1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 5901 GREEN VALLEY CIRCLE 3 CULVER CITY, CALIFORNIA 4 5 6 7 REPORTER'S TRANSCRIPT 8 APRIL 28, 2009 9 10 11 PUBLIC HEARING 12 BUSINESS TAXPAYERS' 13 BILL OF RIGHTS HEARINGS 14 15 16 17 18 19 20 21 Reported by: Juli Price Jackson 22 No. CSR 5214 23 24 25 26 27 28 1 1 2 P R E S E N T 3 4 For the Board Betty T. Yee of Equalization: Chair 5 6 Judy Chu Vice-Chair 7 Bill Leonard 8 Member 9 Michelle Steel Member 10 Marcy Jo Mandel 11 Appearing for John Chiang, State Controller 12 (per Government Code Section 7.9) 13 Diane G. Olson 14 Chief, Board Proceedings Division 15 16 For Taxpayers' Rights Advocate's Office: Todd Gilman 17 18 19 20 21 --oOo--- 22 23 24 25 26 27 28 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 1 INDEX OFSPEAKERS 2 ---o0o--- 3 NAME PAGE 4 5 William Connell 5 6 Omar Pineda 17 7 Marty Dakessian 28 8 9 ---o0o--- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 1 5901 GREEN VALLEY CIRCLE 2 CULVER CITY, CALIFORNIA 3 APRIL 28, 2009 4 ---oOo--- 5 MS. OLSON: Our next item are public 6 hearings -- F1, Business Taxpayers' Bill of Rights, 7 hearing. 8 MR. GILMAN: Good afternoon, Madam Chair and 9 Members of the Board. Todd Gilman, Taxpayers' Rights 10 Advocate with the State Board of Equalization. 11 This is the business taxes taxpayers' bill of 12 rights hearing for Culver City, April 28th, 2009. 13 Individuals have the opportunity to present 14 their ideas, concerns and recommendations regarding 15 legislation, the quality of agency services and other 16 issues relating to the Board of Equalization's 17 administration of its tax programs. 18 At the business tax hearings, the taxpayers can 19 comment on the administration of sales tax, sales and 20 use tax, environmental fees, fuel taxes, excise taxes, 21 as well as comment on ways to resolve problems 22 identified in the Taxpayers' Rights 2007-2008 Annual 23 Report for Property and Business Taxes. 24 For the business taxes hearings we have three 25 speakers. Our first speaker is Mr. William Connell. 26 Mr. Connell? 27 28 5 1 WILLIAMCONNELL. 2 ---o0o--- 3 MR. CONNELL: Good afternoon. I have a couple 4 of things -- I have a couple of things to cover, maybe 5 you can help me here. 6 A while back we had an annotation that was 7 depublished. It still hasn't been printed in the digest 8 of being depublished. I'd like to see if that could be 9 done as soon as possible. 10 Likewise, under Regulation 5700, subdivision a, 11 was this depublished because it was in conflict with 12 another annotation or because it was in error? It's 13 either one or the other. Was it depublished because I 14 was some sort of nice guy? 15 Now I'd like the request that AG be notified 16 that the 4100900 was depublished because it was 17 misleading and openly in error, as that's what I told 18 all of you and that's what the reason was stated. 19 I don't believe it was ever in conflict with 20 another annotation. 21 Likewise, the legislative counsel opinions that 22 are put forth to the letter to the Attorney General 23 contain the annotation. And the annotation is contained 24 in multiple pages. And the report or the letter sent to 25 the Attorney General, 4465 page. So, that's the a first 26 thing, this annotation. 27 I'd really like to get that cleared up very 28 solidly. 6 1 Secondly, now high court with Brooks, it 2 provides for any license, tax or fee whatsoever. And 3 it's not characterized as Ms. Cazadd had put in this 4 letter to the AG. 5 The starting point was very important to me 6 last time I spoke with you in regards to this and that 7 was 1872 and this goes to the history. 1872 is when the 8 State Controller took over and the State Board of 9 Equalization took effect. That date, together, okay, is 10 at that point when you guys have the authority to handle 11 licensing, taxes and fees. 12 The background information must start at 1872, 13 not at Business and Professions Code 16102, as 14 Ms. Cazadd's letter started. 15 It was also a big thing about combination of 16 sister agencies, the Department of Veterans' Affairs. 17 Secretary Johnson and Deputy Legislative Secretary 18 Trembly of the DAV have never been contacted and I'd 19 like to know why. They put you a small little half a 20 page blurb in there and not talking to these gentleman. 21 MS. OLSON: Time has expired. 22 MR. CONNELL: I have an update. 23 MS. YEE: Mr. Connell, complete your thought 24 and we'll have some questions. 25 MR. CONNELL: Okay. I have an update from -- 26 now I know you worked on your Assembly bills for this, I 27 have an update on the Senate Bill. 28 Does everybody know there's a Senate Bill? 7 1 MS. YEE: Yes, there two bills going. 2 MR. CONNELL: Two bills. 3 And does everybody know that all seven Senators 4 signed on, the whole entire -- 5 MS. YEE: Committee? 6 THE WITNESS: -- committee? 7 Now I'd like to have the letter to the Attorney 8 General either redrafted or someone look at it with a 9 fine-tooth comb so that it's accurate. You can't make a 10 decision if you're not getting accurate information. 11 And I, quite frankly, do not think that the Attorney 12 General has. 13 And you wanted my support, let the Attorney 14 General look at it. I gave you that support. But when 15 I read what was put in there, it turned my stomach. 16 They're still dealing with the commas. 17 This has gone -- this has gone on way too long 18 for me. And it's just not fair. 19 If I understand one thing that this State Board 20 is doing, and I know a lot of you trying to help, but 21 one of the things you have to understand is when the 22 beginning of this law started, it was the State Board 23 and State Controller who had all control over licensing, 24 fees and taxes. That is your authority. And that's 25 what sets squarely in your favor. 26 It's your call on this. I know we're still 27 going to work on the legislation, but, you know, you are 28 going to get a letter to the Attorney General, you 8 1 better make sure it's pretty -- pretty accurate. 2 I don't know what else to say. I put forth the 3 other veterans' cases that you wanted. I found two more 4 in my many papers. 5 I've also worked within the Social Services 6 Department and the Department up in Sacramento on what 7 it costs a veteran per year on welfare. 8 I'm going to submit these papers afterwards, 9 you know. This was this is what was sent to your 10 Attorney General. If you were an attorney, would you 11 like to look at this? 12 Look at the size of this (indicating). 