Approved 2000 Minutes - Wednesday July 26, 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 Mr. Chiang present, and Ms. Mandel present on behalf of Dr. Connell in accordance with Government Code Section 7.9.

ANNOUNCEMENT OF CLOSED SESSION

The Board went immediately into closed session with Mr. Andal,

Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel present.

CLOSED SESSION

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

The Board recessed closed session at 9:40 a.m. and reconvened immediately in open session with Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel present.

MULTISTATE TAX COMMISSION'S ANNUAL MEETING

David Levine, Acting Assistant Chief Counsel, Business Taxes, presented twenty-two resolutions for discussion and vote at the annual meeting of the Multistate Tax Commission on July 28, 2000 (Exhibit 7.1).

Upon motion of Mr. Andal, seconded by Mr. Parrish and duly carried, Mr. Andal, Mr. Parrish and Ms. Mandel voting yes, Mr. Chiang voting no, Mr. Klehs passing, the Board adopted an oppose position on Resolution 2000-1.

Mr. Andal moved that the Board adopt an oppose position on Resolution 2000-2. The motion was seconded by Mr. Parrish but failed to carry, Mr. Andal and Mr. Parrish voting yes, Mr. Klehs, Mr. Chiang and Ms. Mandel voting no. Upon motion of Mr. Andal, seconded by Ms. Mandel and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board adopted a position of neutral on Resolution 2000-2.

Upon motion of Mr. Andal, seconded by Mr. Parrish and duly carried, Mr. Andal, Mr. Parrish, Mr. Klehs and Ms. Mandel voting yes, Mr. Chiang voting no, the Board adopted an oppose position on Resolution 2000-3.

Mr. Andal moved that the Board adopt a neutral position on Resolution 2000-4. The motion was seconded by Mr. Parrish but failed to carry, Mr. Andal and Mr. Parrish voting yes, Mr. Klehs, Mr. Chiang and Ms. Mandel voting no. Upon motion of Ms. Mandel, seconded by Mr. Chiang and duly carried, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Andal and Mr. Parrish voting no, the Board adopted a support position on Resolution 2000-4.

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 an oppose position on Resolution 2000-5.

Mr. Andal moved that the Board adopt an oppose position on Resolution 2000-7. The motion failed for lack of a second. Mr. Klehs moved that the Board adopt a neutral position. The motion failed for lack of a second. Upon motion of Mr. Andal, seconded by Mr. Parrish and duly carried, Mr. Andal, Mr. Parrish and Ms. Mandel voting yes, Mr. Chiang voting no, Mr. Klehs abstaining, the Board adopted an oppose position on Resolution 2000-7.

Upon motion of Mr. Parrish, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board adopted a support position on Resolution 2000-8.

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 adopted a support position on Resolution 2000-9.

Upon motion of Mr. Andal, seconded by Ms. Mandel and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board adopted a support position on Resolution 2000-10.

Upon motion of Mr. Chiang, seconded by Ms. Mandel and duly carried, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Andal voting no, the Board adopted a support position on Resolution 2000-11.

Upon motion of Mr. Chiang, seconded by Mr. Andal and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board adopted a support position on Resolution 2000-12.

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 adopted a support position on Resolution 2000-13.

Upon motion of Mr. Andal, seconded by Mr. Parrish and duly carried, Mr. Andal, Mr. Parrish and Ms. Mandel voting yes, Mr. Klehs and Mr. Chiang voting no, the Board adopted an oppose position Resolution 2000-14.

Upon motion of Mr. Chiang, seconded by Ms. Mandel and duly carried, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Andal and Mr. Parrish voting no, the Board adopted a support position on Resolution 2000-15.

Upon motion of Mr. Andal, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs and Mr. Chiang voting yes, Ms. Mandel abstaining, the Board adopted a support position on Resolution 2000-18.

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 adopted a support position on Resolution 2000-19.

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 adopted a support position on Resolution 2000-20.

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 adopted a support position on Resolutions 2000-21 through 2000-25.

Exhibits to these Minutes are incorporated by reference.

RETIREMENT RESOLUTIONS

Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board adopted the following resolutions (Exhibit 7.2) extending its best wishes on their respective retirements and its appreciation for their service to the Board and the State of California.

