1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 REPORTER'S TRANSCRIPT 8 APRIL 13, 2010 9 10 ITEM P OTHER ADINISTRATIVE MATTERS 11 ITEM P3 SALES AND USE TAX 12 DEPUTY DIRECTOR'S REPORT 13 ITEM a UPDATE ON UNAPPLIED REMITTANCES 14 15 16 17 18 19 20 21 22 Reported by: Juli Price Jackson 23 No. CSR 5214 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 Jerome E. Horton 6 Vice-Chair 7 Barbara Alby Acting Member 8 Michelle Steel 9 Member 10 Marcy Jo Mandel Appearing for John 11 Chiang, State Controller (per 12 Government Code Section 7.9) 13 Diane G. Olson 14 Chief, Board Proceedings Division 15 16 Randi Henry Deputy Director 17 Sales and Use Tax Department 18 Dario Romano 19 Administrator Return Analysis and 20 Allocation Section 21 Randy Ferris Assistant Chief 22 Counsel 23 24 ---oOo--- 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 APRIL 13, 2010 4 ---oOo--- 5 MS. YEE Next item? 6 MS. OLSON: Our next item is P3, Sales and Use 7 Tax Deputy Director's Report, update on unapplied 8 remittances. 9 MS. YEE: Okay, Ms. Henry? 10 MS. HENRY: At the March 25th Board meeting 11 you requested an update on our procedures for resolving 12 unapplied remittances. 13 Today I have Dario Romano, Administrator of our 14 Return Analysis and Allocation Section to provide you 15 with a brief update, and Randy Ferris, Assistant Chief 16 Counsel, who will be available for any questions. 17 MS. YEE: Thank you. 18 MR. ROMANO: Thank you. We are here today to 19 outline our procedures for resolving the remaining 20 unapplied remittances from the Aged Unapplied Remittance 21 Project. 22 These remittances relate to accounts where no 23 reply or return mail was received in response to our 24 first notice. 25 I will first provide background on aged 26 unapplied remittances, then I will outline our enhanced 27 procedures for addressing them. 28 Lastly, I'll provide a representative example 3 1 of the cause of an aged unapplied remittance, which 2 represents an amount of tax due. 3 Unapplied remittances are funds received by the 4 Board of Equalization, or the BOE, that cannot be 5 readily matched to a liability. 6 Aged unapplied remittances are defined as 7 unapplied remittances that are over three years old. 8 In July 2008 or the July 2008 legal opinion, 9 which distinguishes remittances from payments, provide 10 staff an opportunity to return aged remittances to 11 the -- or that were sent to the BOE in error. 12 Beginning in August 2008, notices were mailed 13 to accounts with aged unapplied remittances. These 14 notices were sent via first class mail and asked 15 taxpayers to either request the remittance be returned 16 or to identify the intended liability. 17 We now plan to send a second notice by first 18 class mail to the remaining accounts to allow another 19 opportunity for the taxpayer to inform us what the 20 remittances represented and/or to request it be 21 returned. 22 All the taxpayer has to do is check the box 23 "return" to request the remittance be returned. No 24 further documentation will be required. 25 In addition, to add additional incentive to the 26 taxpayer to open the notice, the envelope will have a 27 distinctive (marking) saying, "We may owe you money." 28 If the second notice is returned undeliverable, 4 1 staff will perform a search for a better address using 2 BOE records, available skip tracing tools and the 3 internet. 4 If a better address is located, the notice will 5 be mailed to the new address, allowing an additional 60 6 days for mailing for response. 7 If no better address is located or no timely 8 reply is received, staff will perform a more in depth 9 review of the account to determine if the remittance 10 represents an excess or duplicate remittance or if the 11 remittance was intended for a liability. 12 We will have an experienced staff member review 13 all of these remittances to determine if it was sent to 14 the BOE in error or whether the taxpayer intended to pay 15 this amount based on a return or accounts receivable 16 information. 17 If we have any doubt of the -- on the intent of 18 the remittances, we'll err on the side of the taxpayer 19 and return the funds. 20 All excess duplicate remittances will be 21 returned to the taxpayer. The warrant will be mailed to 22 the most recently identified address and any uncashed 23 warrants will be transferred to the State Controller's 24 office. 25 With one staff member performing this review, 26 it will insure consistency and expertise in applied -- 27 and is applied to all of these remittances in order to 28 determine the client's intent -- or the taxpayer's 5 1 intent. 2 Therefore, any liability established will be 3 based upon a well-researched finding by an experienced 4 staff member that the remittance was not made in error. 