BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 450 N Street, Room 121 Sacramento, California REPORTER'S TRANSCRIPT DECEMBER 15, 2009 LEGISLATIVE COMMITTEE Reported by: Beverly D. Toms No. CSR 1662 1 1 2 P R E S E N T 3 4 For the Committee: Jerome E. Horton Chair 5 Betty T. Yee 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 Joann Richmond Board Proceedings Division 14 15 ---oOo--- 16 17 18 19 20 21 22 23 24 25 26 27 28 2 1 INDEX 2 3 Page 4 5 ITEM I 6 SUB-ITEM 1-6 4 7 SUB-ITEM 1-7 6 8 SUB-ITEM 1-8 4 9 SUB-ITEM 1-9 4 10 SUB-ITEM 2-1 8 11 SUB-ITEM 4-2 13 12 SUB-ITEM 4-3 23 13 SUB-ITEM 4-4 27 14 ITEM II 29 15 16 ---oOo--- 17 18 19 20 21 22 23 24 25 26 27 28 3 1 SUB-ITEMS 1-6, 1-8 AND1-B 2 Sacramento, California 3 December 15, 2009 4 ---oOO--- 5 MS. RICHMOND: Good morning, Members. The 6 first item on this morning's agenda is the Legislative 7 Committee. 8 Mr. Horton is the Chair of that committee. Mr. 9 Horton. 10 MR. HORTON: Good morning. How is everyone 11 this morning? 12 MS. YEE: Great. 13 MS. SHEDD: Good. 14 MR. HORTON: Good. 15 MR. LEONARD: Excellent. 16 MR. HORTON: Well, we'd like to start by moving 17 the consent calendar. Is there a motion? 18 MS. YEE: So moved, Mr. Chairman. 19 MR. HORTON: It's been moved and second by Mr. 20 Leonard. 21 MR. LEONARD: Second. 22 MR. HORTON: Please call the roll. 23 MS. RICHMOND: Mr. Horton. 24 MR. HORTON: Aye. 25 MS. RICHMOND: Mr. Leonard. 26 MR. LEONARD: Aye. 27 MS. RICHMOND: Ms. Steel. 28 MS. STEEL: Aye. 4 1 MS. RICHMOND: Ms. Yee. 2 MS. YEE: Aye. 3 MS. RICHMOND: Ms. Mandel. 4 MS. MANDEL: Aye. 5 MS. RICHMOND: Motion carries. 6 MS. YEE: Mr. Chairman, could we just have Ms. 7 Shedd read into the record which proposals are on 8 consent. 9 MR. HORTON: Sure, of course. 10 MS. SHEDD: Mr. Chair and Members of the 11 committee, the consent agenda is suggestions number 1-6, 12 1-8 and 1-9. 13 MS. YEE: Great. 14 MR. HORTON: Thank you, Ms. Shedd. 15 ---oOo--- 16 17 18 19 20 21 22 23 24 25 26 27 28 5 1 SUB-ITEM 1-7. 2 MR. HORTON: Now we're going to turn it over to 3 Ms. Shedd to just go over the other items on the agenda. 4 Many of them are just administrative in nature but there 5 are a few that may need further discussion. 6 MS. SHEDD: Okay, the first item is suggestion 7 1-7. This extends for five years the assessment of 8 valuation methodology for intercounty pipeline 9 rights-of-way which is otherwise scheduled to sunset. 10 This item was brought to us by the California 11 Assessors Association and the taxpayer representatives. 12 They have agreed upon the language and have requested 13 the Board to sponsor it. 14 This is the same language and methodology that 15 has been in place since 1986 and would allow certainty 16 for both taxpayers and the assessors. 17 MR. HORTON: Is there a motion? 18 MS. STEEL: I have a question. 19 MR. HORTON: Discussion? 20 MS. STEEL: A question. We are doing 2-1 right 21 now? 22 MR. HORTON: Please. 23 MS. STEEL: Is this retroactive? 24 MS. YEE: Oh, actually -- 25 MS. SHEDD: No, we're on 1-7. 26 MR. HORTON: No. 27 MS. YEE: 1-7. 28 MS. STEEL: 1-7, okay. Then -- 6 1 MR. LEONARD: It's still a question. 2 MS. YEE: Let -- let me move approval of 3 proposal 1-7 and -- 4 MR. HORTON: Been moved by Ms. Yee, second 5 by -- 6 MR. LEONARD: Second. 7 MR. HORTON: -- Mr. Leonard. Please call the 8 roll. 9 MS. RICHMOND: Mr. Horton. 10 MR. HORTON: Aye. 11 MS. RICHMOND: Mr. Leonard. 12 MR. LEONARD: Aye. 13 MS. RICHMOND: Ms. Steel. 14 MS. STEEL: Aye. 15 MS. RICHMOND: Ms. Yee. 16 MS. YEE: Aye. 17 MS. RICHMOND: Ms. Mandel. 18 MS. MANDEL: (No audible response.) 19 MR. HORTON: Ms. Shedd. 20 MS. RICHMOND: Motion carries. 21 MR. HORTON: Thank you. 22 ---oOo--- 23 24 25 26 27 28 7 1 SUB-ITEM 2-1. 2 MS. SHEDD: Okay, the next item is 2-1, and 3 this is proposal -- and it is prospective. It would 4 make changes to the tax laws, this being the Sales and 5 Use Tax and the Special Taxes and Fees relative to 6 personal liability of corporate officers in the event 7 that the business entity has suspended. 