1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 REPORTER'S TRANSCRIPT 8 MAY 26, 2010 9 10 LEGISLATIVE COMMITTEE 11 12 13 14 15 16 17 18 19 Reported by: Juli Price Jackson 20 No. CSR 5214 21 22 23 24 25 26 27 28 1 1 2 P R E S E N T 3 4 For the Board Jerome E. Horton of Equalization: Chair 5 Betty T. Yee 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 Government Code 12 Section 7.9) 13 Joann Richmond Clerk, Board 14 Proceedings Division 15 16 17 ---oOo--- 18 19 20 21 22 23 24 25 26 27 28 2 1 INDEX OF SPEAKERS 2 ---o0o--- 3 AB884 4 ---o0o--- 5 NAME PAGE 6 Senator Roy Ashburn 7 7 Mira Guertin 9 8 Gina Rodriquez 11 9 ---o0o--- 10 AB 1687 11 ---o0o--- 12 Craig DeLuz 50 13 Julianne Broyles 51 14 Angie Miller 52 15 16 ---o0o--- 17 18 19 20 21 22 23 24 25 26 27 28 3 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 MAY 26, 2010 4 ---oOo--- 5 AB 884 6 ---o0o--- 7 MS. RICHMOND: The next item on this morning's 8 agenda is the Legislative Committee. 9 Mr. Horton is the Chair of this Committee. 10 Mr. Horton? 11 MR. HORTON: Thank you. 12 Members, the Legislative Committee is hereby by 13 called to order. Members, we're fortunate to have 14 Senator Ashburn here before us to present on SB 884. 15 Thank you, sir, for coming. 16 In the audience we also have a number of 17 individuals who will be principals in support. And I 18 would ask that they come forward at this time to prepare 19 to make their presentation. 20 And at this point we'll turn it over to 21 Ms. Shedd to introduce the matters before us. 22 MS. SHEDD: Thank you, Mr. Chair and Members of 23 the Committee. 24 We have before the Board two bills for 25 consideration. The first is bill is SB 884, by 26 Senator Ashburn. This bill would make several changes 27 related to use tax registration program that was enacted 28 in last year's ABX 418. 4 1 We had understood there might be some 2 amendments to the bill, but we haven't seen those yet, 3 so, the bill before you is the one that was amended on 4 April 22nd of 2010. 5 This would align the due dates for the use tax 6 return under the program with the State income tax 7 returns. So that taxpayers subject to the personal 8 income tax would be required to file their returns by 9 April 15th and taxpayers subject to the corporate tax 10 would be required to file by March 15th. 11 For those taxpayers filing on a fiscal year 12 reporting basis for income tax purposes, the due dates 13 for the use tax return would be aligned with that fiscal 14 year due date. 15 The bill would also enable the Board to grant 16 paperless extensions for up to six months to enable 17 taxpayers to file their use tax returns. However, the 18 bill would require payment of the use tax by the due 19 dates of the returns without regard to any extensions 20 granted. 21 It would specify that no penalty should be 22 imposed on a qualified purchaser's failure to timely 23 remit use tax reporting periods for 2007, 2008, and 2009 24 unless the purchaser fails to report and pay the use tax 25 by March 15th of 2011. And the bill requires the Board 26 to refund any penalties paid for those periods. 27 The staff recommends an opposed position as we 28 believe that it is premature at this time to make 5 1 changes to the program. The April 15th due date has 2 come and gone and we feel that any changes made for this 3 year would cause confusion. 4 Rather, we believe that it would be better to 5 make an assessment after October 15th, which is after 6 the close of FTB's automatic six month extension period 7 to determine what statutory or program changes would be 8 necessary to assist taxpayers in complying with the use 9 tax registration and payment and to make the program 10 most effective. 11 For example, we have found from the returns we 12 have received so far that 83 percent of the returns are 13 zero tax due. So, we may recommend raising the 14 threshold above the $100,000. 15 We also note that by having the ability to have 16 fiscal year basis that would be a possibility of 12 17 different due dates. The staff has identified 18 programming costs of up to $250,000. At this time the 19 staff cannot say with any certainty whether this 20 expenditure is warranted or not. 21 We have met with the sponsors and the 22 supporters of the bill on Monday and shared staff 23 concerns with them and made a commitment to work with 24 them in the fall to craft a comprehensive cleanup bill 25 to this new program. 26 MR. HORTON: Okay. So -- and we'll hear from 27 the supporters and sponsors of the bill. 28 Sounds to me like your recommendation is not to 6 1 oppose, but to delay consideration of the bill? 2 MS. SHEDD: (Whereupon the witness nods head.) 3 MR. HORTON: Okay, Senator Ashburn? 4 ---o0o--- 5 SENATOR ROY ASHBURN 6 ---o0o--- 7 MR. ASHBURN: Well, thank you very much, 8 Mr. Chairman, Members of the Board. 9 In my nearly 14 years as a member of the State 10 legislature, this is the first opportunity I've had to 11 sit in this position. 12 MS. YEE: Welcome. 13 MR. ASHBURN: I have sat on tax policy 14 committees on your side of the dais, so, it's a pleasure 15 to be here. 16 This bill is very straightforward. And I do 17 appreciate the staff's presentation of the bill to you 18 and their recommendation. However, I respectfully 19 suggest an alternative view, which is that with the 20 Assembly Bill X418 in 2009 we created a new requirement 21 for those with the tax liability of $100,000 in gross 22 receipts or greater to register. 23 Now, that bill was not signed into law until 24 July. And the deadline for taxpayers was April 15th. 25 The Board of Equalization did not notify taxpayers of 26 their new obligation. The Board of Equalization did not 27 have procedures in place to accommodate this new 28 requirement on taxpayers. 7 1 And, so, what my bill simply says is that for 2 that one year a new extension would be granted and that 3 we would waive penalties. 4 The performance on the -- on this tax is way 5 under estimates and it shouldn't be any surprise. 6 Taxpayers didn't know what to do. So, delaying the bill 7 does not solve the problem if it was the intent of the 8 legislature to have this tax identified, to have the 9 registration occur and to have the proceeds, you know, 10 accrue to the State Treasury, we ought to facilitate 11 that in a way that is -- achieves best result and is 12 friendly to the taxpayers. 13 And, so, that's the bill that I present to you. 14 And I would urge the Board to take a position in support 15 so we can move this through the legislature. It has had 16 broad bipartisan support -- even Lenny Goldberg has 17 appeared in support of my bill. Now in 14 years in the 18 legislature, that has never happened, ever. And, so, I 19 want to cherish the moment. 20 And, so, I'd ask you to join with me and Lenny 21 Goldberg and a lot of other cast of characters in what's 22 a fair thing to do for the taxpayers. 23 Again, we want -- we want the taxpayers to be 24 properly notified, to have a clear procedure. 25 The abatement of penalties is going to accrue 26 greater proceeds to the State and it's for all those 27 reasons that I would respectfully request that you adopt 28 an alternative position to that which has been 8 1 recommended and to help me support the bill. 2 MR. HORTON: Thank you, Senator. 3 The witnesses self introduce and make your 4 presentation. 5 ---o0o-- 6 MIRA GUERTIN 7 ---o0o--- 8 MS. GUERTIN: Yes, thank you, Mr. Chair and 9 Members. 10 Mira Guertin on behalf of the California 11 Chamber of Commerce. 12 And I first wanted to thank the author and 13 thank everyone with the Board staff and on the Board, as 14 well, for working with us, for working with the sponsor 15 and the author to, you know, try to resolve and talk 16 through a lot of the issues with us. 17 We know that this has been a difficult problem 18 for everyone to try to implement this process. It's 19 been difficult for taxpayers and for people who are 20 working with tax assistance and things like that. So, 21 it's been a difficult conversation. 22 And I think really as a member of the Chamber 23 and on behalf of small businesses who are struggling, I 24 am here today to ask that we allow that conversation to 25 go forward. I don't know that as the Chamber, in 26 particular, is wedded to any particular solution to 27 exact language as it is in the bill, but we would hate 28 to see the process stop until the fall because at that 9 1 point, legislation would not take effect in time to give 2 us relief for next year. So, we would then be looking 3 at continuing this confusion for an additional year. 4 I definitely recognize that there are concerns. 