13 MS. YEE: Mr. Connell, we've requested the 14 Attorney General to render an opinion about our 15 authority. 16 So, we did submit everything on the record on 17 this issue to him, without trying to take sides, and 18 really to give him an opportunity to look at all of the 19 information and to render an independent opinion. 20 MR. CONNELL: I get the annotation taken out 21 and it's mentioned four different times in the letter to 22 the Attorney General. 23 MS. YEE: Well, it's mentioned in a lot of the 24 other backup documents as well. So, we're trying -- 25 he's going to take an independent look, that's the 26 purpose of the opinion request, to really then give us 27 clear guidance as to our authority to promulgate a 28 regulation. 9 1 MR. CONNELL: Okay. 2 MS. YEE: Okay, but I understand your 3 frustration and the points that you've raised. 4 The -- we will look at the timing of the 5 depublishing of the annoation, I think that's definitely 6 in process. 7 MR. CONNELL: I appreciate that. 8 MS. YEE: Okay. 9 MR. CONNELL: I also -- I have -- you guys have 10 so much paper, I have three or four little pieces of 11 paper I want to drop off and I'm am out of here. 12 Thanks a lot for working on this for us because 13 at this point the unemployment rate for the returning 14 veterans is around 28 percent now. 15 Last time I was here it 18.9, now it's up near 16 28. And, my God, something has to be done. And I'm 17 certain that you guys have the power to do it. I am 18 certain of it. 19 And I would expect that the Attorney General to 20 come down on that side. 21 MS. YEE: Okay. 22 MR. CONNELL: If not, we have the two 23 Assembly -- the one Assembly bill and one Senate bill 24 that will help, right? So -- 25 MS. YEE: Okay. Very well, thank you for all 26 your work on this, Mr. Connell. 27 MR. LEONARD: Madam Chair? 28 MS. YEE: Yes, Mr. Leonard? 10 1 MR. LEONARD: I see no one here from Chief 2 Counsel's office, so, through you, Mr. Gilman -- or d 3 you want to help me out? What's -- 4 MR. TUCKER: Sure. 5 MR. LEONARD: -- the process for depublication? 6 Do we give notice that something's depublished? 7 Or because it's depublished it just disappears? And do 8 we say why so that somebody might know that -- why they 9 can no longer rely on it? 10 MR. TUCKER: Robert Tucker, on behalf of the 11 Legal Department. 12 There is a process established for 13 depublication and I believe that this has already gone 14 through, it's already been noticed that the annotation 15 has been depublished. 16 MR. LEONARD: Right. 17 MR. TUCKER: What Mr. Connell may be referring 18 to is the Business Taxes Law Guides. Those printings 19 come out periodically. And, so, that is not necessarily 20 going to be updated immediately. 21 MS. MANDEL: There is -- 22 MR. LEONARD: Should our Legal Department refer 23 to it after it's been depublished? 24 MR. TUCKER: Generally, we would not. It's a 25 depublished annotation there. 26 MR. LEONARD: And when we depublish it, do we 27 put a notice as it's depublished, do we put a notice in 28 as to why? 11 1 MR. TUCKER: I'm not sure. 2 MS. MANDEL: I think what -- there is a thing 3 called "The Current Legal Digest." 4 MR. TUCKER: Correct. 5 MS. MANDEL: And that's what, I think, 6 Mr. Leonard's asking about. 7 Has it been out in the "Current Legal Digest"? 8 MR. TUCKER: My understanding is yes, it has. 9 MS. MANDEL: Okay. 10 MR. TUCKER: It was in the "Current Legal 11 Digest," I believe a month or two ago. 12 MR. LEONARD: But that just says, 13 "depublished," it doesn't -- does it not? 14 Does it say -- 15 MR. TUCKER: There is list of depublished 16 annotations that also provided in the "Business Taxes 17 Law Guide." I do not believe it explains why they were 18 depublished. 19 In this case it was done, as explained in the 20 letter to the Attorney General, simply to provide a 21 neutral and fair evaluation of the Business and 22 Professions Code statute. That was the sole purpose. 23 MR. LEONARD: Thank you. 24 MR. TUCKER: You're welcome. 25 MS. YEE: Any other questions? 26 Mr. Connell? 27 MR. CONNELL: There's -- I have this right in 28 front of me, this is your Regulation 570 -- 5700. 12 1 There's two ways that it's -- an annotation is 2 depublished. One way is if it is in conflict with 3 another annotation. And the other way is if it's openly 4 false. Those are the only two ways that it becomes 5 depublished. 6 It's not depublished because I'm a good guy -- 7 unless they have changed this without telling anybody. 8 It's either in error or it's in conflict with 9 another annotation. That's the only two ways it's 10 depublished. 11 MS. YEE: Well -- 12 MR. CONNELL: I need some help with this. 13 They're making it seem like they -- they want to be 14 Pontius Pilate, washing their hands of this. 15 MS. YEE: Mr. Connell, when you had made the 16 request of us to look at that annotation -- 17 MR. CONNELL: Correct. 18 MS. YEE: -- and to look at depublishing it, it 19 was really in the spirit of trying to provide, you know, 20 neutral ground for the AG to really evaluate. 21 MR. CONNELL: I gave three specific reasons why 22 it should be depublished. 23 And -- and your own attorneys put a -- twelve 24 years ago, eleven years ago, said that the only 25 difference between the sales and use tax, okay, in 26 regards to the annotation, was that -- that it was 27 collected on the posterior, not up front, and it was -- 28 it was tremendously advantage -- it was an advantage to 13 1 make -- I don't see that in there. 2 I don't see -- there is so many things I don't 3 see. 4 MS. YEE: Mr. Connell, I know -- I know, 5 you're -- I understand your frustration, I really do, I 6 really do. 7 But we've had to submit a lot of information to 8 the Attorney General. I think it will -- 9 MR. CONNELL: But it's not correct. 10 MS. YEE: No, it is information -- it is 11 information for that office to then opine as to our 12 authority to promulgate a regulation. 13 We are not trying to influence that opinion one 14 way or the other. And we did depublish the annotation 15 to really provide, you know, kind of a neutral -- 16 neutral place from which the Attorney General can 17 evaluate all of this information and render the opinion. 18 And I think -- I think it would be beneficial 19 for us to all think about, you know, how we move forward 20 on this. 21 THE WITNESS: Boy, I'm trying. 22 MS. YEE: We're all with you, believe me. 23 MR. CONNELL: Believe me, I'm trying. 24 MS. YEE: If we could fix this, I would fix it 25 yesterday. 