BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 5901 Green Valley Circle, Room 207 Culver City, California REPORTER'S TRANSCRIPT FEBRUARY 23, 2010 ITEM B4 FRANCHISE AND PERSONAL INCOME TAX HEARING APPEAL OF WILLARD M. CHRISTINE (No. 468893) AGAINST PROPOSED ASSESSMENT OF ADDITIONAL TAX Reported by: Beverly D. Toms CSR No. 1662 1 1 2 P R E S E N T 3 For the Board Betty T. Yee of Equalization: Chair 4 Jerome E. Horton 5 Vice-Chair 6 Bill Leonard Member 7 Michelle Steel 8 Member 9 Marcy Jo Mandel Appearing for John Chiang 10 State Controller (per Government Code 11 Section 7.9) 12 Diane Olson Chief, Board 13 Proceedings Division 14 For Board of Lou Ambrose 15 Equalization Staff: Staff Counsel 16 17 For Franchise Tax Mark McEvilly Tax Counsel: Tax Counsel 18 19 Jozel Brunett Tax Counsel 20 For Appellant: Willard M. Christine 21 Taxpayer 22 ---oOo--- 23 24 25 26 27 28 2 1 Culver City, California 2 February 23, 2010 3 ---oOo--- 4 MS. OLSON: B4, Willard M. Christine, please 5 come forward. 6 MS. YEE: Okay. Okay, Mr. Ambrose. 7 MR. AMBROSE: Thank you. 8 This is the appeal of Willard M. Christine, and 9 the two issues before the Board are whether the 10 Appellant was entitled to subtract the total amount of 11 Social Security benefits received when calculating his 12 California taxable income rather than only the amount of 13 the taxable Social Security benefits. 14 And secondly, whether any of the interest may 15 be abated due to Appellant's payment of $411.68 on 16 October 28, 2007, which Respondents refunded in error on 17 October 30, 2007. 18 MS. YEE: Thank you, Mr. Ambrose. 19 Good afternoon, sir. If you'll introduce 20 yourself for the record you have ten minutes for your 21 presentation. 22 MR. CHRISTINE: Good afternoon. My name is 23 Willard M. Christine and I am the taxpayer. I would 24 like to thank the State Board of Equalization for 25 allowing me to be here today. 26 This is a case involving an alleged 27 underpayment of State income tax for the tax year 2004. 28 This is not an appeal of this case. My appeal ended the 3 1 August day in 2008 when I walked into the office of 2 Leslie Cardoza, a State Protest Hearing Officer in 3 downtown Los Angeles and handed her a check for $450. 4 By the way, Ms. Cardoza is incorrectly 5 identified in some of the papers before you. She is 6 indeed a Ms. despite the State's attempts in its 7 erroneous filings to make a Mr. out of her. 8 In Ms. Cardoza's memorandum of that 2008 9 meeting she says that I, as the Appellant, quote, 10 "indicated that I was in agreement with the assessment," 11 end quote. 12 If that doesn't mean the appeal was being 13 dropped, I don't know what would, but the State of 14 California has persisted in extending this comedy of 15 errors till today. 16 This case is a microcosm of why the State of 17 California is in the fiscal morass that has gripped its 18 taxpayers in recent years. Malfeasance and 19 incompetence, wheel spinning and duplicity, there are 20 many words fancy and otherwise to describe what has gone 21 on. 22 There is an old vaudeville skit with the 23 recurring punchline, "Pay the $2." Comedy imitates life 24 and vice versa. I tried to pay the State the 400 or so 25 dollars, and in Ms. Cardoza's words, I was in agreement 26 with the assessment, but the State treated me as though 27 I was speaking in a foreign tongue. 28 At least this mess has kept a lawyer or two 4 1 busy, but I would think they would have better things to 2 do. These are the ugly details. 3 On October 28, 2007, I returned what was 4 tantamount to an overpayment of a tax refund by mailing 5 a check to Sacramento for $411.68. No questions asked. 6 Two days later the State of California sent me 7 a check for the same amount. I might not know how to do 8 my own taxes, but I am no fool. I deposited the check 9 in my bank and waited for the other shoe to drop. 10 When that shoe fell, I dutifully marched into 11 Ms. Cardoza's office with a white flag and a check for 12 $450. Why 450? I suspected that the original amount 13 might have grown to approximately that amount and 14 Ms. Cardoza, who walked me over to the cashier to submit 15 the check, seemed to have no problem with my logic. 16 Better you to owe me you few bucks than I to be in 17 arrears of you. That was my logic. 18 The cashier, by the way, and this is an aside, 19 chided me for putting my Social Security number on the 20 check. It wasn't my idea, I told him, that's what the 21 tax rules say you're supposed to do with your payment. 22 But pardon me for following the rules. 