5 There is probably no perfect solution. I can see we why 6 wouldn't want to institute date changes when maybe we're 7 not sure we're instituting the correct ones. But if we 8 do forego changing the dates for now, then I would like 9 us to take another look at penalty relief. Because I 10 think, you know, the Board has been very accommodating 11 and understanding that taxpayers are confused and that 12 they're going to be coming into the fold. 13 In fact, tens of thousands of them, 14 potentially, are going to be coming into the fold over 15 the next several months. And that dealing with those on 16 a case by case basis can be overwhelming for taxpayers. 17 It will be overwhelming for the Board staff. It will 18 also be overwhelming for the Controller cutting return 19 checks, refund checks, for people who figure out 20 belatedly they should have been requesting penalty 21 relief down the road. 22 And, so, for those reasons we ask that you will 23 at least considering allowing this piece of legislation 24 to move forward with the hope that we will all be able 25 to come to an agreement about how best to solve the 26 problem prior to waiting until next year. 27 Thank you. 28 MR. HORTON: Ms. Rodriquez? 10 1 ---o0o--- 2 GINA RODRIQUEZ 3 ---o0o--- 4 MS. RODRIQUEZ: Thank you. 5 Gina Rodriquez with Spidell Publishing, we are 6 the sponsors of the bill. Just a few more points. 7 We have fewer than half of all registered 8 taxpayers that have filed use tax returns right now. 9 And we expect more to file come October 15th, because 10 that is their natural filing date for FTB. So, we're 11 hoping a bigger push with compliance in October. 12 That said, come April 15th, 2011, without a 13 bill in place, many taxpayers will now be five years 14 behind on their use tax filings -- 2007, 8, 9, 10. 15 So, instead of -- instead of not looking at 16 automatic penalty abatement, I think we should -- we 17 really need to be looking at automatic penalty 18 abatement. 19 Get them in. Give them their carrot, give them 20 their safe haven so they know, I don't have penalties 21 this first year. I'm going to file. I'm going to file 22 in October or I might even file maybe even in December. 23 I too would like to thank staff for working 24 with us and for the Board for agreeing to be lenient on 25 all penalty requests that come in. 26 But, again, we don't want to have to have 27 taxpayers file a paper request for penalty and why 28 should Board staff have to process all that paper? 11 1 Again, thank you for your time. 2 Thank you, Senator Ashburn for carrying the 3 bill and we hope you will consider a support position. 4 Thank you. 5 MR. HORTON: Thank you. 6 Members, Ms. Yee -- starting with Ms. Yee, any 7 other members -- Ms. Alby, Ms. Steel 8 MS. YEE: Thank you, Mr. Chair. 9 MR. HORTON: No, there's just -- 10 MS. YEE: Are there more speakers? 11 MS. MANDEL: Yeah, I have just one. 12 MR. HORTON: You have other speakers? 13 MS. MANDEL: No, I just wanted to make 14 sure that that was -- 15 MR. HORTON: No, we're good. 16 MS. YEE: Okay, thank you, Mr. Chairman. And 17 thank you, Senator Ashburn for being here. 18 Let me just kind of -- I hope I'm reflecting 19 the sentiment of my colleagues on this Board. This 20 conversation is not over. And if there is any illusion 21 that it is, then you're sadly mistaken. So, let me just 22 say that at the outset. 23 Our goal here in this agency is to implement 24 what the legislature has enacted. And we want to do 25 that in good faith. We have really, I think, done a 26 yeoman's -- a yeoperson's job in terms of getting this 27 program up and running. 28 And I really do have to take offense, and this 12 1 is personal offense, with respect to some of the 2 comments that have been attributed certainly to me and 3 to -- in terms of my reluctance to move the bill. That 4 is not true. I want to work this out. 5 We have, I think, for this first year 6 $86 million that's anticipated being generated from this 7 program. We are going to fall short. I don't think 8 we're under any illusion we're going to meet that 9 target, but we are trying to make this work. 10 One of the areas that I am reluctant about, 11 however, is that not everyone in the tax preparer 12 community is in agreement about aligning the due dates 13 with the income tax filing due dates. And we don't have 14 a consensus about that. 15 And, so, what I wanted to suggest, because 16 we -- I think we need more information about how this 17 first year is going to play out. I am sensitive about 18 the penalty concerns that have been raised. You've 19 heard the sentiment of this Board. We are going to be 20 very lenient with respect to requests for penalty 21 relief. 22 I am sorry the process has to be that it has to 23 be requested, but it's actually a way to showcase that 24 there is a penalty associated with this program. But I 25 do have a question for staff with respect to what's 26 already come in relative to penalty dollars. 27 But I guess what I would say is I also don't 28 want to wait another cycle with respect to getting this 13 1 fixed. That's not my intent. 2 I am going to make a suggestion here. It goes 3 counter to every bone in my body about how we look at 4 sales and use tax statutes and deadlines. 5 But to the extent that we may not know more 6 until this fall, I am wondering if, Senator Ashburn, you 7 would be amenable to amending your bill that authorizes 8 this Board to -- and I am not even sure that it's 9 regulations -- but guidelines to adjust the timelines as 10 we see fit, as we learn more this fall, so that we're 11 not having to wait another year to actually get 12 something enacted similar to other statutes where you've 13 given this Board a broad authority to promulgate 14 regulations to implement programs. 15 That way we have the latitude to move as we 16 learn more about this program. And we can continue in 17 an ongoing dialogue with the tax preparer community 18 about what's appropriate relative to the timelines. 19 And on the penalty issue, I just wanted to pose 20 a question to staff. 21 We've collected quite a bit of dollars and 22 penalty monies, yes? 23 MR. MC GUIRE: Through the 24th of month, at 24 least reported to us, is a little bit over -- or a 25 little shy of a million dollars in penalties so far -- 26 MS. YEE: Okay. 27 MR. MC GUIRE: -- out of 23 million in total 28 reported. 14 1 MS. YEE: And are we -- how are we treating 2 those? 3 And these are -- these have been reported? 4 So -- 5 MR. MC GUIRE: These are reported, not all have 6 necessarily been paid yet because the payments come 7 after. A number of taxpayers may be paying just the 8 penalty -- the tax and interest and requesting relief. 9 MS. YEE: And how does that square with our 10 process for how taxpayers request penalty relief? 11 I mean, are you getting the sense that people 12 are reporting it and not understanding how to request 13 relief? Or are they -- 14 MR. MC GUIRE: I guess I don't have enough 15 information to know specifically how all taxpayers are 16 perceiving it, but, clearly if they e-file their 17 returns, they have the option of paying, you know, just 18 the amount of the tax and the interest and then -- but 19 as, you know, it's been pointed out still we have a 20 paper process for requesting relief. So, they would 21 have to submit that. 22 And then staff would process those. As far as 23 I know, staff's been approving all those that have come 24 in so far. And I don't have the exact number of penalty 25 relief requests that we've received. 26 MS. YEE: So, presumably, any penalties that 27 have been paid and a request for relief is filed and is 28 granted, we would -- 15 1 MR. MC GUIRE: We would refund. 2 MS. YEE: -- refund those dollars, okay, very 3 well. 4 So, that's -- I mean it's a proposal. I want 5 to -- we want to do right by the legislature, but, 6 frankly, Mr. Ashburn -- senator Ashburn, your colleagues 7 put us in this box. 8 And I really want to figure out a way where we 9 could have a little bit more latitude about how to fix 10 this going forward without having to wait another, you 11 know, legislative cycle to get a bill enacted. 12 MR. HORTON: All right, Senator, we'll provide 13 you an opportunity -- 14 MR. ASHBURN: Thank you, Mr. Chairman. 15 MR. HORTON: -- to respond to Ms. Yee's 16 questions. 17 I want to hear from the rest of the Members, 18 just in case you may need to have a more extensive 19 response. 20 With that, Ms. Alby? 21 MS. ALBY: Thank you, Mr. Chairman. 22 And thank you, Senator, for your willingness to 23 step up on this issue. I think you might have supported 24 this bill in the legislature. I would have voted no, 25 but -- 26 MR. ASHBURN: It was a rare moment. 