Timothy A. Grund, Business Tax Compliance Supervisor II,

Sacramento District Office

Bruce A. Belshaw, Supervising Tax Auditor I, Sales and Use Tax, Oakland District Office

Shirley A. Slater, Office Technician, Special Procedures Section,

Headquarters

Dorothy A. Webber, Office Technician, Norwalk District Office

BOARD MEETING MINUTES

Upon motion of Mr. Klehs, seconded by Mr. Chiang, 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 May 3-4, 2000, May 24, 2000,

May 30, 2000 and June 14-15, 2000.

EXTENSIONS OF TIME GRANTED PURSUANT TO

REVENUE AND TAXATION CODE SECTION 155

Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board granted extensions of time under the provisions of Revenue and Taxation Code Section 155 for filing local assessment rolls to the assessors of Alpine, Amador, Humboldt, Inyo, Mendocino, Merced, Napa, Placer, Plumas, San Mateo, Shasta, Siskiyou and Yuba counties.

2000 PRIVATE RAILROAD CAR TAX RATE

Upon motion of Mr. Klehs, seconded by Mr. Chiang, and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang voting yes, Ms. Mandel not participating in accordance with Government Code Section 7.9, the Board adopted a rate for the 2000-01 private railroad car tax of 1.064 percent. A copy of the Computation of the Tax Rate Applicable to 2000-01Private Railroad Car Tax Assessments Table is incorporated in these minutes by reference (Exhibit 7.3).

ADOPTION OF THE 2000 STATE ASSESSED PROPERTY ROLL

Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang voting yes, Ms. Mandel not participating in accordance with Government Code Section 7.9, the Board adopted the 2000 State-Assessed Property Roll. A copy of the roll correction batch roster is incorporated in these minutes by reference (Exhibit 7.4).

ADOPTION OF 2000 PRIVATE RAILROAD CAR ROLL

Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang voting yes, Ms. Mandel not participating in accordance with Government Code Section 7.9, the Board adopted the 2000 Private Railroad Roll Cars as of January 1, 2000. A copy of the changes are incorporated in these minutes by reference (Exhibit 7.5)

LEGISLATIVE COMMITTEE REPORT

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

Mr. Andal, Mr. Klehs and Mr. Chiang stated that they took a neutral position on AB2309. Mr. Parrish and Ms. Mandel stated that they took a support position on AB2309.

Mr. Klehs and Mr. Andal stated that they took a neutral position on SB1151. Mr. Parrish, Mr. Chiang and Ms. Mandel stated that they took a support position on SB1151.

Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board approved the remainder of the committee report. (Exhibit 7.6).

CUSTOMER SERVICES & ADMINISTRATIVE EFFICIENCY COMMITTEE REPORT

Delena Bratton, Chief, Customer and Taxpayer Services Division, recommended adoption of the Customer Services & Administrative Efficiency Committee Report.

Upon motion of Mr. Parrish, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board approved the committee report. (Exhibit 7.7).

BUSINESS TAXES COMMITTEE REPORT

Ramon J. Hirsig, Deputy Director, Sales and Use Tax Department, recommended adoption of the Business Taxes Committee Report.

Upon motion of Mr. Chiang, seconded by Ms. Mandel and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board approved the committee report. (Exhibit 7.8).

PROPERTY TAX COMMITTEE REPORT

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

Upon motion of Ms. Mandel, 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 7.9).

APPLICATIONS FOR REVIEW, EQUALIZATION

AND ADJUSTMENT OF ASSESSMENTS

Upon motion of Mr. Parrish, seconded by Mr. Andal and duly carried, Mr. Andal and Mr. Parrish voting yes, Mr. Chiang not participating, Ms. Mandel not participating in accordance with Government Code Section 7.9, Mr. Klehs voting no, the Board approved the staff recommendation for the appeals of City of Long Beach,

ARA98-002; 26432 and City of Los Angeles, ARA98-003; 26433 and City of Long Beach, ARA99-003; 28128 and City of Los Angeles, ARA99-004; 28131.

APPEALS MATTERS

Stephen Young & Clifford Jones, SR KH 28-705418-010; 89000748970

10-1-93 to 6-30-95, $10,651.82

Considered by the Board:May 3, 2000

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

Action: Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board adopted a revised Appeals Section recommendation.

