Approved 2001 Minutes – Wednesday, June 20, 2001

The Board met at its offices at 450 N Street, Sacramento, at 3:55 p.m. with Chairman Parrish, Vice Chairman Chiang and Mr. Klehs and present, Ms. Mandel present on behalf of Dr. Connell in accordance with Government Code Section 7.9.

Just prior to the commencement of the Board Meeting, Mr. Chiang made the following statement:

Statement In Honor Of, The Honorable Stanley Mosk,
Justice of the California Supreme Court, Deceased

Today’s meeting of the Board of Equalization is held in honor of, and in memorial to, California Supreme Court Justice Stanley Mosk, who died yesterday at the age of 88. Justice Mosk was the longest serving Justice in the history of the California Supreme Court, serving 37 years. Justice Mosk was one of the truly giant figures of California in the twentieth century, who carried his vision of fairness, justice and the rule of law well into the twenty-first century; as noted in today’s San Jose Mercury News, Justice Mosk showed up for work the day before he died.

Justice Mosk’s career spanned not only the California Supreme Court, but also service as Governor Culbert Olson’s chief legal advisor, a Los Angeles County Superior Court Judge, and service as California Attorney General between 1959 and 1964, where he established the office’s civil rights division. As a California Supreme Court Justice, he authored more than 1,500 opinions, which spanned the entire spectrum of jurisprudence, including civil rights, consumer protection, environmental protection, criminal justice, state finance, and taxation, just to name a few. It is fitting that after a brief moment of silence, we will proceed into the Property Tax Committee and a discussion of state assessment jurisdiction, which is profoundly affected by the opinion Justice Mosk authored in ITT World Communication, Inc. v. San Francisco(1985) 37 Cal.3d 859, which, like all of his opinions, is a thorough examination of not only the issue at hand, but a contemporaneously relevant historical discussion of the law evolved.

Let us all now observe a brief moment of silence in honor of, and in memory of, Justice Stanley Mosk.

TIMBER HARVEST VALUES

Revenue and Taxation Code section 38204(a) requires that the Board shall estimate the immediate harvest value and adopt schedules for each species or subclassification of timber harvested between July 1 and December 31, 2000.

Upon motion of Mr. Chiang, seconded by Mr. Klehs and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs and Ms. Mandel voting yes, Mr. Andal absent, the Board adopted the Timber Harvest Values (Exhibit 6.1).

Exhibits to theses Minutes are incorporated by reference.

PUBLIC HEARINGS

PROPOSED AMENDMENT TO REGUALTION 1574, VENDING MACHINES

Mr. Parrish announced the public hearing of Sales and Use Tax Regulation 1574, Vending Machines.

Janice Thurston, Assistant Chief Counsel, Business Taxes, reported that Regulation 1574 is proposed to be amended to interpret and make specific Civil Code section 1656.1. The amendment and adoptions are necessary to specify that taxable vending machine sales are presumed to be made on a tax-included basis, to add the cold food factor formula to the regulation and to provide for calculation of the factor in 0.125% increments, and to delete obsolete provisions.

Speakers: Speakers were invited to address the Board, but there were none.

Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs and Ms. Mandel voting yes, Mr. Andal absent, the Board adopted the regulation with changes as recommend by staff (Exhibit 6.2).

PROPOSED AMENDMENT TO SALES AND USE TAX REGULATION 1705.1, INNOCENT SPOUSE RELIEF FROM LIABILITY

Mr. Parrish announced the public hearing of Sales and Use Tax Regulation 1705.1, Innocent Spouse Relief from Liability.

Janice Thurston, Assistant Chief Counsel, Business Taxes, reported that Regulation 1705.1, Innocent Spouse Relief from Liability is proposed to be amended to interpret and make specific Revenue and Taxation Code section 6456. The amendment and adoptions are necessary to clarify that innocent spouse relief is not available while the spouses are still married and living together, to require notification to the non-claiming spouse of the innocent-spouse claim, and to conform the regulation to the enactment of AB 2898 (Stats. 2000, Ch. 1052, 1).

Speakers: Speakers were invited to address the Board, but there were none.

Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs and Ms. Mandel voting yes, Mr. Andal absent, the Board adopted the regulation as published (Exhibit 6.3).