8 This is brought forward to the committee by the 9 Legal Department, the Sales and Use Department and the 10 Property and Special Taxes Department. And I have Randy 11 Ferris here from Legal to get into the specifics of the 12 proposal. 13 MR. FERRIS: Good morning. 14 This joint proposal will do a number of 15 positive things. First, it would shorten the Statute of 16 Limitations with respect to suspended corporations' 17 billings to bring them in line with the general 18 three-year Statute of Limitations that the Board 19 approved for the distinct but related 6829 billings for 20 responsible persons. 21 It would -- yes -- yeah, it would also 22 encourage conformity and adherence to State law by 23 providing a safe harbor for the -- the owners of the 24 closely held corporations and LLCs to encourage them to 25 cure the violations that gave rise to the suspension 26 promptly within 60 days. 27 So, we think it has a good effect with respect 28 to that kind of encouraging curative -- prompt curative 8 1 efforts. 2 And -- and then finally it promotes uniformity 3 across all the Sales and Use Tax and Special Tax and Fee 4 Programs with respect to the issue of holding folks 5 responsible when they collect tax and fee reimbursement 6 or -- from their customers, but fail to pay that over to 7 the Board. And we think that that is a -- a positive 8 thing to have uniformity on that issue across all 9 programs. 10 But, again, it only would apply to Special Tax 11 and Fee Programs where we could establish by audit that 12 the tax and fee money was misappropriated by the 13 responsible persons. 14 MR. HORTON: Thank you. 15 Discussion, Members? 16 MS. YEE: Mr. Chairman. I guess let me just 17 clarify Ms. Steel's question, this is prospective only? 18 MS. SHEDD: Yes. 19 MS. YEE: The provisions of this -- okay. 20 And then, secondly, with respect to the Special 21 Taxes where you have an incidence of tax that may not be 22 at the retailer level, do we need to have additional 23 clarification about when there would be personal 24 liability on a responsible person? And I'm thinking 25 about the tobacco excise tax issue. 26 MR. FERRIS: Right. We are working with 27 program staff to work out the -- the technical details 28 as to how to prepare comparable statutes. Because of 9 1 the licensing act there is a requirement to state the 2 tax on the invoices. And so that gives us a ready way 3 of being able to audit for those types of issues that 4 could be applied to the -- the cigarette and tobacco tax 5 law, as well. 6 MS. YEE: Okay. So -- so the proposal as 7 drafted here could be further refined to reflect it -- 8 will it be further refined to reflect that or -- or is 9 the proposal as drafted here in place of a -- 10 MR. FERRIS: Well, we're bringing this forward 11 as a general concept proposal -- 12 MS. YEE: Okay. 13 MR. FERRIS: -- and using the Sales and Use Tax 14 statute because that's what the Board is most familiar 15 with. 16 And we wanted to fix the Statute of 17 Limitations -- 18 MS. YEE: Right. 19 MR. FERRIS: -- problem that we have -- 20 MS. YEE: Okay. 21 MR. FERRIS: -- with suspended corporations for 22 sales tax -- 23 MS. YEE: All right. 24 MR. FERRIS: -- no matter what. 25 But then we -- we wanted to seek the Board's 26 general approval with respect to that. We're already 27 working with program staff to -- to work the -- the 28 comparable statutes languages to -- you know, to get the 10 1 technical details correct. And to make sure that we 2 could actually audit for and establish misappropriation 3 in -- in any program that we would develop a statute 4 for. 5 MS. YEE: Okay. No, I appreciate that. Mr. 6 Chairman, I'm -- I'm happy to move approval of this but 7 I would like to see the -- 8 MR. HORTON: Final -- 9 MS. YEE: -- additional language brought back 10 before the committee, as it's drafted. 11 MR. HORTON: I concur. It's been moved. Any 12 other discussion? 13 Moved by Ms. Yee. Second by Mr. Leonard. 14 Please call the roll. 15 MS. RICHMOND: Mr. Horton. 