27 MS. ALBY: But I did want to commend -- not 28 just commend you, but commend my colleagues. When we 16 1 first addressed this in mid-March this Board did agree 2 that in the event that there was such angst and fear 3 confusion out there regarding this, I was even getting 4 -- I don't know if you heard about that, I was even 5 getting calls from legislators wanting to what we were 6 trying to do to them. 7 Because some of them had businesses in their 8 personal time. And I said, "Well, you know what, you 9 passed the bill, so, it's kind of a strange question 10 coming from you." 11 But, nonetheless, this Board really has worked 12 very much together to try to help taxpayers relieve 13 their fears and give them that relief. And we agreed to 14 do that. 15 And yet I have spent a lot time right now, 16 obviously, traveling around the State and that is the 17 single most urgent request I get, "What does this mean 18 to me? Help me with this," this new requirement on 19 these folks that have never had to do this before. 20 So, I do think it would be very helpful, and I 21 understand the need to -- if you want to draw it out a 22 bit in finding this solution, you're going to be 23 adjourning sine die in a few months, and, so, I 24 appreciate what you are trying to do here. 25 I think our corporate folks need it so they're 26 able to continue on how they file their taxes. And just 27 the comfort zone -- the comfort need out there of the 28 businesses, I appreciate it and I would urge us to 17 1 support this measure. 2 MR. HORTON: Ms. Steel? 3 MS. STEEL: Thank you, Mr. Chairman. 4 You know, I really was against this bill begin 5 with because income tax return we have to -- there is a, 6 you know, line that you have to put use tax amount in 7 it. So, I don't know why we have to go through this. 8 Another thing is my husband, an attorney, he 9 got a notice and the number, use tax number, from the 10 BOE. He just jumped. He said, "What do I buy from 11 outside of California?" 12 So, you know he just threw that paper at me, 13 "You fill it out. I don't even know what to do." 14 I go to a lot of different meetings. And 15 taxpayers and CPAs, even, you know, they were very 16 concerned. They said -- I even asked a few CPAs that, 17 "Did you file it?" And, you know, some of them, "Do I 18 have to file it? I have zero return." 19 I mean, that's the way they said it. I said, 20 "It's a -- it's a law. You have to do it." 21 But, thank you very much, Senator Ashburn, 22 doing this because for the taxpayers, I think they need 23 a little more time to, you know, getting into that, you 24 know, what they really have to do right now. And even 25 professionals don't even know that, you know, how 26 taxpayers have to follow this stuffs. 27 But so far that I was asking taxpayers and CPAs 28 coming to me that how we going to calculate this for 18 1 penalties and interest? 2 I'm looking at this penalty for $996,000 that 3 we already received. I really thank staff that they've 4 been helping me every time I forward these taxpayers to 5 our staff and they try to relieve, you know, penalties 6 as soon as they got it, tried to return it. 7 I just have one question here that penalty 8 reported. They have to request for refund. I mean, 9 the -- this penalty goes back to the taxpayers. What -- 10 what kind of things that we going to do to help 11 taxpayers that it's -- you know, we are helping them to 12 actually waive their penalties? 13 MR. MC GUIRE: If I can respond to that? 14 If they don't pay the amount, they can just 15 request relief of the penalty and we'll just, you know, 16 adjust it off of our system. 17 If they have already paid the penalty and they 18 request relief and then we can refund that. 19 To assist people, make it easier, we have 20 frequently asked questions on our website that 21 specifically address the relief of penalty. 22 We've also moved the extension form and the 23 relief of penalty form to the front page of our website, 24 they'r right in the center highlighted spot that says, 25 "How do I request relief of penalty?" And the form is 26 right there, attached. So, they just to click once, the 27 form appears, they can fill it out and it is still a 28 paper form, though, and they do have to mail that into 19 1 us. 2 MS. STEEL: Okay. So, we are not going out 3 more than that? Just on websites and they still have to 4 do all these paperworks to get refund for the penalties? 5 MR. MC GUIRE: Right. Currently our -- our 6 current statute for relief of penalty says the taxpayer 7 must request relief of penalty. 8 And, so, that's the process. We've tried to 9 make it as easy as we can for taxpayers to do that. 10 MS. STEEL: So, when we do e-filing, they have 11 all these informations on the front page? 12 MR. MC GUIRE: When -- 13 MS. STEEL: Because I didn't see -- 14 MR. MC GUIRE: -- they're in the e-file 15 application itself, I don't believe there's all that 16 additional information. 17 But on our website there's a number of things, 18 which include the forms, the frequently asked questions. 19 We've created a publication specifically for this use 20 tax. We've done a tutorial about the use tax and how to 21 complete the return. 22 And, so, you know, we've tried to put as much 23 information as we can for people. If people have 24 questions, like you say, we've gotten a lot of calls 25 from people, our call centers received a number and our 26 staff is very, you know, informed and knowledgeable 27 about this income, walk everyone right through how to do 28 the process. 20 1 But, you know, we haven't tried to like send an 2 individual letter to every single taxpayer. 3 MS. STEEL: Thank you for your effort. 4 Mr. Chairman, you know, I actually filed it for 5 my husband. And the front page that it's very tough to 6 do it. Actually, you have to know these numbers and you 7 have to go through it. I was kind of like bounce back 8 so many times. So, it's really tough to do it. 9 But I hope that we can put that front page 10 that, you know what, penalties been relieved for, you 11 know, how long, maybe one year, that, you know, Senator 12 Ashburn's been suggested that, you know, we can just 13 delay it for one year. 14 If we can put that under the -- you know, there 15 is -- you put the numbers in it and/or little red 16 flashing light or something so they know that they don't 17 have to pay penalties, but they have to pay interest 18 and, you know, taxes. 19 I think that's going to help taxpayers a lot. 20 So, we have to, you know, looking at that first page of 21 the website and try to help taxpayers before they 22 penalty -- you know, pay penalty. 23 MR. HORTON: Thank you, Member Steel. 24 MS. STEEL: Thank you. 25 MR. HORTON: I appreciate that. 26 Member Mandel? 27 MS. MANDEL: Thank you, Mr. Horton. 28 Since we sometimes do things a little 21 1 differently at this committee than we used to do them 2 years ago, I just wanted to take this opportunity to 3 tell you what the Controller's view was for this bill at 4 this time. 5 His -- 6 MR. HORTON: The current bill? 7 MS. MANDEL: Yeah, his -- his position is 8 support concept, which is a position that he uses over 9 here. He supports the concept, he's not the supporting 10 the bill itself in its current form, but he supports the 11 concept of fixing the problem. 12 So, it's, you know, you are probably used to 13 opposed, support and -- 14 MR. HORTON: No, we can do that. 15 MS. MANDEL: -- neutral, but he's at the 16 support concept. 17 MR. HORTON: We get that. 18 MS. MANDEL: Okay, thank you. 19 MR. HORTON: Mr. Ashburn, Member Yee had asked 20 you a question regarding the amendment of the bill. 21 I would say that I share the Controller's view 22 in that conceptually we've got to codify some language 23 that addresses the problem. 24 Here at the Board of Equalization we've done 25 everything within our authority and we have gone 26 overboard to accommodate the taxpayer under the 27 direction of our Chair. 28 And, so, it has created this process that is 22 1 somewhat time consuming trying to abate the penalty. 2 So, to the extent that we had some legislative authority 3 to be able to -- to act in that regard, I would -- I 4 would have -- I would share -- I wouldn't necessarily 5 have these concerns, it's not my responsibility, but it 6 might be scored as a revenue loss by virtue of the fact 7 that we collected -- assessed the million dollars and 8 haven't refunded all of that. 9 And I don't know -- and, so, there is a 10 potential revenue stream associated with the penalty 11 now -- not something that I would be concerned about, 12 but I would just share that with you as you go through 13 the process. 14 So, Member Yee -- and I support her, her -- her 15 analogy, if you will, this is somewhat of a moving 16 target. And we are saying that we want to participate 17 in that process. 18 As the bill gets codified, we'd like the bill 19 to reflect not only the views of the supporters of the 20 bill in its current form, but the group of folks out 21 there who may -- it may create another burden. 22 And, so, there's a process that the Board of 23 Equalization will go through expeditiously, hopefully, 24 in order to identify what is the most appropriate filing 25 periods in order to accommodate the masses of people 26 that we represent. 27 I think that's fruitful for the legislature, as 28 well as for the legislation. 