BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 450 N Street, Room 121 Sacramento, California REPORTER'S TRANSCRIPT JANUARY 27, 2011 LEGISLATIVE COMMITTEE Reported by: Beverly D. Toms CSR No. 1662 Juli Price Jackson CSr No. 5214 1 1 2 P R E S E N T 3 4 For the Committee: Jerome E. Horton Chairman 5 Michelle Steel 6 Member 7 Betty T. Yee Member 8 George Runner 9 Member 10 Marcy Jo Mandel Appearing for John Chiang 11 State Controller (per Government Code 12 Section 7.9) 13 Diane Olson, Chief Board Proceedings Division 14 Board of Equalization 15 Staff: Margaret Shedd, Chief Legislative & Research Div. 16 Rose Marie Kinnee, Business 17 Taxes Specialist III Legislative & Research Div. 18 Lynn Bartolo, CEA 19 Special Taxes and Fees Div. 20 Cindy Wilson, Businesss Taxes Specialist III 21 Legislative & Research Div. 22 Gil Haas Investigations Division 23 Brad Miller, Business Taxes 24 Specialist II Business Taxes Comittee 25 Training Unit 26 27 --oOo--- 28 2 1 INDEX 2 PAGE 3 ITEMS 1-1 THROUGH 1-13, 3-3, 3-4, 4 3-7 THROUGH 3-13 AND 4-3 4 5 ITEM 2-1 7 6 ITEM 2-2 14 7 ITEM 2-4 17 8 ITEM 3-2 21 9 ITEM 3-5 30 10 ITEM 3-6 54 11 ITEM 3-14 58 12 ITEM 4-1 68 13 ITEM 4-2 79 14 ITEM 5-1 82 15 ITEM 5-2 83 16 SPEAKER: ASHLEY MARTINEZ 83 17 ---oOo--- 18 19 20 21 22 23 24 25 26 27 28 3 1 ITEMS 1-1 THROUGH 1-13, 3-3, 3-4, 2 3-7 THROUGH 3-13 AND 4-3 3 Sacramento, California 4 January 27, 2011 5 ---oOO--- 6 MR. HORTON: Let us call the meeting of the 7 Board of Equalization to order. Ms. Olson, what is our 8 first scheduled matter? 9 MS. OLSON: Our first item on -- 10 MR. HORTON: I guess I should have hit this. 11 MS. OLSON: Our first item on today's agenda is 12 the Legislative Committee. 13 Mr. Horton is the Chair of that committee. Mr. 14 Horton. 15 MR. HORTON: Thank you. Thank you, Ms. Olson. 16 Let us call the Legislative Committee to order. 17 Ms. Shedd, will you please introduce the first 18 matter. 19 MS. SHEDD: Yes. First I'd like to give you 20 the recommended consent calendar; that is items 1-1 21 through 1-13, 3-3, 3-4, 3-7, 3-10, 3-12, 3-13. There 22 have been four items that have been put over for further 23 fine tuning and those are 3-8, 3-9 -- 24 MR. HORTON: Ms. Shedd, can you give us some 25 quick background on the items that have been put over? 26 MS. SHEDD: They were put over at the request 27 of people -- 28 MR. HORTON: No, no, no, no, I don't want to -- 4 1 I don't need to know why, just 3 -- 2 MS. SHEDD: 3-8 -- 3 MR. HORTON: 3-8. 4 MS. SHEDD: -- would have the Board do a study 5 on -- evaluate the feasibility -- 6 MR. HORTON: Oh, I see. 7 MS. SHEDD: -- of employing the system in which 8 Sales Tax reimbursement collected by retailers is 9 segrefy -- segregated at the time of sale and 10 simultaneously transferred to the State. 11 MR. HORTON: Thank you. 12 MS. SHEDD: 3-9 has to do with the sales price 13 of cellular telephone devices. 14 MR. HORTON: Thank you. 15 MS. SHEDD: 3-11 has to do with every person 16 selling a vehicle at auction may not accept a resale 17 certificate from a purchaser. 18 MR. HORTON: Thank you. 19 MS. SHEDD: And 3 -- 4-3 is a penalty instead 20 of seizure of untaxed tobacco products. 21 MR. HORTON: Thank you very much. 22 MS. MANDEL: Mr. -- Mr. Chair. 23 MR. HORTON: Discussion, Members? 24 MS. MANDEL: No, I -- I had -- were there 25 two -- were 4-1 and 4-2 not on consent? 26 MS. SHEDD: Those were pulled from consent. 27 MS. MANDEL: Okay, thank you. 28 MS. YEE: But still before us. 5 1 MS. MANDEL: Right. 2 MS. SHEDD: They're still -- 3 MS. YEE: Okay. 4 MS. YEE: -- to be discussed then. 5 MR. HORTON: Discussed, good. 6 MS. YEE: All right. 7 MS. MANDEL: All right, thank you. 8 MR. HORTON: Okay. 9 Any discussion, Members, on the consent 10 calendar? 