1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 NOVEMBER 16, 2010 10 11 12 13 14 15 LEGISLATIVE COMMITTEE 16 17 18 19 20 21 22 23 24 25 26 27 REPORTED BY: Kathleen Skidgel 28 CSR NO. 9039 1 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 P R E S E N T 2 3 For The Board Jerome E. Horton of Equalization: Chair 4 Betty T. Yee 5 Member 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 13 Board Proceedings Division 14 ---oOo--- 15 For Staff: Margaret Shedd 16 Legislation & Research Division 17 Erin Little Sales & Use Tax Department 18 19 ---oOo--- 20 21 22 23 24 25 26 27 28 2 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 INDEX OF SPEAKERS 2 ---oOo--- 3 Name Page 4 Mira Guertin 6 5 Suzanne Sutton 7 6 Rebecca Madigan 8 7 Stephen Carlson 10 8 Fred Main 11 9 ---oOo--- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 NOVEMBER 16, 2010 4 ---oOo--- 5 MS. YEE: Our next item. 6 MS. OLSON: Our next time is Legislative Committee. 7 Mr. Horton is the Chair of this committee. Mr. Horton. 8 MR. HORTON: Thank you very much. Good morning, 9 Members and those who are in the audience. 10 Members, today we have ten legislative proposals 11 before us. It's my understanding that proposal 2.3 has 12 been pulled pending further refinement by the staff. There 13 are also one, two, three, four -- I just was notified of 14 another -- persons who would like to speak on item 3.2 -- 15 3.1. Strike that. I would ask that those individuals come 16 forward. Mr. Fred Main. Can't quite read the writing, so 17 please excuse me if I -- Ms. Madigan, Mr. Carlson, and 18 Ms. Sutton of CalTax and Guertin with the California 19 Chamber. 20 Ms. Shedd will introduce the matters. 21 MS. SHEDD: Thank you. The speakers before us 22 have comments on item 3-1. We could skip to that right now 23 and have the speakers talk, and then go back to the top of 24 the agenda. 25 MR. HORTON: So be it. 26 MS. SHEDD: 3-1 is brought forward by Board Chair 27 Betty Yee. It would expand the definition of retailer 28 engaged in business in the State for purposes of enforcing 4 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 California's use tax law to the fullest extent. 2 Currently the courts have interpreted the U.S. 3 Constitution Commerce Clause to prohibit a State from 4 discriminating against interstate commerce. Just how far 5 that prohibition goes has been subject to considerable 6 debate. 7 This proposal would amend Section 6203 of the sales 8 tax to say that a retailer engaged in business in the State 9 means any retailer that has substantial nexus with the 10 State for purposes of the Commerce Clause of the United 11 States Constitution and any retailer upon whom federal law 12 permits this State to impose a use tax collection duty. 13 This would enable the Board of Equalization to 14 decide the meaning of substantial nexus as it applies to 15 California's use tax provisions and extend the obligation 16 to collect the use tax to those realtor -- I'm sorry, 17 retailers that are deemed to be engaged in business in the 18 State to the fullest extent allowed under federal law. 19 And we have now the speakers, if you would 20 introduce yourself. 21 MS. SUTTON: Suzanne Sutton with CalTax. 22 MR. GUERTIN: Mira Guertin with the California 23 Chamber of Commerce. 24 MS. MADIGAN: Rebecca Madigan with the Performance 25 Marketing Association. 26 MR. CARLSON: Steve Carlson with the Direct 27 Marketing Association. 28 MR. MAIN: Fred Main on behalf of TechNet. 5 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 MR. HORTON: Okay. Why don't we start from our 2 right and work our way to the left with the testimony. 3 Your left. 4 MR. GUERTIN: Thank you, Mr. Chair and Members, 5 Madam Chair as well. 6 Mira Guertin here on behalf of the California 7 Chamber of Commerce. I just want to start by thanking you 8 all for bringing this important issue up today, and also to 9 kind of give some background that the Cal Chamber is not 10 here in opposition to the proposal because we lack sympathy 11 for the State's efforts to try and get at more use tax 12 revenue. 13 We know that there has been an issue, a significant 14 gap trying to get out-of-state retailers to report that 15 revenue or out-of-state retailers, but more importantly to 16 get individuals to report it where the burden currently 17 lies. And also, it does not reflect a lack of sympathy 18 with in-state brick and mortar companies who we know face a 19 competitive disadvantage with out-of-state retailers. We 20 understand that issue. We represent those members. 21 We're here because we have Constitutional concerns. 22 We don't want to create uncertainty for out-of-state 23 companies which will jeopardize in-state jobs. So we want 24 to protect all California businesses when we craft that 25 proposal. 26 We currently believe that the way that the statute 27 is written provides the Board with ample authority to go 28 after those revenues within the confines of the Commerce 6 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 Clause. And our concern with changing that language, 2 eliminating the safe harbor, and opening it up as a 3 long-arm statute is that it will create uncertainty for 4 businesses, an area that's already been litigated will now 5 have to be relitigated, and on a case-by-case basis. 6 Because it doesn't provide any businesses with an 7 understanding of what factors the Board would be using to 8 pursue them, to ask them to collect that use tax. 9 And so for that reason we think it would actually 10 threaten more jobs, potentially within California, because 11 it's actually broader than all of the proposals that have 12 been considered by the legislature in recent years that we 13 have opposed and that the legislature has ultimately 14 declined to pursue. 15 And so it's for these reasons that we oppose 16 broadening the statute out and believe that the current 17 statute is -- gives the Board ample authority within the 18 confines of the Constitution. 19 Thank you. 20 MR. HORTON: Thank you. 21 MS. SUTTON: Suzanne Sutton, again, CalTax. 22 We understand the frustration of the Board and 23 collecting use tax. As I'm sure you're frustrated with the 24 various in-state retailers who've collected over a billion 25 dollars of sales tax and haven't remitted it to the Board. 26 However, we are very concerned with this proposal's vague 27 definition of substantial nexus, as Ms. Guertin just 28 stated, which creates significant uncertainty for taxpayers 7 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 as does the existing elimination -- as does the elimination 2 of the existing safe harbor language for servers. 3 We are curious why this proposal eliminates this 4 language since the Intermediate Court of Appeal in New York 5 recently reaffirmed that active solicitation is necessary 6 to establish nexus. 7 For these reasons, we have strong concerns with 8 this proposal. 9 MR. HORTON: Thank you. 10 MS. MADIGAN: My name is Rebecca Madigan, and I'm 11 Executive Director of the Performance Marketing 12 Association. And I represent a segment of small businesses 13 that would have an unintended consequence of devastating 14 that segment, and that is affiliate marketers within the 15 State of California. 