BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 450 N Street, Room 121 Sacramento, California REPORTER'S TRANSCRIPT MARCH 17, 2009 FINAL ACTIONS Reported by: Beverly D. Toms No. CSR 1662 1 1 2 P R E S E N T 3 4 For the Board Betty Yee of Equalization: Chair 5 Judy Chu 6 Vice-Chair 7 Bill Leonard Member 8 Michelle Steel 9 Member 10 Marcy Jo Mandel Appearing for John 11 Chiang, State Controller (per Government Code 12 Section 7.9) 13 Diane Olson Chief, Board 14 Proceedings Division 15 Board of Equalization 16 Staff: David Levine Tax Counsel IV 17 18 ---oOo--- 19 20 21 22 23 24 25 26 27 28 2 1 ITEM C3 2 Sacramento, California 3 March 17, 2009 4 ---oOO--- 5 MS. OLSON: Okay, we're -- excuse me, we're at 6 final actions or closed session. 7 MS. YEE: Why don't we take up -- 8 MS. OLSON: So sorry. 9 MS. YEE: Why don't we take up the cases under 10 submission. 11 MS. OLSON: Okay. Our first case is C3, 12 Richard Dean Jensen. 13 MS. YEE: Okay. First item up is C3. This is 14 Richard Dean Jensen. 15 Is there a motion? 16 DR. CHU: I move to adopt the staff 17 recommendation with the -- with that -- the change in 18 the interest that the Appeals had implemented. 19 MS. YEE: Okay. Motion by Dr. Chu to adopt the 20 revised staff recommendation to reflect the interest 21 adjustment. 22 Is there a second? 23 MS. MANDEL: Second. 24 MS. YEE: Second by Ms. Mandel. 25 MR. LEONARD: Is -- 26 MS. YEE: Mr. Leonard. 27 MR. LEONARD: I -- I'm still troubled that 28 we -- we told him that we're going after the other guy 3 1 first and now we've decided we've given up on the other 2 guy. 3 Should -- should we make one more run? Should 4 we ask the Jensens -- apparently we've never really 5 asked the Jensens to help us find Mr. Allard, although 6 they said they originally knew where he was. I don't 7 know if they've checked lately. 8 It just seems -- I guess I'm most bothered by 9 the interest. I understand the tax is due and I know 10 he -- he understands he had a liability in the period he 11 was operating the business. But I also believe him that 12 they would have paid more timely if it had been their 13 sole liability, and -- and we hadn't made the other -- 14 the successor -- semi-successor operator the -- the 15 target. 16 MS. YEE: Yeah. Well, I'm sure the 17 Department -- offer a couple of things. One, that there 18 had been some ongoing effort to try to locate Mr. 19 Allman, whether through -- it be through DMV or other -- 20 MR. LEONARD: Right. 21 MS. YEE: -- sources. I don't know how regular 22 that is in terms of when they try to locate a party like 23 this. Do -- do you have any sense, Mr. Levine? 24 MR. LEVINE: I don't know. 25 MS. YEE: Okay. 26 MR. LEONARD: Could we ever do something like 27 give them 60 days to pay unless they help find Allard 28 for us, a little bounty hunter kind of deal? Instead 4 1 of the usual 30. 2 I mean, clearly it's in their best interest to 3 find the guy. 4 MR. LEVINE: There's no tax. So, the -- the 5 matter -- you can delay the finality date by delaying 6 your decision. And we can also hold off on collection, 7 but there isn't going to be any increase here. 8 MS. YEE: Right. 9 MR. LEVINE: The interest -- it's interest and 10 penalty -- 11 MR. LEONARD: Okay. 12 MR. LEVINE: -- and whether it's paid tomorrow 13 or in a couple years, that's it. It's not going to 14 grow. 15 MR. LEONARD: But once they pay it, we're -- 16 everybody stops with Mr. Allard. 17 MR. LEVINE: That's correct. 18 MR. LEONARD: We all stand down. 19 MS. YEE: Although, was this a candidate for 20 potentially in Offer in Compromise? 21 MR. LEVINE: I don't know what their 22 discussions were, but I -- it sounds like they'd be 23 eligible. 24 MS. YEE: But if so, and if this were not paid 25 in full there still would be some amount owing? 26 MR. LEVINE: Whatever is left I believe the 27 Department can proceed against the other person. It 28 sounds like they're not going to find him, but if they 5 1 do they can proceed. 