5 When the remittance is applied to an 6 established liability, the taxpayer will receive a third 7 notice that will inform them that the remittance has 8 been applied as a payment. Taxpayers will have six 9 months to file a claim for refund. 10 The remaining unapplied remittances represent 11 both excess duplicate remittances and remittances 12 intended to pay tax, interest and/or penalties due to 13 State. 14 The following is one example of an aged 15 unapplied remittance which was intended to pay tax due. 16 For example, when a taxpayer files a corrected return 17 reporting additional tax, staff must make a manual 18 adjustment to increase the tax due on the return to 19 fully apply the remittance in the BOE's Integrated 20 REVENUE Information System, IRIS. This type of 21 adjustment was not required in the old system. 22 After the implementation of IRIS, staff would 23 occasionally miss a step and inadvertently leave a 24 portion of the remittance unapplied. 25 Again, the aged unapplied remittance represents 26 both excess and duplicate remittances and remittances 27 intended to pay liabilities not established on the BOE's 28 records. 6 1 In summary, our enhanced procedures will allow 2 the taxpayer the opportunity to request the remittance 3 be returned or identify the intended liability. 4 The procedures will allow all aged unapplied 5 remittances to be reviewed by an experienced staff 6 member. With one staff member performing this 7 remittance review, we anticipate the best possible 8 outcome for both the taxpayers and the State. 9 The procedures will also result in the 10 application of all amounts due and the issuance of the 11 third notice advising the taxpayer the six minute -- or 12 the six month limit to claim a refund. 13 And, finally, the result -- these procedures 14 will result in the return of all excess or duplicate 15 remittances to the most recently identified address. 16 Any uncashed warrants, again, will be transferred to the 17 State Controller's. 18 Going forward, staff is now reviewing all 19 unapplied remittances before they become aged to 20 determine if the remittance can be returned or applied 21 to a liability. 22 In addition, a new semiannual notice will be 23 sent to taxpayers that have unapplied remittances. This 24 notice will give the taxpayer an additional opportunity 25 to identify the intended liability or request the 26 remittance be returned. We anticipate the first of 27 these new notices will be mailed in May 2010. 28 And we're available to answer any questions. 7 1 MS. YEE: Thank you very much. 2 Questions, Members? 3 Ms. Steel -- Ms. Alby, then Ms. Steel. 4 MS. ALBY: I would just like, if I could, to 5 have some clarification? 6 Following last week's -- or last -- two weeks 7 ago, the discussion of the last Board meeting, and I 8 want to make sure that if we can restate it, it might be 9 a good idea. 10 I believe I heard last time in the discussion 11 that we cannot find the taxpayer, if they -- if you have 12 a -- if they paid us too much money that we would be 13 creating billings to apply some of the remittances to. 14 I checked the minutes and we did -- someone did 15 say that. 16 MR. ROMANO: That is correct, that was -- 17 MS. ALBY: That was disturbing. 18 MR. ROMANO: -- the procedure that we had 19 before. Now that we've revisited the procedures, we 20 will not be doing that. 21 If we find that it's an excess or duplicate 22 amount, you know, with the new procedures that we sent 23 set out the 2nd of April, we will be returning any 24 excess amounts. 25 And if we actually find where it was intended, 26 we will go ahead. 27 MS. ALBY: Will we create billings to apply the 28 money to, but we create them, doesn't that sort of 8 1 circumvent the abandoned property law? 2 I'm a little concerned about that, if you'd 3 just clear that -- clarify that for me? 4 MR. FERRIS: In terms of the abandoned property 5 law, there are statutes in the Code of Civil Procedure 6 that govern that. 7 And kind of behind your question is we have 8 these monies -- 9 MS. ALBY: 11,000 of them? 10 MR. FERRIS: -- right, that we've received. 11 And part of what we're doing right now is trying to is 12 be as thorough as possible in trying to understand what 13 is the nature of these monies that we've received. 14 And we're going through that process to try to 15 make a determination to see if we can have certainty 16 that it is a payment on a liability that's due, in which 17 case a liability may have to be created to apply it to, 18 if we're certain of that. 19 But if we have any doubt about that, it's going 20 to be returned to -- to the taxpayer. 21 As to the abandoned property, we don't -- 22 because we haven't made the determination yet as to what 23 the taxpayer's intent was, we don't believe that we can 24 demonstrate an inaction or an ambivalence from the 25 taxpayer that they have abandoned the property. 