16 Affiliate marketers are simply website owners that 17 earn revenue from advertising. And as we've seen through 18 legislative attempts, the New York style affiliate nexus 19 tax for example, has tried to establish that affiliate 20 marketers establish nexus for out-of-state retailers. 21 Now, I have three points that refute that. 22 Affiliate marketers simply advertise on behalf of 23 out-of-state retailers. They don't establish any 24 definition of nexus. They are not employees. They do not 25 sell. They do not solicit. They have banner ads on their 26 websites and people click on those banner ads. The 27 affiliate marketers don't know who those people are. They 28 don't exchange any products or money with those consumers. 8 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 So they don't fit that definition of nexus. 2 They also add income to the State of California. 3 They are an advertising, sort of a national or 4 international advertising platform. There's an affiliate 5 marketer based here in this area called Newsblaze.com and 6 that's a newspaper, an international newspaper, and he 7 places ads and he earns revenue based on that advertising. 8 But if someone from Illinois, for example, clicks 9 on one of his ads and ends up purchasing something from a 10 retailer in Texas, that's money that California would never 11 see, but they're seeing his income tax through that 12 advertising. 13 So the affiliates, there are 25,000 affiliates in 14 the State of California. And in 2009 they earned $1.6 15 billion and paid $124 million in State income tax in 16 addition to business tax, employment tax, etcetera. 17 88 percent of the revenue comes from transactions 18 completely outside the State of California. So they're 19 adding income to California. 20 The problem with my third point is the problem with 21 having them be the nexus point for out-of-state retailers 22 is that at the end of the day these out-of-state retailers 23 can simply terminate those affiliate marketer relationships 24 to avoid establishing nexus, and all that does is put those 25 small businesses out of business and the State still 26 doesn't collect any additional sales tax. 27 So we've seen this happen in North Carolina, New 28 York, and Rhode Island where the New York style affiliate 9 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 nexus tax was passed. Merchants unilaterally terminated 2 their affiliates. It's a very easy decision for them. 3 They can choose affiliates -- to work with affiliates in 4 other states. Other Newsblaze competitors that happen to 5 live in other states. Because it's sort of a national or 6 boundary list platform, the Internet, it doesn't really 7 matter or isn't determinate where the affiliate marketer 8 lives. 9 So for these reasons, for these very practical 10 reasons, we ask that you reconsider this. 11 MR. HORTON: Mr. Carlson. 12 MR. CARLSON: Thank you. Members -- Board Members, 13 Steve Carlson with the Direct Marketing Association. 14 I don't want to be repetitive, but we certainly 15 concur with the comments made by the previous speakers. We 16 think that -- I would suggest that giving the Board itself 17 sort of the ultimate authority reminds me of Potter 18 Stewart's comment on pornography. I can't define it, but I 19 know it when I see it. 20 But in this case, having a bright line definition 21 is extremely important for businesses. I mean, people have 22 to know what the rules are. The rules right now are pretty 23 clear. And this would, I think, make those extremely 24 uncertain and have impacts. 25 Much of the discussion on this issue centers around 26 one large company that does business around the United 27 States. But as Ms. Madigan was pointing out, there are 28 many, many thousands of smaller businesses that would be 10 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 equally and perhaps even more affected by -- by the 2 removing clarity as it exists today. 3 We are not unsympathetic with the other issues of 4 collection of California use tax. And we certainly would 5 want to work together with the Board to look at other 6 proposals to make sure that the people who owe the tax, the 7 individuals in California, pay the tax. 8 But for that reason, we would oppose the 9 proposal. 10 MR. HORTON: Thank you. 11 Mr. Main. 12 MR. MAIN: Fred Main, Manatt, Phelps & Phillips on 13 behalf of TechNet, a nationally based trade association 14 representing a number of the tech companies that are 15 headquartered here in California. On behalf of those 16 companies and the association, we would ask the Board to 17 reconsider adopting the definition of nexus. 18 You've heard the discussion as to the ambiguity 19 that we would think that it creates and the negative impact 20 on California companies, large and small. For those 21 reasons we're opposed. 22 MR. HORTON: Okay. Let me start off by just 23 thanking those who've testified for your testimony. But 24 also I want to share, this is just before -- this is before 25 us for discussion only. The matter, consideration of the 26 matter may be taken up in January of some sort. So I 27 wanted to share that with all of the parties that are 28 involved. 11 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 And Members, any comments? 2 MS. YEE: Yes, Mr. Horton. 3 MR. HORTON: Madam Chair. 4 MS. YEE: Thank you very much. 5 MR. HORTON: Member Yee. 6 MS. YEE: Thank you. And I appreciate the comments 7 made by the speakers before us this morning. 8 I want to just kind of give you a sense of why I 9 wanted this proposal before us, and I'm very deferential to 10 taking the time to have this Board hear the concerns and to 11 really understand the potential impacts of a proposal like 12 this. 13 But I will tell you why it's before us and why I've 14 decided to pursue this, to get our attention on this. And 15 that is, I think for the better part of certainly the last 16 three or four years we've been grappling with the 17 legislature's -- I guess frustration about how to deal with 18 this issue of nexus. And frankly, I've not been real 19 thrilled about getting legislative inquiries that seek to 20 dance around the issue, and yet when there is legislation 21 doesn't really have much affect. 22 This Governor has not been supportive of looking at 23 expanding the definition of nexus beyond the current 24 statutory provisions and I understand. But I don't think 25 we need to kid ourselves. This issue's going to be decided 26 in the courts. We're not going to decide it. The 27 legislature's not going to decide it. But what I don't 28 like is not being able to have a full-blown discussion 12 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 about what expanding our nexus statute to be a long-arm 2 statute would mean, so that we could have a comprehensive 3 discussion about what it may or may not include. 4 I understand that that may be speculative at this 5 point with the courts still, obviously, taking action in 6 other states. But I do think that there's a potential for 7 legislative action to result in more damage and more 8 confusion than to just try to have a more comprehensive 9 discussion about what this could mean. 10 I will also comment that, yes, we are frustrated 11 with respect to use tax compliance. And I think all of us 12 here are sensitive about where that compliance burden falls 13 here in California, under the California statutes. I'd 14 more than welcome each of your participation in terms of 15 compliance with what the legislature has mandated us to do. 16 It has been a tough road for this Board to try to overnight 17 put together programs that mandate the collection of use 18 tax. It has just been an absolute nightmare. And at the 19 end of the day we're talking about a very marginal effect 20 with respect to improving use tax compliance. 