23 I've lost track of the fingerprints that are 24 all over this force. Steven Mark Kamp, a Tax Counsel 25 for your Board, labored to produce a nine-page hearing 26 summary that by right should have already passed him by. 27 Claudia Madrigal, a Tax Analyst for your Board, kept 28 sending me missives and calling me on the phone. 5 1 At least three times I filled out that 2 Contribution Disclosure for Pary form. I mailed it to 3 Sacramento. I faxed it to Sacramento. I did everything 4 but hand deliver the blasted thing. But the letters 5 from Ms. Madrigal kept coming. "Please fill out this 6 form," they kept saying. 7 By early February of this year the interest 8 quickened and my appearing here today. Not on my part, 9 but theirs. 10 On the 4th of February Ms. Madrigal called to 11 ask if I was coming. I assured her that I would not be 12 a no show. 13 On February 10th I took a call from Mark 14 McEvilly -- McEvilly, I guess it is, of the Franchise 15 Tax Board. I believe he's an attorney. I never did 16 establish what was -- what he was about, but it smacked 17 of a fishing expedition. 18 I asked him if he was duplicating the call I 19 got a few days before from Claudia. He said there was a 20 Claudia in his office, but not with the last name of 21 Madrigal. 22 Be that as it may, Mr. McEvilly sent me a 23 letter on or about February 11th. A day later Claudia, 24 last name of Madrigal, called and left a message on my 25 machine. 26 Two hours later I returned the call and left a 27 message on her machine. I have not heard from her since 28 and that may be a blessing. 6 1 In summing up, from what I see of the tax 2 collecting structure in California, if this were a 3 business in the private sector it would be out of 4 business before not too long. 5 I suppose my wife and I have a few bucks coming 6 from this sorry experience, but our aggravation fee 7 should be much more. My wife has an expression, when 8 we're wrong we pay the penalty. But when they're wrong 9 what's their penalty? Indeed. 10 But let's let bygones be bygones. If 11 California ever balances its budget, the Christines can 12 say that they played a small part. We've paid the $2. 13 We paid the $2 twice, as a matter of fact. 14 Thank you for hearing me. 15 MS. YEE: Thank you very much, Mr. Christine. 16 Franchise Tax Board. 17 MR. McEVILLY: Madam Chairwoman and Members of 18 your Board, my name is Mark McEvilly, appearing for 19 Franchise Tax Board. And to my right is Jozel Brunett, 20 also appearing for Franchise Tax Board. 21 On July 20, 2007 Respondent issued a 22 proposed assessment to the -- to Appellant for the 2004 23 tax year. Appellant protested the proposed assessment. 24 Thereafter, Appellant paid the proposed 25 assessment but Respondent refunded the money -- the 26 payment because there was no final balance due on the 27 account for the 2004 tax year. 28 At the sub -- at the subsequent oral protest 7 1 hearing Appellants indicated they agreed with the income 2 adjustment and again made payment. This -- this one as 3 Appellant has referred to is the $450 payment. 4 On appeal, Respondent has communicated to your 5 Board and to the Appellant that their second payment 6 will be given the effective date of their first payment, 7 which was October 28, 2007. This results in a $38.32 8 refund due to Appellant at the conclusion of this 9 appeal. 10 Since Appellant agreed with the adjustment made 11 in the proposed assessment there seems to be no issue 12 unresolved. 13 I also, as Appellant indicated, telephoned 14 the -- Mr. Christine -- Mr. Christine to basically ask 15 if Mr. Christine understood that since there was no 16 issue involved he'd need not make a -- a travel here 17 today, to try to save him the labor of traveling here if 18 we had nothing to argue about. 19 We do agree that we are in agreement that the 20 adjustment was correct. We agree that the -- the 21 payment that was made by Mr. Christine will be given the 22 effective date of the first time he gave the payment. 23 It's -- it was an error that the payment that 24 he first made was not posted to his account and put in 25 what we would call -- excuse me, pending payments. 26 Basically, it was a timing matter. He made the 27 payment so quick, unlike many taxpayers, that it hit, 28 there was no final amount and somebody just in the 8 1 anxiousness to get refunds out to taxpayers, which in 2 the past has been a gripe with taxpayers, we try to be 3 speedy with our refunds. In this case we were a little 4 bit too speedy. 5 If there are any questions from your Board, 6 Respondent would be glad to field them. 7 MS. YEE: Thank you, Mr. McEvilly. Ms. Steel. 