26 The earliest we could go back to that probably 27 would be the 2008 letter that we initially sent that 28 said, "We may have some money that we shouldn't have." 9 1 That might start the clock ticking as to inaction. 2 But those statutes require three years of 3 inaction before it can be considered escheating to the 4 State. 5 MS. ALBY: Okay. But are you saying that we 6 are creating false billings to a final -- whatever the 7 money is, that we can't apply it somewhere else? 8 MR. FERRIS: Oh, no, absolutely not. 9 MS. ALBY: It's -- 10 MR. FERRIS: It's like if somebody send a use 11 tax payment without a return and we call them up on the 12 phone and say, "Why did you send this money?" 13 And they say, "Oh, I owed this on my use tax 14 for my Amazon purchases." We would have to create a 15 liability to apply it to because they sent us no return, 16 we have no records, we didn't audit them. It's a 17 self-assessed liability that we have confirmed and we're 18 certain of and, therefore, it's just the way IRIS 19 functions. You have to have something to apply the 20 payment to in order for it to be applied. 21 And I'm not the expert on how to -- 22 MS. HENRY: If I could explain? 23 When we first went from the 815 to the IRIS 24 system, this is how they simply explained it to -- I 25 was one of the first districts that they got to use 26 it -- and then if you will just bear with me on this 27 analogy -- but our -- the way our system is that we have 28 to have like a taco shell to put the filling. 10 1 So, if we have a filling, and even though we 2 know that we're supposed to keep it, we've got to make 3 the taco shell to put it in, that would be the 4 liability. 5 So, if one of our billers missed a step -- and 6 it's kind of cumbersome and that's why, you know, 7 someday we'll probably replace the IRIS system -- we 8 have to make the taco shell to put it back in. 9 So, we -- we're not going to make anything up. 10 We -- no doubt, we were instructed to go back to look at 11 our procedures that we brought back to two weeks ago. 12 And under the new procedures that we have, it 13 really is our hope to do our due diligence to make sure 14 that the taxpayers either really wanted us to have the 15 money or there was some mistake because, like Ms. Steel 16 pointed out a couple of weeks ago, they had paid one 17 billing, then they got another one, they crossed in the 18 mail. 19 So, if it's clearly clear, you know, excess or 20 duplicate, we're going to give it back. In the letter 21 they just check, "Return," we're going to send it back, 22 no questions asked. 23 If they tell us keep it, then we're going to 24 have to use our experience of where we think it could go 25 or we're going to have to make a taco shell to put the 26 filling in. 27 Does that make sense? 28 MS. ALBY: Well, aren't we required, after we 11 1 have that for three years, to turn it over to -- we 2 don't have to turn it over to the State Controller after 3 three years? 4 If they say, "Keep it," that fixes -- that 5 resolves that issue? 6 MR. FERRIS: Correct, yeah, because the Code of 7 Civil Procedures sections that apply to this require 8 three years of inaction from -- 9 MS. ALBY: Okay. 10 MR. FERRIS: -- the person. We don't have that 11 yet. 12 MS. ALBY: Well, just -- give me a little 13 patience, here, if you would? It's -- 14 MS. HENRY: Sure, no problem. 15 MS. ALBY: -- getting late, but this was so 16 important last time. 17 Are we holding any monies that no one has 18 claimed past three years now, of this 11,000? 19 MS. HENRY: Well, there's been -- I mean 20 there's remittances that are older than three years -- 21 MR. ROMANO: Yeah. 22 MS. HENRY: -- where nobody's claimed. 23 MS. ALBY: So, that leads to my next question, 24 aren't we violating the abandoned property law by 25 holding onto them beyond three years? 26 MR. FERRIS: I don't think so. I mean, in a 27 sense one could argue that we were inactive for too long 28 in trying to figure out what the intent of the taxpayer 12 1 was. 2 But the terms of the taxpayer's inaction, which 3 is what you have to measure to know when it's escheated 4 to the State or not as abandoned property, then that's 5 due to the inaction of the person who sent the money. 6 I think on the fact pattern that we're on here, 7 I think 2008, when we sent them the first letter, when 8 we gave notice that maybe we have some money we 9 shouldn't have, that would be when the clock might start 10 to begin to tick, you know, as to -- if they didn't 11 respond to that, that perhaps they've been -- now 12 they've been inactive, we've -- it's different than a 13 bank account, you know, that I have with the Bank of 14 America or something like that, where I just leave it 15 inactive where it's my money, I put it in there then I 16 just left my bank account. 