Approved Meeting Minutes - Thursday, March 16, 2000

Thursday, March 16, 2000

The Board met at its offices at 450 N Street, Sacramento, at 9:30 a.m. with Chairman Andal, Vice Chairman Parrish, Mr. Klehs and Ms. Mandel present on behalf of Dr. Connell in accordance with Government Code Section 7.9.

ANNOUNCEMENT OF CLOSED SESSION

The Board recessed at 9:30 a.m. and reconvened immediately in closed session with Mr. Andal, Mr. Parrish, Mr. Klehs and Ms. Mandel present.

CLOSED SESSION

The Board met to discuss personnel matters and Revenue and Taxation Code 7093.5 and 50156.11 settlements.

The Board recessed at 9:31 a.m. and reconvened immediately in open session with Mr. Andal, Mr. Parrish, Mr. Klehs and Ms. Mandel present.

ANNOUNCEMENT OF ACTIONS TAKEN IN CLOSED SESSION

The Board announced the appointment of Judy Newton to Chief, Board Proceedings Division.

SPECIAL PRESENTATION

On behalf of the Board, Mr. Andal presented to E. L. Sorensen, Jr., Executive Director, a retirement resolution extending its sincere and grateful appreciation for his dedicated service to the State Board of Equalization and the State of California.

EXECUTIVE DIRECTOR'S PERFORMANCE APPRAISAL FOR JULY 1998 THROUGH DECEMBER 1999

E.L. Sorensen, Jr., Executive Director, presented Performance Appraisals for July 1998 through December 1999. A copy of the report is incorporated in these minutes by reference (Exhibit 3.1).

Mr. Chiang entered the Boardroom.

James E. Speed, Deputy Director, Sales and Use Tax Department, reported that he will be meeting with each Member during April and May to discuss performance goals.

Exhibits to these Minutes are incorporated by reference.

INVESTIGATION DIVISION OFFICE SITING

Public Comment: Rosmaire Duffy, CSEA

Mr. Sorensen reported that the Board and the California State Employees Association have reached an agreement on the siting of the Board's Investigations Division (Exhibit 3.2). The Division will be located in the Norwalk and Riverside Offices.

RETIREMENT RESOLUTIONS

Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board adopted the following resolutions (Exhibit 3.3) extending its best wishes on their respective retirements and its appreciation for their service to the Board and the State of California:

Janice Masterton, Chief, Board Proceedings Division

Gary J. Jugum, Assistant Chief Counsel, Business Taxes Section

Wayne Philpot, Supervising Tax Auditor II, Legal Division

Walter Moran, Jr., Computer Operator, Technology Services Division

Franklin M. Wilson, Senior Forest Property Appraiser,

County Property Tax Division

Jeanette Billingsly, Associate Tax Auditor, Fuel Taxes Division

Dennis Elliott Goodman, Business Taxes Administrator I, Stockton

BOARD MEETING MINUTES

Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board approved the minutes of its meetings of February 1-4, 2000.

AGENCY-LEVEL PERFORMANCE MEASURES

Mr. Sorensen presented Performance Measures for Board approval (Exhibit 3.4).

Upon motion of Mr. Klehs, seconded by Ms. Parrish and unanimously carried, Mr. Klehs, Mr. Andal, Mr. Parrish, Mr. Chiang and Ms. Mandel voting yes, the Board approved the Performance Objectives.

RESOLUTION CONFERRING POWERS ON THE EXECUTIVE DIRECTOR

Upon motion of Mr. Klehs, seconded by Mr. Parrish, and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board adopted the Resolution Conferring Powers to the Executive Director (Exhibit 3.5).

LEGISLATIVE COMMITTEE REPORT

Margaret Shedd, Legislative Counsel, recommended adoption of the Legislative Committee Report.

Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board approved the committee report. (Exhibit 3.6).

BUSINESS TAXES COMMITTEE REPORT

James Speed, Deputy Director, Sales and Use Tax Department, recommended adoption of the Business Taxes Committee Report.

Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board approved the committee report. (Exhibit 3.7).

PROPERTY TAX COMMITTEE REPORT

Richard Johnson, Deputy Director, Property Taxes Department, recommended adoption of the Property Tax Committee Report.

Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board approved the committee report. (Exhibit 3.8).

CUSTOMER SERVICES & ADMINISTRATIVE EFFICIENCY COMMITTEE

Delena Bratton, Chief, Customer and Taxpayer Services Division, recommended adoption of the Technology and Administration Committee Report.

Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board approved the committee report. (Exhibit 3.9).

ACTION ON BUSINESS TAX APPEAL HEARD MARCH 15, 2000

Upon motion of Mr. Andal and duly carried, Mr. Andal, Mr. Parrish and Mr. Chiang voting yes, Mr. Klehs and Ms. Mandel voting no, the Board directed the Appeals Section staff to draft a formal opinion in the claims of Hewlett Packard Company, SY GH 98-039144-003, 004, 89002094240; 89002094250.

CHIEF COUNSEL MATTERS - RULEMAKING

Public Comment: James Maples, Kern County Assessor

Dick Fisher, Yolo County Assessor

Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board authorized the staff to begin the process of drafting a Property Tax rule regarding confidentiality of information gathered by private appraisers contracting with county assessors by gathering information and meeting with interested parties. The Board directed the staff to prepare a report on how widespread the contract and fee problem is within the counties, how many mining/mineral appeals exist and appeals of other properties appraised by independent contractors, the disposition of these appeals, and the Board's rulemaking authority over contract appraisers.

APPEALS MATTERS

Bechtel Petroleum Operations, Inc.,
Elk Hills Naval Petroleum Reserve No. 1,
HF EF 36-019715-010, 89000911720
7-1-87 to 6-30-88, $10,780.00
HG HQ 36-043257-001, 89000917590
1992, $14,330.00
HF HQ 38-001990-010,
7-1-88 to 6-30-89, $199,750.00
HF HQ 38-001990-001, 89000929210
1986 to 1995, $895,341.00
Considered by the Board:February 23, 2000
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Action: Upon motion of Mr. Andal, seconded by Mr. Parrish and duly carried,
Mr. Andal and Mr. Parrish voting yes, Mr. Chiang voting no, Mr. Klehs not participating, and Ms. Mandel abstaining, the Board ordered that the petitions and claims for refund be granted.

Paper-Pak Products Inc., of Washington, SR AP 40-606237-010, 89000932490
7-1-93 to 6-30-96, $87,059.53
Considered by the Board:August 11, 1999
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Action: Upon motion of Mr. Klehs, seconded by Ms. Mandel and unanimously carried, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Andal not participating, the Board ordered that the petition be redetermined as recommended by Appeals.

Roger E. & Sandra J. Mantz, SR CHA 21-856052-010 through 090, OAO, SR CHA 21-666013-010 through 090, OAO, OBO, OCO, ODO, OEO
11-1-90 to 4-1-94, $296,388.68
1-1-86 to 12-31-95, $352,111.39
Considered by the Board:October 6, 1999
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Action: Upon motion of Mr. Klehs, seconded by Mr. Andal and duly carried,
Mr. Andal, Mr. Klehs and Mr. Chiang voting yes, Ms. Mandel voting no, Mr. Parrish abstaining, the Board ordered that the petition be redetermined as recommended by Appeals.

Charals Haagan, SR AB 12-722407-010, 89000051180
10-1-93 to 6-30-95, $55,045.08
Contribution Disclosures pursuant to Government Code Section 15626: No contribution disclosure forms were filed.
Action: (Motion Expunged)

FRANCHISE AND INCOME TAXES MATTERS

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed for any of the following-listed matters Richard & Madeline Clark through Cleofas P. and Amelia Sales.

Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board adopted a decision in the appeals of Richard & Madeline Clark, 98A-1056, 89002466850, Kent Lane, 98A-1023, 89002463760, Pavel Plesnik & Crystal W. Huang, 98A-1027, 89002467280, John P. & Frances M. Taylor, 98A-1019, 89002465970, Michael and Alice Ward, 98A-1066, 89002466130, modifying the action of the Franchise Tax Board.

Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board adopted a decision in the appeal of Massoud J. and Mahvash Eshaghian, 98A-0871, 89002467540, modifying the action of the Franchise Tax Board.

Ms. Mandel moved that the the Board adopt a decision in the Appeal of Wayne N. Fleischer and Rosemarie A. Fleisher, 98A-0909, 89002462350, 98A-0908, 89002462340 reversing the action of the Franchise Tax Board with regard to the innocent spouse issue. The motion was seconded by Mr. Parrish, but failed to carry, Mr. Parrish and Ms. Mandel voting yes, Mr. Andal, Mr. Klehs and Mr. Chiang voting no.