26 But we are all with you on this. So, we are -- 27 I think the Attorney General has enough information and 28 certainly enough guidance as to the different places 14 1 that he ought to be looking at, history, as well as 2 current law application. 3 MR. CONNELL: That's very important. 4 In your own words, it was 1872 and they didn't 5 even start there. 6 MS. YEE: He's going to determine where to 7 start. But he's got all of that information, okay. 8 And then we have the two bills going, so let's 9 just kind of think forward and think about how we can 10 make a movement positively. 11 And we are glad to work together with you on 12 that. 13 Okay. 14 MR. CONNELL: Thank you so very much for this. 15 MS. YEE: Thank you. 16 And any information you have with you today 17 that's new you feel, you will provide that to 18 Mr. Gilman? 19 MR. CONNELL: I've given so much to so many of 20 guys, I don't know which way goes which, to tell you the 21 truth. 22 And if you -- I don't know, I will let up in 23 the air. 24 Do we have a time, maybe, when the Attorney 25 General might get to this? 26 MS. YEE: Mr. Tucker, any sense? 27 MR. TUCKER: Not that I'm aware of. 28 MS. YEE: Okay. 15 1 MR. TUCKER: I called last week. 2 MS. YEE: Well, we'll continue to make inquiry 3 and update at you as we know. 4 MR. LEONARD: Madam Chair? 5 MS. YEE: Yes, Mr. Leonard? 6 MR. LEONARD: As the Board knows, I believe 7 that we do have the authority and am disappointed that 8 we haven't exercised it to grant the request under 9 the -- under the law. 10 It does strike me -- I mean, I've lost on that 11 so I am not suggesting that now. 12 It does strike me in the context of this 13 discussion that we might have a new conflict emerging 14 where the Attorney General opinion comes out at the same 15 time legislation passes. Statute would trump the 16 opinion -- unless the opinion takes on the subject or 17 discussion that wasn't in the new law, in the statute. 18 We might want to keep track with the Attorney 19 General and with the legislature and if it looks like 20 one of the bills might be successful, that we might ask 21 the Attorney General to suspend action until we know if 22 there is a new law that we're going to have to deal 23 with. 24 Because if there's a law, we'll be adopting 25 regulations to implement it. 26 MS. YEE: Exactly. 27 MR. LEONARD: And the Attorney -- I hate having 28 the Attorney General can come after the fact on top of 16 1 that. 2 MS. YEE: I think that's a point well taken. 3 And I guess Mr. Gilman and Mr. Tucker will 4 coordinate with our Legislative Division in terms -- 5 MR. LEONARD: Thank you. 6 MS. YEE: -- of the timing of both. 7 Okay, thank you very much. 8 MR. CONNELL: I want to thank you very much. 9 And I have one thing to say. I have a public 10 apology to Mr. Tucker. 11 After reviewing these thousands of documents 12 this past weekend, I got myself into a little Jose 13 Cuervo and I made very inappropriate phone call to him. 14 And I wish to apologize to him publicly, as I have done 15 privately. 16 And he has accepted my apology. 17 MS. YEE: Okay, thank you. 18 MR. CONNELL: I'll just let you know, that was 19 a little out of my character. I got a little 20 frustrated. 21 MS. YEE: That's all right, we understand. 22 You've been dealing with this for a very long time. 23 THE WITNESS: Thank you so much. 24 MS. YEE: Thank you very much, Mr. Connell. 25 MR. GILMAN: Thank you. 26 ---o0o--- 27 28 17 1 MR. GILMAN: Next speaker, Mr. Omar Pineda. 2 Mr. Pineda, would you come up, take a seat, 3 please? 4 ---o0o--- 5 OMAR PINEDA 6 ---o0o--- 7 MR. PINEDA: Good afternoon, Board Members. 8 I'm here on a 16-year-old case, actually, two cases 9 concerning two mini markets that I used to own back in 10 the '90s. 11 This has been ongoing, again, for 16 years. 12 There were some audits conducted back in '93 and it was 13 determined back then that additional sales taxes were 14 owed. 15 Because of my inability to pay for these taxes, 16 again this has been going on for a long period of time, 17 I have since then negotiated and signed various 18 agreements in an effort, again, to pay these taxes. 19 Unfortunately, I just haven't earned enough income to 20 pay for these taxes in full. 21 I am here today to share a very, very bad 22 experience, very negative experience that I experienced 23 here at this district a couple of years ago. 24 I was contacted by a -- I won't mention the 25 person's -- the representative's name because it's not 26 really that important. What is important is that I was 27 contacted because of these taxes owed. And I was told 28 to bring personal and financial -- personal and business 18 1 financial information so that they could determine how 2 much I could pay. 3 I did so. And I was told at the time that I 4 was not -- I was told by the tax collection 5 representative that I was not allowed to bring the 6 person who was supposed to help me with this, a 7 gentleman by the name of James Mahoney, who is a 8 Certified Public Account. I was surprised that I was 9 told I couldn't bring this gentleman with me and I don't 10 understand to this day why. 11 Additionally -- 12 MR. LEONARD: I'm sorry, do you have the name 13 of the person that told you that? 14 MR. PINEDA: Oh, yes. 15 MR. LEONARD: Have you given that to 16 Mr. Gilman? 17 MS. MANDEL: I think it's -- 18 MR. PINEDA: Douglas Campos. 19 MS. MANDEL: -- it's in the letter. 20 MR. GILMAN: That's right. 21 MS. MANDEL: Was this -- did you report this 22 before? Or is this the first time? 23 MR. PINEDA: I contacted the Taxpayers' 24 Advocate's office approximately a year or so ago. 25 MS. MANDEL: Okay. Okay, keep going. 26 MS. YEE: Please proceed. 27 MR. PINEDA: At any rate, at that particular 28 hearing he was also -- he also indicated that the -- his 19 1 supervisor would sit in the meeting with us. And for 2 whatever reason -- for whatever reason, she did not. 3 He was very, very aggressive. He was very, 4 very intimidating. He was very threatening, you know, 5 very, very, unprofessional, to say the least. 6 He pressured me into agree to a certain amount 7 of money that December, which I really did not have. 8 And, so, ultimately what happened was I had to 9 go back to my CPA to assist me with this because I was 10 not simply getting anywhere with this particular 11 representative. 