23 1 So, -- 2 ---o0o--- 3 ROY ASHBURN 4 ---o0o--- 5 MR. ASHBURN: Thank you, Mr. Chairman Horton 6 for that. 7 And, first, let me go to Chairwoman Yee, I'm 8 stunned by your opening comments about anything that may 9 have transpired that you found personally -- 10 MR. HORTON: Senator, if you will, I would just 11 answer her question -- 12 MS. YEE: That's okay. That was my venting, 13 but -- 14 MR. ASHBURN: It's important to me and so, I 15 want to say what I want to say. 16 MS. YEE: Okay. 17 MR. ASHBURN: Which is if anything has come 18 from office -- 19 MR. HORTON: Senator, one second. I'm open 20 to -- to the colloquy between you Chairwoman Yee. I 21 would certainly suggest that that occur outside of this 22 public venue. 23 However, if you want to continue, be 24 comfortable with the fact that I may interrupt you at 25 some point if I think it's going in the wrong 26 direction. 27 MS. YEE: I may be helpful here, Mr. Chairman, 28 if I may? 24 1 Mr. Ashburn, I can assure you, it not come from 2 your office. 3 MR. ASHBURN: Okay. 4 MS. YEE: Okay, but -- 5 MR. ASHBURN: Apologies don't take that long 6 and that's all I am offering. 7 You and I have had a remarkably good 8 relationship and I hope to -- 9 MR. HORTON: Mr. Ashburn, go right. 10 MR. ASHBURN: -- continue that. 11 MS. YEE: No. 12 MR. ASHBURN: Now, with respect to the bill -- 13 MR. HORTON: You guys talking to each other? 14 MS. YEE: We're talking about the bill. 15 MR. HORTON: Okay, continue with your 16 statement. I think the caution that I'm sharing is that 17 I am very sensitive to this -- to this discussion that's 18 going on and I may interrupt at some point. 19 And at that point I would ask you to respect 20 that intervention. 21 MR. ASHBURN: I'm finished with that portion. 22 MR. HORTON: Good. 23 MR. ASHBURN: I just wanted to convey that. 24 MS. YEE: Thank you, I appreciate that. 25 MR. ASHBURN: Because -- well, any way, I am 26 not sure what you're asking, Madam Chair, but I'm more 27 than willing to accommodate it. 28 Let's meet. Let's talk. Let's -- I mean, we 25 1 still have time in the legislative process to craft a 2 bill that is helpful to the taxpayers. 3 That's all I'm trying to do is have clarity. 4 We've already identified that with respect to the 5 penalties, they will be processed and are being handled 6 on an individual basis. 7 But that is time consuming for the taxpayer. 8 It is very costly to the Board of Equalization staff in 9 processing each of those individual requests. 10 And, so, I'm hopeful that we can come up with a 11 bill that gives the taxpayers clarity, reasonable 12 periods of time and deals with the issue on the 13 penalties. 14 You know, the bill is in its form now in the 15 legislative process. I am more than open to amendments 16 and have been. 17 And, so, if you want to -- maybe, Mr. Chair, my 18 suggestion would be that we continue the item and that 19 we continue the dialogue toward amendments. 20 MR. HORTON: Excellent. I'm going to ask 21 Ms. Yee to sort of summarize -- 22 MS. YEE: Yeah. 23 MR. HORTON: -- her concerns. 24 MS. YEE: I guess through the -- there are two 25 issues, really, okay? 26 There are -- there is the filing deadline issue 27 and there is the penalty issue, okay? 28 Actually, two issues against the context of 26 1 initial year of implementation and then ongoing, okay. 2 It seems to me the real focus and effort here 3 and push -- and part of my -- I am sensitive about this 4 is that there is a real desire to have penalty relief be 5 as easily available for the taxpayer as possible, 6 without any kind of paper petitioning for penalty 7 relief. And that's one issue. So, I think that's 8 something that's before the Board and we can kind of 9 continue to talk about that. 10 I think we've been adopting a policy and 11 certainly given staff direction that we want to have a 12 fairly lenient penalty relief policy, particularly for 13 this initial year of implementation. 14 Part of why I'm still wedded to having a paper 15 petitioning of the penalty relief is it at least kinds 16 of brings to the attention of taxpayers that there is a 17 penalty associated which this program. 18 Having said that, I don't know that we're going 19 to resolve nor do I think it's necessary to resolve the 20 current year filing deadline issue in a bill now. 21 Where we're at, we're going to see in the fall 22 kind of what happens. I do have a concern about future 23 years implementation. We do not have a consensus about 24 what the appropriate filing deadline or deadlines ought 25 to be for the future years. 26 And that's why I am suggesting that we look at 27 giving this Board, through your bill, Senator Ashburn, 28 as broad latitude as possible by allowing this Board to 27 1 promulgate -- I don't think it's regulations -- it's 2 probably more guidelines with respect to this program 3 about what the deadlines ought to be once we have a 4 consensus about what they ought to be. 5 And that dialogue's going to continue. I can 6 tell you, I've been out in my district and among my tax 7 preparers, they're all over the map. 8 The meeting I had in my office with tax 9 preparers, they were all over the map. Some want the 10 deadlines to conform to incomes tax filings, others do 11 not. It's just too much of a burden. 12 So, we need to get our arms around that. That 13 won't get resolved by the time your bill reaches 14 enactment by the body in which you are a member. 15 So, what I'm suggesting is, give us that 16 authority as we continue to work through that issue. I 17 think the penalty issue is squarely before this Board in 18 terms of how -- how -- how easily and how accessible you 19 want to make that penalty relief process for taxpayers. 20 MR. HORTON: So, Senator, it sounds like there 21 are basically two issues here. And I think you got a 22 bill. 23 One is amend the bill to authorize the Board of 24 Equalization to go through this process and be 25 determining what is the consensus of the impacted 26 parties in the State of California. 27 I think you hear from the body that it is the 28 consensus of this body to be as lenient as we possibly 28 1 can, but at the same time, to consider the -- the 2 dichotomy, the diversity of the interests that are out 3 there, which would ultimately end up in the subsequent 4 amendment to the bill if, in fact, we get another group 5 that comes forward and starts complaining about the 6 actions that we take. 7 So, I think that's an intelligent way of 8 approaching it. I would share that I would be 9 supportive of an amnesty on the penalty. But even there 10 are some situations where the Board of Equalization -- 11 the situation might not warrant a penalty abatement. 12 They may actually be, in the best interests in the State 13 of California, that we assess that penalty. And, so, we 14 made need to have some latitude even in the abatement of 15 the penalty. 16 So, going forward, I would accept your 17 recommendation, Senator, as to we put this over and we 18 work with you to develop the bill to meet your desires 19 to provide relief to the taxpayer on the basis of some 20 penalty relief as well as some filing relief and having 21 the filing concurrent with other filing periods for the 22 convenience of the taxpayer. 23 What that is, we honestly don't know right now. 24 I mean, we have an idea from different -- I too have 25 heard from folks who support the bill in its current 26 configuration and those who have concerns and would like 27 to have it amended to coincide -- some of the dates 28 coincide with different things that's more convenient 29 1 for them. 2 And, so, I would ask your indulgence in 3 allowing us to sort of work through that process. 4 MR. ASHBURN: I'm more than happy to work 5 with you and all of the Members of the Board toward that 6 end. 7 The only other comment I would make is that the 8 legislature did this and the Governor with his 9 signature. 10 This imposed a new requirement with very little 11 time for notification and implementation. So, to me 12 there's a -- there is a first year impact that we need 13 to deal with. 14 We clearly need to grant extension. And we, in 15 my view, clearly need to provide penalty abatement 16 without an automatic penalty abatement. 17 Then there is the second part, which is how do 18 we implement this for the future -- working with tax 19 preparers and others who are directly dealing with the 20 taxpayers? 21 I am not wedded to any particular date. Let's 22 set a date which works best for the taxpayers and in the 23 best judgement of your Board. 24 With respect to future penalties, let's deal 25 with that issue as sort of the going forward portion of 26 the bill. 27 So, with that as a conceptual framework, as I 28 understand the conversation here, let's try to get with 30 1 this over the next couple weeks and put something 2 together that will get the job done. 3 MS. STEEL: Mr. Chairman? 4 MR. HORTON: Yes, Ms. Steel? 