17 MS. ALBY: One last question then, if I could, 18 then I won't ask another one, I don't think. 19 Wouldn't be it simpler and safer if we would 20 just turn any money that we don't have a taco shell for 21 or a place to apply it over to the State Controller 22 after three years? 23 Because then there is no -- it just seems 24 easier and safer legally. 25 MS. HENRY: Well, I guess at the same time, 26 I -- I think we feel like -- I feel an obligation to try 27 to contact these people to let them know that we -- we 28 have their funds, if -- 13 1 MS. ALBY: But you should be able to do that 2 within three years. 3 MS. STEEL: No, actually, there is -- there is 4 two accounts, one that they couldn't recognize who it 5 belongs to, they already do that to the State 6 Controller's office. 7 MS. ALBY: Okay. 8 MS. STEEL: This is different account that they 9 know that taxpayers paid -- overpaid or they mistakenly 10 paid or they tried to apply something else. 11 So, this is totally separate accounts. So, you 12 can't just give taxpayers' money to the Controller. 13 MS. ALBY: Okay. 14 But if it sat here in our bank account -- 15 MS. STEEL: That's why we want to return it 16 and, you know -- 17 MS. ALBY: Go ahead. 18 MS. STEEL: -- I am very happy that, you know, 19 something came up, that, you know, you tried to work 20 with it. 21 But I think we can do a little better 22 because -- especially out of that 11,892, I believe, 23 those taxpayers that they overpaid average $57. And 24 some of those taxpayers don't have seller's permit 25 because they're already closed down, and why don't we 26 just return it without sending those letters? 27 And then letters that -- thank you very much 28 for sending to it me for all those cover letters, you 14 1 know, sample letters. That was too way too complicated 2 was so long. I was reading it and I am saying like, a 3 tax agency sending me this, I don't think -- I don't 4 want to deal with it. 5 So, if you going to send out, I really -- I was 6 hoping that staff is going to coming out with the two 7 different steps, one, that it's been already closed and 8 you are already recognized which taxpayer is that 9 overpaid because they don't owe us anything right now 10 and that we couldn't find it means that they -- in the 11 future we cannot find what they owe to us. So, we 12 return it. 13 And then rest of it of who is -- who have 14 seller's permit as is and they are not responding it, we 15 can send the letter out but that letter has to be very 16 simple, that you overpaid this amount. And then we 17 cannot really put in other accounts. So, can you just 18 want us to send just the money back, then check on the, 19 you know, box for refund. 20 So, I think we should have a two different 21 steps for two different taxpayers at this point. 22 And I know you tried to really work with us, 23 tried to return it, but I think certain -- you know, 24 those was taxpayers that, you know, they don't owe us 25 anything and they close down, why we still holding and 26 keep asking them to, you know, mark on the refund part? 27 MS. HENRY: Well, Ms. Steel, when we started 28 this process there was like 20,000 of these and we 15 1 talked about that. 2 And we wanted to have some level of confidence 3 that we were actually returning checks to the people 4 that open them are the people that were supposed to get 5 the checks. 6 So, when you -- when -- even though we're 7 sending our mail out first class and what that means to 8 us is if we send out first class, it means if there 9 isn't a forwarding address, it will come back to us. 10 And then we work return mail to find a better 11 address. If there is a better address, then our mail 12 machine will send it directly to them. 13 MS. STEEL: Isn't that what we did already, 14 though? 15 MS. HENRY: We did. 16 MS. STEEL: That long letter already went out? 17 MS. HENRY: But we're still -- we're still 18 somewhat concerned that we might have $657,000 out there 19 going to people that shouldn't get the checks and would 20 cash the checks. 21 So, it's a tough -- 22 MS. STEEL: But those people are the one paid 23 it, though, paid those taxes. 24 MS. HENRY: And that would be fine. 25 MS. STEEL: Right. 26 MS. HENRY: If we were trying to reach you and 27 that, unfortunately, your check went to someone else and 28 somebody else just cashed the check -- 16 1 MS. STEEL: Well, somebody can't cash it when - 2 it has different people's name on it. 3 MS. HENRY: Well, I don't know about you, but I 4 get mail from -- in fact, well, my husband and I are the 5 only people that ever owned this house and yet we get 6 mail for other people to our address. 