National Supply Co., Inc. and Oil Well, SZ OH 30-676907-010; 89000854610

Now Oilfield Services, Inc., et al., SZ OH 99-961252-010; 89002448170

10-1-93 to 12-31-95, $13,021.98

Considered by the Board:June 15, 2000

Contribution Disclosures pursuant to Government Code Section 15626: No contribution disclosure statements were filed.

Action: Upon motion of Mr. Andal, seconded by Mr. Klehs and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the petition of National Supply Co., Inc. and Oil Well, SZ OH 30-676907-010; 89000854610, be redetermined as recommended by the Appeals Section and denied the petition for reconsideration of successor liability on the appeal of Now Oilfield Services, Inc., et al., SZ OH 99-961252-010; 89002448170,

Palm Computing, Inc., SR GH 99-383269-010; 89002227050

1-1-92 to 12-31-96, $43,037.66 assessment, $4,616.92 penalty

Considered by the Board:June 15, 2000

Contribution Disclosures pursuant to Government Code Section 15626: No contribution disclosure statements were filed.

Action: Upon motion of Mr. Andal, seconded by Mr. Klehs and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the petition be redetermined as recommended by the Appeals Section and deleting the penalties.

FRANCHISE AND INCOME TAXES MATTERS

Contribution Disclosures pursuant to Government Code Section 15626: No contributions were disclosed for any of the following-listed matters Barry and Amy C. Baker to John and Kathryn Taylor. No contribution disclosure statements we filed for the appeal of Marvin B. Wilcher.

Upon motion of Ms. Mandel, seconded by Mr. Chiang 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 Barry and Amy C. Baker, 99R-0350, 89002469650, denying the claim for refund and sustaining the action of the Franchise Tax Board.

Upon motion of Ms. Mandel, seconded by Mr. Chiang 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 Gerald H. & Elizabeth A. Beaulaurier,

99A-0012, 89002466420, Lothar and Eveline Schmidt, 99R-0022, 89002465680, Clarence E. and Joan M. Bonner, 99N-0013, 89002466520, Howard and Helen Fox, 99R-0032, 89002467610, sustaining the action of the Franchise Tax Board.

Upon motion of Ms. Mandel, seconded by Mr. Chiang 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 Martin M. and Charlene R. Maxey, 28597, sustaining the action of the Franchise Tax Board.

Upon motion of Ms. Mandel, seconded by Mr. Chiang 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 Sharon L. Nazaroff, 99I-0171, 89002464550, sustaining the action of the Franchise Tax Board except reversing the imposition of the collection cost recovery fee.

Upon motion of Ms. Mandel, seconded by Mr. Chiang 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 John E. Patterson, 99A-0235, 89002468370, sustaining the action of the Franchise Tax Board.

Upon motion of Ms. Mandel, seconded by Mr. Chiang 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 Marvin B. Wilcher, 99A-0147, 89002458490, sustaining the action of the Franchise Tax Board.

Upon motion of Ms. Mandel, seconded by Mr. Chiang and duly carried, Mr. Andal, Mr. Klehs and Ms. Mandel voting yes, Mr. Parrish and Mr. Chiang voting no, the Board adopted a decision in the appeal of Cherish F. Robinson, 99A-0366, 89002469810, Alex Tiffany, 99A-0367, 89002469820, Crystal Tiffany, 99A-0368, 89002469830, denying the petition for rehearing.

Upon motion of Mr. Klehs, seconded by Ms. Mandel and duly carried,
Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Andal and Mr. Parrish voting no, the Board in the appeal of Helmi A. Hisserich, 99A-0341; 89002469560, directed staff, in 30 days, to bring back for adoption by the Board a formal opinion reversing the action of the Franchise Tax Board.

Upon motion of Mr. Andal, seconded by Mr. Parrish and duly carried, Mr. Andal, Mr. Parrish and Ms. Mandel voting yes, Mr. Klehs and Mr. Chiang voting no, the Board adopted a decision in the appeal of John and Kathryn Taylor, 98A-0989; 89002469560, reversing the action of the Franchise Tax Board with respect to Issue 1-Losses.

Upon motion of Mr. Andal, seconded by Mr. Klehs and duly carried, Mr. Andal, Mr. Parrish, Mr. Klehs and Ms. Mandel voting yes, Mr. Chiang voting no, the Board sustained the action of the Franchise Tax Board with respect to the Issue 2-Late Filing Penalty.