Upon motion of Mr. Chiang, seconded by Mr. Klehs and duly carried, Mr. Andal, Mr. Klehs and Mr. Chiang voting yes, Ms. Mandel voting no, Mr. Parrish abstaining, the Board adopted a decision in the appeal of Wayne N. Fleischer and Rosemarie A. Fleisher, 98A-0909, 89002462350, 98A-0908, 89002462340, sustaining the action of the Franchise Tax Board.

Upon motion of Ms. Mandel, seconded by Mr. Andal and duly carried, Mr. Andal, Mr. Parrish, Mr. Chiang and Ms. Mandel voting yes, Mr. Klehs voting no, the Board adopted a decision in the appeal of Cleofas P. and Amelia Sales, 99R-0021, 89002465620, reversing the action of the Franchise Tax Board.

APPEALS MATTERS

Upon motion of Mr. Klehs, seconded by Ms. Mandel and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board expunged the record of its earlier action in the petition of Charals Haagan, SR AB 12-722407-010, 89000051180.

Upon motion of Mr. Klehs, seconded by Ms. Mandel and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board granted the petition of Charals Haagan, SR AB 12-722407-010, 89000051180.

BUSINESS TAXES MATTERS

Contribution Disclosures Pursuant to Government Code Section 15626: No disqualifying contributions were disclosed.

Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board approved the staff recommendation with respect to the credit and cancellation (Exhibit 3.10).

APPEALS MATTERS

Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board adopted the Appeals Matters Consent Schedule dated March 16, 2000, consisting of Hearing Notices Sent - No Response and Hearing Request Withdrawn, Hearing Requests Withdrawn and Petitions for Rehearing. (Exhibit 3.11). Ms. Mandel did not participate in the vote on the petition of Old Republic National Title Insurance Co. pursuant to Government Code Section 7.9. The Board deferred consideration of the petitions of Carbon Tech, Inc., MOS Electronics Corporation, Mosel Vitelic Corporation, Victor Moulding Co., Julian's Tortilleria, Linda M. Nantelle, and Barbara A. Wallace LLC.

FRANCHISE AND INCOME TAXES MATTERS

Upon motion of Mr. Chiang, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board approved the staff recommendations with respect to Franchise and Income Tax Decisions and Petitions for Rehearing Schedule dated March 16, 2000, except the Board deferred consideration of Jane E. Harger, 98A-1370, 89002462870, Colin M. Parker, 98A-1362, 89002464780, John and Julie Tomlinson, 98A-1180, 89002466030, Samuel Yee, 99R-0146, 89002462560 (Exhibit 3.12).

BUSINESS TAXES MATTERS

Upon motion of Mr. Parrish, seconded by Mr. Klehs and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board approved the staff recommendations with respect to Business Tax Matters Consent Schedule dated March 16, 2000 consisting of redeterminations and denials of claims for refund (Exhibit 3.13). Mr. Chiang did not participate in the votes on the petitions of Petros & Sarkis Karadjian, Cadence Design Systems, Inc., and Food 4 Less California, Inc. Ms. Mandel did not participate in the vote on the petition of Dayton Hudson Corporation pursuant to Government Code Section 7.9.

Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board approved the staff recommendations with respect to Business Tax Matters Consent Schedule dated March 16, 2000 consisting of credits, cancellations and refunds (Exhibit 3.14). Mr. Chiang did not participate in the votes on the claims of Food 4 Less of Claifornia, Inc., and Alpha Beta Company. Ms. Mandel did not participate in the vote on the claim of McLane Suneast, Inc., pursuant to Government Code Section 7.9.

FRANCHISE AND INCOME TAXES HEARINGS

David K. Hawke, 27588
1983, $534.00

For Appellant: David Hawke
For Franchise Tax Board: Dawn Russ, Legal Analyst
Bruce Langston, Counsel

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether appellant's claim for refund was filed prior to expiration of the applicable statute of limitations.
Appellant's Exhibit: Appellant's Brief (Exhibit 3.15)
Respondent's Exhibit: FTB Printout (Exhibit 3.16)
Action: Upon motion of Mr. Andal, seconded by Mr. Parrish and duly carried,
Mr. Andal, Mr. Parrish, Mr. Chiang and Ms. Mandel voting yes, Mr. Klehs voting no, the Board ordered that the appeal be granted, and that the Franchise Tax Board contact the credit report agency.

The Board recessed at 10:40 a.m. and reconvened at 10:50 a.m. with Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel present.