7 If there was a check in there, we probably 8 could cash it. So, we're trying to -- we're trying to 9 be good stores of the State's money to make sure we're 10 returning it to the right people. 11 At the same time we're trying to make it as 12 simple as possible for the taxpayers, but we're trying 13 improve the level of confidence of where sending this 14 money to. 15 So, it's -- it's really a tough one. It's just 16 a -- 17 MS. YEE: I think the end result that we're all 18 seeking is the same. 19 But what has happened is that with respect to 20 these 11,000 payments, they really haven't been worked 21 through to where we have a level of confidence about 22 whether any of them can be appropriately applied or not. 23 I also think that this -- that this process 24 allows us not only to get more confidence about what 25 that 11,000 universe is or isn't, but also as we return 26 these payments, I would hope then that there will have 27 been contact made to the extent that those who are 28 receiving the payments know, in fact, that's it's a 17 1 check. 2 So, I think it's accomplishing a number of 3 different things, but also I think this agency does have 4 an obligation to understand what it is that we're 5 working with here. 6 MS. STEEL: But still that those checks with 7 different names, I don't think, you know somebody else 8 can really cash it. I mean, you know -- 9 MS. YEE: You'd be surprised. 10 MS. STEEL: Okay, maybe I am naive here. 11 Is there any way possible that we are doing 12 like a Controller's office does, you know, the money is 13 here, kind of like you going into the internet then to 14 BOE website and there is a name and company and that, 15 you know, amount that we can put it on so at least 16 somebody can go in there and that, you know, maybe I 17 overpaid some day and -- 18 MS. HENRY: Well, I certainly think we could 19 take it under consideration. That's one of the reasons 20 why, come May, we're going to send out the statements to 21 show, hey, there's money here. 22 So, hopefully, taxpayers don't think they have 23 to go to our internet site, but -- I -- I'm feeling a 24 lot more confident than I did a couple of weeks ago 25 knowing that we're hiring back a retired annuitant that 26 knew the 815 and also knows the IRIS system, along with 27 the fact that, hopefully, we -- we're going reach the 28 taxpayers. 18 1 We're going to make it as simple as possible to 2 say, yes, please return the funds. We're not going to 3 burden the Controller with just sending them the money 4 and making it their problem. 5 So, hopefully, it will probably take six 6 months, maybe a year to get to the bottom of this -- 7 MS. STEEL: But you hire somebody to do it, I 8 mean, it means that, you know, just return money, it's 9 going to be much simpler, then we don't have to hire. 10 At this point we have a hiring freeze. We 11 cannot hire -- soft hiring freeze now because it, you 12 know, changed the level. And it's so odd that we try to 13 bring somebody else in, even retired or not retired, and 14 then try to do this letters going out there. 15 You -- two weeks ago you made it very clearly 16 these taxpayers you know that they are the ones sent to 17 us. You know, I heard very clear. 18 And the other group of the people that you 19 couldn't recognize and you don't know where those 20 taxpayers are, so, that's why you send out, you know, 21 money to the Controller's office. 22 So, now that 11,892 people that you already 23 know who they are, that's what you said last -- two 24 weeks ago and now we have to hire one more person to 25 send letter out. 26 You know, six months from now that another 27 letter that somebody has to respond it that you been 28 hoarding money, plus we hiring one more person under 19 1 budget deficit. 2 And, you know, I really don't know that it's 3 right direction. If we just send the letter out, who 4 did the letter out last year, if it went out then? Why 5 we need another person to do this job? 6 MS. HENRY: We're not going to have the person 7 send the letter, it's to make sure that if our staff 8 missed one of the steps in the IRIS project -- or the 9 IRIS -- when they were applying the money, they would be 10 able to recognize that. 11 When we first started working this project we 12 had a variety of people working this project along with 13 their other jobs. Some of them weren't as experienced 14 as others. 15 If they -- if we had started this with one 16 person that knew, we might not be sitting here today in 17 the position that we're in. So, we're -- I mean, 18 like -- like Ms. Yee said, I think we all want the 19 same -- we all want the same outcome. 