Existing law prohibits the name of a candidate for Governor from being printed on the ballot of the direct primary election unless the candidate, at least 88 days before the direct primary election, files with the Secretary of State 2 copies of every income tax return, as defined, the candidate filed with the Internal Revenue Service in the 5 most recent taxable years. Existing law requires the candidate to redact specified information from one copy of each submitted return, and authorizes the candidate to redact additional information as specified. Existing law requires the Secretary of State, within 5 days of receipt, to make the redacted versions of the candidates tax returns available to the public on the Secretary of States internet website, and to continuously post the returns until the official canvass for the direct primary election is completed. Existing law requires the Secretary of State to retain the paper copies of the submitted tax returns until the completion of the official canvass of the ensuing general election.

This bill would extend these requirements to general elections and recall elections in addition to direct primary elections. The bill would require and authorize redaction of additional information on the returns, as specified. The bill would require the Secretary of State to make the redacted copies of the tax returns public at the time the Secretary of State issues the certified list of candidates for the election. The bill would require the Secretary of State to continuously post the tax returns until the official canvass is completed for the election at which a candidate is elected to the office, except that the tax returns of a candidate who was not nominated to participate in the general election need only be posted until the official canvass for the direct primary election is completed. The bill would require the Secretary of State to retain paper copies of the submitted tax returns until the completion of the official canvass of the election at which a candidate is elected to the office. The bill would exclude transcripts from the Internal Revenue Service and accountant notes from the definition of income tax return for these purposes.

Existing law prohibits the name of a candidate for Governor from being printed on the ballot of the direct primary election unless the candidate, at least 88 days before the direct primary election, files with the Secretary of State 2 copies of every income tax return, as defined, the candidate filed with the Internal Revenue Service in the 5 most recent taxable years. Existing law requires the candidate to redact specified information from one copy of each submitted return, and authorizes the candidate to redact additional information as specified. Existing law requires the Secretary of State, within 5 days of receipt, to make the redacted versions of the candidates tax returns available to the public on the Secretary of States internet website, and to continuously post the returns until the official canvass for the direct primary election is completed. Existing law requires the Secretary of State to retain the paper copies of the submitted tax returns until the completion of the official canvass of the ensuing general election.

This bill would extend these requirements to general elections and recall elections in addition to direct primary elections. The bill would require and authorize redaction of additional information on the returns, as specified. The bill would require the Secretary of State to make the redacted copies of the tax returns public at the time the Secretary of State issues the certified list of candidates for the election. The bill would require the Secretary of State to continuously post the tax returns until the official canvass is completed for the election at which a candidate is elected to the office, except that the tax returns of a candidate who was not nominated to participate in the general election need only be posted until the official canvass for the direct primary election is completed. The bill would require the Secretary of State to retain paper copies of the submitted tax returns until the completion of the official canvass of the election at which a candidate is elected to the office. The bill would exclude transcripts from the Internal Revenue Service and accountant notes from the definition of income tax return for these purposes.

Existing law prohibits the name of a candidate for Governor from being printed on the ballot of the direct primary election unless the candidate, at least 88 days before the direct primary election, files with the Secretary of State 2 copies of every income tax return, as defined, the candidate filed with the Internal Revenue Service in the 5 most recent taxable years. Existing law requires the candidate to redact specified information from one copy of each submitted return, and authorizes the candidate to redact additional information as specified. Existing law requires the Secretary of State, within 5 days of receipt, to make the redacted versions of the candidates tax returns available to the public on the Secretary of States internet website, and to continuously post the returns until the official canvass for the direct primary election is completed. Existing law requires the Secretary of State to retain the paper copies of the submitted tax returns until the completion of the official canvass of the ensuing general election.

This bill would extend these requirements to general elections and recall elections in addition to direct primary elections. The bill would require and authorize redaction of additional information on the returns, as specified. The bill would require the Secretary of State to make the redacted copies of the tax returns public at the time the Secretary of State issues the certified list of candidates for the direct primary election. The bill would require the Secretary of State to continuously post the tax returns until the official canvass is completed for the general election at which a candidate is elected to the office, except that the tax returns of a candidate who was not nominated to participate in the general election need only be posted until the official canvass for the direct primary election is completed. The bill would require the Secretary of State to retain paper copies of the submitted tax returns until the completion of the official canvass of the election at which a candidate is elected to the office. The bill would exclude transcripts from the Internal Revenue Service and accountant notes from the definition of income tax return for these purposes.

Existing law prohibits the name of a candidate for Governor from being printed on the ballot of the direct primary election unless the candidate, at least 88 days before the direct primary election, files with the Secretary of State 2 copies of every income tax return, as defined, the candidate filed with the Internal Revenue Service in the 5 most recent taxable years. Existing law requires the candidate to redact specified information from one copy of each submitted return, and authorizes the candidate to redact additional information as specified. Existing law requires the Secretary of State, within 5 days of receipt, to make the redacted versions of the candidates tax returns available to the public on the Secretary of States internet website, and to continuously post the returns until the official canvass for the direct primary election is completed.

This bill instead would require a candidate for Governor to submit a single redacted copy of the tax returns, and would require and authorize redaction of additional information on the returns, as specified. The bill would require the Secretary of State to make the redacted copies of the tax returns public at the time the Secretary of State issues the certified list of candidates for the direct primary election. The bill would require the Secretary of State to continuously post the tax returns until the official canvass is completed for the general election at which a candidate is elected to the office, except that the tax returns of a candidate who was not nominated to participate in the general election need only be posted until the official canvas canvass for the direct primary election is completed. The bill would exclude transcripts from the Internal Revenue Service and accountant notes from the definition of income tax return for these purposes.

Existing law prohibits the name of a candidate for Governor from being printed on the ballot of the direct primary election unless the candidate, at least 88 days before the direct primary election, files with the Secretary of State 2 copies of every income tax return, as defined, the candidate filed with the Internal Revenue Service in the 5 most recent taxable years. Existing law requires the candidate to redact specified information from one copy of each submitted return, and authorizes the candidate to redact additional information as specified. Existing law requires the Secretary of State, within 5 days of receipt, to make the redacted versions of the candidates tax returns available to the public on the Secretary of States internet website, and to continuously post the returns until the official canvass for the direct primary election is completed.

This bill instead would require a candidate for Governor to submit a single redacted copy of the tax returns, and would require and authorize redaction of additional information on the returns, as specified. The bill would require the Secretary of State to make the tax returns public at the time the Secretary of State issues the certified list of candidates for the direct primary election. The bill would require the Secretary of State to continuously post the tax returns until the official canvass is completed for the general election at which a candidate is elected to the office, except that the tax returns of a candidate who was not nominated to participate in the general election need only be posted until the official canvas for the direct primary election is completed. The bill would exclude transcripts from the Internal Revenue Service and accountant notes from the definition of income tax return for these purposes.