5 MS. STEEL: You know for -- actually, you know, 6 I love to how help taxpayers, no matter what, but this 7 bill really helps a lot for our ability here that we can 8 extend only month by month. 9 This bill actually gives -- allow six months 10 extension, you know, for the taxpayers. I think that 11 has a lot of room there that taxpayers going to prepare 12 and CPAs and other experts can prepare for tax returns. 13 Because April 15th already done, gone, and that time 14 that most of CPAs they really busy for doing other 15 income tax filings. 16 So, I think part of this bill here -- I mean, I 17 like all of the bills here that you are tried to help, 18 but especially the six months extension is really good 19 idea. 20 So, why don't we just pass this bill today, I 21 mean, support this bill today and then, you know, 22 Senator Ashburn can come back next couple weeks or month 23 or next Board hearing and then bring out another 24 amendment with it. 25 So, I actually support this bill totally for 26 taxpayers and, you know, I want to vote today. 27 MR. HORTON: Madam Yee? 28 MS. YEE: Thank you, Mr. Chairman. 31 1 MS. ALBY: May I? 2 MS. YEE: Oh, I am sorry, Ms. Alby? 3 MS. ALBY: Are you wrapping or -- 4 MR. HORTON: No, she's just commenting. 5 MS. YEE: Okay. 6 MR. HORTON: And then Ms. Alby. 7 MS. YEE: Thank you. 8 I want to be sure that Senator Ashburn leaves 9 this meeting with kind of a sense of where we all want 10 to go. 11 Because I -- having left it kind of fairly 12 undefined for the better part of the last few weeks, 13 we've not made a whole lot of progress. So -- and I 14 really do want to help you get a bill that will be 15 helpful to taxpayers. 16 Seems to me there are a couple of things that 17 need to get resolved right away. And one would be -- I 18 mean, the extension for this current year, the initial 19 year of implementation I think is a moot issue at this 20 point. I really do. 21 The fact that we're being lenient on penalty 22 relief -- they'll get filed when they get filed. And we 23 hope by the fall we're going to see, you know, pretty 24 much, you know, everybody kind of taking up the 25 provisions of the bill and filing and coming forward and 26 complying with the requirements of the statute. 27 What I do think is an issue with respect to the 28 penalties is how are we going to provide that penalty 32 1 relief? And I -- that's -- that's the question squarely 2 before this Board. 3 And, frankly, staff discussions are not going 4 to resolve that issue. So, I think, Mr. Chairman, the 5 Board really should probably have that discussion and 6 make a decision and give some direction to 7 Senator Ashburn with respect to that provision. 8 But with respect to the current year filing 9 deadline, I think that's really a moot issue. 10 And then what really remains is what the 11 deadline's going to look like going forward. And -- 12 and, hopefully, have the bill address that so we're not 13 waiting another cycle for that to happen. 14 And if we can't come to any decision about that 15 because we don't believe we have enough information 16 relative to the initial year's implementation, then I 17 would ask Senator Ashburn to consider -- and my 18 colleagues -- to consider giving this Board the broad 19 latitude I spoke of earlier where we can set the 20 deadline, once we a learn more. 21 I do think the penalty issue is probably 22 squarely before this Board to provide some direction 23 pursuant to decision. 24 MR. HORTON: Okay, Ms. Alby? 25 MS. ALBY: Thank you, Mr. Chairman. 26 I just wanted to concur and thank the Senator 27 for his willingness to work with us. And I look forward 28 to that working relationship on this issue. 33 1 But I did have a question for staff. I am 2 intrigued. You had actually put an opposed position and 3 a statement that the bill is premature. 4 How do you do that without a Board position? I 5 guess, how did that come about? 6 MR. HORTON: I believe that was a 7 recommendation. 8 MS. YEE: It was a recommendation. 9 MS. ALBY: From whom? 10 MS. YEE: Staff. 11 MR. HORTON: Staff. I don't know if that's 12 going outside of the purview of the Board. 13 MS. YEE: Everybody knows. 14 MR. HORTON: Oh, okay. 15 MS. MANDEL: It's a staff recommendation. 16 MR. HORTON: We have not testified on the bill? 17 MS. SHEDD: No. 18 MR. HORTON: All right. 19 MS. SHEDD: Oh, I have testified on the bill, 20 but I didn't -- 21 MR. HORTON: In opposition? 22 MS. YEE: No. 23 MR. HORTON: Okay, all right. 24 MS. ALBY: Who -- are we the only people who 25 have received this position paper by the staff or has 26 the legislature? 27 MS. SHEDD: It was just a staff recommendation 28 to you. 34 1 MS. YEE: Just to the Board. 2 MS. ALBY: It has not gone out? 3 MS. YEE: No. 4 MS. SHEDD: Oh, no. 5 MR. HORTON: Not officially by the agency. 6 MS. ALBY: Or Leg Department? 7 MR. HORTON: Or to, my knowledge, the Leg 8 Department. 9 MS. YEE: No. 10 MS. SHEDD: It's a staff -- 11 MR. HORTON: I may have e-mailed out like a 12 million of them, so -- just kidding. 13 Yeah, I mean -- is it on the website as well, 14 the staff's recommendation? 15 MR. MC GUIRE: It would be with the public 16 agenda. 17 MS. YEE: Yes, with -- yes. 18 MS. ALBY: Well, you know, that is a troubling 19 thing because I know what floor alerts look like in the 20 Assembly and Senate and, so do you, Mr. Chairman. 21 MR. HORTON: Yes. 22 MS. ALBY: I mean, the recommendation of the 23 staff in the Assembly is a position. 24 So, I am concerned about that position on here 25 without the support of the Board. 26 MR. HORTON: Appreciate that. 27 We -- we sort of have an issue over 28 transparency of the process and kind notifying what the 35 1 support is and folks who -- in this case, staff's 2 recommendation. 3 In the legislative process, we -- we tell the 4 world as well what our staff is -- what the Chair's 5 views and the staff's views, trying not have it as a 6 surprise. 7 So, when we get into the deliberation of the 8 matter, everyone is on the same page. 9 MS. YEE: Yeah. 10 MR. HORTON: Mr. Ashburn, let me just share 11 with you my personal perspective and then we can hear 12 from the Board again. 13 Granting an extension for the taxpayer, I think 14 there's a lot of wisdom in that, to give them an 15 extension for -- in order to file. 16 We have innately done that by virtue that we're 17 waiving the penalties and there is no failure to file 18 penalties being assessed, is there? 19 MR. MC GUIRE: Well, some of the taxpayers have 20 self reported the penalty. 21 MR. HORTON: Okay. 22 MR. MC GUIRE: And some have actually paid 23 it. 24 MR. HORTON: Okay, if they have not filed 25 timely, how are we treating that? 26 MR. MC GUIRE: If they don't file timely, then 27 there is a 10 percent penalty assessed and again they 28 can request relief of that penalty. 36 1 MR. HORTON: Is there anything assessed for 2 failure to file? 3 MR. MC GUIRE: There could ultimately be. 4 Again, some haven't filed. 57 percent so far haven't 5 filed a return, 43 percent have. 6 But you have to have a dollar amount to assess 7 a penalty on and with no return, we don't have a dollar 8 amount. 9 MR. HORTON: So, it seems to me that we ought 10 to extend -- give them a little more time to file that 11 return. Otherwise, we're exposing them to a failure to 12 file penalty for not filing their return and that's left 13 up to the discretion of the Board. 14 And based on the consensus of the Board that 15 we've heard thus far, we would probably grant that, if 16 it was in our authority to grant waiver of that failure 17 to file penalty as well. 18 So, to codify that -- but you are looking at 19 emergency legislation in order for it to affect this 20 year? 21 MR. ASHBURN: This is an urgency -- 22 MR. HORTON: You believe that you can get this 23 through and make it retroactive? 24 MR. ASHBURN: Uh-huh. 25 MR. HORTON: And deal with the potential 26 revenue loss associated with making -- 27 MR. ASHBURN: Or revenue gain, to the extent 28 that we have taxpayers who actually comply. 37 1 MR. HORTON: -- and, so, your argument in the 2 Appropriations Committee is that it will actually 3 expedite the filing -- 4 MR. ASHBURN: Absolutely. 5 MR. HORTON: -- and the reporting of existing 6 liabilities? 7 And that this amnesty, relative to the filing 8 or delaying the filing period, giving an extension and 9 potential -- giving the Board the authority and the 10 discretion to deal with the penalty issue will generate 11 revenue? 12 MR. ASHBURN: (Whereupon the speaker nods 13 head.) 14 MS. YEE: It'll stop the downward spiral from 15 what was booked in the budget, I think is a better way 16 of characterizing it. 17 MR. HORTON: Yeah, okay, so -- 18 MR. ASHBURN: Everything in the budget is a 19 downward spiral, so -- 20 MR. HORTON: -- I think based on what Ms. Steel 21 and Ms. Yee and Ms. Alby has shared, and Ms. Mandel, 22 sounds like you got a bill here. 23 But just so -- why don't we hold it -- 24 MR. ASHBURN: I think that's the best course, 25 Mr. Chairman. 