12 James Mahoney took over the case, James Mahoney 13 being the CPA, and he tried working with Douglas -- with 14 Douglas Campos, and again had no success. He submitted 15 all of the information that he requested of him. He was 16 working on offers of compromise because, again, these 17 are very, very old cases. And he was not successful in 18 doing so. 19 Then the case was assigned to a -- to a 20 different representative, a young woman by the name of 21 -- I wasn't going to mention their names, but since you 22 have asked for their names, I will mention their names. 23 The case was assigned to Sandra -- I believe her name 24 was -- 25 MS. YEE: Is it Sandra Gonzales? 26 MR. PINEDA: -- Sandra Gonzales. 27 MS. YEE: Okay. 28 MR. PINEDA: And James Mahoney tried to work 20 1 with her as well and again was unsuccessful. 2 She -- according to James Mahoney she attacked 3 my character and, frankly, I don't know why because I've 4 have never met this lady. She -- she accused me of 5 various things. And bottom line is that James Mahone 6 was not able to work with her either. 7 So, finally, James Mahoney just turned to me 8 said, "Look, we have a situation where I can't work with 9 these folks. I've tried, you know," and bear in mind 10 that James Mahone has been a CPA in the San Fernando 11 Valley for a good twenty plus years, he's a very 12 experienced CPA and I'd like to think that he knows what 13 he's doing. 14 So, he finally said, "You're going to have to 15 seek help elsewhere because I'm not getting -- I'm not 16 getting anywhere with Miss Gonzales." 17 Then Miss Gonzales called me after that and 18 that's the only time that I spoke with her. And she -- 19 the first thing that she uttered out of her mouth was, 20 "Did you -- did you give James Mahoney the boot?" 21 And I couldn't understand that remark, you 22 know, did I give him the boot. 23 And I told her that no, I did not give him the 24 boot, that I was seeking help elsewhere. 25 I did seek help with the Jake K. Harris and 26 Company. And these are folks, as I'm sure most of you 27 have heard of, they specialize in these matters, tax 28 matters before the IRS and the various State agencies. 21 1 They worked -- they filed attorney claims before this 2 District. And they also tried to work with this 3 District. 4 Unfortunately, they never did complete the 5 offers because they were going to try to submit some new 6 -- some fresh offers. They never did complete them. 7 And now I find myself in a situation where I'm in a 8 dispute with them because they did not complete those 9 offers. 10 In the meantime, here I sit, 16 years later, 11 still with these two cases unresolved -- again because 12 of because of the way this District has chosen to deal 13 with these cases. 14 MS. OLSON: Time has expired. 15 MS. YEE: Okay. Mr. Gilman, have you had a 16 chance to look into this? 17 . 18 MR. GILMAN: Yes, I have, I've had a chance to 19 talk to Mr. Pineda, as well as the District 20 Administrator in the office and get a little more detail 21 and background about the case. 22 Unfortunately, the Advocate's Office has no 23 indication that Mr. Pineda contacted our office for 24 assistance. That's not to say that Mr. Pineda didn't 25 contact our office. 26 Generally when a taxpayer calls the Advocate's 27 office, if we determine that they haven't worked through 28 normal channels -- meaning they haven't talked to a 22 1 supervisor or the next person in charge, we will 2 instruct or advise the taxpayer to talk to a supervisor. 3 And if they're not able to resolve it at that 4 level, to please call our office back. Subsequent to 5 that, I've also had an opportunity to talk to the 6 Offers-In-Compromise Section in terms of the two offers 7 that Mr. Pineda has made. 8 The information I have received from them is 9 that the reason the offers weren't accepted at the time 10 was because Mr. Pineda, apparently from their analysis, 11 had the ability to pay the liability within a reasonable 12 amount of time. However, at this point in time there is 13 no collection action being taken against Mr. Pineda's 14 case. 15 The District office has invited Mr. Pineda in 16 to a meeting with him to sit down and go over his 17 current financial situation to see whether or not they 18 can develop an equitable, fair payment arrangement and 19 also evaluate whether or not he is eligible for an 20 offers-in-compromise now as opposed to when he filed, I 21 believe in the 2007. 22 Is that correct, Mr. Pineda, when you filed? 23 MR. PINEDA: That is correct. 24 MR. GILMAN: You had two -- two 25 offers-in-compromise, that you filed? 26 MR. PINEDA: Yes. 27 MR. GILMAN: And they were both denied? 28 MR. PINEDA: Yes. And that's another thing 23 1 that I want to add. 2 To this day I don't have a letter stating 3 specifically as to why they were denied. I do remember 4 getting a letter that stated that they were what they 5 called collectible accounts. But they didn't specify as 6 to why. 7 Neither myself nor James Mahoney -- to this day 8 I don't know why they were denied. 9 MS. YEE: Okay, questions, Members? 10 MS. MANDEL: Yes. 11 MS. YEE: Dr. Chu and then Ms. Mandel. 12 DR. CHU: And what about this -- this issue 13 about the CPA not being allowed to go into the meeting? 14 Is this -- is this normal or not? 15 I mean, I would think -- it sounds strange. 16 MR. GILMAN: No, I would not think that that is 17 normal practice. 18 That's his representative, so, he should have 19 the opportunity to have his representative present when 20 he's negotiating or talking to staff. 21 But I don't -- I'm not aware of this. I mean, 22 I haven't heard of this practice. 23 MS. YEE: Was that addressed when you looked 24 into the matter. 25 MR. GILMAN: Following up with the District now 26 in terms of some of the allegations that Mr. Pineda has 27 brought up. And right now we want to make sure that we, 28 at least, get him in a situation where he's comfortable 24 1 with the collection staff and enter into a voluntary 2 payment agreement and then address these issues that 3 he's brought up later with management in terms of the 4 concerns that he has. 5 MS. YEE: Okay. Could I also suggest that you, 6 at some point, involve our Chief of Field Operations. 7 MR. GILMAN: Yes. 8 MS. YEE: Thank you. 9 Ms. Mandel? 10 MS. MANDEL: I guess there's -- yeah, there's 11 sort of three parts to what he's saying. 