1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 5901 GREEN VALLEY CIRCLE 3 CULVER CITY, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 JUNE 18, 2010 10 11 12 13 14 15 FINAL ACTIONS 16 17 18 19 20 21 22 23 REPORTED BY: JULI PRICE JACKSON 24 CSR NO. 5214 25 26 27 28 1 1 P R E S E N T 2 3 For The Board Betty T. Yee of Equalization: Chair 4 Jerome E. Horton 5 Vice-Chair 6 Barbara Alby Acting Member 7 Michelle Steel 8 Member 9 Marcy Jo Mandel Appearing for John Chiang 10 State Controller (per Government Code 11 Section 7.9) 12 Diane G. Olson Chief, Board 13 Proceedings Division 14 15 ---OOO--- 16 17 18 19 20 21 22 23 24 25 26 27 28 2 1 5901 GREEN VALLEY CIRCLE 2 CULVER CITY, CALIFORNIA 3 JUNE 18, 2010 4 ---o0o--- 5 MS. OLSON: We are on those items that have 6 been submitted. 7 MS. YEE: Okay, what's the first one? 8 MS. OLSON: The first one is D1, K.A.R.E.N. Oil 9 Company, Incorporated. 10 ---o0o--- 11 D1 K.A.R.E.N. Oil Company, Inc. 12 NO. 339357 (MT) 13 ---o0o--- 14 MS. YEE: Okay, Members, the items that we've 15 taken under submission today, item D1, K.A.R.E.N. Oil 16 Company, Incorporated. 17 May I have a motion, please? 18 MS. STEEL: I want to move to sustain the staff 19 recommendation for fees assessed but abate the late 20 payment penalty and abate the interest from January 1st, 21 2000 to October 26th of 2004, which is the first period 22 allowed by law until the Department notified Petitioner 23 of their filing obligations. 24 This is exactly same case as last month. 25 MR. LEVINE: Just for clarification, you mean 26 the interest that has accrued on the fees that were 27 incurred beginning January 1, 2000? 28 MS. STEEL: Yes. 3 1 MS. YEE: Similar to a motion -- 2 MS. STEEL: Almost same as last month. 3 MS. YEE: -- we heard in May? 4 MS. STEEL: Yes. 5 MS. YEE: On May 26th? 6 Okay, we have a motion by Ms. Steel to uphold 7 the fee, but to abate the failure to timely pay penalty 8 and grant relief from interest from January 1st on. 9 Is there a second? 10 MS. ALBY: Second. 11 MS. YEE: I'm sorry, January 1st, 2001 on. 12 Second by Ms. Alby. 13 Discussion? 14 MR. HORTON: Yes, Madam Chair? 15 MS. YEE: Mr. Horton, please? 16 MR. HORTON: Members, just want to make a note, 17 the last time this came before us I was convinced that 18 the Board of Equalization should be lenient on this 19 matter. 20 In this particular case -- I distinguish it in 21 that, you know, I believe that the taxpayer 22 representative should have had some knowledge of their 23 required duties and should have advised their client. 24 And it's not always incumbent upon the Board of 25 Equalization to do that type of work. Certainly we want 26 to reach out and educate and to inform, but at some 27 point when you have representation, the representation 28 by virtue -- presumably that they're in the business of 4 1 knowing the requirements -- should have advised their 2 client to some degree. 3 And, mindful, I'm very sensitive of how these 4 issues seem to delay and how the tax pay issue seems not 5 to elevate itself until some time has passed. 6 In this case I would be voting no on that. 7 MS. YEE: Well -- 8 MS. STEEL: Mr. Horton, I agree with you about 9 this. You know, something has to be done. 10 But for this case that -- this taxpayer already 11 had vendor use fuel permit at that time. And he thought 12 that the contractor that was building the underground 13 storage tank permit had been actually completed by the 14 contractors. And this was his first gas station he ever 15 owned. So, he didn't have any clue. He thought he had 16 the vendor use fuel permit plus a seller's permit, then 17 he thought everything's taken care of. 18 We always going after we -- our excuse was we 19 send out the bulletin but when these taxpayers receive a 20 lot of bulletins, then, you know, a lot of times that 21 they ignore it. 22 Now we changed our practice. So, they try to 23 build the database. And we actually contacting all 24 these taxpayers. So, we are doing much better job. 25 But this is the old case that this taxpayer was 26 very innocent. That's why I made the same motion as 27 last month case. 28 So, I think we should really give a little 5 1 break for this taxpayer, especially this is really old 2 case too and -- 3 MS. YEE: Okay, we have a motion by Ms. Steel, 4 second by Ms. Alby. 5 Please call the roll. 6 MS. OLSON: Madam Chair? 7 MS. YEE: No. 8 MS. OLSON: Ms. Alby? 9 MS. ALBY: Aye. 10 MS. OLSON: Ms. Steel? 11 MS. STEEL: Aye. 12 MS. OLSON: Mr. Horton? 13 MR. HORTON: No. 14 MS. OLSON: Ms. Mandel? 15 MS. MANDEL: No. 16 MS. OLSON: Motion fails. 17 MS. YEE: May I have another motion, please? 