16 MR. HORTON: Aye. 17 MS. RICHMOND: Mr. Leonard. 18 MR. LEONARD: Aye. 19 MS. RICHMOND: Ms. Steel. 20 MS. STEEL: Aye. 21 MS. RICHMOND: Ms. Yee. 22 MS. YEE: Aye. 23 MS. RICHMOND: Ms. Mandel. 24 MS. MANDEL: Aye. 25 MS. RICHMOND: Motion carries. 26 MS. SHEDD: Just to clarify, do you want that 27 language brought back at the next Legislative Committee 28 as an information item? 11 1 MR. HORTON: Yes. 2 MS. SHEDD: Okay. 3 ---oOo--- 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 12 1 SUB-ITEM 4-2. 2 MS. SHEDD: Thank you. The next item is 3 brought forward by the Excise Tax Division. And this 4 would clarify that a licensee who has their license -- 5 cigarette tax, rather, tobacco products, if the license 6 has been revoked or suspended then they are prohibited 7 from gifting or displaying cigarettes during that period 8 of suspension or revocation. 9 And it provides a presumption that if these 10 products are displayed during that period then -- and 11 they're visible to the retail customers then they're 12 presumed to be displayed for sale. 13 This could -- it clarifies the law and could 14 potentially reduce the number of Board seizures of 15 cigarettes or tobacco products in that there isn't any 16 confusion whether they're out there for sale or not. 17 And I have Lynn Bartolo here from the Excise 18 Tax Division to answer questions. 19 MR. HORTON: Thank you. Any discussion, 20 Members? 21 MR. LEONARD: Yes, Mr. Chair. 22 MR. HORTON: Mr. Leonard. 23 MR. LEONARD: The idea makes total sense and 24 I -- I support it, but I would ask the Board to consider 25 something that I think has come up in several hearings 26 that the Board has agonized over, some flexibility in -- 27 in -- in the law, itself and how it's -- how it's 28 enforced. 13 1 I know our staff does a great job out in the 2 field of -- of making the law really work. But we have 3 situations, particularly in this case, where the person 4 can't sell tobacco but they have another -- thousands of 5 other products in the store. They have no warehouse to 6 store the tobacco properly and keep it fresh when they 7 recover their license. 8 So they merely try to cover up the shelves or 9 the case of the tobacco products. That -- that makes 10 sense. That's what the law should do, that it's just 11 not for sale or cover it up. 12 But if a sign on top of it says "Cigarettes for 13 sale," or something or "Cigarettes here," it -- I 14 want -- wouldn't want the law to be so inflexible that 15 that's what triggers the penalty even if every piece of 16 tobacco product was actually covered up to the customer. 17 And a lot of these customers, they're -- 18 they're just routine regular customers. They know where 19 the stuff is. So they don't even look up, they just -- 20 you know, "Give me one of those," and they don't even 21 know that it's covered. 22 So if there's some flexibility in the law that 23 gives our field agents the power to say this is 24 adequately covered up, this is not adequately covered 25 up, I think would help in some of the -- some of the 26 enforcement hearings we have here. 27 If the Board is interested in putting that in a 28 law somewhere, giving our field agents the legal 14 1 authority for the flexibility that I think some of them 2 already properly utilize -- 3 MS. BARTOLO: We can certainly work on some 4 language. 5 MR. LEONARD: If the Board -- agrees. I'm 6 asking. 7 MR. HORTON: You know, I would concur with 8 language that did not prohibit the auditor from 9 exercising that discretion, and then suggest that 10 possibly we codify more detail in the audit manual or in 11 giving them direction. Only because each circumstance 12 in itself may be somewhat unique, and I don't know if we 13 can codify that in law. 14 But a general -- some generalities that allows 15 us to then codify that from a regulatory perspective or 16 a policy perspective. 