12 And one is can he get and offer, which you're 13 working on. One is when we get the letter that says 14 that the offer is rejected -- and I haven't seen one of 15 these letters, but I guess the letter says, well, it's 16 rejected because we think it's a collectible account, 17 which is a magic word for we think that you have enough 18 assets that in the normal course of a reasonable period 19 we could be able to get all of the money. That maybe 20 isn't explained well enough in the letters or -- or, 21 perhaps, people think that what they filed shows -- you 22 know, is there no discussion explaining why? 23 And then if it's viewed that the account's 24 collectible, why don't they -- I mean, either it's 25 collectible because you have a pot of money sitting 26 there right now or we should put you on an installment 27 plan. 28 Do they not go that second step to say, "We 25 1 think it's collectible, so, we're not going to accept an 2 offer, but you need to look at it an installment payment 3 plan if you don't have all of the money right now. 4 MR. GILMAN: Yes. I mean, as I understand it, 5 letters were sent to either Mr. Pineda and your CPA in 6 terms of the offers that were denied. And they 7 instructed or explained to the taxpayer that the Board 8 referring back to the District office for you to enter 9 into a voluntary payment agreement based on our analysis 10 that you had the ability to pay. 11 And they also put a comment in ACMS that a 12 letter was sent and that the collection staff should 13 engage the taxpayer to work out a payment arrangement. 14 MS. MANDEL: Okay. Because I would just want 15 to make sure that the letters are clear enough that 16 people know what they ought to be doing next. 17 MR. GILMAN: Right. 18 MS. MANDEL: And you already answered, I guess, 19 the second -- the second part was whether he has the 20 financial capacity now? 21 And the third part is the part, you know, it's 22 kind of the personnel part that Dr. Chu was asking about 23 is when -- you know, on occasion, you know, if I got 24 something that was a complaint, or maybe it's just 25 because I don't know exactly who to send them to. And I 26 tend to send them -- I think I sent one recently to 27 ISAT. 28 So -- but you're sort of following up with that 26 1 through channels and making sure that nobody's 2 getting -- 3 MR. GILMAN: And that's not uncommon for us to 4 do that when we get a complaint from a taxpayer in 5 writing and in terms of treatment. 6 And we've had this before. And we send that up 7 through the chain of command for them to respond to us 8 in terms of what action they plan on taking or what 9 they've determined or what they've discovered. 10 MR. PINEDA: If I may add, while I was waiting 11 in the car, because, you know, it was -- the meeting or 12 the hearing was postponed 'til later this afternoon, I 13 actually called on my cell phone, I called James Mahoney 14 because I couldn't remember if he had gotten a letter 15 precisely indicating specifically why the offers were 16 denied or not accepted. 17 And he tells me no, he didn't get a letter. I 18 did get a letter from Sacramento, again stating to the 19 effect that they were collectible accounts. But that's 20 all that I -- no specifics. 21 And we thought that we had some properly made 22 offers. I mean, you are right. You either have the 23 assets or you don't. You have the money or you don't. 24 There is no gray area. 25 MS. MANDEL: It's available for the taxpayer, 26 though, to talk to Offers-In-Compromise when they get a 27 letter. 28 MR. GILMAN: Absolutely. 27 1 MS. MANDEL: So that they understand why it was 2 rejected? 3 MR. GILMAN: Right. And to my understanding, 4 there's contact information on the letter from whoever 5 prepared that if it taxpayer wishes they can call the 6 Offers-In-Compromise Section. 7 MS. MANDEL: Thanks. 8 MS. YEE: Other questions, Members? 9 Okay, thank you very much, Mr. Pineda for 10 bringing your concerns forward. 11 We will continue to look into it and be in 12 contact with you. 13 MR. PINEDA: Thank you for your time and for 14 the opportunity to hear me. 15 MS. YEE: Thank you. 16 MR. GILMAN: Thank you. 17 ---o0o--- 18 19 20 21 22 23 24 25 26 27 28 28 1 MR. GILMAN: Okay, our next speaker is 2 Mr. Marty Dakessian. 3 He has three items he'd like to present before 4 the Board. 5 Mr. Dakessian? 6 ---o0o--- 7 MARTY DAKESSIAN 8 ---o0o--- 9 MR. DAKESSIAN: Good afternoon, Madam 10 Chairwoman, Members of the Board. 11 My name is Marty Dakessian. I'm a shareholder 12 with the Law Firm Akerman Senterfitt here in downtown 13 Los Angeles. I'm here today on behalf of three 14 different clients of mine, all of whom are small 15 businesses. 16 And let me just start with this, generally 17 speaking, you have a fine staff. I'm impressed with the 18 quality of your staff overall. They are, for the most 19 part, very conscientious. They work hard. They do 20 their best. 21 But today is an opportunity for us to talk 22 about the exceptions, maybe some of the less than 23 positive experiences we've had with some of the actions 24 that have been taken as I've represented taxpayers. 25 So, if I could be permitted, I'd like to speak 26 specifically about the three different clients of mine, 27 three specific case studies that I think we can all 28 learn from and improve upon. 29 1 The first case I'd like talk about is the 2 appeal of Ara Harabetian. Mr. Harabetian is a taxpayer 3 who was assessed a derivative sales tax liability under 4 Revenue and Taxation Code Section 6829. 5 Mr. Harabetian's father operated a small service station 6 in Southern California. And Mr. Harabetian was found to 7 be a responsible person under Section 6829. 8 I'm not here to talk about the merits of the 9 case, even though I disagree with that finding, the 10 reason I'm bringing this case to your attention today 11 has to do with the manner in which collection activity 12 was handled on this account. 13 Upon my advice, Mr. Harabetian paid the entire 14 tax amount at issue. We filed a timely claim for refund 15 on his behalf, which was -- which was denied by the 16 Board. 17 And under published Board procedures, 18 specifically Compliance Policy and Procedures Manual 19 703.030, once the tax is paid and a claim for refund has 20 been filed, Board staff is supposed to wait for a period 21 of 180 days after denial of a claim pending verification 22 that a lawsuit has not been filed in Superior Court. 23 If a lawsuit has, in fact, been filed, then 24 collection activity is to remain in suspension until the 25 case resolves itself in court. So, only then do Board 26 published procedures permit resumption of collection 27 activity. 