BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 450 N Street, Room 121 Sacramento, California REPORTER'S TRANSCRIPT DECEMBER 16, 2009 ITEM M1 CHIEF COUNSEL MATTERS OTHER CHIEF COUNSEL MATTERS 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 Jerome E. Horton 6 Vice-Chair 7 Bill Leonard Member 8 Michelle Steel 9 Member 10 Marcy Jo Mandel Appearing for John 11 Chiang, State Controller (per Government Code 12 Section 7.9) 13 Diane Olson Chief, Board 14 Proceedings Division 15 Board of Equalization 16 Staff: Randy Ferris Legal Division 17 18 Gil Haas Investigations Division 19 20 ---oOo--- 21 22 23 24 25 26 27 28 2 1 Sacramento, California 2 December 16, 2009 3 ---oOO--- 4 MS. OLSON: Our next item is M1, Opinion and 5 Recommendation on Federal Ban and Attorney General's 6 De-Listing of Flavored Cigarettes and Roll-Your-Own 7 Tobacco Products. 8 MR. FERRIS: Okay. Randy Ferris from the Legal 9 Department, along with Gil Haas from the Investigations 10 Division, with a followup. We -- in November we 11 promised that we would come back and provide an oral 12 report with regard to the educational outreach program 13 and efforts that we would make with regard to the 14 Federal ban on flavored cigarettes. 15 Mr. Haas. 16 MR. HAAS: Members, Gil Haas. Investigations 17 Division. Since the September 2009 ban on the FDA 18 flavored cigarettes, the BOE has taken the following 19 steps to make the -- to notify the public: In October 20 the BOE did increase their -- enhance their web site to 21 links to the Attorney General's site for tobacco 22 directory. 23 In November the BOE web site was updated adding 24 a direct link to the FDA web site on the ban. A special 25 notice was posted on the BOE web site announcing the FDA 26 ban on flavored cigarettes. The special notice was also 27 sent out on an e-mail to all the licensed California 28 distributors and wholesalers. 3 1 A press release was published and distributed 2 in late November. The cigarette and tobacco tax class 3 was revised to include a section to directly discuss the 4 FDA ban and the class advertisements that were posted in 5 all the Board offices included a bullet that identified 6 the FDA ban. It advertised the class. 7 The staff did meet with our outreach unit and 8 we did develop some contact information for the relevant 9 BOE divisions. And we did create a preliminary plan to 10 provide further outreach to the affected taxpayers. 11 The staff did submit an article to the -- of 12 the FDA ban which was approved and will be included in 13 the March 2010 Taxpayer Information Bulletin, which will 14 be going out to all the retailers who file monthly and 15 quarterly. 16 In December the BOE's on-line virtual seminar, 17 the one on retail sales and cigarette and tobacco 18 products, was modified and the information was added to 19 the FDA ban. 20 The outreach unit in December did send out 21 e-mails to over 700 associations requesting their 22 possible assistance with the member -- with their 23 members using the outreach's database on partnerships, 24 which includes the Chamber of Commerces, the Small 25 Business Development centers, the Small Business 26 Administrations and other nonprofit organizations that 27 support the small businesses. And they did use their 28 new retailer and tobacco association database. 4 1 It is hoped with the assistance of these 2 associations that we'll reach out to more of our 3 retailers to get the information. We have heard back 4 from a small number of the associations who have already 5 indicated to us that they're very willing and able to 6 get the information out by publishing newspaper 7 articles, by e-mailing blast information to their 8 members, distributing fact sheets for us. And they are 9 posting links on their web sites to the FDA ban and to 10 our Board links. 11 The associations have responded having 12 indicated that this information will be going out this 13 month and next month in January. 14 We hope to further develop our outreach efforts 15 once we've accumulated more information from these 16 different groups. There are a lot more that need to 17 respond. 18 An article about the FDA ban was included on 19 the excise tax newsletter, which I believe is being sent 20 out this week. If it hasn't already gone out it will be 21 going out to all the licensed retailers, distributors 22 and wholesalers. 23 Our future proposed efforts, the Excise Tax 24 Division has plans to add the FDA special notice to the 25 back of their little cigarette notice that they send 26 out. They sent the little cigar notice out with each of 27 the new applications and the renewals. They put -- plan 28 to put this on the back and send it out with all the 5 1 renewals. 2 The Investigations staff will commence with our 3 six-month proposal to go out as we identified in the 4 memo to the Board at the last meeting. As part of our 5 Small Business Faires notice of recent program changes 6 it is being proposed to add an informational slide at 7 the end of the BOE Small Business Faire class that 8 explains the FDA ban. 9 We are also proposing to include with the June 10 2010 Taxpayer Information Bulletin the article on the 11 FDA, which will go out to our fiscal filers. 12 We're also going to include with the December 13 2010 Taxpayer Information Bulletin the same article 14 which would go out to the calendar year filers. 15 Our estimated direct cost associated with the 16 plan is less than $2,000. The amount of employee time 17 by each division has been identified as being very 18 minimal and absorbable within our budgets. 19 As the Board had directed us, we did meet with 20 our -- in our monthly meeting with the Attorney 21 General's office on December 2nd we discussed the cost 22 sharing with the A. G.'s office. And although the A. 23 G.'s office is unable to provide a direct reimbursement 24 they are willing to do the following: They'll work with 25 the BOE to further our outreach efforts by sending out 26 additional information to retailers about the tobacco 27 directory and the Federal ban. 28 They have offered to assist us with printing 6 1 flyers or special notices through their printing shop. 2 And they are willing to participate with us in any joint 3 efforts that we decide need to be done in the future. 4 That basically concludes my presentation on the 5 time line. We do plan to come back to the Board 6 probably in late Spring to report on the educational 7 process and our further outreach efforts. 8 MS. YEE: Thank you very much, Mr. Haas. 9 Mr. Horton, please. 10 MR. HORTON: I commend you. Who needs a 11 marketing team? We got you two. Great. Fabulous work. 12 Thank you very much. 13 MS. YEE: Mr. Leonard. 14 MR. LEONARD: I take the opposite tack. 15 MS. YEE: Yes. 16 MR. HORTON: Uh-oh. 17 MR. LEONARD: Justice won't give us a dollar, 18 doing their job. And we're going to divert our 19 resources in collecting taxes to providing consumer 20 information about unhealthy tobacco tainted products. I 21 just don't get it. 22 I -- your efforts are kind of overwhelming. I 23 know you've tried to shave the dollars off, but I -- I 24 don't think we should spend another dollar on a non-tax 25 program that has no benefit to this Department 26 organization and diverts our good people from their real 27 duties. 28 Thank you. 7 1 MS. YEE: Thank you, Mr. Leonard. 2 Other comments, Members? 3 Yeah. This is something I don't know that we 4 have a whole lot of choice over, to the extent that we 5 are kind of in the enforcement capacity here, but I 6 would join Mr. Horton applauding all the efforts that 7 have been accomplished to date. And there's certainly 8 more to come. 9 But I share your frustration, Mr. Leonard, 10 equally. 11 Other comments, Members? 12 Thank you both very much for the update. 13 ---oOo--- 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 December 16, 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 constitute a complete and accurate transcription of the 14 shorthand writing. 15 16 Dated: January 15, 2009. 17 18 19 20 21 ____________________________ 22 BEVERLY D. TOMS 23 Hearing Reporter 24 25 26 27 28 9