 UNFINISHED BUSINESS  

Bill No: SB 658

Author: McGuire (D)

Amended: 6/27/23

Vote: 21

SENATE ELECTIONS & C.A. COMMITTEE: 7-0, 3/21/23

AYES: Glazer, Nguyen, Allen, McGuire, Menjivar, Newman, Umberg

SENATE JUDICIARY COMMITTEE: 9-0, 4/11/23

AYES: Umberg, Wilk, Allen, Ashby, Laird, McGuire, Min, Niello, Wiener

NO VOTE RECORDED: Durazo, Stern

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SENATE FLOOR: 40-0, 5/31/23

AYES: Allen, Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

ASSEMBLY FLOOR: 79-0, 8/31/23 (Consent) - See last page for vote

SUBJECT: Nominations: tax return disclosures: candidates for Governor

SOURCE: Author

DIGEST:

This bill makes various changes to statutory guidelines for submitting and disclosing a gubernatorial candidate’s income tax returns.

Assembly Amendments

provide language applicable to gubernatorial recall elections and make other technical and clarifying changes.

ANALYSIS:

Existing law:

1. Prohibits the name of a candidate for Governor from being printed on the ballot of the direct primary election unless, at least 88 days before the direct primary election, the candidate files with the Secretary of State (SOS) two copies of every income tax return, as defined, the candidate filed with the Internal Revenue Service (IRS) in the five most recent taxable years, in accordance with specified procedures, with an exception for any year in which the candidate was not required to file and income tax return.
2. Requires the candidate to redact specified information from one copy of each submitted return, and authorizes the candidate to redact additional information, as specified.
3. Requires the SOS to review the redacted copy of each tax return submitted by the candidate to ensure that the redactions comply with existing law. Requires the SOS to notify a candidate for Governor of any deficiencies in their tax return submissions if the SOS determines that the candidate has redacted information other than that required under existing law. Requires a candidate to submit corrected hard copies of the tax return no later than 5 p.m. on the 78th day before the direct primary election. Provides that a candidate is not qualified to appear on the direct primary ballot if the corrected copies are not timely submitted.
4. Requires the SOS, within five days of receipt, to make the redacted versions of the candidate’s tax returns available to the public on the SOS’s internet website, and to post continuously the returns until the official canvass for the direct primary election is completed.

This bill:

1. Expands provisions of existing law that require a candidate for Governor at a primary election to provide copies of their income tax returns to the SOS in order to appear on the ballot so that those provisions apply to candidates for Governor at a general or recall election. Requires two copies of each tax return to be submitted to the SOS no later than 5 p.m. on the 88th day prior to a primary or general election, or in the case of a recall election, no later than 5 p.m. on the 60th day before a recall election.
2. Clarifies that tax returns submitted without redactions are not subject to public disclosure.
3. Clarifies the definition of “income tax return,” and provides that it does not include transcripts from the IRS nor accountant notes.
4. Expands the list of information required to be redacted from the tax returns submitted to the SOS to include bank account numbers and routing numbers, and IRS personal identification number (PIN).
5. Expands the list of information a candidate for Governor is permitted to redact from their tax returns to include the accountant’s tax identification number and contact information, and the candidate’s client number.
6. Requires a candidate for Governor, in the case of a recall election, to submit corrected tax returns, if necessary, no later than 5 p.m. on the 57th day before a recall election.
7. Deletes provisions of existing law that require the SOS to post redacted tax return copies within five days of receipt, and instead requires the SOS to post the redacted tax returns at the time the SOS issues the certified list of candidates for the direct primary election.
8. Requires the redacted tax returns of candidates for Governor who were nominated to participate in the general election to remain posted on the SOS’s website until the completion of the official canvass of the general election.
9. Makes other technical and conforming changes.

Background

Tax Return Disclosure Requirements. In 2019, the Legislature approved and Governor Newsom signed SB 27 (McGuire, Chapter 121, Statutes of 2019) which required a candidate for Governor, as a precondition for appearing on a California primary election ballot, to file copies of their income tax returns with the SOS. SB 27 required a candidate for Governor to submit to the SOS two copies of each tax return filed with the IRS in the five most recent taxable years, as specified. One copy of each tax return was required to be identical to the version submitted to the IRS, without redactions, and the second copy of each tax return had to be redacted in accordance with existing law. SB 27 similarly required candidates for United States President to file copies of their income tax returns as a precondition for appearing on the primary election ballot in California, but the California Supreme Court directed the SOS to refrain from enforcing those provisions if they would keep the name of a recognized candidate for President off of the ballot, as specified. (Patterson v. Padilla (2019) 8 Cal. 5th 220.)

According to the SOS’s Office, during the process of implementing the provisions of SB 27, and subsequent legal challenges and rulings pertaining to the September 14, 2021 gubernatorial recall election, various implementation issues were discovered. In order to address these concerns before candidate filing for the June 7, 2022 statewide gubernatorial primary election, the SOS requested certain statutory changes be made. SB 35 (Umberg, Chapter 318, Statutes 2021) extended the deadline for a candidate for Governor to submit tax returns to the SOS and aligned the submission of those documents with the deadline for a candidate to file a declaration of candidacy and nomination papers.

SB 35 also modified the procedure that applies when a candidate improperly redacts copies of tax returns that are provided to the SOS. Instead of requiring the SOS to prepare a properly-redacted copy of the tax returns as required in certain situations under existing law, SB 35 required the SOS to notify a candidate for Governor of any deficiencies in their tax return submissions, as specified, and requires a candidate to submit corrected hard copies of the tax return no later than 5 p.m. on the 78th day before the direct primary election. SB 35 further clarified that a candidate is not qualified to appear on the direct primary ballot if the corrected copies are not timely submitted.

Comments

1. Author’s statement. According to the author, transparency is a non-partisan issue and it is why we advanced the original bill, SB 27.  In 2019, SB 27 established the framework for Governor candidates in the state of California to make public their income tax returns as a provision for inclusion on the primary election ballot. The reason for this, as I think we all believe, is that California voters should be made aware of potential conflicts of interest, domestic and international business dealings, financial status, as well as charitable donations. 

SB 658 provides minor cleanup to the elections code to simplify and improve the process for Governor candidates to submit their tax returns.

Californians believe that transparency is vital to ensure the integrity of our electoral system. SB 658 will assist in continuing to ensure the system remains transparent, fair, and accountable to the people of our state. 

1. Candidate Concern. Existing law shifted responsibility from the SOS to the candidate for fixing any errors. This bill may not provide sufficient time for the SOS to complete their review and allow the candidate time to fix any problems. For example, in a gubernatorial primary election, candidates are required to submit their tax return information by the 88th day prior to the election. If the information is submitted on the 88th day to the SOS, then the candidate has until 5 p.m. on the 78th day to submit a corrected hard copy. In the event the SOS disagrees with the original submittal or does not submit their comments in a timely fashion, the candidate may not have the time to fix the problem and resubmit the paperwork. If that happens, then the candidate may not be listed on the ballot.