28 Well, Mr. Harabetian called my office and told 30 1 me that your Board's Centralized Collections Unit had 2 levied a bank account that belonged to my client's wife 3 and her brother, which is a separate issue. The account 4 didn't belong to him and is not community property, but 5 that's separate issue. So, I guess there's really two 6 issues the way I see it. One, the Board needs to be 7 really careful not undertake collection activity when 8 the tax is paid, a claim for refund is filed and the 9 taxpayer has an opportunity to file a lawsuit because I 10 think then we're getting into the problems of 11 circumventing the Supreme Court's decision in Agnew 12 versus State Board of Equalization, which asserted or 13 confirmed the right of the taxpayer -- the right under 14 the California constitution, of a taxpayer to file a 15 lawsuit having paid only the tax. So -- and I 16 think Board staff recognized it because the changes to 17 the CPPM, at least one of the previous versions that I 18 remember, actually cite Agnew and say, you know, "As a 19 result of Agnew, we've got to, you know, really, you 20 know, be careful about how we handle collection 21 activity." And -- and, so, that's what the Board's 22 published policy is, wait 180 days, it's a no 23 collections period. 24 But Board staff basically, I don't know, 25 consciously or unconsciously, ignored this. And the 26 result was a levy against my client's individual bank 27 account for like $1500 and then a larger levy of about 28 $40,000 against the wife and the brother-in-law's 31 1 account. 2 So, I tried to work through this with 3 collections staff. And I called the head of Centralized 4 Collections, wrote him a letter and said, 5 "Hey, you know, there must kind of a mistake 6 here. You guys ought to refund this money 7 because we're going to file suit and you ought 8 to just, you know, wait until the lawsuit is 9 over and let's see what happens." 10 I wrote him a letter to that effect, which I 11 can provide for your Board. I don't have a copy with me 12 today. 13 I got a letter back, a one paragraph 14 response -- oh, and I cited the Agnew decision -- got a 15 letter, you know, back with a one paragraph response 16 saying that we don't think there's really -- well, I'm 17 paraphrasing, "We don't think there's anything wrong 18 with this. We're not compromising your client's ability 19 to bring a lawsuit under Agnew. And, you know, so 20 that's it. And as for this allegation that it's not 21 your client's funds, well, we're looking into this." 22 So, you know, it -- as far as I could tell, the 23 Board staff didn't conduct any sort of investigation to 24 see who these funds belonged to. And you've got the 25 problem with the collections procedures. 26 So, what choice do we really have at that 27 point, you know? We try and work it out and we kind of 28 get to this roadblock. So, we had to file a claim, had 32 1 to file a lawsuit. 2 So, in full disclosure, there is a lawsuit 3 pending. So, you know, be under advisement, you know, 4 if you want to seek advice from your counsel before you 5 make any comments in public, I understand that. 6 But the reality is that is the only avenue that 7 was really left for us. And what it ends up doing -- 8 you know, there are going to be two tracks to this tease 9 lawsuit now, one is going to be for the straight refund, 10 but there is going to be another track under the 11 Taxpayer Bill of Rights, under Section 7099, you have 12 the right to bring a lawsuit if the Board disregards -- 13 Board staff recklessly disregards its own published 14 procedures and damages a taxpayer, then the Board is 15 liable for those damages and liable for reasonable 16 litigation costs. 17 So, if we could only have communicated better 18 with your staff, if we could only have had some real 19 discussion around the issue rather than sort of the 20 standard, "Hey, we didn't do anything wrong," I think we 21 would have solved the problem and we wouldn't have had 22 to file the lawsuit. And your Board would have avoided 23 exposure for attorney's fees, which -- 24 MS. OLSON: Time has expired. 25 MS. YEE: Complete your thought, Mr. Dakessian. 26 MR. DAKESSIAN: -- okay, can I just say that I 27 wanted to speak out with respect with three different 28 taxpayers, I'm hoping. 33 1 MS. YEE: That's okay. Finish up this case, 2 then we're going to ask you to be a little bit more 3 efficient with your time with respect to the other two. 4 MR. DAKESSIAN: Okay, all right. 5 Well, I'll just stop talking about that then. 6 The second case I wanted to talk about -- 7 MS. YEE: Actually, before you move on, 8 Mr. Gilman, any thoughts on this matter. 9 MR. GILMAN: Mr. Dakessian has been in contact 10 with my office and we have been in contact with the 11 Refund Section in terms of this issue. 12 What we discovered was that -- apparently a 13 flag is supposed to be put on the account when a claim 14 for refund is filed in IRIS. And, apparently, a flag 15 for this particular assignment or this case there was no 16 flag placed on it, so, when the account came out of the 17 Refund Section, there was no red flag and, therefore, it 18 allowed the collection staff to pursue collection action 19 immediately. 20 So, we have been working with our Refund 21 Section, we've also been in contact with our Legal 22 Section over this and, of course, Mr. Dakessian has -- 23 did you also file a VCGC claim on that too? 24 MR. DAKESSIAN: Yes. 25 MR. GILMAN: Okay. So, we've been in contact 26 with our Legal Department as well as our Refund Section 27 in terms of this issue and working it from our 28 perspective. 34 1 MS. YEE: Okay. Questions? Mr. Leonard? 2 MR. LEONARD: And the second part, the levy of 3 somebody else's money, have you looked in that? 4 MR. GILMAN: In terms of -- yes, we have, 5 that's also been -- did you also file a claim for that 6 too? 7 MR. DAKESSIAN: We did. 8 MR. GILMAN: That's part of his claim. 9 We've also had discussion with the Refund 10 Section in terms of that issue as well. 11 MR. LEONARD: So -- 12 MR. GILMAN: We're waiting to hear back from 13 Legal in terms of what Mr. Dakessian's position -- 14 MR. LEONARD: We'll get an answer? 15 MR. GILMAN: Right, correct. 16 MS. STEEL: When did you file it, asking for 17 refund? 18 MR. GILMAN: Marty? 19 MR. DAKESSIAN: When did I file the claim with 20 the Board of Control, with the Victims' Compensation 21 Board? 22 MR. GILMAN: Well, we mentioned both. You 23 filed the claim for refund back in -- 24 MR. DAKESSIAN: February, I think. 25 MR. GILMAN: -- of '09 -- '08? 26 MR. DAKESSIAN: Of -- of '09. All the claims 27 were filed fairly recently. 