17 MS. SHEDD: Well, the lang -- the way the 18 language is written it says it's presumed that 19 cigarettes or tobacco products clearly and easily 20 visible in retail stock are displayed for sale. 21 And that indicates to me that you can always 22 rebut the presumption. So that would be the taxpayer -- 23 MS. MANDEL: Does it say it's -- does it say 24 it's presumed or does it say it's a rebuttable -- it's 25 rebuttable? 26 MS. SHEDD: It doesn't say either conclusive or 27 rebuttable. But we could add rebuttable presumption -- 28 it's rebuttably presumed. 15 1 MS. MANDEL: And what was the intent in 2 drafting that? 3 MS. SHEDD: I'm sorry? 4 MS. MANDEL: Was it -- 5 MS. SHEDD: I think it was rebuttable. 6 MS. MANDEL: Was the intent that it be absolute 7 presumption? 8 MR. FERRIS: The intent was that it would be 9 rebuttable, yeah. 10 MS. MANDEL: Okay. And you -- 11 MR. HORTON: Then let's -- 12 MS. MANDEL: Did the statutes usually say 13 rebuttably presumed when it's a rebuttable presumption? 14 MR. FERRIS: They do sometimes, yeah. And -- 15 MS. MANDEL: Sometimes; sometimes no? 16 MR. FERRIS: Right. 17 MS. SHEDD: Let's clarify it and say that it is 18 rebuttable. 19 MR. HORTON: Yeah. 20 MR. LEONARD: Well -- 21 MS. MANDEL: But you had a different point. 22 MR. LEONARD: Well, it's -- 23 MR. HORTON: Can we -- 24 MR. LEONARD: I'm -- I'm concerned about our 25 field agents and the work they do. The rebuttable 26 presumption is before us. And this is already -- we're 27 all -- if the person is suspended from selling tobacco 28 and an agent walks in and thinks they're still selling 16 1 tobacco, that's revocation. And if they are, that's -- 2 that's what the law says and that's appropriate. But -- 3 but if they're not -- 4 MR. HORTON: Just a display, yeah. 5 MR. LEONARD: -- and -- and the display is 6 attempted to be covered but it's covered sloppily, and 7 the agent -- does the agent have flexibility to -- to 8 say, I'm -- I'm presuming that they're not for sale 9 even -- even though they're not totally covered or does 10 the agent say, look it, it's just strict interpretation, 11 they're not covered, they had to be for sale, I'm 12 revoking your license, but you're free now that I've 13 done all that to appeal to the Board of Equalization 14 months down the line to rebut that presumption. 15 And it's hard to rebut. How do you prove I 16 didn't sell cigarettes? And -- and I guess you could do 17 the sales reports on that, but -- 18 MR. FERRIS: Right. I mean, this -- 19 MR. LEONARD: -- it's -- would our agent -- 20 would our people believe him at that point if -- if they 21 already thought they were -- they were playing games 22 with the law. 23 So this -- it's that flexibility to our field 24 agents to empower them to make the appropriate call, is 25 what I'm after. 26 MR. HORTON: Yeah. 27 MR. FERRIS: The field agents definitely would 28 have the -- the discretion and the good judgment to -- 17 1 to make inquiry and all that. 2 This came up -- this proposal came up, as you 3 may recall, because of a Board hearing where the owner 4 of the shop said, oh, I knew I was suspended but I had 5 to leave the shop for some reason and an employee of 6 mine didn't understand about the suspension, so while I 7 was out of the store for an hour when the investigators 8 came in and made a purchase he erroneously sold them -- 9 MR. LEONARD: Right. 10 MR. FERRIS: -- some cigarettes and they were 11 all displayed there and there was -- you know, and -- 12 and so the response to that was we really should be 13 encouraging people to not even have them on display so 14 that that kind of mistake can't happen. You know, that 15 all the -- you know, an employee can't make that kind of 16 mistake because the product is clearly marked or is 17 taken off the shelves or -- or what have you. 18 So -- and so that's where the -- the -- the 19 discussion in that hearing led to, well, maybe there 20 should be a rebuttable presumption that when you're -- 21 when you're suspended if you are displaying for sale 22 that you -- you probably are making some sales along 23 those lines. 