2 MS. YEE: Yeah. So, -- 3 MR. LEONARD: Can we recommend the Offer in 4 Compromise unit be asked to look into this or is that -- 5 MS. YEE: I think we can direct them, yeah. 6 MR. LEVINE: I believe he -- he talked with Mr. 7 Gilman afterwards. 8 MS. YEE: Sure. 9 MR. LEVINE: I don't know what -- 10 MR. LEONARD: I know that, but I'm -- can this 11 Board encourage that effort? 12 MS. YEE: I -- I think we would want to. 13 MS. MANDEL: What -- what are the restrictions 14 on Board participation in Offer in Compromise? Are they 15 similar to settlement or not? Or can we just encourage 16 somebody go there? 17 MS. YEE: Right. 18 MS. MANDEL: Huh? 19 I know there's a prohibition on settlements, on 20 the Board participating on settlements. I just don't 21 know -- 22 MS. CAZADD: Right, an Offer in Compromise is 23 similar in that it's a separate statutory program and in 24 order for an offer to be -- someone to be accepted into 25 the program they have to have a -- meet a specific set 26 of criteria. But the Board can certainly encourage. 27 MS. MANDEL: Right. I just don't want to foul 28 up something that says the Board participated in the 6 1 Offer -- 2 MR. LEONARD: Right. 3 MS. MANDEL: -- the time will now -- 4 MS. YEE: No. No. 5 MR. LEONARD: That's why I asked the way I 6 asked it. 7 MS. CAZADD: No, the Board Members are not -- 8 MS. YEE: No, and I'm not thinking about 9 involvement at that level, certainly. 10 Okay. Well -- 11 MR. LEONARD: Well, if the motion includes that 12 the Board sense that we encourage an Offer in Compromise 13 procedure, that may be the best way to go. 14 MS. YEE: Okay. Maker of the motion, second, 15 is that agreeable? 16 DR. CHU: Yeah. 17 MS. YEE: Okay. Very well. 18 So we have a motion by Dr. Chu, second by Ms. 19 Mandel that incorporates encouraging the Petitioner to 20 pursue the Offer in Compromise program. 21 Without objection, that motion carries. 22 ---oOo--- 23 24 25 26 27 28 7 1 ITEMD1 2 MS. OLSON: Our next item is D1, Azad Amiri and 3 Nassrin Amiri. 4 MS. YEE: Okay. Item D1, Azad Amiri and 5 Nassrin Amiri. Is there a motion? 6 DR. CHU: I move to adopt the staff 7 recommendation. 8 MS. YEE: Okay. Motion by Dr. Chu to adopt the 9 staff's recommendation. 10 Is there a second? 11 MS. MANDEL: Second 12 MS. YEE: Second by Ms. Mandel. Please call 13 the roll. 14 MS. OLSON: Madam Chair. 15 MS. YEE: Aye. 16 MS. OLSON: Mr. Leonard. 17 MR. LEONARD: Aye. 18 MS. OLSON: Ms. Steel. 19 MS. STEEL: Aye. 20 MS. OLSON: Dr. Chu. 21 DR. CHU: Aye. 22 MS. OLSON: Ms. Mandel. 23 MS. MANDEL: Aye. 24 MS. OLSON: Motion carries. 25 MS. YEE: Okay. Thank you. 26 ---oOo--- 27 28 8 1 ITEM D2. 2 MS. OLSON: Our next item is D2, R & R Greene 3 Living Trust. 4 MS. YEE: Okay, Item D2, R & R Greene Living 5 Trust. 6 Is there a motion? 7 MS. STEEL: I want -- move the staff 8 recommendation regarding the fee issue, but move to 9 abate the failure to pay penalty and interest from 10 January 1, 2002 to May 5, 2003 because Department didn't 11 explain clearly enough that why it took so long. 12 MS. YEE: Okay. 13 MR. LEONARD: Second. 14 MS. YEE: Motion by Ms. Steel, second by Mr. 15 Leonard. Please call the roll. 16 MS. OLSON: Madam Chair. 17 MS. YEE: No. 18 MS. OLSON: Mr. Leonard. 19 MR. LEONARD: Aye. 20 MS. OLSON: Ms. Steel. 21 MS. STEEL: Aye. 22 MS. OLSON: Dr. Chu. 23 DR. CHU: No. 24 MS. OLSON: Ms. Mandel. 25 MS. MANDEL: No. 26 MS. OLSON: Motion fails. 27 MS. YEE: Okay. May I have another motion? 28 DR. CHU: I move to adopt the staff 9 1 recommendation. 2 MS. YEE: Okay. Motion by Dr. Chu to adopt the 3 staff recommendation. 4 Is there a second? 5 I will second that motion. Please call the 6 roll. 7 MR. LEONARD: I have a question. 8 MS. YEE: Yes. 9 MR. LEONARD: Ms. Mandel asked a question after 10 the hearing regarding the finality, failure to pay, 11 failure to report. Did we ever find out what that 12 penalty is that's -- 13 MR. LEVINE: I didn't look it up, but it is 14 what -- it just took me a while to remember the glitch. 