11 MS. YEE: I'll move adoption. 12 MR. HORTON: It's been -- 13 MR. RUNNER: Second. 14 MR. HORTON: -- moved by Ms. Yee, second by Mr. 15 Runner. 16 Without objection, Members -- such will be the 17 order. 18 ---oOo--- 19 20 21 22 23 24 25 26 27 28 6 1 ITEM 2-1. 2 MS. SHEDD: Okay. Then the first item before 3 us for discussion is Item 2-1. This proposal would 4 revise the interest calculation provisions in the tax 5 and fee programs that the Board administers so that the 6 rate of interest allowed on refunds of tax and fee 7 overpayments is the same as that calculated on late 8 payments. This is consistent with the uncodified 9 language that was in AB 2612, which was chaptered in 10 2000, which provides that it's the intent of the 11 Legislature to require that the rate of interest 12 accruing on both overpayments and underpayments of Sales 13 and Use Tax be determined in the same manner. These 14 rates were the same amount prior to 1990. There was a 15 Court decision and so they changed that for budgetary 16 purposes so that there -- there was a differential, 17 about a seven point differential on the overpayments and 18 underpayments. 19 Right now the rate of interest on refunds is 20 zero and the rate that we charge taxpayers is seven 21 percent. 22 MR. HORTON: Thank you. Discussion, Members? 23 MS. STEEL: This -- Mr. Chairman. 24 MR. HORTON: Sure. 25 MS. STEEL: This is the interest parity that it 26 has to go both ways, and all other tax agencies are 27 doing it except BOE, as I understand. And the interest 28 has been. Changed last year was eight percent to 7 1 taxpayers and we gave -- you know, we give them zero, 2 this year to seven percent. It has to be both ways that 3 when we charge them for eight percent then we have to 4 give them eight percent when they overpay. So this is 5 the interest parity. It's fairness to the taxpayers, 6 and I really wish to, you know, send this bill out to 7 legislators. 8 MR. HORTON: Thank you, Ms. Steel. Any -- 9 further discussion, Members? 10 MS. YEE: Mr. Chairman. I'm sorry, a question 11 for Ms. Shedd. What was the -- 12 MR. HORTON: Madam Yee. 13 MS. YEE: What was the fiscal impact of the 14 proposal? I'm sorry. 15 MS. SHEDD: If it had been in place in fiscal 16 year 2008/'09, it would have resulted in credit interest 17 payments of approximately $26 million. 18 MS. YEE: Okay. Thank you. 19 MS. STEEL: You know, I am very concerned about 20 State deficit, too, but at the same time that taxpayer 21 has to be survived in California, too. So when they 22 overpay they should get the same interest. That's why I 23 intro -- sponsored the bill. 24 MR. RUNNER: Mr. Chair. 25 MR. HORTON: Mr. Runner. 26 MR. RUNNER: Yeah, I -- I think that at this 27 point there's a lot of things that we may want to do. 28 Let's see, if we use the deficit as an excuse there's 8 1 lots of things that we may want to do to taxpayers if 2 we're not careful in order to compensate for that. 3 MR. HORTON: Uh-huh. 4 MR. RUNNER: And so I think the real test here 5 is one of fairness. And that is do -- do -- why would 6 we have a State benefiting at a different rate than what 7 taxpayers do when it comes to the issue of interest? I 8 would move that we have this on our Leg. agenda. 9 MR. HORTON: Okay. Further discussion, 10 Members? 11 MS. YEE: I'm sorry, I'm -- and perhaps this is 12 why I'm confused. This proposal was before us 13 previously, right? 14 MS. MANDEL: Yeah, this proposal -- sorry, 15 Margaret, this proposal was before us I think in 16 November but we didn't -- that was when we -- we -- 17 MS. SHEDD: Discussed them all. 18 MS. MANDEL: -- we discussed them but we didn't 19 take positions on things because we were -- we -- 20 MS. YEE: I remember the November discussion 21 but was this even before the Board prior to November in 22 a previous year? 23 MS. SHEDD: This has been a Board sponsored -- 24 MS. MANDEL: Right. 