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Bill: State pays penalty for late refunds

April 21, 2009 12:00:00 AM PDT
When Californians are late paying their state taxes, they pay a penalty; one California lawmaker wants the state to do the same when it is late sending out refunds. Assemblywoman Lori Saldana, D-San Diego, has introduced a bill that would require California to pay interest on personal tax refunds, beginning 15 days after the return is filed."Over two million Californians had their refunds delayed in February," during the state budget crisis, said Saldana, "And the average household had $850 withheld. When a taxpayer is delinquent, he or she will owe interest. The state should do likewise when it delays the payment of tax refunds."

Saldana pointed out that the state pays hundreds of millions of dollars every year in loans and borrowing fees to its creditors. "California taxpayers deserve the same consideration for the money they involuntarily loan the state," she said.

Saldana's bill, AB 1251, would require the state to pay interest at 5 percent, the same rate paid by taxpayers when they are delinquent. The bill would also make the interest payments retroactive to February 2009, when many refunds were delayed. However, the interest payments would only be required if the budget is delayed, and the State Controller determines there is not enough cash in the General Fund to meet the state's obligations. Furthermore, the total amount of interest paid out would be capped at $5 million.

AB 1251 will get its first hearing April 27, in the Assembly Committee on Revenue and Taxation.