FRANCHISE AND INCOME TAXES HEARINGS

Philip & Mary Lund, 79535
1992, $6,463.00 Assessment, $1,292.60 Penalty, Accuracy-related
1993, $ 89.00 Assessment, $ 17.80 Penalty, Accuracy-related

For Appellant: Philip Lund
For Franchise Tax Board: Jean Cramer, Tax Counse

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issues: Whether appellants have shown that respondent improperly made an assessment based upon a federal adjustment. Whether this Board may order accountant fees to be reimbursed. Whether this Board has jurisdiction to abate interest. Appellant’s Exhibit: Misc. Documents (Exhibit 6.4)
Action: Upon motion of Mr. Klehs, seconded by Mr. Chiang and duly carried, Mr. Parrish, Mr. Chiang and Mr. Klehs voting yes, Ms. Mandel voting no, Mr. Andal absent, the Board ordered that the action of the Franchise Tax Board be modified.
Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs and Ms. Mandel voting yes, Mr. Andal absent, the Board ordered to submit for decision the issue of accountant fee reimbursement.

Pomona First Federal Savings & Loan, 77959
1994, $1,620,036.00 Assessment

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

Action: The Board took no action.

Daniel W. & Pamela A. Bullock, 92497
1995 (Daniel), $11,567.00 Assessment, $2,891.75 Penalty, Delinquent
1996 (Daniel), $11,022.33 Assessment, $2,755.58 Penalty, Delinquent
1996 (Pamela), $ 1,302.00 Assessment, $ 325.50 Penalty, Delinquent

For Appellant: No Appearance
For Franchise Tax Board: Kathleen Cooke, Tax Counsel

Action: The Board took no action.

BUSINESS TAXES APPEALS HEARINGS

Filco, Inc., SY KH 28-691911; 89000747000
1-1-93 to 9-30-96, $75,512.98 Tax

For Petitioner: Abe Golomb, Representative
John Roman, CPA
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issue: Whether petitioner has met its burden of proving that it accurately reported its taxable sales.

Action: Mr. Parrish moved to grant the petition. The motion was seconded by Mr. Klehs but failed to carry, Mr. Parrish voting yes, Mr. Chiang, Mr. Klehs and Ms. Mandel voting no, Mr. Andal absent.

Upon motion of Mr. Klehs, seconded by Ms. Mandel and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs and Ms. Mandel voting yes, Mr. Andal absent, the Board ordered that the petition be submitted for decision.

Irwin Memorial Blood Centers, SN BH 52-006068; 89000965760, -770
10-1-89 to 12-31-97, $145,232.45 Tax, $27,621.90 Penalty, Failure to File
Peninsula Blood Bank, SU BH 19-786398; 89000295750, -760
1-1-94 to 12-31-97, $8,699.74

For Petitioner: Waived Appearance
For Sales and Use Tax Department: David H. Levine, Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.
Issues: Whether the statutory exemption provided by Revenue and Taxation Code section 6364.5 for the sale and use of blood collection units and blood pack units also applies to petitioners’ purchases of apheresis kits, blood pack units, and other miscellaneous supplies, such as needles, tubing and canisters, from out-of-state vendors. Whether the Department correctly determined that 85 percent of the cost of the apheresis kits purchased from out-of-state vendors is taxable. Whether the Department correctly determined that the 25 percent of the cost of the blood packs purchased from out-of-state vendors is taxable. Whether the Department properly determined that the use of these items is a taxable use. Whether relief from the penalty for failure to file returns is warranted.
Action: Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Parrish, Mr. Klehs and Ms. Mandel voting yes, Mr. Chiang not participating, Mr. Andal absent, the Board ordered that the petition be granted and the failure to file penalty be deleted.

FINAL ACTION ON APPEALS HEARD JUNE 20, 2001

Upon motion of Mr. Chiang, seconded by Mr. Klehs and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs and Ms. Mandel voting yes, Mr. Andal absent, the Board ordered to sustain the action of the Franchise Tax Board with regards to the accountant fee reimbursement in the appeal of Philip & Mary Lund, 79535.

FINAL ACTION ON PETITIONS HEARD JUNE 20, 2001

Upon motion of Mr. Chiang, seconded by Ms. Mandel and unanimously carried, Mr. Parrish, Mr. Chiang, Mr. Klehs and Ms. Mandel voting yes, Mr. Andal absent, the Board ordered that the petition of Filco, Inc., SY KH 28-691911; 89000747000, be redetermined as recommended by the Appeals Section.

The Board adjourned at 4:50 p.m.

The foregoing minutes are adopted by the Board on August 1, 2001