25 MS. SHEDD: -- for -- 26 MR. HORTON: The last 20 years. 27 MS. SHEDD: -- many years. 28 MS. MANDEL: Many, many, many years. 9 1 MS. YEE: No, no -- okay. And what happened in 2 the most recent past with respect to the Board- 3 sponsored -- 4 MR. HORTON: Legislation. 5 MS. YEE: -- bill? 6 MS. SHEDD: It failed. 7 MS. YEE: In the Legislature. Okay. So it 8 never made it through -- 9 MS. MANDEL: No. 10 MS. YEE: -- the process. 11 MS. MANDEL: Yeah. There -- there have been 12 several attempts -- 13 MS. YEE: Okay. 14 MS. MANDEL: -- and my recollection was that it 15 was always the understanding that it was only done for 16 the aerospace refunds -- 17 MS. YEE: Right. 18 MS. MANDEL: -- and the idea was -- 19 MS. YEE: Right. 20 MS. MANDEL: -- it would come back to parity 21 when they finished -- 22 MS. YEE: Right. 23 MS. MANDEL: -- dealing with that -- 24 MS. YEE: Yeah, I remember. 25 MS. YEE: -- and it just hasn't, which -- 26 MS. YEE: Okay. All right, thank you. 27 Well -- 28 MR. HORTON: Further discussion on the matter? 10 1 MS. YEE: No, I'm fine, thanks. 2 MS. MANDEL: I'll second the motion if you need 3 a second. 4 MS. SHEDD: This is for Board sponsorship. 5 MS. YEE: Uh-huh. 6 MS. MANDEL: Right. 7 MS. YEE: Yes. 8 MR. HORTON: Okay. There's a motion to sponsor 9 the item. There's a second. I would only offer just a 10 tad bit of -- sort of historical perspective from both 11 the Legislature and the Board of Equalization. 12 The Board of Equal -- when I -- working at the 13 Board of Equalization I also had a huge concern about 14 credit interest on claim for refunds. In fact my first 15 claim for refund I just put credit interest on it. It 16 was prior to Iris and when Iris would do all it for you 17 and you'd have to do the calculation yourself and the 18 reviewer gave me a kick back and a long, you know, list 19 of why I, you know, shouldn't be doing this. And -- and 20 it took me a while to sort of understand the -- the 21 logic behind the credit interest on claim for refunds is 22 that the intent of the interest -- one of the -- one of 23 the purposes is -- well, the intent is not necessarily 24 revenue to generate revenue. So I believe Ms. Steel is 25 right in trying to bring some equity to the process. 26 It is behavior modification and the concern at 27 the time was, is that in providing credit interest the 28 credit interest was more than what you would get in the 11 1 bank. And so a mistake you would actually have a 2 windfall at the end of the day and so if you 3 intentionally -- if your business wasn't going well you 4 could actually just pay the Board in advance and take 5 credit, something like that. There's a whole other 6 logic. 7 And when it came to the Legislature, the 8 Legislature was concerned about the same aspect of it, 9 the behavior modification, and that's why at least 10 during my tenure didn't really even get out of 11 committee. 12 And under the current budget climate we 13 probably will face the same thing. But I'm supportive 14 of the bill because it's -- I think it's always 15 important for the agency -- the Board to participate in 16 the process whether we're successful or not necessarily. 17 But there are times that we should communicate 18 that there should be some equity and that the 19 Legislature ought to look at this. It may not be parity 20 in the sense that the -- the interest that is charged, 21 debit interest, may not be equal to the credit interest 22 and what the Legislature had considered once was to 23 provide credit interest at least equal to the market 24 rate if in fact that was the lower of the two, the 25 market rate or the rate charged by the Board of 26 Equalization. 