20 And I'm sorry if we're still not procedurally 21 going the route that you wish that we would. I'm 22 certainly open to suggestions from the Board, if they 23 would like to change any of the procedures that we're 24 doing or suggesting to do. 25 MS. YEE: Well -- 26 MS. STEEL: I don't think that's really right 27 direction that -- I mean, the direction that I wanted to 28 begin with because I thought, yes, you send another 20 1 letter out that's going to be good improvement. 2 But we have to hire somebody to do that, only 3 that job, is -- you know, I don't know what other Board 4 Members are thinking about it, but that's not really 5 right because it's a -- you know, when you think this is 6 a really simple way, then you just return the money 7 because you said you already know the address and 8 taxpayer that -- who pay us over or duplicate or 9 whatever mistakenly. So, I really don't know why we are 10 going that direction. 11 And then, you know, you know, putting on the 12 internet is so simple way to do it because, you know, 13 they can find their own money. 14 Controller's office does very well for that. 15 So, you know what, I'd rather go that direction. So, 16 you know, and then send the e-mails out that, look, you 17 know what, there is money posted that, you know, whoever 18 over paid here is, you know, the returning money. We 19 cannot say refund, but, you know, returned money is 20 here. 21 MS. HENRY: Can I just reiterate your 22 suggestion then? 23 You're saying instead of sending out another 24 letter, post all these 11,000 people on the internet, 25 but then let them know that they might -- we might owe 26 them money and then they can contact us by checking the 27 internet? 28 MS. STEEL: No. I already said there is two 21 1 steps. One, already closed down, you already know that 2 all of the accounts been cleared, send a check out. 3 And then the other, second set, that we put on 4 the internet and then put it, you know, how much, 5 who's -- which company and which owner and how much they 6 overpaid. 7 MS. HENRY: Okay. Well, the ones for this 8 procedure, we're going to take out all of the active 9 accounts, which is only about a thousand, and we're 10 going to work those separately. So, they're not even in 11 this procedure because I have to agree, those people 12 that have active seller's permits, we should know where 13 they're at and we should be able to contact them. 14 MS. STEEL: Yeah, I understand that part. So, 15 that's why we -- 16 MS. HENRY: So, about 10 -- 17 MS. STEEL: -- we have to -- 18 MS. HENRY: -- but about 10,000 of them would 19 be the closed out accounts that no longer have a permit 20 any more. 21 MS. STEEL: And we should send those money out. 22 MR. FERRIS: And as to the internet idea, I 23 think we have to do some research as to the Taxpayer 24 Bill of Rights on confidential information -- 25 MS. YEE: Right. 26 MR. FERRIS: -- about taxpayers and what we can 27 post publicly. 28 MS. STEEL: But how Controller's office does? 22 1 MR. FERRIS: They're not subject to the 2 Taxpayer Bill of Rights. 3 But, for example, like we put tax 4 delinquencies -- 5 MS. STEEL: Just send the money out, I mean. 6 MR. FERRIS: -- on the internet that we have 7 legislative authority to disclose that taxpayer 8 information to the world. 9 But in general who is -- the only information 10 in general we're allowed to give to the world is just 11 that someone has a seller's permit and not how much they 12 maybe owed or that type of thing. 13 So, their -- I actually think, though, that in 14 terms of what Ms. Henry and the Department is proposing 15 is going to be much more effective in actually getting 16 the money into the hands -- 17 MS. YEE: And probably sooner. 18 MR. FERRIS: -- of the people who should get it 19 as opposed to just an internet posting that they may or 20 may not find. 21 We're actually saying we are going to do -- 22 move heaven and earth to try to get in touch with these 23 people, find out how to get the money to them or we're 24 making an extraordinary effort to. 25 MS. STEEL: But isn't that -- the internet, you 26 try to file something that -- without your seller's 27 permit number, you cannot even get in. 28 MR. FERRIS: I'm sorry? 23 1 MS. STEEL: You know, those e-filing that 2 without your seller's permit number, you cannot even get 3 into BOE certain sites. 4 MR. FERRIS: Right. 5 MS. STEEL: But that's --nobody -- 6 MR. FERRIS: Like a myboe type concept. 7 MS. STEEL: None of the public can get into 8 that kind of, you know, website. 9 MS. YEE: But we're also talking about closed 10 accounts for the majority of -- the overwhelming 11 majority of these. 12 And I guess -- here's what I don't want to do, 13 I really think we're all after the same outcome and I 14 think we're on a path in terms of what the staff has 15 proposed to try to do that in the most efficient way 16 possible. 