26 MR. HORTON: -- and massage the bill a little 27 bit to address the concerns of the Members and work with 28 staff and see if you can give us enough latitude. 38 1 I still believe prospectively we need more 2 latitude in order to do what's in the best interests of 3 the majority. 4 And the unfortunate thing about the Board of 5 Equalization, as it is in the legislative process, is 6 that we don't necessarily hear in this environment from 7 all of the taxpayers. 8 But when we return to our districts, we hear a 9 mouthful. So -- and I'm hearing different sides of this 10 on an ongoing basis and want an opportunity to address 11 those. 12 When can we bring this back? 13 MS. YEE: In July? 14 MS. RICHMOND: It would be the July -- 15 MR. HORTON: How does that fit into your time 16 frame, Senator? 17 I am not suggesting that you discontinue 18 working the bill. 19 MR. ASHBURN: Right. 20 MR. HORTON: I would recommend that we take a 21 neutral position right now and that we withdraw if there 22 is an existing opposing position. 23 We would draw that position. We notify folks 24 that the BOE is in a neutral mode and that we're trying 25 to work with the author in order to address these 26 concerns. 27 If that would be the consensus of the Board, 28 that would be my recommendation. 39 1 MS. ALBY: Mr. Chairman? 2 MS. YEE: Yeah. 3 MS. ALBY: May I? 4 MR. HORTON: Yes, Ms. Alby? 5 MS. ALBY: I don't have any problem at all. 6 But we must remember that Mr. Ashburn has no 7 obligation to wait on this bill if the time crunch comes 8 and he needs to move, he's free to do with or without or 9 support officially. 10 So, hopefully, we can work with him during this 11 process and sort of in an arm's length -- if we need to 12 -- if he needs to move it earlier, that there is an 13 agreement among people without official vote if that 14 needs to happen. 15 MR. ASHBURN: Well, I think it's helpful, if 16 may, Mr. Chairman, to have the official proposed 17 recommendation set aside, a neutral position for now, a 18 commitment that we work with you individually and 19 collectively to come up with a bill that works. 20 And along the lines of what Ms. Alby -- a 21 dynamic process where perhaps it does not come back to 22 the Board of Equalization for a formal, but we will 23 have -- we will have accommodated the best results. 24 And we'll do that. 25 MR. HORTON: Where's the bill now, Mr. Ashburn? 26 MR. ASHBURN: It is -- 27 MS. SHEDD: Senate Rev and Tax. 28 MR. HORTON: It's in committee? 40 1 MR. ASHBURN: It's in committee. 2 MR. HORTON: Okay. Ms. Yee? 3 MS. SHEDD: June 9th? 4 MR. ASHBURN: It's in the suspense file, right? 5 MS. SHEDD: No, remember we voted on -- you 6 held it over. 7 We held it. 8 MR. ASHBURN: Oh, that's right, okay. 9 MS. YEE: Let me make a suggestion. 10 I'm not confident, given what we've experienced 11 so far with respect to discussions, that things are 12 going to kind of land. 13 And I am not pointing fingers, it's just a very 14 complex issue, there a lot of moving parts. 15 And I really want to give you a bill, Senator 16 Ashburn. I can -- I think my colleagues are ready to 17 support the bill in its current form -- 18 MR. HORTON: I don't know. 19 MS. YEE: -- well, okay, I won't speak for 20 others then. 21 I am hearing that there is -- 22 MR. ASHBURN: I liked where you were going. 23 MS. YEE: -- but I'm sensitive to the 24 legislative deadlines, okay, sensitive. 25 And I really applaud you for carrying the bill 26 to really try to get everyone on the right course with 27 respect to implementation of this program. 28 I just want to be sure that this is not a one 41 1 shot deal where we're so focused on the current year 2 implementation that we're right back here with respect 3 to what happens in future years. 4 MR. ASHBURN: I agree. 5 MS. YEE: So, I really want that future year 6 piece in there, which is really kind of the broad Board 7 latitude that I feel like we need once we learn more 8 about what happens in Year 1. 9 The penalty issue, I think my colleagues have 10 expressed a preference with respect to how that relief 11 ought to be given. 12 You've heard my concerns about the deadline 13 issue, or, actually, not even a concern, I think it's 14 moot given our sentiment about how we're going to deal 15 with penalty relief. 16 But are we close, Mr. Chairman, to just giving 17 Senator Ashburn some clear direction about the 18 provisions of the bill or are we not? 19 When we come back in July, we're past, you 20 know, another series of deadlines. And, frankly, by 21 July we ought to be thinking about what's going on with 22 this bill in the second house or approaching the second 23 house. 24 MR. HORTON: Here's where I think we are, Madam 25 Chair, I mean, is that I think the Senator is among some 26 of the most talented of the legislators we have over 27 there. 28 I think he sort of gets the message of body and 42 1 that there is a huge upside of the Board taking a 2 neutral position and we're communicating to folks that 3 we think we can get there. 4 And from my perspective, I agree with Member 5 Yee that the horse has left the barn and -- relative to 6 this previous period. 7 The issue of concern before us is the extension 8 on the filing, which if you can get us something right 9 away that can be retroactive, I would be supportive of 10 that. I don't know that that's possible. 11 But if it is, I do know that it's possible 12 here, that we can do that. And I do know that all five 13 of the Members want to be supportive of the taxpayers 14 who have reasonably relied on the statute and done 15 everything that they could to comply and found that they 16 just didn't have the time because the statute came upon 17 them too quickly and other issues of concern. 18 So, we're sensitive to that and we have the 19 authority to work with that. 20 So, prospectively, though, you've got the issue 21 of the timing of the filing -- should be it concurrent 22 with this or that or this or that? We probably need to 23 work that out or provide you at least the advice of the 24 Board. 25 The penalty abatement would be a retroactive 26 issue. Going forward, everyone knows about it now, this 27 whole process has made the whole world knowledgeable 28 about it. 43 1 So, if you're comfortable with that, Senator, 2 as the author of the bill and that you can work through 3 the process, and I agree with Member Alby that you ought 4 to continue to work through the process. This has been 5 very fruitful, I think, and been very helpful and 6 removal of the opposition gives you the latitude, I 7 think, to do that -- unless the body wants to amend 8 and -- the bill in a hearing, which I have always stayed 9 away from amending an author's bill in this environment, 10 unless the author is prepared to offer up some 11 amendments as a result of this stimuli of conversation. 12 But, if not, we hold it abeyance, we remove the 13 opposition. 14 Senator, continue to work your bill. You got a 15 good bill. You are going in the right direction. As 16 the Controller has said, you've got a wonderful concept 17 here and we're all supportive conceptually of what 18 you're trying to do. 19 We're just trying to affix this moving target. 20 MR. ASHBURN: Thank you. 21 MR. HORTON: So, if there is -- 22 MS. YEE: Mr. Chairman, you want to calendar 23 this for the July Sacramento meeting? 24 MR. HORTON: Yes. 25 MS. YEE: Okay, for an update. 26 MS. RICHMOND: Excuse me, Mr. Horton. We do 27 have one more speaker for this item. 28 Would you like her to address the Board? 44 1 MR. HORTON: Yes. And I'd like for both 2 parties to stay, with the exception of one that would 3 volunteer to leave to provide that speaker a seat. 4 My apologies for not hearing from you in 5 advance. 6 MS. RICHMOND: Ms. Gina Rodriquez. 7 MS. MANDEL: We got her already. 8 MS. RICHMOND: Okay. 9 MR. HORTON: Okay, all right. 10 So, we good to go? 11 MR. ASHBURN: We're good. 12 MR. HORTON: Anyone else want to speak? 13 Hearing none, the place is closed -- no, just 14 kidding. 15 Thank you, Mr. Ashburn, we appreciate that. 16 MR. ASHBURN: Thank you. 17 MR. HORTON: To the staff, Ms. Shedd, we 18 really appreciate all that you've done through this 19 process and look forward to hearing from you as well -- 20 and the two of you guys sort of working it out. 21 MS. SHEDD: Just to clarify, was there a motion 22 to be neutral on the bill? 23 MR. HORTON: I would make that a motion if I 24 had a second. 25 MS. STEEL: Second. 26 MR. HORTON: Second. 27 MS. MANDEL: Well, then, yeah, that was what I 28 was going to ask you, how we were going to reflect it in 45 1 the minutes because I would need to be reflected as 2 support concept because we did have an internal 3 discussion about what he wanted to be recorded as. 4 MR. HORTON: Let -- is that necessary? 5 Because we have not -- the agency has not 6 advanced a position. 7 MR. MC GUIRE: Right. 