18 MR. HORTON: Motion to adopt the staff 19 recommendation. 20 MS. YEE: Motion by Mr. Horton to adopt the 21 staff recommendation. 22 Is there a second? 23 MS. MANDEL: Second. 24 MS. YEE: Second by Ms. Mandel. 25 Further discussion? 26 Please call the roll. 27 MS. STEEL: You know -- 28 MS. YEE: I am sorry. 6 1 MS. STEEL: Before we vote -- 2 MS. YEE: Yes, Ms. Steel? 3 MS. STEEL: -- we have to be really consistent 4 here because last month we had same case there and 5 somebody gets it and some taxpayers cannot get it. 6 That's not really right way to practice our business 7 here. 8 And on the top of it, that we keep improving 9 our practice at BOE. I think there's something short 10 and something not really quite there to reach out to the 11 taxpayers, that's why we are keep improving ourselves 12 and try to make the database and work with Water Board. 13 So, I think that we should give the -- we 14 should give break to the taxpayers, not even the break 15 because he's going to pay his taxes, this is -- that 16 what I suggested was just abate the late -- you know, 17 penalty and abate the interest only from January 1st, 18 2000. 19 That was done for last month case, it was all 20 almost same. I think last month case was 1996, this is 21 1997. 22 I think we have to practice our work here 23 consistent way. 24 MS. YEE: Thank you, Ms. Steel. 25 MR. HORTON: Madam Chair? 26 MS. YEE: Yes, Mr. Horton? 27 MR. HORTON: I would concur with Member Steel, 28 with the exception that the -- every transaction has to 7 1 be judged on its own merit and the circumstances 2 surrounding that particular transaction. 3 Otherwise, we, in effect, would be 4 setting legislation or standardizing regulations that 5 would say every taxpayer who has not complied with the 6 law for this particular period of time would 7 automatically receive an abatement of interest and an 8 abatement of penalties. 9 The knowledge or -- the knowledge of the 10 taxpayer, the awareness, the activity of the Board of 11 Equalization, the level of professionalism of their 12 representative, all of those things sort of come into 13 play among a number of other variables in making these 14 decisions. And, therefore -- and thereby, why I'm 15 distinguishing the two is because I think the set of 16 facts are different. 17 MS. STEEL: Mr. Horton, seems like just going 18 between you and me. 19 But, you know, I totally agree with you. But 20 for this case that he had the seller's permit, he had 21 the vendor use fuel permit and this is the first case -- 22 actually, this taxpayer is more innocent than the other 23 one, the last month one. 24 So, yes, the case by case, but at the same time 25 that we really have to deliver the consistency too. 26 Yes, we have to do something about it. That's why we 27 are going in and we are doing better practice at this 28 point. 8 1 So, why does the other taxpayer got the break 2 and this taxpayer -- actually, he's more innocent 3 because this is the first gas station he ever owned. 4 And I just don't understand that why we cannot 5 be really consistent for this? 6 MR. HORTON: I would say that based on the 7 criteria of ownership, they're equal. And they're 8 equally innocent by virtue that there is some 9 probability that they lacked the knowledge. 10 But the debate is -- or the decision is over 11 all of the other factors that weigh into responsibility 12 and access to knowledge and representation. 13 And, so, it's the other factors. I mean, I 14 concur, I think the innocent -- the taxpayer in and of 15 itself is an innocent party, with the exception of his 16 fiduciary responsibility to himself as well to his 17 business. But they all share that same thing. 18 But the other factors kind of weigh heavily in 19 my decisionmaking factor and where I draw the 20 distinction between the two. 21 But I thank you very much for your input. 22 MS. STEEL: You know, I wish before we open up, 23 especially somebody who came up from the private sector 24 that they have some college, that they teach you before 25 you open up the business in California as the California 26 business environment is very, very tough. 27 Last five years and out of 50 states we were 28 the worst ones for the last whole five years, award that 9 1 we got that's really not good awards that we receive it. 2 And especially I think that we should give 3 little break to the taxpayers who never had business 4 before because everybody comes in to it, they come into 5 California, they open up the business and that's 6 learning process there. 