BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 450 N Street, Room 121 Sacramento, California REPORTER'S TRANSCRIPT AUGUST 31, 2009 ITEM F1 PUBLIC HEARING 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 Steve Shea 6 Acting Member 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: Bradley Heller Legal Department 17 Deborah Cooke 18 Legal Department 19 Kevin Hanks Sales and Use Department 20 Lou Feletto 21 Use Fuels Division 22 23 24 ---oOo--- 25 26 27 28 2 1 Sacramento, California 2 August 31, 2009 3 ---oOO--- 4 MS. OLSON: Okay, our next item on the agenda 5 is F1, Proposed Amendments to Sales and Use Tax 6 Regulation 5237, Board Approval Required for Refunds; 7 and Sales and Use Tax Regulation 5266, Appeals Staff 8 Recommendations, Requests for Reconsideration and 9 Requests for Oral Hearings. 10 Ms. Yee. 11 MS. YEE: Good morning, Mr. Heller. Will you 12 refresh our memories on this matter, please. 13 MR. HELLER: Certainly. Good morning, Madam 14 Chair, Members of the Board. My name is Bradley Heller. 15 I'm an attorney with the -- the Board's Legal 16 Department. I have Deborah Cooke here, also with the 17 Board's Legal Department; Kevin Hanks from the Sales and 18 Use Tax Department; and Lou Feletto from our Use -- our 19 Use Fuels Division. Perfect. 20 And essentially, first of all, we need to 21 request the Board's adoption of the proposed amendments 22 to Regulation 15 -- excuse me, 5237 and Regulation 5266, 23 which -- which increased the regulatory threshold for 24 staff to approve refunds. 25 In addition, on Friday we distributed some 26 additional materials that kind of relate back to the 27 Board's discussion back on May 27th. And essentially 28 they kind of outline the various public notice 3 1 requirements that apply to refunds that are over certain 2 threshold amounts in all of the Board's different 3 programs. And the documents also outline the steps the 4 two departments take in order to approve refunds that 5 are not submitted for Board approval. They kind of 6 outline the different documents that are provided to the 7 taxpayers as well as the different steps that management 8 takes before a refund's actually issued or a credit's 9 made for a taxpayer. 10 Finally, we worked with the Department -- I'll 11 say our Legal Department and the two tax departments 12 worked together to try to formulate a draft public 13 notice that we can use for -- for staff-approved refunds 14 between $50,000 and $100,000 and we also tried to add 15 some language to those notices to kind of provide the 16 public with some kind of background information about 17 what the notice entailed, so we added language 18 explaining why a refund was granted or why a certain 19 amount of tax was cancelled or a penalty relieved. 20 And so with that we can certainly answer any 21 questions you have and -- and we do request that the 22 Board adopt the proposed amendments to the two 23 regulations today. 24 MS. YEE: Okay. Thank you very much, Mr. 25 Heller. And I appreciate the late information that came 26 in on Friday, which actually speaks to the concern that 27 I had about the regulation, and that is it seemed like 28 the bulk of our conversation when this was before us the 4 1 last time was on the issue of public notice, to the 2 extent that we are delegating these actions. 3 And what I had wanted to see, not in any 4 specificity as you've outlined in some of the 5 attachments in your Friday correspondence to us, but 6 just some reference to public notice so that's not lost 7 in the regulation. 8 And I don't want to hold up the reg., but it 9 just seemed like there was a lot of concern about that, 10 and I'm happy to -- I'd like to just see that added to 11 the language of the reg., itself. 12 MR. HELLER: Staff can amend the regulation and 13 bring it back for -- for a Board adoption. I believe 14 that would go -- I'd have to check to see if we could do 15 that with the 15-day file. 16 MS. YEE: Is it 15 day? 17 MR. HELLER: I think it should be substantially 18 related to the Board's current action. 19 MS. YEE: Okay. 20 Discussion or comments, Members? 21 Okay. And I'm happy to suggest just kind of 22 some general language to be added to the reg., but I 23 think given the -- the tenor of the discussion we had 24 when this was last before us, I'd like to see that 25 memorialized in some fashion in the regulation, itself, 26 and then certainly backed up by the specific suggestions 27 that you've made in your recent correspondence to us. 28 Okay. Other comments? Mr. Leonard. 5 1 MR. LEONARD: Yes, Madam Chair. I'm -- you're 2 suggesting that we put into our regulations more public 3 notice of refunds that are being granted? 4 MS. YEE: Just the reference to public notice 5 actually being provided. But not the specifics of the 6 detail. 7 MR. HELLER: As I understood it, Mr. Leonard, 8 it was just to essentially reference the fact that -- 9 that we -- there is a statutory requirement in all -- 10 basically all these programs that would require us to 11 have a public notice available for ten days before 12 the -- the decisions become final. 13 And so to just reference that without 14 necessarily -- 15 MS. YEE: Right. 16 MR. HELLER: -- adding a whole lot of -- 17 MS. YEE: Right. It just seems to me with 18 expanded delegation that that kind of is the other -- 19 that we should go ahead and -- 20 MR. LEONARD: Okay, that -- that makes sense 21 for the time being. I -- I don't know who to ask, but 22 since refunds of overpayments to other California State 23 agencies aren't required to be noticed in the same way 24 as the statute requires us to do on our tax programs, 25 I'd -- I'd like some research done kind of the origins 26 of these different notice statutes and whether or not 27 our -- our refund in -- in today's context our 28 refund notice statute is -- is a violation of -- of 6 1 taxpayer privacy in a way that other citizens' privacy 2 is not violated when they get refunds of overpayments to 3 State agencies, and whether or not we should be 4 sponsoring legislation in the future that would -- that 5 would make that law more flexible so we could make 6 our -- our refund requirements more flexible. 7 MS. YEE: Okay. Maybe perhaps, Ms. Cooke, can 8 you take a look at this. 9 MS. MANDEL: Do a little historical research. 10 MS. YEE: Yes. 11 MR. LEONARD: Yeah. 12 MS. COOKE: Certainly. 13 MR. LEONARD: I think -- thank you very much. 14 I mean, if there's -- if there's some public reason 15 why -- why everybody in California needs to know that 16 somebody accidentally paid their fuel tax twice, I'm -- 17 I'm open to hearing it. 18 MS. COOKE: Okay. 19 MR. LEONARD: But so far it's kind of the same 20 as me asking FTB for a refund when I over -- have 21 over-withheld on my taxes, and that's really nobody 22 else's business but mine and FTB's. 23 And so, I'm looking for -- I'm looking for 24 arguments that say we shouldn't be parallel to other -- 25 other agencies. 26 MS. COOKE: Okay. 27 MS. YEE: Okay. 28 MR. LEONARD: But in the meantime this -- I 7 1 commend the staff and Ms. Yee's leadership in -- in 2 moving this along to -- to at least expedite as many 3 refunds as possible. 4 MS. YEE: Okay. And is that a motion? 5 MR. LEONARD: Yes, it is. 6 MS. YEE: Okay. Motion by Mr. Leonard. 7 Is there a second? 8 I'll -- I'll second that motion. 9 Without objection, such will be the order. 10 Thank you very much. 11 MR. HELLER: Thank you very much. 12 ---oOo--- 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8 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 August 31, 2009 I recorded verbatim, in shorthand, to 10 the 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 8 pages 13 pages constitute a complete and accurate transcription 14 of the shorthand writing. 15 16 Dated: September 10, 2009. 17 18 19 20 21 ____________________________ 22 BEVERLY D. TOMS 23 Hearing Reporter 24 25 26 27 28 9