8 MR. HORTON: Staff has a position that is out 9 there that that can disappear tomorrow. 10 So, the agency has not advanced a position and, 11 so, let's affirmatively do it. 12 I make a motion that the agency affirmatively 13 take a neutral position on the bill given -- 14 MS. YEE: With further work to be done on the 15 bill? 16 MR. HORTON: -- with further work to be done on 17 the bill. 18 MS. MANDEL: Okay, then I have to be a no on 19 that. 20 MR. HORTON: I got it. 21 MS. ALBY: Second. 22 MR. HORTON: I understand Ms. Mandel's 23 position, very supportive of the concept, willing to 24 continue to work with us, but this was an evolution that 25 took a different direction. 26 And, so -- appropriately so, we should wait to 27 hear from the Controller before we articulate his views. 28 So, there's a motion and a second by Ms. Alby, 46 1 Madam Secretary, please call the roll. 2 My apologies for doing the roll like that. 3 MS. RICHMOND: Mr. Horton? 4 MR. HORTON: Horton, aye. 5 MS. RICHMOND: Ms. Alby? 6 MS. ALBY: Aye. 7 MS. RICHMOND: Ms. Steel? 8 MS. STEEL: I still support the bill, so, no. 9 MS. RICHMOND: Ms. Yee? 10 MS. YEE: Aye. 11 MR. HORTON: Let me -- I can't -- 12 MS. YEE: Finish the roll call, then we can -- 13 MR. HORTON: Finish the roll call. 14 MS. RICHMOND: Ms. Mandel? 15 MS. MANDEL: I'm a no on neutral because the 16 position is support concept. 17 Would you rather have a support concept 18 position? 19 MS. YEE: Huh-uh. 20 MS. MANDEL: Okay, all right. 21 MR. HORTON: Okay. 22 MS. MANDEL: You have your motion. 23 MR. HORTON: The motion is passed. 24 I'd like to make a subsequent motion to the 25 previous motion, if I could? 26 MS. YEE: Subsequent or substitute? 27 MR. HORTON: Substitute motion to the previous 28 motion, if I could? 47 1 MS. YEE: So, do we have to rescind the vote on 2 prior motion? 3 MR. HORTON: Rescind the vote on the other, if 4 that's okay with the body? 5 Only to allow a little more deliberation and I 6 would only do this for Ms. Steel -- 7 MS. STEEL: Sorry, about that. You know, 8 actually, at six months it's already due date was ever 9 April 15th, this is almost June. So, we already had 10 that one month extension. It's already passed. 11 And I really support the six months, at least, 12 that we going to have extensions. So, I -- I know you 13 want to be on neutral position and then after we see 14 amendment that, you know, we going to vote, but I still 15 want to stay the way it is. 16 MR. HORTON: The motion on the floor deals with 17 whether we oppose, we're neutral or we are in support. 18 If the motion dies, then okay, fine. 19 MS. STEEL: The motion passed, though. 20 MR. HORTON: The motion is passed. 21 So, we officially have a neutral position. 22 Mr. Ashburn, we look forward to working with 23 you. 24 Thank you very much for your presentation. 25 MS. YEE: Thank you. 26 MR. HORTON: And to all of your witnesses as 27 well. 28 ---o0o--- 48 1 AB 1687 2 ---o0o--- 3 MR. HORTON: Second item before us, wow, 4 Members is AB 1687. Jeffery's -- Ms. Shedd, will you 5 please present on the bill? 6 MS. SHEDD: Yes, this bill would provide until 7 January 1, 2006 that a qualified destination management 8 company is the consumer rather than a retailer of 9 tangible personal property it provides to its client 10 under a qualified contract. 11 The type of services that a destination 12 management company provides, it would be a combination 13 of four or more of the following services: 14 transportation, entertainment, meals, recreational 15 activities, tours, registration, staffing. 16 Under this bill, the qualified DMC would not be 17 liable for the sales tax on the retail sales of the food 18 and beverages and other items related to the sale of 19 food and beverages, like a centerpieces, flowers, 20 candles, silk, paper mache flowers, ice sculptures, 21 including any markups associated with these items. 22 Moreover, DMCs would not be liable for sales 23 tax on their charges for planning, design and 24 coordination that are related to the sale of the 25 tangible personal property. 26 The staff recommends neutral and point out 27 problems in that it treats similar businesses that 28 operate like DMCs differently. 49 1 And these would be conference and meeting 2 planners, convention coordinators, fast floor 3 organizers, wedding planners, special occasion and 4 organizers and trade show planners. 5 These would still be treated as retailers where 6 the destination management companies would be treated as 7 consumers and it could be confusing. 8 MR. HORTON: Thank you, Ms. Shedd. 9 Those in support? 10 ---o0o--- 11 CRAIG DE LUZ 12 ---o0o--- 13 MR. DE LUZ: Yes, my name's Craig DeLuz, I'm 14 with the office of Assemblyman Kevin Jeffries, who's the 15 author of this particular measure. 16 Before I get started, first, I'd like to just 17 in particular thank the Chairman, Mr. Horton, and 18 Ms. Yee and your staffs for working with -- working with 19 us in bringing this issue to the Board of Equalization. 20 Destination management companies -- and we have 21 some folks here from the Association of Destination 22 Management Companies, so, I think they'll talk a little 23 bit more about the differences between destination 24 managers and, I think, some of the other service 25 providers that were brought up by staff. 26 I think it's important to note that for 40 27 years destination managers have been operating in the 28 State of California as consumers, in regards to sales 50 1 tax. 2 It has only been until recently that there has 3 been a change in terms of the interpretation and how 4 they have been treated when it comes to sales tax. 5 All AB 1687 does is continue that process. It 6 continues that practice of treating them as consumers 7 when it comes to sales tax -- the collection of sales 8 tax. 9 ---o0o--- 10 JULIANNE BROYLES 11 ---o0o--- 12 MS. BROYLES: Morning, Mr. Chairman, Members, 13 Julianne Broyles here on behalf of the Association 14 Destination Management Executives and in support of 15 AB 1687. 16 Again, I must reiterate a great deal of thanks 17 that goes to the Chairman Yee's staff and Mr. Horton's 18 staff, Ms. Steel's staff for working with our 19 association members in bringing this issue forward. 20 AB 1687, we've been attempting to resolve this 21 issue for now nearly three years. And we started first 22 with the BOE. We're not able to resolve it here in the 23 regulatory process, ended up moving the issue to the 24 legislature with the BOE's blessing, Chair's blessing 25 and other Member blessings to try to resolve it there. 26 With that, we are here asking for your support 27 today. These are very small companies. They are 28 women-owned companies for the most part and they are an 51 1 integral part of the tourism industry here in 2 California. 3 They are not meeting planners. They are not 4 wedding planners. They are not event producers. 5 They act as a contract center point for all of 6 those services. They are a contractual service 7 provider. 8 And what the issue at the base of AB 1687 is 9 the tax on the service portion of their contracts, that 10 is what is at discussion. 11 Audits are occurring with the 45 -- actually 12 now 43, DMCs here in California, two have closed down, 13 one in the Laguna Nigel area and one in the 14 San Francisco Bay area. Just in the last few weeks they 15 have notified us that they are closing down. They can 16 no longer take what has been happening through the 17 audits and will not be continuing their businesses. 18 And that's why we're here asking for your 19 support today. We really need the help. We really need 20 this bill to be enacted. 21 And the support of the Board would be very much 22 appreciated. 23 MR. HORTON: Thank you. 24 Please introduce yourself for the record. 25 ---o0o--- 26 ANGIE MILLER 27 ---o0o0--- 28 MS. MILLER: I'm Angie Miller with -- on behalf 52 1 of ADME. 2 Our company is Fun is First. We're in Laguna 3 Beach. We are a DMC that focuses primarily on Laguna 4 Beach. 5 Basically, what a DMC does is when a 6 corporation wants to come to California or they're 7 looking at California to come to, we work with the 8 resort to show them what the experience of California 9 will be like. 10 We don't sell TPP, we sell the experience of 11 Laguna Beach. 12 The first thing that they do is, basically, get 13 off the bus and they can put their toes in the sand. 14 They have to eat. It's part of the process of the 15 experience of being here for four days, but they have 16 the choice of going to other states, at this point, and 17 we strongly urge you to support this bill so that we can 18 be competitive out there again with tourism, corporate 19 tourism, bringing it back to California. 20 Thank you. 21 MR. HORTON: Any other witnesses in support? 22 Sir, you had indicated -- 23 MR. DE LUZ: No, this is complete. 24 MR. HORTON: Okay, all right. 25 Members, starting with Ms. Yee, looks like 26 Ms. Alby. 27 MS. YEE: Thank you, Mr. Chairman. 