21 But I do think this is an issue that we can say and 22 we can be in denial about it. It's going to come back 23 before the legislature. And all I want to have the 24 opportunity to do for this Board and for the legislature's 25 consideration is to understand what we are talking about 26 when we are looking at expanding the nexus authority and 27 what it means when we are talking about, whether it's third 28 party warrantee providers, whether it's talking about 13 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 affiliates, whether it's talking about servers. 2 I'm not going to claim that I'm an expert in this. 3 I represent the Silicon Valley. I understand, you know, 4 what some of these issues are, quite intimately. But I do 5 think it's one of those situations that, as the legislature 6 decides, they're going to focus on a very narrow basis with 7 respect to how we should amend our statutes. It really 8 could have more deleterious affects over the long term. So 9 that is the reason the proposal's before us. 10 And, Mr. Horton, I appreciate deferring the Board's 11 action on this until January. This is something that I 12 hope we can have a broader participation of discussion on, 13 and that would include obviously the speakers that are here 14 today. 15 MR. HORTON: Thank you. Any other comments, 16 Members? 17 Okay. Seeing none -- 18 MS. YEE: Can I just make one other comment? I'm 19 going to express some frustration here. 20 MR. HORTON: Sure, of course. 21 MS. YEE: The one largest online retailer that we 22 all seem to have a hard time naming, Amazon, I will just 23 say this, I'm more than happy to have a discussion with 24 them. They came before us to make a presentation before 25 this Board. But I do have to say that the arrogance of 26 this company in terms of trying to help us understand its 27 operation and, you know, really being a large retailer 28 online with California consumers has just really been the 14 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 biggest source of frustration among the legislature, and 2 it's beginning to be a big source of frustration for me 3 personally. 4 MR. HORTON: Members, for discussion purposes 5 primarily -- and I sort of qualify this in order to 6 indicate that I'm certainly open to consider the input from 7 the various individuals who will be impacted by this. But 8 I think it's important for me to share that, one, I'm not 9 frustrated with the collection of the use tax. 10 I believe that we have the authority to collect the 11 use tax now. I believe we have the authority to assess 12 Amazon.com now, and allow the matter to be discussed in the 13 courts if that be the case. That we set it up, assess the 14 tax, bring them before this body. They certainly will have 15 the option of paying the liability, filing a claim for 16 refund, and going to court. 17 I believe we have the authority to put together a 18 system by which we can actually take an affirmative 19 approach as it relates to collection of the use tax, 20 consumers who are collecting the use tax. My discussions 21 with various different consumers, many of them are not 22 gaming the system. They're not intentionally trying to 23 avoid paying their fair share to address education in 24 California and the various different programs that are 25 administered by the State of California, police, public 26 safety, and so forth. I believe the majority of 27 Californians actually support paying their fair share. 28 If there is a frustration, the frustration would be 15 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 on behalf of the California retailers who are competing 2 against a company that their business model or our failure 3 to act is putting them at a competitive disadvantage. I 4 believe we ought to take the action to accelerate this 5 process, put it in the courts, and allow the courts to 6 decide as they are deciding across the United States. 7 What will happen as a result of that, I believe, is 8 that there will be some continuity and some uniformity that 9 will come out of the courts that will apply to every State. 10 And to the extent that the federal government needs to take 11 action to bring clarity as it relates to the Commerce Act, 12 that will force their hands to do that. Further delay only 13 causes this to mount up and have, in my opinion, a negative 14 affect on California's economy. 15 I'm very sympathetic to the affiliates that are 16 here in the State of California. But I'm also very 17 conscious of the market and how the market works. When you 18 have consumers in California, they're going to buy. If 19 they want a book, they're going to buy the book. If they 20 can't buy it from the affiliates, they will buy it from 21 someone else. And if in fact the rule is that the 22 consumers are liable for the use tax and the consumers 23 perceive that there's a responsibility and a liability 24 there that may cause them to be penalized, may cause them 25 to commit a fraudulent act, may cause them to be subject to 26 a misdemeanor of some sort, I believe if they're not driven 27 by their commitment to the State of California to 28 participate and pay their fair share, then they'll be 16 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 driven by the penalties associated with failure to do so. 2 And on that side, I'm prepared to be as aggressive 3 as we necessarily need in order to collect the revenues on 4 behalf of the people of the State of California. 5 So, but I support the process. I mean, I commend 6 the Chair for bringing this forward because I think it's 7 important to debate the process. I think the 8 legislature -- in my mind, the legislature will ultimately 9 say that they want to retain this authority to make this 10 decision. They don't necessarily want us to make such a 11 decision as it relates to codifying law. We currently have 12 the regulatory authority to make regulatory decisions as it 13 relates to the sales and use tax law. So arguably we could 14 do so if we had that authority. 15 Shifting legislative authority to a regulatory 16 body, I don't think that's going to happen. But that's, 17 you know, one person's opinion that is supported by alleged 18 counsel, supported by Constitution, and so many other 19 different bodies of law. 20 But I think it's admirable of our Chair to take 21 this on. And I'm prepared to join arms with the Members of 22 this Board that are willing to do so. But probably just a 23 little bit more aggressively as it relates to Amazon.com. 24 I'm prepared to go to court on this matter as soon as 25 possible. Let's set the liability up, let's have them come 26 before this body in an affirmative, aggressive sort of 27 manner. 28 Those are my comments. 17 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 MS. MANDEL: Mr. Chair. 