Related/Prior Legislation

SB 35 (Umberg, Chapter 318, Statutes of 2021) codified minor clarifications to SB 27 by extending an existing deadline for a candidate for Governor to submit tax returns to the SOS in order to have the candidate’s name printed on the direct primary election ballot, and makes changes to the process for submitting those documents, as specified.

SB 27 (McGuire, Chapter 121, Statutes of 2019) required that all candidates for Governor release the last five years of their tax returns in order to appear on the California ballot.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Assembly Appropriations Committee, there are no state costs to the SOS.

SUPPORT: (Verified 8/31/23)

Secretary of State Shirley N. Weber, Ph.D.

OPPOSITION: (Verified 8/31/23)

None received

ASSEMBLY FLOOR: 79-0, 8/31/23

AYES: Addis, Aguiar-Curry, Alanis, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Chen, Connolly, Megan Dahle, Davies, Dixon, Essayli, Flora, Mike Fong, Vince Fong, Friedman, Gabriel, Gallagher, Garcia, Gipson, Grayson, Haney, Hart, Holden, Hoover, Irwin, Jackson, Jones-Sawyer, Kalra, Lackey, Lee, Low, Lowenthal, Maienschein, Mathis, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Jim Patterson, Joe Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Rendon, Reyes, Luz Rivas, Rodriguez, Blanca Rubio, Sanchez, Santiago, Schiavo, Soria, Ta, Ting, Valencia, Villapudua, Waldron, Wallis, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert Rivas

NO VOTE RECORDED: McCarty

Prepared by: Scott Matsumoto / E. & C.A. / (916) 651-4106

8/31/23 16:18:09

**** END ****

Date of Hearing: August 23, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

SBPCA Bill Id:SB 658

Author:(McGuire) – As Amended Ver:June 27, 2023

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill modifies how the Secretary of State (SOS) must make the income tax returns of gubernatorial candidates available to the public and extends the disclosure requirements to gubernatorial recall elections.

Specifically, this bill:

1. Extends the gubernatorial tax return disclosure requirement to general elections and recall elections, in addition to primary elections.
2. Requires the candidate to redact additional information on their tax returns and excludes Internal Revenue Service (IRS) transcripts and accountant notes from disclosure.
3. Requires the SOS to make the redacted tax return copies public at the time the SOS issues the certified list of candidates for the election, instead of within five days of receipt of the return, and continuously post the copies online until the official canvass is completed for the election, instead of until completion of the election.

FISCAL EFFECT:

No state costs to the SOS.

COMMENTS:

1. Purpose. According to the author, this bill will “improve the process for Governor candidates to submit their tax returns” so voters are “made aware of potential conflicts of interest, domestic and international business dealings, financial status, as well as charitable contributions.” This bill is supported by SOS Shirley N. Weber.
2. Tax Return Disclosure Requirements. SB 27 (McGuire), Chapter 121, Statutes of 2019, required a candidate for governor, as a condition for appearing on the state primary election ballot, to file with the SOS copies of their federal income tax returns from the five most recent taxable years. SB 27 also applied to candidates for United States president, but the California Supreme Court directed the SOS to refrain from enforcing such provisions if the requirement would keep the name of a recognized presidential candidate off the ballot. According to the SOS, the implementation process of SB 27 and subsequent legal challenges during the 2021 gubernatorial recall election revealed how existing law could be improved. SB 35 (Umberg), Chapter 318, Statutes of 2021, implemented some SOS-requested changes before the candidate filing deadline for the 2022 gubernatorial primary election. This bill further bolsters implementation of SB 27 by extending the disclosure requirement to general elections and recall elections, expanding the list of mandatory and discretionary redactions, and lengthening the time the tax returns must be made public.

Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081

Date of Hearing: July 5, 2023

ASSEMBLY COMMITTEE ON ELECTIONS

Gail Pellerin, Chair

SBPCA Bill Id:SB 658

Author:(McGuire) – As Amended Ver:June 27, 2023

SENATE VOTE: 40-0

SUBJECT: Nominations: tax return disclosures: candidates for Governor.

SUMMARY: Makes various minor modifications to the process by which candidates for Governor of California at a primary election must provide copies of their income tax returns to the Secretary of State (SOS) for public viewing in order to appear on the ballot, and makes that requirement applicable to candidates at gubernatorial recall elections. Specifically, this bill:

1. Expands provisions of existing law that require a candidate for Governor at a primary election to provide copies of their income tax returns to the SOS in order to appear on the ballot so that those provisions apply to candidates for Governor at a general or recall election. Requires two copies of each tax return to be submitted to the SOS no later than 5 p.m. on the 88th day prior to a primary or general election, or in the case of a recall election, no later than 5 p.m. on the 60th day before a recall election.
2. Clarifies that tax returns submitted without redactions are not subject to public disclosure.
3. Clarifies the definition of “income tax return,” and provides that it does not include transcripts from the Internal Revenue Service (IRS) nor accountant notes.
4. Expands the list of information required to be redacted from the tax returns submitted to the SOS to include bank account numbers and routing numbers, and IRS personal identification number (PIN).
5. Expands the list of information a candidate for Governor is permitted to redact from their tax returns to include the accountant’s tax identification number and contact information, and the candidate’s client number.
6. Requires a candidate for Governor, in the case of a recall election, to submit corrected tax returns, if necessary, no later than 5 p.m. on the 57th day before a recall election.
7. Deletes provisions of existing law that require the SOS to post redacted tax return copies within five days of receipt, and instead requires the SOS to post the redacted tax returns at the time the SOS issues the certified list of candidates for the direct primary election.
8. Requires the redacted tax returns of candidates for Governor who were nominated to participate in the general election to remain posted on the SOS’s website until the completion of the official canvass of the general election.
9. Makes other technical and conforming changes.

EXISTING LAW:

1. Prohibits the name of a candidate for Governor from being printed on a direct primary election ballot, unless the candidate, at least 88 days before the direct primary election, files with the SOS copies of every income tax return the candidate filed with the IRS in the five most recent taxable years, as specified. Defines the term “income tax return,” for these purposes, to mean any tax or information return, declaration of estimated tax, or claim for refund required by, or provided for or permitted under, the provisions of the Internal Revenue Code, and that is filed on behalf of, or with respect to any person, and any amendment or supplement thereto, including supporting schedules, attachments, or lists that are supplemental to, or part of, the return so filed. (Elections Code §§8901, 8902)
2. Requires a candidate for Governor to submit the following to the SOS when filing their tax returns:
   
   1. Two hard copies of each tax return. Requires one copy of each tax return to be identical to the version submitted to the IRS, without redactions, and the second copy of each tax return to be redacted, as specified.
      
