Today I am proud to announce that the BOE agreed to sponsor Assembly Bill 1506 (Anderson) yesterday at our Board Hearing in Sacramento. The bill, which was luckily revived from the suspense file on Friday, will allow taxpayers that receive IOUs from the state, to return those IOUs as payment for any obligations owed to the state.

When we agreed to accept IOUs from taxpayers at our July 21st hearing, we requested for Board staff to return on August 31st, with a legislative proposal to standardize the policy of the Board regarding registered warrants.

The Board is not currently required by law to accept state-issued IOUs, but has done so this year as well as in 1992, the last time IOUs were issued by the state. The BOE staff proposal, approved yesterday, as an amendment for AB 1506, will clarify the law for the BOE to accept IOUs automatically when they are issued in the future.

AB 1506 is common sense, revenue-neutral, legislation that will ease the burden placed on taxpayers that do business with the state in the event of another cash crunch, which we are sure to face in the future.

327,000 IOUs have been issued in the two months since the State Controller reported the state was out of cash. That’s over $2 billion that vendors will not receive until those IOUs mature. We voted to accept IOUs in July, and to support AB 1506 yesterday, so that taxpayers can put their IOUs to immediate use, and not be forced to pay cash to the state when the state pays them in plain paper.

Yet, only about 160 taxpayers have used their IOUs as payment for obligations owed to the BOE. One cause for this may be that taxpayers are not aware that we are accepting their IOUs. Without a formal rule that we will always accept IOUs, it is difficult to let taxpayers know our policy in time for them to act on it. The Franchise Tax Board for example, is required by law to accept IOUs and therefore is able to plan ahead and get the word out to taxpayers on how to pay their income or corporate taxes with their IOUs.

Now that the BOE has officially endorsed AB 1506, I hope that the legislative process will help to let taxpayers know that we will take your IOUs for payment. I also hope that legislators in Sacramento will see the importance of passing this bill. If the state has to issue IOUs from time to time, the least we can do is accept them as payment, and when this bill passes, with the BOE amendment included, we can even let you know about it in advance.

In case anyone that reads this is holding an IOU that you want to use to pay a BOE obligation, this is what you need to know:

If you received an IOU from the State Controller’s Office, you can use it to pay any sales and use tax owed to the Board of Equalization, as well as any excise taxes and fees. All you have to do is sign the back of the original IOU that you received, endorse it to the BOE and mail it in with the corresponding return. If your IOU covers the total liability due, it will be counted as paid. You can also combine the IOU with a check or other form of payment to cover the total liability.

And make sure to call your state legislator to let him or her know that you support AB 1506, its common sense, at the right time.