2 MR. HORTON: Yes. 3 MS. MANDEL: Can I ask a question of -- well, let 4 me ask staff a question. This proposal, is this the same 5 language that was in AB 1840 a couple years ago? 6 MS. SHEDD: Yes, it is. 7 MS. MANDEL: Okay, thank you. 8 I'm not about to tell staff who to assess or not 9 assess. I trust staff, you know, investigates all the 10 facts relative to a particular -- any particular entity 11 that may or may not have adequate connections to the State 12 to have the substantial nexus. Which I think if staff 13 discovers facts that there's nexus, I would expect that 14 staff would pursue. But I'm not about to tell them who 15 does or does not have nexus since I'm not looking at all 16 the facts in front of me right now. 17 So I just wanted to get that down. 18 MR. HORTON: Thank you. 19 I am. You know, I was elected by the people to set 20 policy and give direction, and I will not hesitate to do 21 that in any form or fashion. 22 In order to discover, we have to uncover first. 23 You got to open the box to see what's in the box. And if 24 we don't open up this can of worms, it will continue to be 25 so. 26 And so the only reason that I'm projecting today is 27 because the matter's before us. But I want to make it 28 clear that I'm not about to acquiesce any authority given 18 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 to me by the people of the State of California as it 2 relates to setting policy, as it relates to giving 3 direction and establishing an opinion by the majority of 4 this body. 5 And I'm very, very supportive of whichever 6 direction this body decides to go at the end of the day. I 7 believe in democracy, and am very supportive of that. And 8 part of the democracy is to do what the Chair is setting 9 forth, is to engage the interested parties and have this 10 debate. 11 The Chamber of Commerce, they represent a number of 12 individuals, both California and out-of-state. So I can 13 understand their dilemma. TechNet, I understand their 14 dilemma. Every interested party, we understand the dilemma 15 that they face. 16 But this is an issue that is relative to the entire 17 nation. And those individuals who are negatively impacted 18 are the children of the State of California, are the 19 teachers of the State of California, public safety, and so 20 forth, when you have a business plan that gives an unfair 21 advantage to an entity that is not operating or paying 22 their fair share in the State of California, to the extent 23 that the law applies. I'm not talking about violating the 24 Commerce Act. I'm not talking about not having factual 25 support for the actions that we take. 26 Personally, I like to win in court. I don't want 27 to go to court and lose. So I want to win. So I want to 28 establish it. But as I said from the onset, you can't 19 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 discover anything until you begin to uncover it. And I 2 think this is the process by which we have the intellectual 3 debate about this particular issue. 4 MS. YEE: Mr. Chairman. 5 MR. HORTON: Madam Chair. 6 MS. YEE: Thank you, if I may. 7 I appreciate the comments you have made. This is a 8 legislative proposal before us and I do want to defer 9 action on it. And thank you for allowing the discussion 10 today. 11 I just wanted to put on the record, this Board has 12 actually gotten a lot of pressure to act in this arena. 13 And I have been of the thought that we don't have any 14 additional authority with which to do so, through 15 regulation. 16 We have a fairly limited nexus statute now. I 17 think our regulations coupled with recent court decisions, 18 well, fairly recent court decisions have really -- this 19 Board is doing probably everything it can to honor the 20 nexus laws here in California. 21 And part of why I want to advance this proposal is 22 really to open the eyes of the legislature. They do 23 believe we have the regulatory authority to go much broader 24 than what current law allows us to do. And I think this 25 discussion would be -- I would really welcome this 26 discussion in the legislative arena just so all eyes are 27 open. 28 And we know that there are actions that the courts 20 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 will be taking in other jurisdictions. I also really want 2 to be sure that we all understand, myself included, of the 3 potential impact of a long-arm statute on California 4 businesses, and really having a good handle on that. 5 What we have seen with respect to legislative 6 action and response to certainly our Board, responding that 7 we pretty much are implementing our nexus statute as 8 provided by law and the court decisions is, you know, just 9 piecemealing this to where I don't know that we're going to 10 at the end of the day get any kind of clarification about 11 what either the Federal Constitution or the State 12 Constitution can provide. 13 And it will be a test. I'm not -- it's a difficult 14 position to be in to look at the potential pursuing 15 legislation just so we can force some clarification 16 ultimately by the court. It's not the greatest way to make 17 law. But this is going to happen at one point or another. 18 And the question really is, is this Board going to have a 19 hand on that or not? 20 The use tax is within our purview and jurisdiction. 21 The way that I want to start out pursuing a legislative 22 proposal is really with trying to get greater understanding 23 and information -- and with information. So I will 24 continue to do that between now and January, and certainly 25 would welcome other input from our speakers today and 26 beyond. 27 MR. HORTON: Just in closing, Members, unless 28 there's other comments, I think it's very important that 21 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 you give the industry a clear definition on the direction 2 that we're going to take. And so I've always held that 3 legislation has ambiguity in it. It just opens up too much 4 uncertainty in the industry. And so, ultimately, I think 5 that clear-line definition actually comes from the courts 6 whenever there's ambiguity of this nature. 7 Thank you again, Madam Chair, Member Yee, for 8 bringing this forward. I look forward to the debate and 9 discussion as we move forward in deciding. 10 MS. YEE: Thank you, Mr. Chairman. 11 MS. SHEDD: The next item before you is proposal 12 2-1. And as I go through these, I'd like to reiterate what 13 Mr. Horton said, all of these proposals are for discussion 14 only and will be brought back in January for a vote by the 15 new Board. 16 2-1 is brought forward by Board Member Steel. It 17 would revise the interest calculation provisions in the tax 18 and fee programs that the Board administers so that the 19 rate of interest allowed on refunds, on tax and fee 20 overpayments is the same as that calculated on late 21 payments. 22 Currently an -- the interest on late payments is 23 calculated by using the IRS rate plus three percent. That 24 currently is seven percent. For overpayments of interest 25 that the Board does have to pay back to taxpayer, the rate 26 is the bond equivalent rate of 13-week treasury bills. 27 Since July 1, 2009, that has been zero. So taxpayers have 28 been paying seven percent to the Board and they get zero 22 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 back on their refunds. 2 Prior to July 1, 1991, there was -- interest was 3 equal both on refunds and overpayments and late payments. 