8 MS. STEEL: I think taxpayer came because he 9 was very frustrated that how to deal with FTB, that 10 every time that he knew that he owes taxes and then he 11 was refunded, and then keep asking interest on the top 12 of it. 13 I mean, it's that the -- you know, process that 14 it's been done by FTB is not really acceptable because I 15 was reading these -- this case and it was just like, you 16 know, I understand why taxpayer is here, because he 17 wants us to hear that, you know, what went on with his 18 life. 19 It's -- it's a nightmare, try to work with tax 20 agencies. And I was reading and I was actually laughing 21 and I felt sorry for the taxpayer that he has to go 22 through. So I just want to say that. 23 MR. McEVILLY: I think we can all emphasize 24 with the taxpayer, yes. 25 MS. STEEL: Thank you for admitting that. 26 MS. YEE: Thank you, Ms. Steel. Other 27 comments? 28 MR. LEONARD: Yeah. 9 1 MS. YEE: Mr. Leonard. 2 MR. LEONARD: I guess Franchise Tax Board, it 3 appears that the original misunderstanding is the 4 taxpayer tried to literally follow Franchise Tax Board's 5 instructions on how to report Social Security income and 6 they're confusing, to be generous. It's not clear what 7 number the taxpayer is to put in, between their -- 8 MR. McEVILLY: Well, California law 9 provides that -- that California will not tax that 10 Social Security amount that has been subject to Federal 11 tax. 12 So in this case what -- what happened was the 13 taxpayer put in the entire amount -- 14 MR. LEONARD: Right. 15 MR. McEVILLY: -- which was $30,000 plus, 16 instead of the amount that had been subjected to Federal 17 taxes, which -- which was 26,000 plus. 18 MR. LEONARD: But how do we explain that? How 19 is the taxpayer to calculate that? 20 MR. McEVILLY: Well, there's -- 21 MR. LEONARD: Because it doesn't show on what 22 they get in -- you know, from the Federal government, 23 their Social Security thing from there doesn't show 24 that. 25 MR. McEVILLY: In the Schedule CA you're 26 referred back to the instructions and you are told to 27 put in the adjustment column where you're subtracting 28 out the amount that was subject to Federal tax. 10 1 MR. LEONARD: Okay. So you do your Federal 2 return first. 3 MR. McEVILLY: Yes. 4 MR. LEONARD: And -- and does it -- does it 5 instruct the taxpayer to do that first? 6 MR. McEVILLY: Well, I think in this instance 7 Mr. Christine is, I think, a -- he is a -- he files 8 timely and we have received his Federal return in -- 9 in -- you know, in conjunction with the State return. 10 So it appears as Mr. Christine is -- has filled his 11 Federal return out first. 12 And so, yes, he's done it, I think, the correct 13 way. It's just the numbers are confusing. 14 MR. LEONARD: Could I ask you to go back to 15 your publications folks and revisit that because it -- 16 if -- Mr. Christine seems well informed on how to -- how 17 to read forms and instructions, and if he's having 18 trouble my guess there's millions of other Californians 19 that are at risk -- 20 MR. McEVILLY: Yes. 21 MR. CHIANG: -- making that mistake. 22 MR. McEVILLY: Thank you. 23 MR. LEONARD: And I got to go see how I did my 24 mother-in-law's return. I'll be back in that chair. 25 MS. YEE: Thank you, Mr. Leonard, for raising 26 that point. 27 Other comments, Members? 28 MR. LEONARD: You want a motion to -- 11 1 MS. YEE: Please. 2 MR. LEONARD: I -- I move adoption of Appeals 3 recommendation. 4 MS. YEE: Okay. 5 MR. HORTON: Second. 6 MS. YEE: Motion by Mr. Leonard to -- 7 MS. MANDEL: That includes the FTB concession 8 in their latest -- 9 MS. KELLY: The motion needs to -- 10 MR. LEONARD: Add -- 11 MS. KELLY: -- accept the FTB modification -- 12 MR. LEONARD: I thought that came through 13 you -- 14 MS. KELLY: -- with respect to the interest. 15 MR. LEONARD: -- is why I said it that way. 16 MS. KELLY: No, no, no, no. 17 MS. YEE: No, it came from -- 18 MR. LEONARD: Oh, it did not. I'm sorry. 19 MS. KELLY: It's just in the hearing summary 20 and then a subsequent memorandum. 21 MR. LEONARD: Okay. 22 MS. KELLY: So -- 23 MS. YEE: Okay. 24 MR. LEONARD: Including Franchise Tax Board 25 final letter. 26 MS. YEE: Okay. We have a motion by Mr. 27 Leonard to adopt the Franchise Tax Board's modified -- 28 yes, recommendation. Modified action. 12 1 Mr. Horton. 2 Let me second that motion to put it on the 3 table. Mr. Horton. 4 MR. HORTON: Just out of curiosity, was -- was 5 the Department at fault in any way? 6 MR. McEVILLY: Was the Department at fault? 7 When the penalty came in, it comes in, of course, it's 8 submitted through mail and lower level people apply 9 these payments. 