24 So that's where this all came from. Of course 25 it would be dependent upon our aud -- our investigators 26 using good judgment out in the field. 27 MS. STEEL: What's current practice right now, 28 that after they get the suspension, what they do? 18 1 Just nothing, just leaving it? 2 MS. BARTOLO: Currently we incorporated the 3 statement requesting that the retailer remove these 4 products from their retail sales area during the period 5 of suspension. But that's a suggestion. And without 6 statutory authority it's only a suggestion. 7 MS. STEEL: Because I went to the stores and 8 sometimes they put like a big tapes on the top of those 9 displays. So, I think -- I think Mr. Leonard is right 10 that, you know, we have to really clarify here that 11 display, what does display means exactly from the law. 12 MR. FERRIS: And I think if -- if this statute 13 was passed and enacted into law, I think the 14 Investigations Division would be coming forward probably 15 with some specific protocols with respect to how we 16 would implement the statute on a -- 17 MR. HORTON: Why don't we do this; why don't we 18 consider this; why don't we consider including a 19 definition and possibly in the definition we can define 20 what "display" actually means. And we can give some 21 latitude in the definition, which in itself -- but 22 again, my concern is -- is codifying policy and 23 discretion into law. 24 But if we go into the intent area and we talk 25 about the definitions of display and so forth, we might 26 be able to get there. 27 Because there are so many different situations 28 that will occur that will have a sign on the -- on the 19 1 window, "Cigarettes for sale." Cigarettes will be down 2 below the counter where they traditionally are. They'll 3 tape it over. They'll cover it and so forth. 4 Mr. Leonard is absolutely right, many of the 5 smaller stores in particular don't necessarily have the 6 storage space to -- to relocate it. 7 So, adding the language "rebuttable" I think 8 gets us there in the discretionary territory, and 9 possibly we can look at additional language as this goes 10 through. And definitely look at reflecting the -- the 11 concerns of the -- of the Board and the policy manual 12 relative to this. 13 MS. YEE: Mr. Chairman. 14 MR. HORTON: Yes. 15 MS. YEE: We are talking about mostly product 16 display. Is there any concern about signage? 17 MR. HORTON: You know, signage in and of 18 itself, the law sort of implies that if the signage is 19 there we've got a problem. So -- 20 MS. YEE: Does this language contemplate kind 21 of both? 22 MR. FERRIS: I think it was -- I think it's 23 focused mainly on the display aspect, that if you're -- 24 if there's -- if there's no signs or tape or anything 25 that's indicating that it's not for sale, by putting it 26 out there these types of mistakes that we had in that 27 one Board hearing become increasingly likely. 28 We're trying to encourage folk to -- when 20 1 they're suspended to -- to take precautionary measures 2 to make sure that those types of mistakes don't happen. 3 MR. LEONARD: Mr. Chairman? 4 MR. HORTON: Yes, Mr. Leonard. 5 MR. LEONARD: In the discussion of signs, Ms. 6 Yee's raised a good point. I wonder -- and I don't 7 think it needs to be in the law, but why shouldn't we 8 print up a sign that we hand to the suspended 9 tobacconist that says "By order of the State Board of 10 Equalization it's illegal for this establishment to sell 11 tobacco products until further notice," and require them 12 to post that sign on -- on top of where they've covered 13 the product for sale, or any other cigarette for sale 14 type sign or in a prominent place, and we hand them that 15 sign and that's -- that helps the presumption, and it 16 helps them explain to their customers it's -- it's not 17 my fault -- well, not necessarily, but it's order of the 18 State Board of Equalization that I cannot do this right 19 now. 20 MR. HORTON: I like it. Good idea. 21 Any comments from staff? Is that something 22 that's feasible? 