Willamette Industries, Inc., 99R-0383; 16375
12-31-78, $107,058.46

For Appellant: Lawrence V. Brooks, Attorney
For Franchise Tax Board: Bruce Langston, Tax Counsel

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether appellant has shown that the doctrine of res judicata barred respondent from asserting or collecting tax with respect to appellant's 1978 income year.
Whether appellant has shown that the applicable statute of limitations barred respondent from asserting or collecting tax with respect to appellant's 1978 income year.
Respondent's Exhibit:Court Decision & Board Decision (Exhibit 3.17)
Action: Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the appeal be submitted for decision.

Stephen P. and Vickery M. Cherner, 98A-1312; 89002466800
1990, $97,887.00
Robert T. and Joann Winzinger, 98A-0928; 89002466240
1990, $55,971.25

For Appellant: Alfred D. Ellis, Attorney
For Franchise Tax Board: Kent Summers, Tax Counsel

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether appellants have shown that they properly excluded, under Internal Revenue Code section 108, the income from cancellation of indebtedness derived from an underlying partnership from their respective gross incomes.
Whether appellants have shown that the alleged redemption of their limited partnership interests did not result in California-source income.
Whether appellants have shown that they have properly applied the tax benefit rule in the instant matter.
Appellant's Exhibit: 1990 Partner Return (Exhibit 3.18)
Action: Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the appeal be submitted for decision.

Amdahl Corporation, 99A-0054; 89002459110; 29780
12-31-88 $1,105,973.00
12-31-88 8,943.00
12-31-89 1,168,409.00

  1. 24,312.00
  2. 28,389.00
  3. 79,152.00
  4. 22,919.00

12-31-92 525,731.00

For Appellant: Ron Schrotenboer, Attorney
John Ryan, Attorney
For Franchise Tax Board: David Gemmingen, Tax Counsel
Cody Cinnamon, Tax Counsel

Contribution Disclosures pursuant to Government Code Section 15626: No disqualifying contributions were disclosed.
Issue: Whether appellant has shown that certain payments received by Amdahl International Corporation from a foreign subsidiary are properly characterized as dividends for California franchise tax purposes.
Whether appellant has shown, in the alternative, that such payments are properly characterized as either a nontaxable refund of a foreign tax or a nontaxable contributions to capital.
Whether appellant has shown that respondent incorrectly disallowed the exclusion from gross income of certain dividends claimed under Revenue and Taxation Code section 25106.
Appellant's Exhibit: Federal Forms (Exhibit 3.19)
Respondent's Exhibit: Chart (Exhibit 3.20)
Court Case Decisions (Exhibit 3.21)
Action: Upon motion of Mr. Andal, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the appeal be submitted for decision, and the Appeals Section is to prepare a recommendation for the Board's consideration at its meeting on April 6, 2000.

Darrell W. Casoli, 99A-0296; 89002469080
1994, $438.00

For Appellant: No Appearance
For Franchise Tax Board: Ed Kline, Tax Counsel

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether respondent properly calculated the tax due on appellant's California-source income.
Action: Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board sustained the action of the Franchise Tax Board.

Gunnar Laett, 28417
1993, $909.00

For Appellant: No Appearance
For Franchise Tax Board: Terry Collins, Tax Counsel

Action: The Board took no action.

R. Jeffery Todoroff, DVM, Inc., 99A-0364; 89002469790
9-18-96, $10,702.00

For Appellant: No Appearance
For Franchise Tax Board: Ann Hoover, Tax Counsel

Action: The Board took no action.

Maxus International Energy Company, 98N-0953; 89002464140
Income Proposed Claims for

Years Ended Assessments Refund

12-31-78 $91,550.00

  1. $302,682.00
  2. $653,521.00
  3. $210,029.00
  4. $145,526.00

For Appellant: No Appearance
For Franchise Tax Board: Jon Jensen, Tax Counsel

Action: The Board took no action.

FINAL ACTION ON APPEALS HEARD MARCH 16, 2000

Upon motion of Mr. Klehs, seconded by Ms. Mandel and duly carried,

Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Andal voting no, Mr. Parrish passing and then voting no, the Board ordered that the appeal of Willamette Industries, Inc., 99R-0383; 16375, be denied.

Upon motion of Mr. Klehs, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the appeal of Stephen P. and Vickery M. Cherner, 98A-1312; 89002466800; Robert T. and Joann Winzinger, 98A-0928; 89002466240, be denied.

The Board adjourned at 12:00 p.m.


The foregoing minutes are adopted by the Board on May 4, 2000.