7 Yes, they have basic knowledge, but how many 8 people really have basic knowledge to open gas station 9 here? And they start -- they get into the business and 10 they trust that everything has to be done, especially 11 when had it the seller's permit and the vendor use fuel 12 permit and BOE didn't do anything until escrow opened 13 up. 14 So, what BOE did, I think here a lot of part of 15 it is BOE's fault too. It's not that -- that, you know, 16 I keep going back and forth, but I'm very frustrated 17 because it was 1997 to 2005, until they closed down and 18 they were ready to sell it, BOE didn't even have a clue 19 for ten years. 20 If they kept the business until now, then we 21 didn't even let them know that you owe us for storage 22 tank fee. So, this is not just part of taxpayers fault, 23 but, I think, BOE's fault too. 24 MR. HORTON: Yeah, I -- Madam Chair if I may, 25 just in closing? 26 MS. YEE: Closing, please. 27 MR. HORTON: You know, this reminds me of what 28 happens -- my son, we were driving along and he, after 10 1 -- after a very grueling legislative cycle where I think 2 we voted on some 6,000 pieces of legislation and I was 3 sharing that with him. 4 And he said to me, "Hey, Dad, how do we know 5 when we're breaking the law?" 6 And I thought about it and I said, "Well, I 7 don't know. I just don't know. I mean, of all of the 8 bills that we passed and that have been signed into law, 9 you would need to be a scholar and constantly studying 10 the law. 11 And, so, you sort of rely on the inherent 12 fairness of the law and the justice of the law and try 13 to do the right thing. 14 And in some cases -- and I agree with 15 Ms. Steel -- the agency, the BOE, we might want to 16 consider in certain industries doing what I refer to as 17 a one year audit in their first year of operation, 18 identify certain taxpayers that may have a higher 19 propensity for errors of these types and go in and 20 provide them some advice, identify where the sales for 21 resales and other issues germane to their business and 22 they may have some challenge. And provide them with a 23 report, which may -- may actually result in an audit 24 liability, but certainly not three or five years worth 25 of liability. 26 And -- but we'll -- certainly might be well 27 worth it in order for them to correct it and minimize 28 the interest and penalties that would result if, in 11 1 fact, in this case, the audit period 1997 to 2005 -- 2 quite a significant period of time to remain in the 3 dark. 4 MS. YEE: Thank you. We have a motion by Mr. 5 Horton, second by Ms. Mandel. 6 Please call the roll. 7 MS. OLSON: Madam Chair? 8 MS. YEE: Aye. 9 MS. OLSON: Ms. Alby? 10 MS. ALBY: No. 11 MS. OLSON: Ms. Steel? 12 MS. STEEL: No. 13 MS. OLSON: Mr. Horton? 14 MR. HORTON: Aye. 15 MS. OLSON: Ms. Mandel? 16 MS. MANDEL: Aye. 17 MS. OLSON: Motion carries. 18 MS. YEE: Thank you. 19 Mr. Levine, on that matter can we do what we do 20 consistently and be sure that the feepayer is aware of 21 our offers-in-compromise program? 22 MR. LEVINE: Yes. 23 MS. YEE: Thank you. 24 ---o0o--- 25 26 27 28 12 1 MS. YEE: Next item, please?. 2 MS. OLSON: Our next item C14, Matthew Emerey 3 LsTray. 4 This was no show. 5 ---o0o--- 6 C14 MATTHEW EMERY LA TRAY 7 NO. 434597 (AS) 8 ---o0o--- 9 MS. YEE: Okay, item C14, Members, Matthew 10 Emerey LaTray. 11 May I have a motion? 12 MR. HORTON: Motion to sustain the staff 13 recommendation. 14 MS. YEE: Okay. Motion by Mr. Horton to adopt 15 the staff recommendation. 16 Is there a second? 17 MS. MANDEL: Second. 18 MS. YEE: Second by Ms. Mandel. 19 Discussion? 20 Hearing none, without objection, that motion 21 carries. 22 ---o0o--- 23 24 25 26 27 28 13 1 MS. OLSON: And our last item for the day is C18, Nelly's 2 Market, Incorporated. 3 ---o0o--- 4 C18 NELLY'S MARKET, INC. 5 NO. 472377 (AC) 6 ---o0o--- 7 MS. YEE: Okay, items C18, Members, Nelly's 8 Market. 9 May I have a motion? 10 I'll move to adopt the staff recommendation. 11 Is there a second? 12 MR. HORTON: This one? 13 MS. MANDEL: It's this one (indicating). 14 MS. MANDEL: I'll second. 15 MS. YEE: Second by Ms. Mandel. 16 Discussion? 17 MR. HORTON: None. 18 MS. YEE: Discussion? 19 Okay, motion by Yee, second by Mandel, without 20 objection, motion carries. 21 Next item? 22 MS. OLSON: That concludes our business for 23 this afternoon. 24 ---o0o--- 25 26 27 28 14 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 JUNE 18, 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 14 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: JULY 6, 2010 17 18 19 ____________________________ 20 JULI PRICE JACKSON 21 Hearing Reporter 22 23 24 25 26 27 28 15