4 At that time there was a adverse US Supreme Court decision 5 which held that the Board must refund taxes to US 6 Government contractors. Those amounts have already been 7 repaid. There's no reason now not to eliminate the 8 disparity. 9 You can see on page five of six, the interest on 10 assessments and refunds from '87 to the present, and page 11 six of six is the amount many bills that the Board has 12 sponsored over the time to equalize the interest rate. 13 Are there any questions? 14 MR. HORTON: Thank you, Ms. Shedd. Any comments 15 from the Members? 16 MS. STEEL: Chairman. 17 MR. HORTON: Ms. Steel, please. And let me just 18 commend, before she starts, commend her for this. This is 19 something that has frustrated me for years, and I'm so 20 pleased that Ms. Steel is bringing this forward. Thank 21 you. 22 MS. STEEL: Thank you very much bringing this to 23 the Board, and thank you very much for all the Board 24 Members that bring it up every year that we try to pass 25 this. And this was your bill 2008, right, Mr. Horton? 26 MR. HORTON: Yes, it was. 27 MS. STEEL: Yeah. We tried to work on this and we 28 actually sponsored the bill for 13 times. And I hope 14th 23 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 is the lucky one, so we going to pass it. 2 This is a matter of fairness because it goes back, 3 coming back everything has to be same interest rate and 4 it's been really bothering me so much, when you pay tax 5 agency, all the taxpayers really get scared of tax agency 6 because this is one of the reasons that when they get 7 overpaid you give zero interest rate, interest payment with 8 the overpayment. But when you owe them, owe to the 9 taxpayers -- us, I guess at this point -- that you to have 10 pay interest. And that's not really fair. And thank you 11 for supporting it. 12 And thank you very much, Mr. Horton. 13 MR. HORTON: You're welcome. It was a laborious 14 process trying to get it through. I would only share that 15 as well. 16 MS. SHEDD: The next proposal is 2-2. This is a 17 staff proposal that was unanimously adopted by the Board 18 last year. It incorporates provisions that are currently 19 in the sales and use tax to eight other tax and fee 20 programs that the Board administers to enable the board to 21 collect delinquent taxes from corporate officers of 22 terminated corporations when there's evidence that the 23 corporation collected the tax from the customers and failed 24 to pay it to the State. 25 It also relieves corporate officers from being held 26 personally liable for delinquent taxes if they correct the 27 violation that led to the corporate suspension within 60 28 days. 24 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 This was in AB 2676. The Governor vetoed it, 2 citing the reason that the most significant provision in 3 the bill was the use tax line on the income tax form. And 4 he said the rest of the bill was unnecessary. Staff 5 differs and would like to see this come forward again. 6 MR. HORTON: 2.3. 7 MS. STEEL: Mr. Chair. 8 MR. HORTON: Discussion. 9 MS. STEEL: I have one quick question. When we 10 voted this, it was 60 days of the imposition of the 11 suspension that it goes back to the corporation and 12 corporation owes taxes. But I didn't know that we add 13 special taxes on the top of it here. 14 MS. SHEDD: Yes, we added the special taxes to the 15 successor or the corporate officer liability. For those 16 taxes where we can demonstrate that the taxpayer collected 17 the money from the customer and pocketed it rather than 18 turned it to the Board. So this is to -- 19 MS. STEEL: So right now it's only sales tax -- 20 MS. SHEDD: Right. 21 MS. STEEL: -- by the law, but you're extending it 22 to the special taxes. 23 MS. SHEDD: To eight of them. 24 MS. STEEL: Okay. I really cannot go for that 25 part. But anyway, thank you. 26 MR. HORTON: Thank you very much. Any other 27 discussions? 28 Ms. Shedd 2.3, please. 25 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 MS. SHEDD: 2.3 has been put over. 2 MR. HORTON: 3.3 -- 3.2. My apologies. 3 MS. SHEDD: 3.2 is also brought forward by Board 4 Member Steel. It authorizes the Members of the Board to, 5 in a meeting as a public body, to relieve all or any part 6 of the interest imposed on a late payment if the Board 7 Members find in their discretion that the person's late 8 payment was due to an extraordinary circumstances and that 9 is equitable to compute interest as requires under special 10 circumstances. 11 This proposal was prompted by a sales tax hearing 12 before the Board in December '09. That's when a taxpayer's 13 accountant embezzled funds from the taxpayer and they were 14 late on their payments, and there was nothing in the law 15 that would allow the Board to relieve the interest on that. 16 This bill was in AB 2375 (Knight) last year. It 17 did fail passage in Senate Revenue Tax Committee. 18 MS. STEEL: Mr. Chair. 19 MR. HORTON: Discussions. Member Steel. 20 MS. STEEL: This one -- this bill is going to give 21 us a little more flexibility for our decision-making as a 22 Board because interest, there's a lot of unfairness to the 23 taxpayers. That sale tax case came up was the CPA did the 24 fraud, right? Ms. Shedd? 25 MS. SHEDD: Yes. 26 MS. STEEL: So we tried to give some credit, 27 interest to -- back to the taxpayer, but we couldn't do it 28 because our hands been tied. So this is going to give us a 26 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 little more flexibility. Thank you. 2 MR. HORTON: Thank you very much. Any other 3 discussions? 4 Hearing none, 3.3. 5 MS. SHEDD: 3.3 is brought forward by sales and use 6 tax department. It's a housekeeping measure. It would 7 amend the sales tax law to remove that requirement that 8 retailers and lenders file an election form with the Board 9 of Equalization prior to claiming a bad debt in the case of 10 accounts held by a lender that have been found worthless 11 and written off by the lender. 12 Removing this requirement we think will save. It 13 would be beneficial to both the taxpayer and the 14 warehousing requirements on the Board. It's been on the 15 law for ten years. And these signed election forms have 16 not been really of any assistance to the Board. So we 17 recommend that they continue to sign them, but they keep 18 them. If we need them, we can ask them for them. 19 MR. HORTON: Discussion, Members? 20 Hearing none, 3.4. 21 MS. SHEDD: 3.4 is a housekeeping measure brought 22 forward by the legal department. It codifies a recent 23 court decision which held that the Lemon Law applies to 24 both the sales and the use tax. So that would apply to 25 leases of cars in which the use tax applies. 26 MR. HORTON: Discussion, Members? 27 Hearing none, 3.5. 28 MS. SHEDD: 3.5 is brought forward by the sales and 27 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 use tax department. It was also in a bill last year, 2 AB 2332. It authorizes the Board to request the 3 Contractors State License Board for a denial or suspension 4 of a contractor's license for failure to resolve any 5 outstanding final tax or fee liabilities. 6 This would give the BOE the same collection tool 7 that is currently available to the FTB for delinquent 8 income taxes and EDD for payroll taxes of delinquent 9 contractors. 