   2. A written consent form, signed by the candidate, granting the SOS permission to publically release a redacted version of the candidate's tax returns. (Elections Code §§8903(a)(1), 8903(a)(2))
3. Requires the candidate to redact specified information from the redacted version of each tax return, and permits the candidate to redact certain other information from the redacted version of each tax return, as specified. (Elections Code §§8903(a)(1)(B), 8903(a)(1)(C))
4. Requires the SOS to review the redacted copy of each tax return submitted by the candidate to ensure that the redactions comply with existing law. Requires the candidate, if the SOS determines that the candidate has redacted information other than that required under existing law, to prepare and submit a corrected version of the tax return no later than 5 p.m. on the 78th day prior to the direct primary election. (Elections Code §8903(b))
5. Requires the SOS, within five days of receipt of a candidate’s tax returns, to make the redacted versions of the tax returns available to the public on the SOS’s internet website. (Elections Code §8903(c))
6. Requires the public versions of the tax returns to be continuously posted until the official canvass for the direct primary election is completed, and requires the SOS, upon completion of the official canvass, to remove the public versions of the tax returns, as specified. (Elections Code §8903(c))
7. Requires the SOS, at least 68 days before the direct primary election, to transmit to each county elections official a certified list of candidates who are eligible to be voted for in their county at that election. (Elections Code §8120)

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Rule 28.8 negligible state costs.

COMMENTS:

1. Purpose of the Bill: According to the author:

Transparency is a non-partisan issue and it is why we advanced the original bill, SB 27. In 2019, SB 27 established the framework for Governor candidates in the state of California to make public their income tax returns as a provision for inclusion on the primary election ballot. The reason for this, as I think we all believe, is that California voters should be made aware of potential conflicts of interest, domestic and international business dealings, financial status, as well as charitable donations.

SB 658 provides minor cleanup to the elections code to simplify and improve the process for Governor candidates to submit their tax returns.

Californians believe that transparency is vital to ensure the integrity of our electoral system. SB 658 will assist in continuing to ensure the system remains transparent, fair, and accountable to the people of our state.

1. Secretary of State, Tax Return Disclosure Requirements, & Previous Legislation: SB 27 (McGuire), Chapter 121, Statutes of 2019, requires a candidate for Governor, as a precondition for appearing on a California primary election ballot, to file copies of their income tax returns with the SOS. Specifically, SB 27 requires a candidate for Governor to submit to the SOS two copies of each tax return filed with the IRS in the five most recent taxable years, as specified. The bill requires one copy of each tax return to be identical to the version submitted to the IRS, without redactions, and the second copy of each tax return to be redacted, as specified. SB 27 similarly required candidates for United States President to file copies of their income tax returns as a precondition for appearing on the primary election ballot in California, but the California Supreme Court directed the SOS to refrain from enforcing those provisions if they would keep the name of a recognized candidate for President off of the ballot. (Patterson v. Padilla (2019) 8 Cal. 5th 220.)

According to the SOS’s office, during the process of implementing the provisions of SB 27, and subsequent legal challenges and rulings pertaining to the September 14, 2021, gubernatorial recall election, various implementation issues were discovered. In order to address these concerns before candidate filing for the June 7, 2022, statewide gubernatorial primary election, the SOS requested statutory changes. Accordingly, SB 35 (Umberg), Chapter 318, Statutes of 2021, extended the deadline for a candidate for Governor to submit tax returns to the SOS to have the candidate’s name printed on the direct primary ballot, from 98 days before the direct primary election to 88 days before the direct primary election, and aligned the submission of those documents with the deadline for a candidate to file a declaration of candidacy and nomination papers.

Additionally, SB 35 modified the procedure that applies when a candidate improperly redacts tax returns that are provided to the SOS, requires the SOS to notify a candidate for Governor of any deficiencies in their tax return submissions, as specified, and requires a candidate to submit corrected copies of their tax return no later than 5 p.m. on the 78th day before the direct primary election. SB 35 further clarified that a candidate is not qualified to appear on the direct primary ballot if the corrected copies are not timely submitted.

This bill makes further improvements to the process for a candidate for Governor to submit their tax returns. Notably, this bill requires tax return disclosure requirements to be applicable to general elections and recall elections, expands the list of mandatory and discretionary redactions, and requires the tax return to be made public at the time the SOS issues the certified list of candidates that will appear on the ballot.

1. Arguments in Support: The sponsor of this bill, Secretary of State Shirley N. Weber, Ph.D., writes:

Senate Bill 658 aims to remove any possible confusion about statutory policies and timelines that apply to disclosure of income tax records for candidates who seek the highest elective office in our state. Specifically, SB 658 would ensure uniformity and clarify [] the definition of "income tax return." This term is not currently defined within the Elections Code Chapter that sets forth the guidelines for preparing and submitting required tax returns to the Secretary of State (SOS). Therefore, SB 658 would insert the existing statutory definition of tax return into the appropriate code sections and further proscribe that candidates are not required to disclose certain types of tax documents and accountant notes.

ln addition, SB 658 would make related technical changes to statute. The measure would remove a requirement for submitting a duplicate copy of income tax returns, specify that the deadline for submitting the form to the SOS is 5 p.m. on the 88th day before the election, and permits candidates to redact certain personal identifying information. SB 658 also clearly establishes the timeframe during which tax records are publicly available to voters and members of the public.

REGISTERED SUPPORT / OPPOSITION:

Support

Secretary of State Shirley N. Weber, Ph.D. (Sponsor)

Opposition

None on file.

Analysis Prepared by: Nichole Becker / ELECTIONS / (916) 319-2094

 THIRD READING  

Bill No: SB 658

Author: McGuire (D)

Amended: 4/13/23

Vote: 21

SENATE ELECTIONS & C.A. COMMITTEE: 7-0, 3/21/23

AYES: Glazer, Nguyen, Allen, McGuire, Menjivar, Newman, Umberg

SENATE JUDICIARY COMMITTEE: 9-0, 4/11/23

AYES: Umberg, Wilk, Allen, Ashby, Laird, McGuire, Min, Niello, Wiener

NO VOTE RECORDED: Durazo, Stern

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SUBJECT: Nominations: tax return disclosures: candidates for Governor

SOURCE: Author

DIGEST:

This bill makes simplifying and clarifying changes to statutory guidelines for submitting and disclosing a gubernatorial candidate’s income tax returns.

ANALYSIS:

Existing law:

1. Prohibits the name of a candidate for Governor from being printed on the ballot of the direct primary election unless, at least 88 days before the direct primary election, the candidate files with the Secretary of State (SOS) two copies of every income tax return, as defined, the candidate filed with the Internal Revenue Service (IRS) in the five most recent taxable years, in accordance with specified procedures, with an exception for any year in which the candidate was not required to file and income tax return.
2. Requires the candidate to redact specified information from one copy of each submitted return, and authorizes the candidate to redact additional information, as specified.
3. Requires the SOS to review the redacted copy of each tax return submitted by the candidate to ensure that the redactions comply with existing law. Requires the SOS to notify a candidate for Governor of any deficiencies in their tax return submissions if the SOS determines that the candidate has redacted information other than that required under existing law. Requires a candidate to submit corrected hard copies of the tax return no later than 5 p.m. on the 78th day before the direct primary election. Provides that a candidate is not qualified to appear on the direct primary ballot if the corrected copies are not timely submitted.
4. Requires the SOS, within five days of receipt, to make the redacted versions of the candidate’s tax returns available to the public on the SOS’s internet website, and to post continuously the returns until the official canvass for the direct primary election is completed.