28 March -- February and March, I think -- 35 1 February for the claims for the straight tax case and I 2 think I want to say March for the government claims. I 3 can get the specific dates. 4 MS. YEE: Very well. 5 Okay, next issue, Mr. Dakessian? 6 MR. DAKESSIAN: The second case I wanted to 7 talk about, which is another one that I think was 8 totally avoidable, and that's a case -- also it is in 9 litigation right now -- which is Parmar versus State 10 Board of Equalization. 11 The clients in this case were a small business. 12 They were assessed individually with corporate excise 13 taxes during that portion of the audit that the 14 corporation was suspended. 15 And there is absolutely no statutory or 16 regulatory authority for this period. I did not 17 represent the Parmars during the administrative process, 18 but it is undisputed that the Board knew there were 19 problems with this assessment, you know, assessing these 20 individuals, one of whom was neither even an officer nor 21 a shareholder of the business. 22 But instead of canceling the assessments and 23 the statute for the corporation was still open at that 24 time -- instead of canceling the assessments and issuing 25 an assessment against the corporation or, you know, 26 promulgating a regulation or asking for legislative 27 authority to issue the suspended corporation 28 assessments, the Board rested on its longstanding 36 1 policy, which has been in place for over forty years, to 2 assess the Parmars -- and, again, without any legal 3 authority whatsoever. 4 The case came before your Board in 2004. It 5 was 3-2 decision, with Board Member Leonard and Board 6 Member Parrish in the minority. The Board voted to 7 sustain staff. 8 The administrative process in this case took 9 over nine years from the time the Notice of 10 Determination was issued until the claims for refund 11 were denied. And to fight this, in my view, clearly 12 illegal tax, my clients had to then pay the tax, file 13 the claims for refund and then proceed to Superior 14 Court, which we did. 15 We get to Superior Court, try to resolve the 16 case via settlement, speak with your counsel about it -- 17 I am not going to discuss any more beyond that. 18 MS. YEE: We're not discussing this at all. 19 So, we're just going to listen. 20 MR. DAKESSIAN: That's quite all right. 21 MS. YEE: Okay. 22 MR. DAKESSIAN: And I think it's -- I'm really 23 happy that you are listening because for the past forty 24 years the Board has been collecting taxes on -- by its 25 own admission -- has been collecting taxes from officers 26 and shareholders of suspended corporations illegally. 27 We had two different Superior Court judges say 28 that, one on a ruling on summary judgment, where there 37 1 was -- agreed with us on the legal issues and asked to 2 prove up some factual issues at trial; then we actually 3 had the trial court decision and now your Board has 4 appealed. 5 So, we filed cross motions for summary 6 judgment, we went through a six-day bench trial, rounds 7 of pre and post trial briefing, and now here we are. 8 And I just think that from the standpoint of 9 good, sound tax policy, where your staff has admitted 10 that this affects over 25 different tax and fee programs 11 and has been be doing this for the last forty years, 12 your Board has been collecting millions upon millions of 13 dollars worth of illegal taxes, in my view, mostly from 14 small businesses. 15 So, in my view, it's not good tax policy to 16 continue to engage in activities which we now have a 17 court decision on saying are illegal. 18 The third case I'd like to bring to your 19 attention is Appeal of B & R Industries, not in 20 litigation, feel free to comment. 21 This is another derivative liability case, this 22 time successor liability. The issue at the time was 23 whether the alleged successors had to pay the initial 24 purchase price of $400,000 or the later court-ordered 25 reduced price of $90,000 and change. 26 The case made it all of the way to your Board, 27 which voted for staff. My clients, who had not retained 28 me at the time, consulted with a bankruptcy attorney. 38 1 They had 25 employees and were going to file bankruptcy. 2 They were on the brink of bankruptcy, had the liability 3 gone final. 4 They retained me at that point. I requested a 5 rehearing. I specifically remember meeting with Dr. Chu 6 in her Monterey Park office to talk about the case. And 7 the entire Board, to your credit, voted to grant a 8 rehearing. So, I thank you for that. 9 And it was a good thing that you did. Because 10 when I looked at this case, I remember thinking that the 11 Board's assessment appeared to be cutting it awfully 12 close to the statute of limitations, which in successor 13 liability cases runs -- at least under the old 14 statute -- three years from the date the Board had 15 notice of the assessment. 16 So, the Board claimed in the summary analysis, 17 which you have before you -- it's the document -- the 18 multi-page document that has the green tab -- that it 19 received notice of the sale of the predecessor business 20 on January 25th, 2001, the January 18th, 2004 assessment 21 was, therefore, timely since it was within the three 22 years. 23 Well, you know, as part of my due diligence on 24 the statute of limitations issue, which had not been 25 previously raised by the taxpayer, I requested all 26 communications records between the predecessor 27 corporation and the Board. 28 Your Board's disclosure staff refused to 39 1 provide those documents to me -- which is really 2 problematic, because here I am trying to challenge the 3 timeliness of the Board assessment and the Board is 4 claiming disclosure of records that would prove my case 5 is prohibited under the confidentiality provisions of 6 Section 7056. 7 So, I argued, you know what, the statute says 8 we're a successor directly interested within the meaning 9 of the statute, but to no avail. 10 So, I was basically thinking we were going to 11 have to go to court on this and get the records I wanted 12 through discovery. So then, you know, I decided I was 13 going to put the matter into settlement and see if I 14 could resolve it through settlement. 15 And I explained the situation to the settlement 16 attorney that was assigned, Steve Ryan. And I asked him 17 to conduct his own investigation, to look into it. And 18 he did. And, guess what, he found two separate pieces 19 of evidence proving that the Board had notice as of -- 20 as early as November of 2000 and that the assessments 21 were, therefore, two months late. 22 The notice of successor liability has since 23 been canceled based on the recommendations of Mr. Ryan 24 and Kevin Hanks, Chief of the Headquarters Operations 25 Division. 