17 And I appreciate your comments, Ms. Steel, 18 certainly for those accounts that are closed, it should 19 be very easy to just get the payments back without a lot 20 of -- without the process being bogged down. 21 I think by the time we figure out how to post 22 it and deal with the confidentiality issues, we probably 23 will have already implemented what Ms. Henry is proposed 24 and the payments will be on their way back. 25 So, I want to keep it simple. I don't know 26 that it's worth creating kind of a new, you know, kind 27 of procedure to accommodate this that raises all kinds 28 of other issues when I do have confidence that we're 24 1 going be able to get these payments back pretty quickly. 2 And I -- 3 MS. STEEL: So, if you do it the way you want 4 to do, how long it's going to take to send all those 5 money back? 6 When the first letter is going to go out? 7 MR. ROMANO: Well, we would have to get the 8 letter through the clearance and get it established. 9 MS. YEE: When would it go out, the date? 10 MR. ROMANO: We can get them out in May, we 11 could start -- 12 MS. YEE: May? 13 MR. ROMANO: -- start mailing them in May. 14 But we would also start redoing some research 15 on some of the accounts to start finding, you know, 16 how -- if we can locate better addresses than that. 17 MS. STEEL: So, if you come back on May and 18 then report the status? 19 MR. ROMANO: It's going to take, you know, at 20 least six months or -- you know, to work through the 21 process. 22 Because if we send out the letters you have to 23 allow -- we're allowing 60 days for responses and that. 24 So, next month -- in the past -- 25 MS. STEEL: Can I look at the letter before it 26 goes out, at least, so you can e-mail me what kinds of 27 letters are going out? 28 I'm backing off at this point. 25 1 MS. HENRY: Thank you, Ms. Steel. 2 MS. STEEL: You know what, I really want to 3 send those money back to the taxpayers because it 4 doesn't belong to our Department, it's just lingering 5 some place. It's not -- we are not even using it or we 6 can not even use it. 7 So, why we are holding onto it? So, we want to 8 return these money as soon as we can. 9 So, I want to see it, at least the letter, you 10 know, the kind of letter going out because that -- the 11 other letter was very complicated. It seems like, you 12 know, something like, oh, maybe I owe something, that's 13 why they are sending me this kind of letter. 14 So, something little more simple and friendlier 15 and, you know -- 16 MS. HENRY: Now, I did send you the letter last 17 week, I don't know if got to look at it. Was that the 18 one that you thought was still too complicated or too -- 19 did you want more simple? 20 MS. STEEL: You send me only one. 21 MS. HENRY: Well, I sent -- you should have 22 gotten three attachments, but I'm sorry if you didn't 23 get them, I can send them again. I just want to make 24 sure. 25 If that's the one that you're speaking of that 26 you would like to be more simple, I'll send them to you. 27 MS. STEEL: I can help you to -- 28 MS. HENRY: Thank you. 26 1 MS. STEEL: -- help her out. 2 MS. YEE: Maybe the letter and then also stated 3 with a timeline. 4 MS. HENRY: Okay. 5 MS. YEE: So that we have some sense of the 6 flow of the process. 7 MS HENRY: A timeline, okay. 8 MS. YEE: Mr. Horton, did you have a comment? 9 And then Ms. Mandel? 10 MR. HORTON: Yes, Madam Chair, thank you. 11 I just want to share with staff that I -- my 12 belief is that the Board has a fiduciary responsibility 13 to make an assessment as to whether or not there's a 14 liability associated with any payments, irrespective -- 15 oh, I did it again. 16 My belief is Board has a fiduciary 17 responsibility to California taxpayers to make an 18 assessment as to whether or not there is a liability 19 associated with any payments whatsoever. 20 And, so, the fact that you are going through 21 this process to make that determination as to whether or 22 not there is a liability, I think there -- you know, I 23 commend you for doing that. 24 Once that determination is made, based on your 25 assessment and based on the expertise of this particular 26 individual, it seems to me that you've developed an 27 expedited process to get the money back to the taxpayer 28 in question. 27 1 The concern would be if we have a closed out 2 account and to arbitrarily just send all of the money 3 back to all of the closed out accounts without making 4 that assessment might be a violation of our 5 responsibility to all of the other California taxpayers 6 who the debt would be owed to in the event that there 7 was some sort of determination. 8 And, again, I don't necessarily want to 9 micromanage that from the Board, but encourage you to -- 10 to go through that process, to make that determination. 11 And if the determination is that there is no 12 liability, then return the money. 