This bill:

1. Clarifies that one copy shall be identical to the version submitted to the IRS. Requires the second copy be identical to the version submitted to the IRS but be redacted, as specified.
2. Expands the list of mandatory redactions to include personally identifying bank account numbers, routing numbers and personal identification numbers.
3. Expands the list of discretionary redactions to include the accountant’s tax identification number and email address, as well as the candidate’s client number.
4. Requires the tax returns be provided to the SOS in hard-copy form, and clarifies that the deadline for submitting the form to the SOS is 5 p.m. on the 88th day before the election.
5. Clarifies the definition of “income tax return” to exclude transcripts from the IRS and accountant notes.
6. Requires the SOS to make the tax returns public at the time the SOS issues the certified list of candidates for the direct primary election.
7. Requires the SOS to post the tax returns continuously until the official canvas is completed for the general election at which a candidate is elected to the office. Specifies that the tax returns of a candidate not nominated to participate in the general election only need to be posted until the official canvas for the direct primary election is completed.

Background

Tax Return Disclosure Requirements. In 2019, the Legislature approved and Governor Newsom signed SB 27 (McGuire, Chapter 121, Statutes of 2019) which required a candidate for Governor, as a precondition for appearing on a California primary election ballot, to file copies of their income tax returns with the SOS. SB 27 required a candidate for Governor to submit to the SOS two copies of each tax return filed with the IRS in the five most recent taxable years, as specified. One copy of each tax return was required to be identical to the version submitted to the IRS, without redactions, and the second copy of each tax return had to be redacted in accordance with existing law. SB 27 similarly required candidates for United States President to file copies of their income tax returns as a precondition for appearing on the primary election ballot in California, but the California Supreme Court directed the SOS to refrain from enforcing those provisions if they would keep the name of a recognized candidate for President off of the ballot, as specified. (Patterson v. Padilla (2019) 8 Cal. 5th 220.)

According to the SOS’s Office, during the process of implementing the provisions of SB 27, and subsequent legal challenges and rulings pertaining to the September 14, 2021 gubernatorial recall election, various implementation issues were discovered. In order to address these concerns before candidate filing for the June 7, 2022 statewide gubernatorial primary election, the SOS requested certain statutory changes be made. SB 35 (Umberg, Chapter 318, Statutes 2021) extended the deadline for a candidate for Governor to submit tax returns to the SOS and aligned the submission of those documents with the deadline for a candidate to file a declaration of candidacy and nomination papers.

SB 35 also modified the procedure that applies when a candidate improperly redacts copies of tax returns that are provided to the SOS. Instead of requiring the SOS to prepare a properly-redacted copy of the tax returns as required in certain situations under existing law, SB 35 required the SOS to notify a candidate for Governor of any deficiencies in their tax return submissions, as specified, and requires a candidate to submit corrected hard copies of the tax return no later than 5 p.m. on the 78th day before the direct primary election. SB 35 further clarified that a candidate is not qualified to appear on the direct primary ballot if the corrected copies are not timely submitted.

Comments

1. Author’s statement. According to the author, transparency is a non-partisan issue and it is why we advanced the original bill, SB 27.  In 2019, SB 27 established the framework for Governor candidates in the state of California to make public their income tax returns as a provision for inclusion on the primary election ballot. The reason for this, as I think we all believe, is that California voters should be made aware of potential conflicts of interest, domestic and international business dealings, financial status, as well as charitable donations. 

SB 658 provides minor cleanup to the elections code to simplify and improve the process for Governor candidates to submit their tax returns.

Californians believe that transparency is vital to ensure the integrity of our electoral system. SB 658 will assist in continuing to ensure the system remains transparent, fair, and accountable to the people of our state. 

1. Candidate Concern. Existing law shifted responsibility from the SOS to the candidate for fixing any errors, this bill may not provide sufficient time between the 5 p.m. on the 88th day and the 78th day for the SOS to complete their review and allow the candidate time to fix any problems. In the event the SOS disagrees with the submittal or does not submit their comments in a timely fashion, the candidate may not have the time to fix the problem and resubmit the paperwork. If that happens, then the candidate may not be listed on the ballot.
2. Special Election Application. The 2021 California gubernatorial recall election was a special election that concluded on September 14, 2021. The second question of the recall gave voters the option to select a replacement candidate. Had the recall been successful, the replacement candidate with the most votes would have assumed the office. Issues arose from one replacement candidate claiming that current law allowed the SOS to find deficiencies in tax returns which would result in removal from the ballot. Under this bill, it is unknown whether special elections involving the Office of Governor, such as gubernatorial recall elections, require tax return submissions.

Related/Prior Legislation

SB 35 (Umberg, Chapter 318, Statutes of 2021) codified minor clarifications to SB 27 by extending an existing deadline for a candidate for Governor to submit tax returns to the SOS in order to have the candidate’s name printed on the direct primary election ballot, and makes changes to the process for submitting those documents, as specified.

SB 27 (McGuire, Chapter 121, Statutes of 2019) required that all candidates for Governor release the last five years of their tax returns in order to appear on the California ballot.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 4/25/23)

Secretary of State Shirley N. Weber, Ph.D.

OPPOSITION: (Verified 4/25/23)

None received

Prepared by: Karen French / E. & C.A. / (916) 651-4106

4/26/23 15:11:55

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SENATE JUDICIARY COMMITTEE

Senator Thomas Umberg, Chair

2023-2024 Regular Session

Bill No: SB 658 (Author:McGuire)

Version: February 16, 2023

Hearing Date: April 11, 2023

Fiscal: Yes

Urgency: No

Consultant: TSG

SUBJECT

Nominations: tax return disclosures: candidates for Governor

DIGEST

This bill clarifies and makes minor modifications to the process by which candidates for Governor of California must provide copies of their income tax returns to the Secretary of State for public viewing in order to appear on the primary ballot.

EXECUTIVE SUMMARY

As part of a 2019 effort to promote greater electoral transparency, California enacted a new law requiring candidates for the office of Governor to submit copies of their tax returns for the previous five years to the office of the Secretary of State before their name can appear on the primary ballot. The law then directs the Secretary of State’s office to publish those tax returns on its website for public review and inspection. Experience over the ensuing four years has demonstrated the need for minor revisions to those procedures in order to further clarify and streamline the process. This bill would accomplish those revisions. In summary, those revisions include: (1) clarifying that accountant’s notes and transcripts from the Internal Revenue Service do not have to be included; (2) adding bank account numbers, routing numbers, and PINs to the material that must be redacted from the return; (3) authorizing the redaction of the accountant’s tax identification number, the client number, and the accountant’s email address; (4) eliminating the requirement for a candidate to submit one redacted and one unredacted copy of their returns; (5) changing the time for public posting of the tax returns to coincide with certification of candidate names for the ballot; and (6) enabling the Secretary of State’s office to take down the tax returns of gubernatorial candidates once they have been eliminated from contention in the general election.