SALES AND USE TAXES MATTERS

Contribution Disclosures Pursuant to Government Code Section 15626: No contribution disclosure statements were filed.

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 credits and cancellations. (Exhibit 7.10).

SALES AND USE TAXES MATTERS

Contribution Disclosures Pursuant to Government Code Section 15626: No contribution disclosure statements were filed.

Upon motion of Ms. Mandel, seconded by Mr. Chiang 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 denial of claim for refund for Scimed Life Systems, Inc., 60449.

Upon motion of Mr. Parrish, seconded by Mr. Klehs and unanimously carried, Mr. Andal, Mr. Parrish and Mr. Klehs voting yes, Mr. Chiang and Ms. Mandel not participating, the Board approved the staff recommendation with respect to denial of claim for refund for International Business Mach. Corp., 89002086480. (Exhibit 7.11).

APPEALS MATTERS

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, Ms. Mandel not participating in the matters of Equitable Variable Life Insurance Co., 89000901780 and Nations Title Insurance Company, 89000904210, pursuant to Government Code Section 7.9, the Board adopted the Legal Appeals Matters Consent Schedule dated July 26, 2000, consisting of Hearing Notice Sent - No Response, Appearance Waived, Hearing Request Withdrawn, Hearing Request Withdrawn and Petitions for Rehearing, except the staff withdrew Flying Vikings, Inc., 89002405410 and the Board withdrew Neil M. and Lorraine K. Mac Swain, 89002277020 and KMS Research Laboratories, Inc., 89000800570. (Exhibit 7.12).

FRANCHISE AND INCOME TAXES MATTERS

Upon motion of Mr. Parrish, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Ms. Mandel not participating in the matter of Max E. and Betty D. Meyer, 89002466640, the Board approved the staff recommendations with respect to Franchise and Income Tax Decisions and Petitions for Rehearing Schedule dated July 26, 2000, except deferring the matters of Electric Machine Entertainment, Inc., 99R-0447; 18027, Carl M. Nagata, 99R-0360; 89002469750, Homer and Elizabeth Beldt, 97A-0635; 89002466550, and Max E. and Betty D. Meyer, 98A-1321; 89002466640. (Exhibit 7.13).

SALES AND USE TAXES MATTERS

Upon motion of Mr. Chiang, 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 recommendations with respect to Sales and Use Taxes Matters Consent Schedule dated July 26, 2000, consisting of Redeterminations and a Denial of Claim for Refund (Exhibit 7.14).

SALES AND USE TAXES MATTERS

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, Ms. Mandel not participating in the matters of Chevron U.S.A., Inc., 55700 and Genentech, Inc., 47926, the Board approved the staff recommendations with respect to Sales and Use Taxes Matters Consent Schedule dated July 26, 2000, with respect to credits, cancellations, relief of penalty and refunds (Exhibit 7.15), except the Board withdrew from the calendar Cigarettes Cheaper!, 67013.

SPECIAL 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, Mr. Chiang not participating on GTE California, Inc., 76501, Ms. Mandel not participating in accordance with Government Code section 7.9, except on Contel of California, Inc., TU ET 35-100007; 76508 and GTE California, Inc., TU ET 35-100012; 76501, the Board adopted the Special Taxes Matters Consent Schedule dated

July 26, 2000, consisting of refunds, except the staff withdrew from the calendar Tosco Corporation, 89000006100. (Exhibit 7.16).

FRANCHISE AND INCOME TAXES HEARINGS

Sue A. Hoxie, 99A-0420; 17200

1993, $30,750, $6,150

1994, $20,346, $4,069.20

For Appellant: R. Todd Luoma, Attorney
For Franchise Tax Board: Mark McEvilly, Counsel

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

Issue:Whether appellant filed a valid 1994 joint return with her former husband.

Whether appellant should be granted relief as an innocent spouse.

Appellant's Exhibit: "Innocent Spouse" Pamphlet and supporting documentation (Exhibit 7.17)

Action:Upon motion of Mr. Andal, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the appeal be granted.

The Board recessed from 10:30 a.m. to 10:40 a.m. and reconvened with Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel present.