23 MS. BARTOLO: Sure. I think that's something 24 we can look into. 25 MR. HORTON: Any other discussion? 26 With that direction do I have a motion? 27 MS. YEE: I'll move approval of the proposal as 28 amended. 21 1 MR. HORTON: It's been moved by Ms. Yee, second 2 by Mr. -- 3 MR. LEONARD: Second. 4 MR. HORTON: -- Leonard. Please call the roll. 5 MS. RICHMOND: Mr. Horton. 6 MR. HORTON: Aye. 7 MS. RICHMOND: Mr. Leonard. 8 MR. LEONARD: Aye. 9 MS. RICHMOND: Ms. Steel. 10 MS. STEEL: Aye. 11 MS. RICHMOND: Ms. Yee. 12 MS. YEE: Aye. 13 MS. RICHMOND: Ms. Mandel. 14 MS. MANDEL: Aye. 15 MS. RICHMOND: Motion carries. 16 ---oOo--- 17 18 19 20 21 22 23 24 25 26 27 28 22 1 SUB-ITEM 4-3. 2 MR. HORTON: Ms. Shedd. 3 MS. SHEDD: The next item is Special Taxes 4 suggestion 4-3. This was brought forward by the 5 Environmental Fees Division. This would authorize the 6 Board to admit the EDD's confidential employment tax 7 information into evidence at the Board's administrative 8 hearings or feepayer appeals and to submit such 9 information into evidence in Court proceedings. 10 We have two fees, environmental fee and the 11 occupational lead fee poison prevention fee, that are 12 based on workforce or number of employees. We look to 13 EDD to confirm that information. 14 In the past we've been able to bring that 15 information to the Board hearings. However, in our last 16 agreement with EDD they have indicated that they feel 17 that that should not be brought to light in the Board 18 proceedings or the Court. In fact, they prohibit that 19 in their recent agreement that's in place from '08 to 20 '11. 21 So they have provided us with the language 22 that's in this proposal that will give us the legal 23 authorization to use that. Because if we can't defend 24 those fees in Court or before the Board, we'd have to go 25 to subpoenaing their payroll information, which is a 26 much more intrusive way of getting that information. 27 So, this is a less intrusive way to just defend 28 our assessment of the fees. 23 1 MR. HORTON: And with you today? 2 MS. SHEDD: I have Julia Findley from the 3 Environmental Fees. 4 MR. HORTON: Thank you very much. 5 MS. YEE: Question -- 6 MR. HORTON: Discussion, Members? 7 MS. YEE: Question. What was the EDD's 8 rationale for the prohibition? 9 MS. SHEDD: Julia -- 10 MS. FINDLEY: Section -- Section 1094 of the 11 UIC sets forth that we can't -- that no one, unless 12 they have a special exemption in Section 1095 of the 13 UIC, can introduce any information into evidence or any 14 kind of special proceedings that they obtain from the 15 EDD. 16 And so their -- they came us to when we were 17 doing the information sharing agreement this last time 18 around and said, you know, under Section 1094 you guys 19 aren't exempt in Section 1095 of the UIC, therefore you 20 cannot be using this information in any of your 21 proceedings. 22 And fortunately for us the ones that have come 23 before the Board for appeal in the past they -- they 24 have -- they're claiming they're not an employer. So, 25 they're -- we're not really using that information as 26 the basis. But when the law changed in January of 2007 27 and we expanded the fee to include other business 28 organizations besides just corporations we anticipate 24 1 that there will be more appeals before the Board and we 2 want to make sure that feepayers have their due process. 3 MS. YEE: Okay. Thank you. 4 MR. HORTON: Further discussion? 5 And what is the reason that we're not exempt? 6 I mean, why not? 7 MS. FINDLEY: I -- I really don't know. The 8 Employment Development Department has their own 9 Unemployment Insurance Code, and this is what they 10 specified in the code. And they never asked us and I 11 guess we've never talked to them about including us or 12 were even aware, to be honest, about Section 1094. 13 MR. HORTON: Now that we are aware, is there 14 any reason we can't have discussions about being 15 included? 16 MS. FINDLEY: No, not at all. And -- and they 17 did provide the language to add us as an exempt agency 18 in Section 1095, so that we could move forward with this 19 proposal. 