The bill is author-sponsored. Support comes from California Secretary of State Shirley Weber. There is no opposition on file. The bill passed out of the Senate Elections and Constitutional Amendments Committee by a vote of 7-0. If the bill passes out of this Committee, it will next be heard in the Senate Appropriations Committee.

PROPOSED CHANGES TO THE LAW

Existing law:

1. Prohibits the name of a candidate for Governor from being printed on a direct primary election ballot, unless the candidate, at least 88 days before the direct primary election, files with the Secretary of State copies of every income tax return the candidate filed with the Internal Revenue Service in the five most recent taxable years, in accordance with specified procedures, with an exception for any year in which the candidate was not required to file an income tax return. (Elec. Code § 8902(a) and (c).)
2. Specifies that if the candidate has not filed the candidate’s income tax return with the Internal Revenue Service for the tax year immediately preceding the primary election, the candidate shall submit a copy of the income tax return to the Secretary of State within five days of filing the return with the Internal Revenue Service. (Elec. Code § 8902(b).)

This bill:

1. Modifies what constitutes the “tax return” that gubernatorial candidates must submit to the Secretary of State to exclude transcripts from the Internal Revenue Service and accountant notes.
2. Requires gubernatorial candidates to submit just one redacted copy of their tax return to the Secretary of State instead of two copies, one redacted and one unredacted.
3. Requires gubernatorial candidates to redact all of the following from the copy of their tax returns that they submit to the Secretary of State:

a) bank account numbers;

b) routing numbers; and

c) Internal Revenue Service personal identification number (PIN) from the copy of their tax returns that they submit to the Secretary of State.

4) Authorizes gubernatorial candidates to redact all of the following from the copy of their tax returns that they submit to the Secretary of State:

a) accountant tax identification number;

b) client number; and

c) accountant email address.

5) Aligns the date on which the Secretary of State is to post gubernatorial candidates’ tax returns with the date for the Secretary of State to certify the names that are to appear on the gubernatorial primary ballot.

6) Authorizes the Secretary of State to remove from publication on its website, at the conclusion of the gubernatorial primary election, the tax returns of those candidates who did not progress to the general election ballot.

COMMENTS

1. Background on California’s candidate tax return transparency efforts

In 2016, Donald Trump became the first presidential candidate since Watergate to refuse to make his tax returns available to the public. In response, the California Legislature sought to establish new procedures that would obligate presidential candidates to submit the last five years of their tax returns to the Secretary of State for publication in order to appear on the state’s primary ballot. (SB 149, McGuire, 2017.) Late during consideration of that measure, the Legislature opted to extend the same requirement to gubernatorial candidates as well.

Initially, Governor Jerry Brown vetoed the bill. The Legislature resurrected the idea in 2019, however, and it found a more receptive audience in Governor Gavin Newsom. (SB 27, Ch. 121, Stats. 2019.) Shortly after it was enacted, however, the new law was challenged in court. Ultimately, the California Supreme Court determined that the California Constitution is the exclusive source of instructions for how the Secretary of State is to determine whose names to include on the presidential primary ballot. (Patterson v. Padilla (2019) 8 Cal. 5th 220.) Accordingly, the state high court struck down the part of the bill requiring the submission and publication of presidential candidates’ tax returns. Only the equivalent requirement for gubernatorial candidates remained.

2. Summary of proposed revisions to the gubernatorial candidate tax return submission and publication procedure

The Secretary of State’s office has now had an opportunity to road test the law requiring submission and publication of gubernatorial candidate tax returns. Based on that experience, it is apparent that some minor modifications would be helpful. This bill provides them. It carries the support of the current Secretary of State.

The proposed revisions and the reasoning behind them may be summarized as follows:

a. Clarifying the precise meaning of tax return

The existing law states that gubernatorial candidates must submit their tax returns for the last five years. It defines “tax return” by reference to another statute. The referenced statute says that a “tax return” is “any tax or information return, declaration of estimated tax, or claim for refund required by, or provided for or permitted under, the provisions of the Internal Revenue Code, and that is filed on behalf of, or with respect to any person, and any amendment or supplement thereto, including supporting schedules, attachments, or lists that are supplemental to, or part of, the return so filed. (Elec. Code § 6882.) Such a broad definition raises the question of whether candidates must include accountant’s notes and transcripts from the Internal Revenue Services (IRS) in their submission to the Secretary of State. This goes beyond the core components of a tax return. This bill clarifies that accountant’s notes and IRS transcripts need not be included.

b. Expanding the list of mandatory redactions

Existing law requires gubernatorial candidates to redact certain information from the tax returns they submit to the Secretary of State’s office. These mandatory redactions are meant to protect the candidate’s privacy and exclude from public view information that has little or no bearing on the candidates’ fitness for office. Existing law leaves out a few items that fall into this category, however; this bill adds them to the mandatory redaction list. Those items are: bank account numbers, routing numbers, and personal identification numbers (PINs).

c. Expanding the discretionary redactions permitted

Relatedly, existing law allows gubernatorial candidates the discretion to redact some other information that, while less private for the candidate, still has some degree of personal privacy associated with it and does not provide significant information about the candidate’s fitness for office. This bill expands that discretionary redaction list to include the accountant’s tax identification number and email address, as well as the candidate’s client number.

d. Reducing the number of copies that the candidates must submit

The current process for submission and posting of gubernatorial candidate tax returns requires the candidates to submit two copies of their returns: one redacted and one unredacted. The purpose was to provide a mechanism by which the Secretary of State could verify that candidates were redacting only the information that they are allowed to redact by law. The dual submission leaves personal and private information in the hands of the Secretary of State, however, and also adds to the overall bureaucracy of the process. Accordingly, this bill would simplify the process and only require candidates to submit the redacted version of their returns.

While this slightly simplified approach is attractive in some ways, it removes an important safeguard against the possibility that gubernatorial candidates could game the system and thereby hide potentially relevant financial information from public view. If a candidate only has to submit a redacted copy of their tax return, there is no way for the Secretary of State’s office to verify that the redaction was appropriate. A candidate whose tax return shows income received from Satan & His Minions, Inc., for example, could redact this information and, if questioned, claim that the redacted information is among the private information that the law requires or allows candidates to redact. There would be no way for anyone to be any the wiser. With this problem in mind, the author proposes to offer amendments in Committee that restore the existing procedure in which candidates must submit one unredacted copy of their tax return to the Secretary of State together with the redacted copy. The Secretary of State would then have a basis for verifying that the candidate’s redactions are appropriate and could request revised redactions if appropriate. Consistent with existing law, the Secretary of State’s office would destroy the unredacted hard copy of each tax return as soon as practicable upon the completion of the general election, unless ordered to preserve them by a court or a state or federal agency.

e. Aligning the timing of the tax return publication with the certification of which candidates will appear on the ballot

The Secretary of State is charged with certifying what names will appear on the gubernatorial primary ballot. The tax return submission process requires the Secretary of State not to certify candidate’s names to appear on the primary ballot unless they have complied with the tax return submission process. Under current law, however, the timing for certification and for posting of the tax returns is not necessarily aligned. This bill synchronizes the two.

f. Eliminating the need to keep tax returns posted for candidates who have not advance to the general election

Existing law specifies that the Secretary of State is to leave the tax returns of all gubernatorial candidates posted on its website until the general election has concluded. This is both unnecessary and potentially confusing to voters, because it means that candidates who have been eliminated in the primary still have their names and tax returns posted on the Secretary of State’s website. To address this issue, this bill directs the Secretary of State, at the conclusion of the primary election, to remove the tax returns of any candidates who have not progressed to the general election.