27 But it's been moved and -- moved by -- moved by 28 Mr. Runner, second by Ms. Mandel. 12 1 Further discussion, Ms. Mandel? 2 MS. MANDEL: Yeah, the -- this proposal's just 3 with respect to the rate, it doesn't change the 4 circumstances under which credit interest is payable, 5 right? 6 MS. SHEDD: Right. 7 MR. HORTON: No. 8 MS. SHEDD: It's just the rate. 9 MS. MANDEL: Okay. 10 MR. HORTON: Just the rate. 11 MS. MANDEL: Thank you. 12 MR. HORTON: So it's been moved and a second. 13 Any objection, Members? 14 MS. YEE: No objection. 15 MR. HORTON: Without objection, such will be 16 the order. Next item. 17 ---oOo--- 18 19 20 21 22 23 24 25 26 27 28 13 1 ITEM 2-2 2 MS. SHEDD: The next item is 2-2. This is 3 brought forward by the Legal Department, Sales and Use 4 Department and Property and Special Taxes Department. 5 This would incorporate provisions that are currently in 6 the State Sales and Use Tax law into other tax programs 7 that the Board administers in order to enable the Board 8 to collect delinquent taxes from corporate officers of 9 terminated corporations when there is evidence that the 10 corporation collected the tax from customers and failed 11 to pay it to the State. 12 For suspended corporations it also relieves the 13 corporate officers from being held personally liable for 14 delinquent taxes if they correct the violations that led 15 to the corporate suspension within 60 days. 16 We had discussed this in November. It was put 17 over for a vote. This was before the Board last year. 18 The Board unanimously adopted it. It was in a bill that 19 the Governor vetoed for another reason. 20 MR. HORTON: Ms. Shedd, are you in a position 21 to share the reason? 22 MS. SHEDD: The reason was that it was coupled 23 with a couple other provisions, one being the Use Tax 24 line on the income tax form -- 25 MR. HORTON: Uh-huh. 26 MS. SHEDD: -- and that provision was picked up 27 in the budget trailer bill language -- 28 MR. HORTON: Uh-huh. 14 1 MS. SHEDD: -- so the Governor said that the 2 two provisions weren't necessary. 3 MS. YEE: I think it just fell through the 4 cracks. 5 MS. SHEDD: Yeah. 6 MR. HORTON: Yeah. Maybe we can fill up the 7 cracks. 8 MS. SHEDD: That -- 9 MR. HORTON: I'll allow that. 10 MS. SHEDD: -- that's the idea. 11 MS. YEE: Would this be a stand-alone proposal 12 at this time then? Or are you thinking about it in an 13 omnibus -- 14 MS. SHEDD: I -- I haven't decided yet. I mean 15 I -- what's your preference? 16 MS. YEE: Well, just seeing what happened, you 17 know, last year, I really don't want to see it fall 18 through the cracks again. This is something that I 19 think we all have been pursuing. Perhaps it ought to 20 be -- if it's in an omnibus bill with non-budget related 21 provisions so that we don't have the same experience 22 again. So you either stand-alone or really kind of more 23 of a omnibus bill that doesn't have any, you know, 24 revenue potential that would affect the budget. 25 MS. SHEDD: Okay. 26 MS. YEE: Okay. 27 MR. HORTON: All right. Further discussion, 28 Members? Is there a motion? 15 1 MS. YEE: I'll --- I'll move adoption. 2 MR. HORTON: Been moved by Ms. Yee. Second 3 by -- 4 MS. MANDEL: Second. 5 MR. HORTON: -- Mrs. Mandel. 6 Any objection, Members? 7 Hearing none, such will be the order. 8 ---oOo--- 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 16 1 ITEM 2-4 2 MS. SHEDD: The next item is 2-4. This was 3 brought forward by the Legal Department, Sales and Use 4 Department and Property and Special Taxes Department. 