13 And if the determination is that there is a 14 liability, then we have a responsibility to apply that. 15 And the methodology in which you accomplish that 16 technically is what it is. 17 So, I sort of get that understanding. 18 MS. YEE: Thank you, Mr. Horton. 19 Ms. Mandel? 20 MS. MANDEL: I just had a very technical 21 question on your process. And maybe I read the memo 22 wrong. 23 In the first go-round, where notices were 24 returned and you couldn't find a better address, my 25 recollection was that then -- where you couldn't find a 26 better address and you also couldn't -- could not 27 determine that it looked like there really was a 28 liability somewhere that hadn't been entered in IRIS 28 1 appropriately, for those you sent the money over to the 2 Controller's was my recollection -- no -- no address on 3 the original crowd. 4 Was that right? 5 MR. ROMANO: If it came back and we couldn't 6 locate a better address and it was undeliverable. 7 MS. MANDEL: And you didn't have -- you 8 couldn't -- 9 MR. ROMANO: And no liability? 10 MS. MANDEL: -- couldn't match it, just 11 something that should have been entered? 12 MR. ROMANO: Right. 13 MS. MANDEL: So, you sent those over, okay. 14 When I read the most recent memo, it -- you 15 talked about sending -- if the notice that you're 16 talking about now sending out comes back undeliverable, 17 you're going to try to find a better address and, you 18 know, you'd send it to the better address. 19 And then it said if the notice was returned 20 again or you couldn't find a better address, then you 21 are going to do the review, which you should do to see 22 whether there is a liability that should have been 23 created, the fabulous taco shell, or that should have 24 been entered originally and wasn't and, therefore, must 25 now be made. 26 And then you said anything that was excess or 27 duplicate, if you did that and discovered it really was 28 excess or duplicate, you'd return it to the taxpayer. 29 1 And I think that there was a sentence missing 2 because it then said any uncashed warrants would go to 3 State Controller. 4 But in the first go-round if you know you don't 5 have a good address for the person, why are we going to 6 issue a check and send it out to a bad address? 7 Or did I just sort of misread that? Was there 8 a logic missing? 9 MR. ROMANO: There's a little bit of the step 10 -- any time that we send out the refund or the return 11 warrant to the taxpayer, we're going to make an effort 12 to locate it. If for some reason when we find the 13 better address and we make the contact and for some 14 reason they're not contacted, it's my understanding 15 eventually uncashed warrants end up at the Controller's 16 office. 17 MS. MANDEL: Yeah, I guess -- well, we can 18 always talk about it later. 19 The way I read the -- 20 MS. HENRY: I think we -- 21 MS. MANDEL: -- memo it sounded like if the 22 notice came back and you couldn't find a better address, 23 then you did the research and figured out the money 24 really should go to the taxpayer, that even though you 25 didn't have a better address, you were going to try to 26 send -- 27 MR. ROMANO: We're going to continue -- 28 MS. MANDEL: -- you were going to try to send 30 1 the warrant out to an address you already knew was bad. 2 And I was kind of wondering why those weren't just 3 going -- 4 MS. HENRY: I'm sorry, we missed a step. 5 MS. MANDEL: Okay. 6 MS. HENRY: We really did spend a lot of time 7 on that memo and -- 8 MS. MANDEL: Okay. 9 MS. HENRY: -- so, I think if we don't know 10 where they're at, then we'll just send it over there. 11 MS. MANDEL: Okay. 12 MS. HENRY: If we -- 13 MS. MANDEL: That's what you did in the first 14 go-round. 15 MS. HENRY: Right. 16 MS. MANDEL: Okay. 17 MS. HENRY: But we do know that we will send 18 them out. And we know that some of them will not get 19 cashed. 20 MS. MANDEL: Right, some of them you'll have an 21 address for and some of them you'll send it out and it 22 will just be -- 23 MS. HENRY: Right. 24 MS. MANDEL: -- not cashed 'cause, you know, 25 people -- sometimes that happens. 26 And then -- then those will also go over as 27 uncashed warrants? 28 MS. HENRY: Right. 31 1 MS. MANDEL: Okay, thank you. 2 MS. HENRY: Thank you. 3 MS. YEE: Okay, Ms. Mandel. 4 Staff clear about the direction from Ms. Steel? 5 MS. HENRY: I think so. 6 MS. YEE: About the letter timeline? 7 Okay. Other comments, Members? 8 Thank you very much. 9 ---o0o--- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 32 1 REPORTER'S CERTIFICATE 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 APRIL 13, 2010 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 32 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: May 19, 2010 17 18 19 ____________________________ 20 JULI PRICE JACKSON 21 Hearing Reporter 22 23 24 25 26 27 28 33