10 Similar to EDD and FTB, the BOE finds that some 11 delinquent contractors do not respond to the usual 12 enforcement actions such as liens, levies, warrants to 13 seize property, and garnishment of wages. Authorizing the 14 Board to request a suspension serves as a strong incentive 15 for those delinquent taxpayers to come forward and pay the 16 tax or ask if they can be put on an installment program. 17 The FTB who has this enforcement tool has found 18 that it has an 85 percent compliance rate once the request 19 has been made to suspend the contractor's license. 20 This would also implement the LAO recommendation 21 which is asking the EDD, FTB and BOE to use common 22 collection tools and share information. 23 MR. HORTON: Thank you. Discussion, Members. 24 MS. STEEL: Mr. Chair. 25 MR. HORTON: Ms. Steel. 26 MS. STEEL: I want to see that 85 percent of 27 Franchise Tax Board, the list, or something really backing 28 up. Because it doesn't make any sense to me that 28 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 contractors that specially buildings, that business went 2 down and it's under the recession when they cannot pay for 3 it. And then their license is suspended or denied. How 4 they going to make money and pay for the taxes? 5 So I think we are going wrong direction for this 6 bill. Thank you. 7 MS. SHEDD: Okay. 8 MS. MANDEL: I actually had something. 9 MR. HORTON: Member Mandel. 10 MS. MANDEL: Thank you. I had a question, and it 11 had to do with the outstanding liabilities, which is, for 12 the contractor's identified accounts it's showing 13 $55 million in outstanding liabilities. When we had this 14 proposal before us last time, there was a number, I don't 15 remember what it was, but I had the same question which was 16 whether the numbers in the chart that were given included 17 liabilities for which the contractor is currently under an 18 installment payment plan. 19 Last time my notes were that I was told the numbers 20 then did not include liabilities that were currently in an 21 installment payment plan, and that getting on an 22 installment payment plan would be a way of resolving for 23 purposes of this proposed -- the proposed legislation. 24 This time when I asked the question of staff when I 25 was getting ready for the meeting, about the 55 million, I 26 asked the same question, does it include liabilities where 27 the contractor's currently under an installment payment 28 plan, the answer I got back was yes, the number does 29 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 include it. But it's a very small percentage of the 2 outstanding liabilities. 3 And it seems to me that if -- that this is not a 4 fair presentation if we're going to say we can't -- we need 5 this additional tool that FTB has and has been helpful 6 because we can't get them to come into compliance and we 7 can't get them to pay using our existing tool. Well here 8 you have an existing tool, the installment payment plan, 9 that some of them are actually doing. 10 And so I don't -- when you bring it back, I think 11 you need -- I mean, even if it's, you know, hardly, you 12 know -- even if it's like, I don't know, a million dollars 13 or something, it's still a million dollars, and I think we 14 ought to be giving a fair presentation of what are the 15 dollars that we're currently saying? Because this then 16 feeds into the revenue estimates which says we could -- we 17 might be able to get this if we have this extra tool. 18 So that was a concern to me when you said that the 19 numbers still included the installment payment plan. I 20 know granted some people may fall off installment payment 21 plans, and then we have whatever our rules are to try to 22 get them back in an installment payment and everything. 23 But it seems to me that that universe of people, people who 24 fall off installment payment plans and never come back into 25 an installment payment plan, then that figures maybe into 26 how the revenue guys do their analysis of the number. But 27 I just was concerned that we were presenting it as 55 28 million. 30 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 MS. SHEDD: Ms. Mandel, we have someone from the 2 program staff to address your concerns. 3 MS. LITTLE: Good morning, Members. I'm Erin 4 Little with the sales and use tax department. Last year 5 when we brought this forward the number was 68 million. 6 And we found the difference this year to be related to 7 several factors. At 55 million, some accounts paid, some 8 accounts were written off. We looked at the numbers 9 yesterday and it was reduced about six million in active 10 accounts and seven million in closed out. The seven 11 million could be related to the written off accounts. 12 And then, in addition, this year when we ran the 13 numbers, we had NAICS codes available and last year we were 14 not able to refine the search as much. So we're not 15 certain between those three factors, the reduction, which 16 applies to which portion, but we may have a smaller group 17 of taxpayers now that we've been able to run the numbers by 18 the NAICS codes. 19 To answer your question specifically about the 20 payment plans, we did include that dollar figure. It 21 represents about six percent of the taxpayers. So right 22 now it's about three million of the dollars are currently 23 in payment plans out of the 55 million. Which is about six 24 percent of the -- 25 MS. MANDEL: Right. But I think if we're going to 26 bring a legislative proposal forward, and then we're going 27 to -- if it gets the Board's approval to take it to the 28 legislature, we need to be clear about what the number is. 31 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 And that -- and, you know, the installment payment plan 2 thing just sort of -- well, you heard me. I don't have 3 to -- 4 MR. HORTON: Yeah, I think as well. 5 Ms. Little, maybe you can speak to the equity of 6 including the installment payment plan and the base of the 7 computation. I agree with Ms. Mandel, if the taxpayer's 8 attempting to cooperate, and they're in an installment 9 payment plan, then why should this -- why do we need this 10 at that particular in point in time, and given that the 11 legislation provides that tool, when it's not necessary? 12 MS. LITTLE: And we're not seeking this tool for 13 those taxpayers that enter the payment plan process. The 14 installment payment plan we do consider a collection tool, 15 very viable tool. And we see this as similar to enforcing 16 the suspension of the alcoholic beverage control licenses 17 where we have the expectation that staff work with the 18 taxpayers first, attempt to enter installment payment 19 proposals, reach out to the taxpayers, use the tools 20 available. 21 And so we don't anticipate use of this tool until 22 at least a year of efforts have been in place to bring the 23 taxpayer into compliance, offer a payment plan. And when 24 all of those things fail is when we look to the Contractors 25 Board for assistance. 26 MS. MANDEL: Okay. Then I think what I would 27 suggest -- I mean some people do fall out of payment plans. 