28 And I appreciate the authorship of 53 1 Mr. Jefferies on this bill. We've been working very 2 closely with the destination management companies and I 3 appreciate that community coming forward and working 4 closely with our staff. 5 This is one area that I just feel very 6 strong -- I don't support a lot of these bills, but this 7 particular industry, it was particularly compelling to 8 me. There are many of them located in my district and 9 to the extent we're going to keep tourism healthy in 10 California, this is one industry that we want to be sure 11 remains healthy in this state. 12 I was a little, I guess, perplexed by the 13 concern of the staff with respect to setting up kind of 14 a disparate treatment under this bill of DMCs in 15 comparison to wedding planners and other types of event 16 planters. 17 And I thought that DMCs had a unique way of 18 how -- they don't sell tangible personal property, 19 they're kind of a -- you kind of bring all the services 20 together for particular events. 21 And, so, I didn't -- which is similar to what 22 an event planner does, but also the way that the charges 23 are actually billed and I think was kind of the issue 24 that we had. Because we had tried to look at whether we 25 could resolve that through a change in our rules and we 26 could not. 27 But how broadly is this going to open up that 28 disparity? This is the first I've heard of that. 54 1 And maybe we just need to hear more about the 2 DMCs and how they actually have the bills for services 3 take place. 4 MS. BROYLES: Go ahead. 5 MS. MILLER: Basically the way that we would 6 do -- a corporation would come for four days, basically, 7 is what as program is. 8 ADME -- the DMC is basically certified. So, 9 under ADME they have to be certified to be a Destination 10 Management Company. 11 And there is no other unique or niche that fits 12 what we do at all. We -- we don't -- we specialize in 13 our own locale. And, you know, there's like three in 14 San Diego, but there's only one in Laguna Beach. 15 So, ultimately, we hire event planners, but we 16 don't do weddings. We bring corporations from out of 17 state to California and run programs for them. 18 We are the catchall for them to come to 19 California and to make it easy for them to get here and 20 to experience California. 21 MS. BROYLES: With one bill. 22 MS. MILLER: With one bill. And we itemize all 23 of the details. Sometimes there is things that -- we 24 are in audit right now going over every single detail of 25 what that experience is and, of course, it always 26 catches us on the food part of it. 27 So, I hope that answered your question, sort 28 of. 55 1 MR. HORTON: Ms. Yee, with your permission, I'd 2 like to extend that question -- 3 MS. YEE: Please? 4 MR. HORTON: -- to staff. 5 MS. YEE: Yes. 6 MR. MC GUIRE: Yeah, I think that basically the 7 language that's in the bill that requires multiday 8 events and the things that they're describing, 9 there's -- there's probably not a lot of other types of 10 businesses like wedding planners and such that are 11 probably in the multiday events. 12 Our experience is that the DMCs, while their 13 traditional larger events with corporations surely would 14 qualify under this and we probably wouldn't have a lot 15 of conflict, but there's still potential that when they 16 do these smaller events that don't meet the very 17 specific criteria they've put into the bill, they start 18 to kind of blend over into the other larger event 19 planner type of transactions and those aren't actually 20 exempt in this bill. 21 And, therefore, they're -- I'm not sure we're 22 solving all of their confusion problems because now 23 they're going to have to know which contracts are exempt 24 and which ones aren't. If they stay only in the area 25 that's outlined in the bill, then they would stay 26 strictly in the consumer area. 27 MR. HORTON: Okay -- yes. 28 MS. BROYLES: If I might, Mr Chair? 56 1 I think one of the other distinctions between 2 something -- an event planner or wedding planner and a 3 DMC is that most of the time they own their own 4 properties, their own props, the things that they bring 5 to the weddings. 6 DMCs do not. 7 Additionally, you have the distinction where 8 DMCs are -- again are a contractual, fee-based service, 9 where a wedding planner, for instance, is paid mostly on 10 commissions from the vendors that she or they obtain 11 services from. 12 So, it's a very different dynamic between the 13 wedding planner and/or an event planner and the 14 destination management company. 15 They are truly the independent service provider 16 that has -- that is acting as that contractual center 17 point. It's their credit. It's their insurance. It's 18 their company's assets that are basically putting -- 19 that are out there, put on the line for a big tour or 20 big company coming in to bring their sales incentive 21 meeting here to California. 22 MS. YEE: Is that defined in the bill? 23 MS. BROYLES: I don't know if that is defined 24 in the bill. It's certainly been something that we have 25 gone through in prior discussions with your legislative 26 staff. 27 MS. YEE: I guess -- is there a definition for 28 a destination management company that -- 57 1 MS. BROYLES: Yes. And it shows that we are 2 not -- it says that we don't take on individual clients, 3 we don't -- 4 MS. YEE: In the statute, is there -- 5 MS. BROYLES: In the proposed statute, yes. 6 MS. YEE: Okay, all right. 7 Thank you. 8 MR. HORTON: Madam Alby? 9 MS. ALBY: Thank you. 10 I concur with Ms. Yee's support of your bill. 11 So, I appreciate the effort by the Assemblyman, if 12 you'd let him know? 13 But I did want to ask a question of staff, just 14 to clarify our process here. 15 I noticed that on this particular legislation 16 there was no summary from you or position paper as it 17 was in the Asburn bill. 18 Why was that? 19 MS. SHEDD: You should have received it. There 20 was -- 21 MS. MANDEL: You mean the one pager type thing? 22 MS. ALBY: Yes. 23 MR. HORTON: I'll let staff -- 24 MS. SHEDD: I don't know. Well, you should 25 have received them together. 26 MS. ALBY: They didn't -- that didn't arrive. 27 MR. HORTON: Okay. You want to make a copy 28 available? Somebody? 58 1 Do you want it at this point, Ms. Alby? Or is 2 it a -- 3 MS. ALBY: No, no, just I wanted to understand 4 the process, why one got one and one did not. 5 MS. SHEDD: That was inadvertent. 6 MR. HORTON: Okay. 7 MS. ALBY: Thank you. 8 MR. HORTON: Any other questions of the 9 Members? 10 Okay. 11 MS. YEE: Do you need a motion? 12 MR. HORTON: Before we entertain a motion, I 13 just want to share with the author, in addition to 14 thanking him for his leadership on this and, as well as 15 the individuals who have come forth from the industry -- 16 and I'm pleased to hear that the bill in its current 17 form has an extensive definition of what we're talking 18 about here because a destination manager can actually 19 perform other services, if they so decide to do so. 20 And, so, it's not the -- it's not the industry 21 that we're supporting exempt in its totality, it is the 22 act that is traditionally performed by a certified -- 23 so, the concern as the bill goes forward -- I mean, I'm 24 supportive of the bill, but as it goes forward, would be 25 that definition and how you defined it and how you 26 create this exemption. 27 So, with that, is there a motion on the bill? 28 MS. YEE: Move a support position on the bill. 59 1 MS. ALBY: Second. 2 MR. HORTON: Before I second that, did you, 3 Ms. Mandel -- 4 MS. MANDEL: No, but, again, I'm -- I'll have 5 to be a no on the motion because I'm a support concept 6 on this one as well. 7 MR. HORTON: Okay. 8 It's been moved and Ms. Alby seconds, Madam 9 Secretary, please call the roll. 10 MS. RICHMOND: Mr. Horton? 11 MR. HORTON: Aye. 12 MS. RICHMOND: Ms. Alby? 13 MS. ALBY: Aye. 14 MS. RICHMOND: Ms. Steel? 15 MS. STEEL: Aye. 16 MS. RICHMOND: Ms. Yee: 17 MS. YEE: Aye. 18 MS. RICHMOND: Ms. Mandel? 19 MS. MANDEL: No. 20 Record it as a support concept. 21 Thank you. 22 MS. RICHMOND: Motion passes. 23 MR. HORTON: Okay, you have a lot of support, 24 sir. 25 MS. BROYLES: Thank you very much. 26 MS. MILLER: Thank you very much. 27 MR. HORTON: A little fluid on the support, but 28 you got it. 60 1 ---o0o--- 2 REPORTER'S CERTIFICATE 3 4 State of California ) 5 ) ss 6 County of Sacramento ) 7 8 I, JULI PRICE JACKSON, Hearing Reporter for the 9 California State Board of Equalization certify that on 10 MAY 26, 2010 I recorded verbatim, in shorthand, to the 11 best of my ability, the proceedings in the 12 above-entitled hearing; that I transcribed the shorthand 13 writing into typewriting; and that the preceding pages 1 14 through 60 constitute a complete and accurate 15 transcription of the shorthand writing. 16 17 Dated: August 18, 2010 18 19 20 ____________________________ 21 JULI PRICE JACKSON 22 Hearing Reporter 23 24 25 26 27 28 61