20 MR. HORTON: All right. Let's consider doing 21 that. Let's consider having that conversation to 22 include us. I don't know why we're not. 23 MS. YEE: Yeah. 24 MS. SHEDD: That's what this proposal does. 25 MS. YEE: That's what the proposal is. 26 MR. HORTON: Okay. 27 MS. YEE: You know, I -- the reason I asked, 28 and I think I'm -- when you look at some of these other 25 1 exemptions it just seems like we should be a natural -- 2 MR. HORTON: Yeah. 3 MS. YEE: -- to be included. So -- 4 MR. HORTON: Any other discussion? 5 Moved by Ms. Steel, second by Ms. Yee. 6 Call for the question. 7 MS. RICHMOND: Mr. Horton. 8 MR. HORTON: Aye. 9 MS. RICHMOND: Mr. Leonard. 10 MR. LEONARD: Aye. 11 MS. RICHMOND: Ms. Steel. 12 MS. STEEL: Aye. 13 MS. RICHMOND: Ms. Yee. 14 MS. YEE: Aye. 15 MS. RICHMOND: Ms. Mandel. 16 MS. MANDEL: Aye. 17 MS. RICHMOND: Motion carries. 18 ---oOo--- 19 20 21 22 23 24 25 26 27 28 26 1 SUB-ITEM 4-4. 2 MS. SHEDD: Thank you. The next item is 3 Special Taxes suggestion 4-4. This was brought to us by 4 the Fuel Division and it would reclassify alcohol fuel 5 as a use fuel -- oh, from a use fuel to a motor vehicle 6 fuel. 7 It's intended to remain revenue neutral and 8 does not directly change the amount of tax imposed on 9 the fuels. However, because of the increase in the 10 amount of alcohol fuels it would by reclassifying them 11 to the motor vehicle fuel it shifts the responsibility 12 for collection and payment of the excise tax from the 13 vendor to the supplier, thereby easing the compliance 14 and reporting burden at the vendors and providing 15 administrative efficiencies to the Board. 16 So it's kind of a win-win for everyone. And I 17 have with me Phil Bishop from the Fuels Division to 18 answer any questions. 19 MR. HORTON: Thank you. Discussion, Members? 20 MS. YEE: I'll move approval, Mr. Chairman. 21 MR. HORTON: It's been moved by Ms. Yee, second 22 by Ms. Steel. 23 Please call the roll. 24 MS. RICHMOND: Mr. Horton. 25 MR. HORTON: Aye. 26 MS. RICHMOND: Mr. Leonard. 27 MR. LEONARD: Aye. 28 MS. RICHMOND: Ms. Steel. 27 1 MS. STEEL: Aye. 2 MS. RICHMOND: Ms. Yee. 3 MS. YEE: Aye. 4 MS. RICHMOND: Ms. Mandel. 5 MS. MANDEL: Aye. 6 MS. RICHMOND: Motion carries. 7 ---oOo--- 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 28 1 ITEM II. 2 MS. SHEDD: And the final item I'd like to 3 discuss is the table of sections scheduled to sunset on 4 January 1st of 2011. As you'll recall we brought these 5 back with staff recommendations. 6 The first one is Revenue and Taxation Code 7 401-10, which is scheduled to sunset in 1-1-11. The 8 Board just adopted that proposal, 1-7, to sponsor that 9 interCounty pipeline rights-of-way assessment 10 methodology. 11 The second one is -- has to do with -- and 12 there's actually three different sections that are all 13 scheduled to sunset in 12/31/10. And this has to do 14 with the assessment methodology of commercial air 15 carriers. This has been sponsored in the past by the 16 California Assessors Association. They had a bill last 17 year to extend this. That was AB 311 Ma. The Governor 18 vetoed it saying that there wasn't full consensus. 19 There was one airline that still opposed it, so they are 20 hoping for full consensus this year. 21 The staff recommendation is to have the 22 assessors continue to take the lead and to support any 23 bill that comes about. And -- 24 MR. HORTON: Discussion? Please. 25 Any discussion, Members? 26 MS. YEE: Mr. Chairman, I'd -- I'd like to see 27 the three provisions that were included in AB 311 which 28 the Governor vetoed because I think he felt it was 29 1 premature -- 2 MS. SHEDD: Well -- 3 MS. YEE: -- on one of the provisions premature 4 to have extension. But were the other two -- were any 5 of these controversial with respect to -- to the policy? 6 MS. SHEDD: I don't believe so. I think it -- 7 it was Southwest Airlines and they basically objected to 8 the value that was placed on their planes. So, I think 9 that's -- they need to work that out still. And that 10 was the gist of the veto message. 