26 Those are the other two documents you have, by 27 the way. So, it was canceled five years and three 28 months after it was initially issued -- never should 40 1 have been issued. 2 And my clients incurred attorneys' fees in 3 excess of $70,000 to fight this. I did not get the bulk 4 of that, I want you to know, but never should have been 5 issued. 6 So, I am still looking into how this could 7 happen -- what happened? How did this -- how did this 8 calamity almost take place where my clients would have 9 had to have filed bankruptcy and a California small 10 business with 25 employees would have wiped off the map. 11 I mean, it took -- it, obviously, took 12 representation by counsel, but it also took 13 conscientious Board employees like Mr. Ryan to prevent 14 it from happening -- never should have happened. 15 But, you know, I am really thankful that you 16 had someone on your staff that stepped up to the plate 17 and did the right thing. I don't know what we're going 18 to do at this point. 19 My clients are not happy, but -- but, based on 20 what I have talked about, actually, I'm not just here, 21 you know, to gripe, but I actually have real suggestions 22 for your Board that I think that you ought to consider 23 implementing and that I think will make the Board a 24 better agency. 25 First of all, I think the common thread for all 26 three of these cases is that they're all derivative 27 liability cases. The law in this area, Members of the 28 Board, is not well defined. It is not fleshed out. And 41 1 it's no coincidence that it's an area rife with 2 problems. 3 Whether you need to do this by regulation, by 4 annotation, by providing your staff with guidance -- 5 you know, if you have longstanding Board policies that 6 you think are worthwhile, then put them in statutes or 7 regulations. There is a lot of catch up work to do 8 because you have a lot of different tax and fee 9 programs. And people have experience on staff based on 10 what's happening in sales tax, but the statutes and the 11 regulations are not in place for those other programs. 12 It's a big undertaking, but it would really go 13 a long way to helping taxpayers and small businesses 14 understand what the law is because they're the ones when 15 a mistake like this happens, like to B & R Industries, 16 they're the ones that can least afford to sustain the 17 type of damage. 18 I think it makes government more accountable, 19 makes it more transparent. I know -- I have worked with 20 all of you -- I know all of you believe in that, so -- 21 MS. OLSON: Time has expired. 22 MR. DAKESSIAN: A few more suggestions that are 23 positive. 24 MS. YEE: Briefly. 25 MR. DAKESSIAN: Okay. I would strive for more 26 consistency from your collections staff. Maybe you can 27 assign a member of the Legal staff to serve as 28 Collections Counsel to help prevent the type of 42 1 situation that we had described above with 2 Mr. Harabetian. 3 And then, finally, my last suggestion is, 4 consider having a specific reward, rewarding behavior 5 from your staff that results in assisting a taxpayer, 6 especially a small taxpayer, perhaps somebody rights a 7 wrong that took place, perhaps you can -- a Board 8 employee goes out of his way to secure an important 9 right for a taxpayer. 10 You should really think about rewarding 11 employees that do so by increasing their compensation, 12 by promoting them, by recognizing them, maybe an annual 13 award for excellence in taxpayer service for each of the 14 Board's departments. How you do it is up to you. I 15 think it's a good idea and I think it will encourage 16 more evenhanded administration of the tax. 17 MS. YEE: Thank you very much for the 18 suggestions, Mr. Dakessian. 19 Mr. Gilman, you have those jotted down? 20 MR. GILMAN: Well, I appreciate Mr. Dakessian's 21 comments. 22 There have been a couple of situations in the 23 cases that have come to my office in which we could 24 certainly have benefitted by having some better policy 25 or guidance in terms of our collection staff as far as 26 some of the issues that we've dealt with. 27 But I certainly appreciate his comments and 28 we'd be willing to work with whoever the Board deems 43 1 necessary if they want me to pursue any of 2 Mr. Dakessian's recommendations to see if we can make 3 some improvements. 4 MS. YEE: Very well. 5 Questions, Members? 6 Mr. Leonard? 7 MR. LEONARD: Mr. Gilman, could you look into 8 the answer that Mr. Dakessian got as to he was not 9 allowed access to the prior liability records in order 10 to help defend the successor liability? 11 Is that our policy? Was that an error? 12 Was that at somebody's discretion? 13 MR. GILMAN: Yes, sir. I can look into that. 14 MR. LEONARD: I don't think it was on your list 15 of reforms, but I'd include that in. 16 MS. YEE: Okay, other questions? 17 Very well, thank you so much. 18 MR. DAKESSIAN: Thank you. 19 MR. GILMAN: Okay. I believe, unless anybody 20 else has signed in that I'm not aware of, that that 21 concludes our speakers for the Business Taxes hearing. 22 If there's anybody in the audience that would 23 like to come forward and speak now, with the 24 Chairwoman's permission? 25 26 27 28 44 1 Okay. Real quick, we have two letters that 2 were written submissions that I'd like to make a comment 3 about provided by Mr. Abe Golomb. 4 The first one pertains to audits by the 5 Interstate Commerce Analysis Team. And the second 6 submission pertains to Revenue and Taxation Code 6829, 7 billings issued when a corporation is not terminated. 8 I've been communication with the Sales and Use 9 Tax Department over both of these issues and will be 10 providing a response to the Board on those submissions 11 as to problems that Mr. Golomb has brought forward. 12 ---o0o--- 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 45 1 REPORTER'SCERTIFICATE. 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, JULI PRICE JACKSON Hearing Reporter for the 8 California State Board of Equalization certify that on 9 CULVER CITY 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 pages 1 13 through 44 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: June 8, 2009 17 18 19 ____________________________ 20 JULI PRICE JACKSON 21 Hearing Reporter 22 23 24 25 26 27 28 46