PROPERTY TAX HEARING - WELFARE EXEMPTION CLAIM

Why Not? Community Housing Corporation, Sacramento County, WEC00-001

1995-96, 1996-97, $550

For Claimant: Eric J. Almquist, Director
For Property Tax Department: Ken McManigal, Counsel

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

Issue:Whether a rental agreement between a landlord and the current tenant limiting the amount of the rent a "deed restriction, agreement, or other legal document that restricts the projects usage to and that provides that the units ... are continuously available to or occupied by lower income households at (prescribed rent limits)" within the meaning of section 214(g).

Whether the agreement can be signed after the lien dates in question.

Whether the Board and its staff review the deed restriction, agreement or other legal document and determine whether it meets the requirements of the code, or whether it is sufficient that the owner "certify and ensure" that there is an adequate document.

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 ordered that the claim be submitted for decision.

FRANCHISE AND INCOME TAX HEARINGS

Georges and Pauline Abitboul, 99A-0478; 18407

1990, $1,864,084

Max H. and Eleanor Baril, 99A-0441; 18410

For Appellant: Alfred F. DeLeo, Attorney
Sidney J. Machtinger, Attorney
Barry Scherr, Witness
For Franchise Tax Board: Jack Stilwell, Counsel

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

Issue:Whether appellants have shown that the transactions in question qualify as nontaxable like kind exchanges.

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 granted.

John E. Frantz, 97A-1160; 89002462420

1991, $237,080

For Appellant: John Frantz
Jan Rosati, CPA
For Franchise Tax Board: Kent Summers, Counsel

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

Issue:Whether appellants can exclude flow through partnership allocations from income.

Whether appellants can increase the basis in a partnership's assets by depreciation, which was not deducted for California purposes.

Whether appellants have shown that appellant-husband was a nonresident of California in 1991.

Action: Upon motion of Mr. Chiang, seconded by Mr. Klehs 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.

The Board recessed at 11:45 a.m. and reconvened at 1:30 p.m. with Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel present.

Mr. Klehs recognized that today is Mr. Parrish's birthday.

ACTION ON CASES HEARD JULY 25, 2000

Upon motion of Mr. Klehs, seconded by Mr. Chiang and duly carried, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Andal and Mr. Parrish voting no, the Board ordered that the petition of Richard Brian Powers, SR CH 21-763169-020, 89000327470, be redetermined.

ACTION ON CASES HEARD JULY 26, 2000

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 claim of Why Not? Community Housing Corporation, WEC00-001, 50136, be denied.

Upon motion of Mr. Klehs, seconded by Mr. Andal and duly carried, Mr. Andal, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, Mr. Parrish voting no, the Board ordered that the action of the Franchise Tax Board be sustained in the appeal of John E. Frantz, 97A-1160, 89002462420.

PUBLIC HEARING

PROPOSED ADOPTION OF SALES AND USE TAX REGULATION 1702.6, SUSPENDED CORPORATIONS

David Levine, Acting Assistant Chief Counsel, Business Taxes, reported that the proposed amendments to Regulation 1702.6 implement existing Board practices and constructions regarding personal liability for sales tax on the part of responsible persons in the case of suspended corporations that continue to make sales after suspension and extend such practices to similar use tax liabilities.

Speakers: None

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 adopted the amendments to Regulation 1702.6 as published. A copy of the regulation as amended is incorporated in these minutes by reference (Exhibit 7.18).

PROPOSED AMENDMENT TO EMERGENCY TELEPHONE USERS'

REGULATION 2401(a), SERVICE SUPPLIER; PROPOSED ADOPTION OF EMERGENCY TELEPHONE USERS' SURCHARGE REGULATION 2401(e), PREPAID TELEPHONE CALLING CARDS; PROPOSED ADOPTION OF EMERGENCY TELEPHONE USERS' SURCHARGE REGULATION 2403, PREPAID TELEPHONE CALLING CARDS; PROPOSED ADOPTION OF EMERGENCY TELEPHONE USERS' SURCHARGE REGULATION 2432, RELIEF FROM LIABILITY

Mr. Levine reported that the proposed amendments to Regulation 2401(a) clarify that a "service supplier" includes the person that provides access to its lines and switches for telephone services to a person that uses a prepaid telephone calling card.