28 I just think the 55 million is not a fair presentation if 32 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 it does not say X dollars are currently under installment 2 plans. I mean whether they should be even in the analysis 3 or not is a question. But I think it really needs to be 4 separated out. And then, because our revenue estimators, 5 they're -- whatever number and explanation they come up 6 with is only as good as the information that they're 7 getting to develop that number. And they're assuming 8 this is -- that the whole number -- 9 I mean, if they're under installment payment plan, 10 our hope and expectation is we're going to be getting their 11 money. And so that that money is not money that we could 12 anticipate getting through this new tool except to the 13 extent if we have experienced that in general life -- and 14 I'm completely making this up -- that, you know, three 15 percent of people fall off installment payment plans and 16 never come back in installment payment plans, you know, 17 then revenue estimators do what they do with that and that 18 would all be stated in their assumptions. 19 But I don't think it's right to go forward and say 20 there's a potential of -- at least based on what I've 21 heard, that there's a potential of 55 million that would be 22 subject to this proposal. 23 MR. HORTON: So -- 24 MS. MANDEL: I'd just ask that staff look at all of 25 that and consider it and bring it back in a format that's 26 appropriate, right. 27 MR. HORTON: Okay. Why don't we also sort of 28 consider whether or not we should provide a specific 33 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 exclusion in the language or some direction to the Board to 2 regulate this in such a way that we can bring clarity that 3 when there is an installment plan, this particular tool 4 will not be used. And if you fall out of the -- off the 5 plan, then it becomes available after a certain period of 6 time, a consideration and so forth. 7 I share Member Mandel's concern, probably more -- 8 less on the quantitative analysis, more on the -- whether 9 or not this is equitable and fair and so forth. 10 As it sort of evolves, why don't we consider that 11 in bringing it forward, how we would go about separating or 12 codifying the impact of the installment payment plans, 13 those that are within the installment payment plans. 14 The other concern from my perspective is more of a 15 legislative concern. I don't want this to become a 16 unwarranted Achilles' heel for the legislation where in the 17 debate in the legislature, that they begin to debate the 18 numbers and they begin to debate the equity, and it gets 19 narrowed down to an issue that really has nothing to do 20 with the tool itself and the intent of the Board of 21 Equalization in utilizing that. 22 So let's see if we can address those concerns, as 23 well as the concern of Member Steel, and making sure that 24 the numbers that we put forth as far as the 85 percent 25 compliance and whether or not that's consistent with what 26 we anticipate that we will experience in the quantitative 27 analysis of the 85 percent database that we have thus far. 28 MS. SHEDD: All right. We'll bring that back as 34 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 directed by the Board when it comes back in January for a 2 vote. 3 MR. HORTON: Thank you. Any other discussion, 4 Members? 5 Hearing none, 3.6. 6 MS. SHEDD: 3.6 is brought forward by the sales and 7 use tax staff. This was also in AB 2676 last year as a 8 Board-sponsored provision. It allows the Board to access 9 the EDD's new employee registry to enable the Board to move 10 more quickly in finding delinquent taxpayers that have 11 failed to resolve their outstanding liabilities with the 12 Board. 13 This information's already obtained by EDD's online 14 wage and employment information which is based on quarterly 15 employment returns filed by employers. However, the new 16 employee registry is about four to six months more current. 17 The FTB currently is authorized access to this data 18 and has found that to be a useful tool in tracking missing 19 and delinquent taxpayers. The sharing of the status also 20 consistent with the recommendations of the Legislative 21 Analyst's office in their 2007 report. 22 MR. HORTON: Discussion, Members? 23 MS. STEEL: Just one comment. 24 MR. HORTON: Member Steel -- I mean Yee. My 25 apologies. 26 MS. YEE: No, Steel. 27 MS. STEEL: Steel. 28 MR. HORTON: Steel. I'm right. 35 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 MS. STEEL: I think this is an expansion of 2 government power, and the new employee registry was created 3 to collect the child support. And now it's going to go to 4 other tax agencies, and I don't think this is really right 5 direction for tax agencies are doing. That's my comment. 6 MR. HORTON: Further discussion, Members? 7 Hearing none, let me ask staff to just take a look 8 at a conformity measure and that the authority that exists 9 for the Franchise Tax Board and EDD as it relates to data 10 sharing, data warehousing and the exchange of information 11 that the Board of equalization seek to have the same type 12 of authority. 13 How we utilize that is subjective in its nature and 14 I would be hopeful that certainly that we would use it 15 properly. But we should have access to it. It's a 16 valuable resource in identifying unreported tax liability. 17 And the interesting thing about this, or the great thing 18 about the Board of Equalization and California taxpayers is 19 that the majority, 95, 96 percent of the taxpayers are in 20 compliance. They're very cooperative. We have some of the 21 greatest taxpayers in the world, and they want to pay their 22 fair share. They're cooperating. 23 But those who choose not to cooperate, 24 intentionally or otherwise, that is not the result of a 25 misinterpretation of the law or unintentional consequences 26 by their actions. Those who intentionally seek to evade 27 the tax, we need to have every resource that's available in 28 order to make sure that we can administer and collect that 36 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 revenue on behalf of the people of the State of 2 California. 3 Any other discussions? 4 Hearing none, 4.1. 5 MS. SHEDD: 4.1 is a housekeeping measure brought 6 forward by the sales -- the special taxes and fee division. 7 It amends the emergency telephone users surcharge law to 8 remove the requirement for the Board of Equalization to 9 publish its -- in its meeting minutes the emergency 10 telephone user surcharge rate that is set by the California 11 Technology Agency. 12 This rate that's set by the CTA is not -- the Board 13 of Equalization cannot change that. So the ministerial act 14 of actually adopting it and publishing it is something we 15 have -- the Board doesn't have anything to do with other 16 than it delays the time of getting the information to the 17 taxpayers. 18 So this would delete that ministerial requirement 19 that the Board fix and publish in its minutes the annual 20 surcharge, and it's intended to parallel other tax and fee 21 programs with respect to the Board's role and rate setting 22 and streamline the annual surcharge rate determination 23 process. 24 MR. HORTON: Discussion, Members? 25 Hearing none, item 5.1, please. 26 MS. SHEDD: 5.1 is brought forward by Board Chair 27 Yee. It would amend the Government Code to specifically 28 provide that the Board of Equalization accept registered 37 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 warrants as payment for any tax, surcharge, or fee to the 2 Board of Equalization if that registered warrant is issued 3 specifically to the tax, fee, or surcharge payer. 