3. Proposed amendments

To address some of the issues set forth in the comments above, the author proposes to offer amendments in Committee that would:

• restore the existing requirement that gubernatorial candidates submit both a redacted and an unredacted copy of their tax returns.

A mockup of the specific proposed amendments is attached to this analysis.

4. Arguments in support of the bill

According to the author:

Transparency is a non-partisan issue and it is why we advanced the original bill, SB 27. In 2019, SB 27 established the framework for Governor candidates in the state of California to make public their income tax returns as a provision for inclusion on the primary election ballot. The reason for this, as I think we all believe, is that California voters should be made aware of potential conflicts of interest, domestic and international business dealings, financial status, as well as charitable donations. […] Californians believe that transparency is vital to ensure the integrity of our electoral system. SB 658 will assist in continuing to ensure the system remains transparent, fair, and accountable to the people of our state.

In support, California Secretary of State Shirley Weber writes:

Senate Bill 658 aims to remove any possible confusion about statutory policies and timelines that apply to disclosure of income tax records for candidates who seek the highest elective office in our state. Specifically, SB 658 would ensure uniformity and clarity of the definition of “income tax return.” This term is not currently defined within the Election Code Chapter that sets forth the guidelines for preparing and submitting required tax returns to the Secretary of State (SOS). Therefore, SB 658 would insert the existing statutory definition of tax return into the appropriate code sections and further proscribe that candidates are not required to disclose certain types of tax documents and accountant notes.

In addition, SB 658 would make related technical changes to statute. The measure would remove a requirement for submitting a duplicated copy of income tax returns, specific that the deadline for submitting the form to the SOS is 5 pm on the 88^th day before the election, and permits candidates to redact certain personal identifying information. SB 68 also clearly established the timeframe during which tax records are publicly available to voters and members of the public.

SUPPORT

Shirley Weber, California Secretary of State

OPPOSITION

None known

RELATED LEGISLATION

Pending Legislation: None known.

Prior Legislation:

SB 27 (McGuire, Ch. 121, Stats. 2019) required candidates for President of the United States and for Governor of California to submit copies of their federal income tax returns for the five most recent taxable years to the California Secretary of State’s Office (SOS) as a precondition for having their names appear on a California primary election ballot. SB 27 instructed the SOS, after redacting the returns for privacy purposes, to make the returns available to the public through its website.

SB 35 (Umberg, Ch. 318, Stats. 2021), among other things, extended an existing deadline for a candidate for Governor to submit tax returns to the Secretary of State in order to have the candidate’s name printed on the direct primary election ballot, and made changes to the process for submitting those documents, as specified.

SB 505 (Umberg, Ch. 149, Stats. 2019) clarified the criteria that a candidate must meet in order to appear on the California presidential primary ballot.

SB 149 (McGuire, 2017) was nearly identical to SB 27, above. Then Governor Brown vetoed SB 149, writing: “[w]hile I recognize the political attractiveness – even the merits – of getting President Trump’s tax returns, I worry about the political perils of individual states seeking to regulate presidential elections in this manner. First, it may not be constitutional. Second, it sets a “slippery slope” precedent. Today we require tax returns, but what would be next? Five years of health records? A certified birth certificate? High school report cards? And will these requirements vary depending on which political party is in power? A qualified candidate’s ability to appear on the ballot is fundamental to our democratic system. For that reason, I hesitate to start down a road that well might lead to an ever escalating set of differing state requirements for presidential candidates.”

SR 23 (Wiener, 2017) urged President Trump to release his tax returns as part of its broader call for an independent investigation into connections between Russia and Trump’s presidential campaign and administration.

PRIOR VOTES:

Senate Elections and Constitutional Amendments Committee (Ayes 7, Noes 0)

**************

Amended Mock-up for 2023-2024 SB-658 (McGuire (S))

Mock-up based on Version Number 99 - Introduced 2/16/23

The people of the State of California do enact as follows:

SECTION 1. Section 8901 of the Elections Code is amended to read:

8901. For the purposes of this part, “income tax return” means any tax or information return, declaration of estimated tax, or claim for refund required by, or provided for or permitted under, the provisions of the Internal Revenue Code, and that is filed on behalf of, or with respect to, any person, and any amendment or supplement thereto, including supporting schedules, attachments, or lists that are supplemental to, or part of, the return so filed. For the purposes of this part, an “income tax return” does not include transcripts from the Internal Revenue Service nor accountant notes.

SEC. 2. Section 8903 of the Elections Code is amended to read:

8903. (a) The candidate shall submit the following to the Secretary of State:

(1) (A) Two copies of each tax return required by Section 8902. One copy of each tax return shall be identical to the version submitted to the Internal Revenue Service, without redactions, and shall not be subject to disclosure pursuant to this section. One copy shall be identical to the version submitted to the Internal Revenue Service but shall be redacted pursuant to this paragraph. The tax returns shall be provided to the Secretary of State in hard-copy form not later than 5 p.m. on the 88th day prior to the direct primary election.

(B) The candidate shall redact the following information from the redacted copy of each tax return:

(i) Social security numbers.

(ii) Home address.

(iii) Telephone number.

(iv) Email address.

(v) Medical information.

(vi) Bank account numbers and routing numbers.

(vii) Internal Revenue Service personal identification number (PIN).

(C) The candidate may also redact the following information from the redacted copy of each tax return:

(i) Names of dependent minors.

(ii) Employer identification number.

(iii) Business addresses.

(iv) Preparer or accountant tax identification number, client number, address, telephone number, and email address of paid tax return preparers or accountants.

(2) A written consent form, signed by the candidate, granting the Secretary of State permission to publicly release a version of the candidate’s tax returns redacted pursuant to this section. The Secretary of State shall prepare a standard consent form consistent with this paragraph.

(b) The Secretary of State shall review the redacted copy of each tax return submitted by the candidate to ensure that the redactions comply with subdivision (a). If the Secretary of State determines that the candidate has redacted information other than that permitted by subdivision (a), or failed to redact information required to be redacted by subdivision (a), the Secretary of State shall notify the candidate of any deficiencies. The candidate shall submit corrected hard copies of the tax return no later than 5:00 p.m. on the 78th day prior to the direct primary election. If the corrected hard copies are not timely submitted, the candidate shall not be qualified to have their name placed on the ballot of the direct primary election.