10 It should have been recognized I think as a 11 payment. It should have been checked that there was 12 a -- a final -- amount that would have been final later, 13 a pending dollar amount, a proposed assessment. And 14 that would have triggered -- in, you know, the right 15 person, they would have said, oh, this should go into 16 pending payments. 17 MR. HORTON: Okay. You shared the conversation 18 that you had with Mr. Christine indicating that it 19 wasn't necessary for him to come because the issue was 20 resolved. And you subsequently said today that you sort 21 of empathize with the taxpayer. 22 Did you express that in your conversation? 23 MR. McEVILLY: Oh, the empathy? 24 MR. HORTON: Yes. 25 MR. McEVILLY: I don't -- I don't think so. It 26 was more business like. I think that -- I was sort of 27 sidetracked when he asked about Claudia and I was trying 28 to figure out who Claudia was. And it turned out he had 13 1 the Board of Equalization mixed in with Franchise Tax 2 Board. Until he mentioned her last name, and then I go, 3 oh, that's the Board of Equalization. 4 I just did not want him to needlessly make a 5 trip here from -- I think was it Redondo Beach to 6 Culver -- Culver City if we were all in agreement. 7 MR. HORTON: I mean, it seems to me to be clear 8 that if he wasn't seeking concurrence possibly, and I 9 don't know what the FTB's policy on this is, but I would 10 suggest that we take a look at it, whenever we are at 11 fault just to any degree, and there is a level of 12 empathy, we ought to be able to express that prior to 13 the Board hearings. Possibly that could have stimulated 14 a conversation that would have actually saved the 15 taxpayer some time. 16 He would have felt that his voice had been 17 heard. And I would suggest that we take that under 18 consideration in our training. 19 MS. MANDEL: Madam Chair. 20 MS. YEE: Yes, Ms. Mandel. Thank you, Mr. 21 Horton. 22 MS. MANDEL: What I -- what I heard from 23 Mr. Christine today I didn't necessarily get all of it 24 from the paperwork, because what it sounded like was 25 that all along from Day One he -- that's why he paid it 26 back when he paid the 411. He was -- he thought he was 27 done. He gets letters to come to protest hearing. He 28 pays it again. He thought he was done. 14 1 And so, I -- you know, in the -- whatever he 2 sent in writing in response was treated as a protest. 3 Whatever he sent in writing as a response because the 4 notice of action came out and didn't reflect his 5 previous payment was treated as an appeal. So all of 6 the regular mechanisms came into play and the interest 7 of making sure that the taxpayer was heard, because 8 often we get documents that are meant as protests and 9 meant as appeals and not, you know, completely artfully 10 drawn as such. 11 And so, to the extent that -- that Franchise 12 Tax Board and the Board treated something as he was 13 still contesting and certainly since his payment wound 14 up not getting credited at the earlier date, you know, I 15 think that that's -- we want to make sure that taxpayers 16 can be heard all the way through if that's what they're 17 looking at. 18 Here Mr. Christine, it just turns out, thought 19 he had paid and was done and became frustrated at the 20 continual contacts. So that's -- that's kind of what I 21 heard from you today. But they have credited the 22 payment back to the original date when you paid it. And 23 so, that takes care of that one remaining issue that 24 there really had been. 25 MR. CHRISTINE: May I say something? 26 MS. YEE: Yes, please, Mr. Christine. 27 MR. CHRISTINE: Mr. McEvilly on the -- during 28 the conversation on February 10th, my recollection is he 15 1 never invited me not to appear here, which he stated 2 today. And also he sent me a letter dated the same day. 3 Now, I don't know whether that letter was written before 4 or after our telephone conversation, but it was dated 5 the same day as the conversation. And nowhere in that 6 letter does it say not to appear. 7 MS. YEE: Okay. We'll take note of that, 8 Mr. Christine. Thank you. 9 Okay. We have a motion on the table, Members, 10 to adopt the Franchise Tax Board's modified action, with 11 a second. Without objection, that motion carries. 12 Thank you very much, Mr. Christine -- 13 MR. CHRISTINE: Thank you. 14 MS. YEE: -- for making the time. 15 ---oOo--- 16 17 18 19 20 21 22 23 24 25 26 27 28 16 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 February 23, 2010 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 16 13 pages constitute a complete and accurate transcription 14 of the shorthand writing. 15 16 Dated: March 8, 2010. 17 18 19 20 21 ____________________________ 22 BEVERLY D. TOMS 23 Hearing Reporter 24 25 26 27 28 17