funds for Audits of Political Campaigns


At the June 3 meeting of the three-member Franchise Tax Board, agency staff and board members discussed 11 “proposal concepts” that could be formalized into official requests for additional state funding for the 2022-23 fiscal year.

Since the presentation was conceptual and informational only, there was no vote by the board – comprised of State Controller Betty Yee, State Board of Equalization Chair Antonio Vazquez, and Jay Chamberlain, chief of the Department of Finance’s Financial Research Unit, representing Finance Director Keely Bosler – and no detail provided on the cost estimates for the proposals.

The staff member presenting the item said staff will return in September with specific figures on the concepts the staff deems appropriate for the board’s consideration.

The concepts presented this week:

  • Positions and funding “to timely and effectively complete mandated audits [of political campaign committees] as required in Section 90001 of the Political Reform Act.” (CalTax: The Fair Political Practices Commission has proposed taking over this responsibility from the FTB, but the Legislature has indicated it will provide more resources to the existing FTB program instead.)
  • Funds for phase 2 of the Enterprise Data Revenue project. According to the staff, this proposal requests positions and funding for consultant and professional services for the ongoing technology upgrade.
  • Funding for accessibility enhancements for the agency’s website, applications, forms, publications, and other products.
  • “Positions and funding to address enterprise centralization of taxpayer identity proofing and verification, monitoring online activity for the detection of fraud, and identifying fraudulent calls made to FTB’s Interactive Voice Response (IVR) phone system.”
  • “Funding to refresh critical network hardware and software within FTB’s technology infrastructure that supports all of the department’s Ecommerce and data processing programs originally purchased in 2015-16.”
  • Money to “refresh aging hardware that supports FTB’s IT infrastructure.” According to staff, this refresh will provide “updated hardware components, address security compliance, improve performance, and mitigate against the risk of aging hardware.”
  • Positions and funding “to address the ongoing financial and procurement functionality enhancements and rollouts from FI$Cal” (the Financial Information System for California).
  • Positions and funding “to address the new reporting requirements that have begun as a result of Revenue and Taxation Code Section 41,” which requires significant amounts of data collection and reporting for any “tax expenditure” (credit, deduction, exclusion, etc.) introduced on or after January 1, 2020).
  • Funds for the FTB’s litigation budget with the Attorney General’s Office “to defend against increasing tax refund lawsuits.”
  • Funds to allow the FTB to transition to an upgraded software program.
  • Funds to pay for data center upgrades for the FTB’s central office campus. According to the agency, “This proposal requests funding to consolidate and upgrade the department’s data center into one raised floor space, refresh end-of-life equipment and eliminate all single points of failures.”

Vazquez asked whether the proposal requesting additional funding for litigation was due to an increase in new refund cases, as the staff’s description appeared to indicate. The staff member presenting the issue responded that litigation costs are increasing not due to an increase in new cases but due to the increasing complexity of litigation.

Vazquez also asked whether the additional funding requested to conduct Political Reform Act audits was due to the increasing complexity of the election cycle and the number of candidates, but staff replied that they have not yet completed their analysis of the issue.

Controller Yee asked staff for additional detail on the section 41 reporting requirements to better inform the public about this issue.