(c) (1) At the time the Secretary of State issues the certified list of candidates for the direct primary election in accordance with Section 8120, the Secretary of State shall make the redacted copies of the tax returns available to the public on the Secretary of State’s internet website. Except as provided in paragraph (2), the Secretary of State shall make public the redacted copies of the tax returns submitted by the candidate pursuant to subdivision (a).

(2) If the candidate is required to submit a corrected copy of a tax return pursuant to subdivision (b), the Secretary of State shall make public that corrected copy.

(3) The redacted tax returns shall be continuously posted until such time as the official canvass is completed for the general election at which a candidate is elected to the office, except that the tax returns of a candidate who participated in the direct primary election and who was not nominated to participate in the general election need only be posted until the official canvass for the direct primary election is completed.

(4) The Secretary of State shall retain the paper copies of the submitted tax returns until the completion of the official canvass of the ensuing general election. Thereafter, the paper copies of the submitted tax returns shall be destroyed as soon as practicable, unless the Secretary of State has received a court order, or a lawful written request from a state or federal governmental agency, directing the Secretary of State to preserve the submitted tax returns.

SENATE COMMITTEE ON

ELECTIONS AND CONSTITUTIONAL AMENDMENTS

Senator Steven Glazer, Chair

2023 - 2024 Regular

Bill No: 658 Hearing Date: 3/21/23

Subject:

DIGEST

This bill makes simplifying and clarifying changes to statutory guidelines for submitting and disclosing a gubernatorial candidate’s income tax returns.

ANALYSIS

Existing law:

1. Prohibits the name of a candidate for Governor from being printed on the ballot of the direct primary election unless, at least 88 days before the direct primary election, the candidate files with the Secretary of State (SOS) two copies of every income tax return, as defined, the candidate filed with the Internal Revenue Service (IRS) in the five most recent taxable years.
2. Existing law requires the candidate to redact specified information from one copy of each submitted return, and authorizes the candidate to redact additional information as specified.
3. Existing law requires the SOS, within five days of receipt, to make the redacted versions of the candidate’s tax returns available to the public on the SOS’s internet website, and to post continuously the returns until the official canvass for the direct primary election is completed.

This bill:

1. Requires a candidate for Governor to submit a single redacted copy of their tax returns. Requires and authorizes redaction of additional information on those returns, including certain personally identifying bank and IRS information.
2. Clarifies that the deadline for submitting the form to the SOS is 5 p.m. on the 88th day before the election.
3. Excludes transcripts from the IRS and accountant notes from the definition of “income tax return” for these purposes.
4. Requires the SOS to make the tax returns public at the time the SOS issues the certified list of candidates for the direct primary election.
5. Requires the SOS to post the tax returns continuously until the official canvas is completed for the general election at which a candidate is elected to the office. Specifies that the tax returns of a candidate not nominated to participate in the general election only need to be posted until the official canvas for the direct primary election is completed.

BACKGROUND

Tax Return Disclosure Requirements. In 2019, the Legislature approved and Governor Newsom signed SB 27 (McGuire), Chapter 121, Statutes of 2019, which required a candidate for Governor, as a precondition for appearing on a California primary election ballot, to file copies of their income tax returns with the SOS. SB 27 required a candidate for Governor to submit to the SOS two copies of each tax return filed with the IRS in the five most recent taxable years, as specified. One copy of each tax return was required to be identical to the version submitted to the IRS, without redactions, and the second copy of each tax return had to be redacted in accordance with existing law. SB 27 similarly required candidates for United States President to file copies of their income tax returns as a precondition for appearing on the primary election ballot in California, but the California Supreme Court directed the SOS to refrain from enforcing those provisions if they would keep the name of a recognized candidate for President off of the ballot, as specified. (Patterson v. Padilla (2019) 8 Cal. 5th 220.)

According to the SOS’s office, during the process of implementing the provisions of SB 27, and subsequent legal challenges and rulings pertaining to the September 14, 2021, gubernatorial recall election, various implementation issues were discovered. In order to address these concerns before candidate filing for the June 7, 2022, statewide gubernatorial primary election, the SOS requested certain statutory changes be made. SB 35 (Umberg), Chapter 318, Statues 2021, extended the deadline for a candidate for Governor to submit tax returns to the SOS and aligned the submission of those documents with the deadline for a candidate to file a declaration of candidacy and nomination papers.

SB 35 also modified the procedure that applies when a candidate improperly redacts copies of tax returns that are provided to the SOS. Instead of requiring the SOS to prepare a properly-redacted copy of the tax returns as required in certain situations under existing law, this bill requires the SOS to notify a candidate for Governor of any deficiencies in their tax return submissions, as specified, and requires a candidate to submit corrected hard copies of the tax return no later than 5 p.m. on the 78th day before the direct primary election. SB 35 further clarified that a candidate is not qualified to appear on the direct primary ballot if the corrected copies are not timely submitted.

COMMENTS

1. Candidate Concern. By shifting responsibility from the SOS to the candidate for fixing any errors, this bill may not provide sufficient time between the 88th day and the 78th day for the SOS to complete their review and allow the candidate time to fix any problems. In the event the SOS disagrees with the submittal or does not submit their comments in a timely fashion and the candidate cannot timely fix the problem and resubmit the paperwork, the candidate may not be listed on the ballot.
2. Special Election Application. The 2021 California gubernatorial recall election was a special election that concluded on September 14, 2021. The second question of the recall gave voters the option to select a replacement candidate. Had the recall been successful, the replacement candidate with the most votes would have assumed the office. Issues arose from one replacement candidate claiming that current law allowed the SOS to find deficiencies in tax returns which would result in removal from the ballot. Under this bill, it is unknown whether special elections involving the Office of Governor, such as gubernatorial recall elections, require tax return submissions. The committee should consider whether or not the bill provisions should be expanded to include gubernatorial special elections.
3. Argument in Support. In a letter supporting SB 658, the SOS states, in part, the following:

Senate Bill 658 aims to remove any possible confusion about statutory policies and timelines that apply to disclosure of income tax records for candidates who seek the highest elective office in our state. Specifically, SB 658 would ensure uniformity and clarify of the definition of "income tax return." This term is not currently defined within the Elections Code Chapter that sets forth the guidelines for preparing and submitting required tax returns to the SOS. Therefore, SB 658 would insert the existing statutory definition of tax return into the appropriate code sections and further proscribe that candidates are not required to disclose certain types of tax documents and accountant notes.

RELATED/PRIOR LEGISLATION

SB 27 (McGuire), Chapter 121, Statutes of 2019, required that all candidates for Governor release the last five years of their tax returns in order to appear on the California ballot.

SB 35 (Umberg), Chapter 318, Statutes of 2021, codified minor clarifications to SB 27 by extending an existing deadline for a candidate for Governor to submit tax returns to the SOS in order to have the candidate’s name printed on the direct primary election ballot, and makes changes to the process for submitting those documents, as specified.

POSITIONS

Sponsor: Secretary of State Shirley N. Weber, Ph.D.

Support: None received

Oppose: None received

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