15 There was a glitch in the statute where what we normally 16 have is we have two penalties but it's limited to only 17 fine, maximum ten percent, either failure to pay or 18 failure to file. 19 At the time of this case, this law did not have 20 the failure to file penalty so it only had the failure 21 to pay. Normally if someone doesn't file a return they 22 also don't pay. And what you see is a failure to file 23 penalty. 24 But if they filed without a payment you would 25 see a failure to pay penalty. Here we just see the 26 failure to pay penalty. So we don't show failure to 27 file because there wasn't one. 28 MS. YEE: Okay. And -- and had there been, Mr. 10 1 Levine, prior cases of this type? Had we -- 2 MR. LEVINE: I don't have a clear memory but 3 Ms. Mandel's recollection -- it -- it sounds -- I don't 4 doubt that there are at least some cases that the Board 5 relieved the penalties on the theory that there was 6 uncertainty in the program, and the Department -- these 7 audits, it's been a recurring thing that people think 8 they should have been told even though the law doesn't 9 require the Department to do it. 10 MS. YEE: Then Dr. Chu. 11 DR. CHU: I remember that I voted on -- on one 12 case of an elderly gentleman who had a -- a gas station 13 and then -- and then got notice of the necessity to pay 14 this fee afterwards. 15 However, I just looked up the case and that was 16 in 1998. So, he actually did not get this -- this 17 important notice which was mailed in July of '94. 18 This is a different case I feel because she 19 actually did get the notice of the July '94 important 20 notice, which was individualized. 21 MS. MANDEL: The part -- part of what I was 22 trying to remember over the lunch hour was how old the 23 program, itself, was. Because this is -- this years are 24 starting in '95 for this taxpayer. 25 And I -- you know, I don't remember how old the 26 other cases were that might have come forward. They 27 might have been the beginning of the program and in -- 28 you know, '89, '90, '91 and -- and forward, before the 11 1 notice. 2 But, you know, that's the -- the good news and 3 bad news about being here so long is I tend to remember 4 some of those things. 5 But -- but this case -- these tax years may not 6 have been as -- as old as the other ones, but I do 7 remember a lot of discussion about how confusing the 8 program was when it -- when it first came in. 9 MR. LEVINE: And as the Department explained, 10 that's why they now adopted the -- the program where the 11 Sales and Use Tax auditors do check this, so that they 12 can help the taxpayers. 13 And it -- the genesis of that was the confusion 14 that -- and the cases that were argued during the '90s, 15 which are the ones I think you're remembering. 16 And I don't -- I can't recall exactly which 17 cases they were that the Board relieved penalties and -- 18 and it could be the ones that -- 19 MS. MANDEL: Yeah, it would have been -- 20 MR. LEVINE: -- were before that notice. 21 MS. MANDEL: Yeah, it would have been -- it 22 certainly would have been before the -- the OPS memos, 23 my guess. You know, for older years. 24 MS. YEE: Okay. We have a motion to adopt the 25 staff recommendation with a second. Please call the 26 roll. 27 MS. OLSON: Madam Chair. 28 MS. YEE: Aye. 12 1 MS. OLSON: Mr. Leonard. 2 MR. LEONARD: No. 3 MS. OLSON: Ms. Steel 4 MS. STEEL: No. 5 MS. OLSON: Dr. Chu. 6 MS. YEE: Aye. 7 MS. OLSON: Ms. Mandel. 8 MS. MANDEL: Aye. 9 MS. OLSON: Motion carries. 10 ---oOo--- 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 13 1 REPORTER'SCERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, BEVERLY D. TOMS, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 March 17, 2009 I recorded verbatim, in shorthand, to the 10 best of my ability, the proceedings in the 11 above-entitled hearing; that I transcribed the shorthand 12 writing into typewriting; and that the preceding 13 13 pages constitute a complete and accurate transcription 14 of the shorthand writing. 15 16 Dated: April 3, 2009. 17 18 19 ____________________________ 20 BEVERLY D. TOMS 21 Hearing Reporter 22 23 24 25 26 27 . 28 14