11 MS. YEE: The value but not the actual process 12 or method or duties that were laid out by the lead 13 county, right? 14 MS. SHEDD: Let -- let me check. 15 Rosemary, she probably will know. 16 MR. HORTON: If I may, I actually authored this 17 bill, the original bill. 18 MS. YEE: The original one. Yeah. 19 MR. HORTON: And the -- the methodology that 20 was established was agreed upon originally by everyone, 21 which was about a year ago, and Southwest purchased 22 brand new planes and when they purchased brand new 23 planes it sort of changed things and put them at a -- 24 somewhat of a disadvantage relative to the method. 25 And so that was their -- their challenge. But 26 since then United has began to purchase new planes, as 27 well, and so taking another shot at the apple, I think 28 we should be able to get Southwest on board. 30 1 MS. YEE: Okay. 2 MR. HORTON: But you never know. 3 MS. YEE: You never know, that's right. 4 MR. HORTON: Never know. 5 MS. YEE: Well, Mr. Chairman, I guess I would 6 like to see -- given that the sunset dates are 7 approaching, just have the assessment methodology for 8 commercial common carriers, the consolidated property 9 statements and the lead county assessment duties all be 10 reintroduced again and -- and especially if there are 11 concerns going to be raised by any of the airlines that 12 we at least have some time for those to get vetted in 13 the legislative process before we actually reach the 14 sunset date. 15 MR. HORTON: Yeah, I concur. We might even 16 want to reach out to -- to Southwest to see exactly. 17 MS. SHEDD: Why don't we have conversations 18 with the Assessors Association and see what their 19 intention is, and then -- and offer our support in doing 20 the non-controversial issues to moving forward with 21 that. 22 MS. YEE: Okay. And then if you'll also, as 23 Mr. Chairman states, confer with Southwest to see if 24 they have any outstanding issues. 25 MS. SHEDD: Uh-huh. 26 MS. YEE: Okay. 27 MR. HORTON: Any other discussions? 28 Is there a motion? 31 1 (Inaudible discussion.) 2 MS. YEE: Well, I think maybe we should wait 3 until the staff bring back the actual -- 4 MR. HORTON: Come back. 5 MS. YEE: -- proposals, yeah. Then we can -- 6 MR. HORTON: Good. 7 MS. YEE: -- see, yeah. 8 MR. HORTON: Receive and file. 9 MS. YEE: Okay. 10 MR. HORTON: Yes. 11 MS. SHEDD: There's one final item on the 12 sunset dates and that is to authorize -- to extend the 13 sunset date to have people report their Use Tax on their 14 income tax return that is due to sunset this year. 15 We've had in the past tried several bills to 16 make it mandatory. The Governor vetoed that. This now 17 will simply extend just having the line on the -- the 18 income tax return. 19 And if it's allowed to sunset the taxpayer's 20 only option then is to report the Use Tax and report it 21 directly to the Board of Equalization. This does give 22 them a convenient method of reporting it on the -- the 23 income tax form. 24 And so this has already been adopted by the 25 Board for sponsorship. We did that in November and it 26 was item 3-2. 27 MR. HORTON: Okay. Any discussion, Members 28 before Ms. Shedd leaves? 32 1 Mr. Leonard, you had shared some interest in 2 the past on this. 3 MR. LEONARD: I love sunsets. 4 MR. HORTON: Okay. 5 MS. YEE: They do serve a purpose. 6 MR. HORTON: All right. Seeing none, thank you 7 very much, Ms. Shedd. 8 MS. SHEDD: Thank you. 9 MR. HORTON: Appreciate it. 10 ---oOo--- 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 33 1 REPORTER'S CERTIFICATE. 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 December 15, 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 33 13 pages constitute a complete and accurate transcription 14 of the shorthand writing. 15 16 Dated: January 7, 2009. 17 18 19 ____________________________ 20 BEVERLY D. TOMS 21 Hearing Reporter 22 23 24 25 26 27 28 34