Mr. Levine also reported that the proposed addition of Regulation 2401(e) defines "prepaid telephone calling card", which is a means of advance payment for telephone service, to mean any card, or other identifier such as an authorization number or access code, which is purchased in advance of use of telephone services and which entitles the card holder to a specified dollar amount or numbers of minutes of telephone service. The proposed addition of Regulation 2403 describes how the 911 Surcharge applies to prepaid telephone calling cards, and authorizes a service supplier to estimate its prepaid telephone calling card charges for intrastate services based on call information that the providing service supplier reasonably believes demonstrates the approximate amount of such intrastate telephone communication service charges subject to the 911 Surcharge. The proposed addition of Regulation 2432 is to clarify how a service supplier may be relieved of liability when the liability resulted from reasonable reliance on written advice given by the Board, including advice that appeared in a prior audit.

Speakers: None

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 adopted the amendments to Regulations 2401(1), 2401(e), 2403 and 2432 as published. Copies of the regulations as amended are incorporated in these minutes by reference (Exhibit 7.19).

BUSINESS TAXES HEARINGS

Shirley J. & Donald M. Zink, SR EA 24-895655-020; 89000484410

10-1-93 through 12-31-96, $25,918.95

For Petitioner: No Appearance
For Sales and Use Tax Department: Janice Thurston, Counsel

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

Issue:Whether California Code of Regulations, title 18, section 1670(b) applies to petitioner's transfers of marketing aids (brochures) to certain nonprofit organizations who are considered to be consumers of products they sell; in such case, petitioner is deemed to be the consumer of the marketing aids and owes tax on its purchase of the aids.

Alternatively, if Regulation 1670(b) applies, whether the evidence establishes that petitioner's ex-tax brochure purchases are exempt from use tax on the basis that it donated them to certain nonprofit organizations.

Action: Upon motion of Mr. Parrish, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the petition be granted.

Darshan S. & Charanjit K. Mundy, SR JHF 26-810584-001, -020,

89000682350, 89000682370

3-7-90 through 12-31-92, $78,929.09

4-1-93 through 9-30-96, $29,153.43, $2,915.35

For Petitioner: No Appearance
For Sales and Use Tax Department: Kevin Hanks, Hearing Representative

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

Issue:Whether the audit allowance of one percent for pilferage of taxable store merchandise should be increased.

Whether an allowance for the cost of self-consumed taxable liquor store merchandise for each audit period is warranted.

Whether audited costs of taxable liquor store merchandise for the current audit period include the costs of non-merchandise supplies.

Whether any of the disallowed federal excise tax deductions include nontaxable federal retailer's excise taxes.

Whether audited sales of diesel fuel include the nontaxable state use fuel tax.

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 adopted a revised Appeals Section recommendation.

Balwant Rai Birla & Sudesh Birla, SP ET 50-001677-010, CR ET 02-001247-010; 89000959600, 89000005140

Balwant Rai Birla, Sudesh Birla & Nuts and Spice Co., SP ET 50-000811-010,

CR ET 02-001177-010; 89000959530, 89000005070

1-12-93 through 11-17-95, $86,191.59, $30,167.17

For Petitioner: Balwant Birla, President
Sanjay Birla, Vice President
For Sales and Use Tax Department: Monica Brisbane, Counsel

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

Issue:Whether petitioners operated as a distributor of untaxed imported beedie cigarettes and tobacco products.

Whether the taxable measure of petitioners' distribution of untaxed cigarettes and tobacco products was established in accordance with the facts.

Whether the determinations are beyond the statute of limitations.

Whether relief from the 25 percent penalty for fraud or intent to evade the tax is warranted.

Whether relief from the ten percent penalty for failure to file returns is warranted.

Action: 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 adopted a revised Appeals Section recommendation with respect to CP ET 50-001677-010, CR ET 02-001247-010 and CP ET 50-000881-010.

Mr. Andal moved that the fraud penalty be reduced a failure to file penalty. The motion was seconded by Mr. Parrish but failed to carry, Mr. Andal and Mr. Parrish voting yes, Mr. Klehs, Mr. Chiang and Ms. Mandel voting no.

Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel voting yes, the Board ordered that the remainder of the petition be submitted for decision, directing the Appeals Section to provide a recommendation to the Board at its August 10 meeting.

The Board adjourned at 2:00 p.m.

The foregoing minutes are adopted by the Board on October 3, 2000