4 This was brought before the Board last year and it 5 was amended into SB 1494. When that bill went to 6 appropriations, the consultant had said in extreme 7 circumstances mandatory acceptance of IOUs by the BOE could 8 adversely affect the State's ability to make higher 9 priority payments. We were told at that time that the 10 Committee would hold that bill. So that provision was 11 amended out. 12 On a parallel track was AB 1506 (Anderson) which 13 would have provided that authority to all State agencies. 14 The Board supported that as it applied to the Board. The 15 Governor vetoed AB 1506, stating requiring the State 16 departments to accept IOUs in lieu of cash payments defeats 17 the purpose of issuing IOUs in the first place. 18 This would propose -- this proposal would require 19 in statute that we accept the registered warrants from a 20 taxpayer. Currently we do have the authority -- the 21 opinion of the legal staff is that the Board has discretion 22 to accept them now without a statutory fix. 23 MS. YEE: Mr. Chairman. 24 MR. HORTON: Member Yee. 25 MS. YEE: Thank you very much. I understand the 26 hurdles that this particular proposal faced this last 27 legislative session. I just want some certainty that our 28 practice, and if it's the will of this Board to require the 38 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 acceptance of IOUs as payment of tax or any liability, that 2 that be memorialized in some fashion. 3 I don't want any legal memo to be lost in the file 4 20 years from now when I'm long gone from this Board. It 5 seems like we're constantly kind of reinventing our policy 6 in that regard. And I can't believe that we won't have 7 support for a proposal like this going through to the 8 legislature. 9 I am sensitive to a priority of payments, but we 10 have a lot of people hurting when we have a budget impasse. 11 And I think I would like to see it clear that this Board is 12 required to accept registered warrants as payment. 13 The other piece of this that it does clarify also 14 is the payment of interest, and I do think there's still 15 some confusion with respect to recipients of registered 16 warrants about when interest actually accrues and the 17 payment of those warrants. And it's not from the time of 18 issue until the warrant actually is used for payment, but 19 it's from the time of issue until the warrant is actually 20 matured and redeemable. And so I think that clarification 21 at the very least is in order. 22 MR. HORTON: Further discussion, Members? 23 MS. STEEL: Just one comment. Thank you very much 24 for bringing this up. This is totally, totally right 25 direction for taxpayers. And of course when they get the 26 warrant without payment -- we had a case like that here and 27 then they had to pay penalty and interest. It was really 28 heartbreaking at that time. And thank you very much for 39 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 bringing it up to the Board. 2 MR. HORTON: Thank you. Any other discussions, 3 Members? 4 Hearing none, that concludes the Legislative 5 Committee. Ms. Shedd. 6 MS. SHEDD: There's one informational, which has to 7 do with notification of law sections that are administered 8 by the Board that will sunset by January 1st, 2013. This 9 is an informational item. And if there's any questions, I 10 would be happy to answer them. 11 MR. HORTON: Discussion, Members? Member Mandel. 12 MS. MANDEL: These are coming -- are they going to 13 come back as alleged proposals to extend the sunsets? 14 MS. SHEDD: Well, the first one which would extend 15 214.02 of the rev and tax code which has to do with the 16 welfare exemption for property in its natural state, that 17 has been on the books since 1972 and has never been 18 sponsored by the Board. 19 MS. MANDEL: Oh, oh, okay. So these are just -- if 20 they had been previously Board-sponsored, I guess. 21 MS. SHEDD: Well, I think, from talking to the 22 staff, the itinerant veteran vendors will be a staff 23 recommendation in December to extend that date. The AIDS 24 and HIV thrift store exemption -- 25 MS. MANDEL: We have that one coming back, right? 26 MS. SHEDD: That's going to come back in December. 27 And the offers in compromise, I'm told that staff is 28 working on that, to extend that. 40 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 MS. MANDEL: Okay. Thank you. 2 MR. HORTON: Just for clarification, Ms. Shedd, are 3 we talking about not taking a look at the items that will 4 sunset that were not sponsored by the Board, that impacted 5 the Board in some form or fashion? 6 MS. SHEDD: What I have listed here are all those 7 provisions that will sunset in either 2012 or 2013. 8 MS. MANDEL: Okay. So there's the one, the first 9 one you mentioned. 10 MS. SHEDD: The first one is something that will 11 expire in 2013. And there is no reason for the Board 12 really to sponsor. 13 MS. MANDEL: It's been -- the legislature's been 14 extending it. 15 MS. SHEDD: Mm-hmm. And it's the welfare 16 exemption. So we are, you know, marginally administering 17 it in that we oversee the assessors. But that doesn't mean 18 the Board can't if they want to. 19 MR. HORTON: What I suggest is, Members, I would 20 not want to be presumptuous in presuming that the 21 legislature's going to act. These are measures such that I 22 believe they will be compelled to act, but let's see if we 23 can figure out a way to at least notify the legislature in 24 some form or fashion that these are items that should be 25 taken up for consideration. How we accomplish that, we can 26 discuss that at a later date. Unless there's some input at 27 this time. 28 MS. YEE: Mr. Horton. I would just add, I would 41 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 agree. I think that it is under the jurisdiction of the 2 Board, but I really would like an opportunity to understand 3 what the effects have been of some of these laws. We 4 really don't have a chance to provide any kind of oversight 5 of that if we don't have the proposal for extending the 6 sunset before us. 7 MR. HORTON: Yeah. Thank you member, Yee. 8 In many cases the historical knowledge of these 9 measures are here at the Board of Equalization. It's not 10 necessarily in the legislature, with all due respect to the 11 legislature. Term limits has caused a turnover not only in 12 staff but also in members to a significant degree. 13 So we should be conscious, monitor, and make sure 14 that we're aware of these issues. 15 MS. SHEDD: Mm-hmm. 16 MR. HORTON: Okay, thank you. 17 MS. SHEDD: We're completed. 18 MR. HORTON: All right. Members, that concludes 19 Legislative Committee. Thank you so very much for your 20 engagement. 21 ---oOo--- 22 23 24 25 26 27 28 42 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, KATHLEEN SKIDGEL, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 November 16, 2010 I recorded verbatim, in shorthand, to the 10 best of my ability, the proceedings in the above-entitled 11 hearing; that I transcribed the shorthand writing into 12 typewriting; and that the preceding pages 1 through 42 13 constitute a complete and accurate transcription of the 14 shorthand writing. 15 16 Dated: December 20, 2010 17 18 19 ____________________________ 20 KATHLEEN SKIDGEL, CSR #9039 21 Hearing Reporter 22 23 24 25 26 27 28 43 TOWN & COUNTRY DEPOSITION SERVICE (530) 642-0333