5 This conforms to a bill that was sponsored by the FTB 6 last year. It was AB 1530 Skinner. This would provide 7 that the Board of Equalization and State Controller's 8 office with express authority to collect orders of 9 restitution awarded to the Board in criminal proceedings 10 in the same manner as tax liabilities. 11 Currently those restitutional awards are 12 awarded in a criminal proceedings but in order to 13 enforce that order you have to go to Civil Court, which 14 is kind of -- there's more hurdles to jump through. But 15 since -- for the State, which is the victim of the 16 crime, the amounts are the tax, the interest, the 17 penalties, we already have those collection tools and 18 rather than go through civil Court to enforce a criminal 19 proceeding we would like the authority the same as FTB 20 to use our own collection tools 21 MR. HORTON: Thank you, Ms. Shedd. Discussion, 22 Members? 23 MS. STEEL: Question. The FTB started -- 24 MR. HORTON: Ms. Steel. 25 MS. STEEL: -- last year for this program? 26 That's what I heard? 27 MS. SHEDD: Yes. 28 MS. STEEL: So, what's their experience? 17 1 MS. MANDEL: I think the bill -- 2 MS. YEE: I think the bill was just enacted. 3 MS. MANDEL: Right. 4 MR. HORTON: Yeah. 5 MS. SHEDD: Yeah. 6 MS. STEEL: So it's just acted. So, it's not 7 really started yet? 8 MS. SHEDD: Right. 9 MS. STEEL: Do you know anticipated cost for 10 this? 11 MS. SHEDD: For them or for us? 12 MS. STEEL: For us. And for them, too. But 13 they didn't even start yet, so -- 14 MR. HAAS: Members, Gil Haas has from the 15 Investigations Division. The estimated cost, I believe, 16 for FTB, I don't believe they showed any additional cost 17 on -- on there other than some programming that they 18 were doing for their -- for their computers. 19 For the Board of Equalization our TSP 20 Department has only estimated about $103,000 worth of 21 additional cost which would be in the programming. 22 There wouldn't be any -- we're not anticipating any 23 personnel years or any personnel being needed to 24 implement this process. 25 MS. YEE: Okay. 26 MS. SHEDD: And we are estimating that it would 27 bring in increased revenue collection of a million 28 dollars annually. 18 1 MS. STEEL: Thank you. 2 MR. HORTON: The -- further discussion, 3 Members? 4 The programming cost, is that reoccurring? 5 MR. HAAS: I believe not. I believe it's a 6 one-time thing to -- 7 MR. HORTON: Yeah, let me just commend staff 8 for bringing this forward. I'll tell you, part of my 9 concern, a part of the benefit that could be derived at 10 some point down the road as the State of California 11 grapples with dealing with controlling the 12 distribution -- illegal and legal distribution of 13 marijuana in the State of California, reports have said 14 anywhere from 12 billion to 20 billion dollars worth of 15 marijuana is actually grown here in the State of 16 California. And if you look at the reports throughout 17 the State, throughout the nation, as the -- as the 18 judiciary enforcement component arrests and prosecutes 19 these individuals that are growing it illegally, one of 20 the up side is the amount of revenue that they're 21 confiscating, their homes, their cars, cash and all 22 these different things -- of course the marijuana, thank 23 God, they burn it up, hopefully not close to my home. 24 But they -- they burn it up. 25 But, you know, being able to -- to obtain 26 restitution in this process allows the Board of 27 Equalization to participate in -- in collecting those 28 revenues if in fact there's a debt created. And I know 19 1 as some of you know, is that I've been very much 2 interested in having a similar structure that exists 3 with the tobacco tax now, is that to have a liability on 4 the dis -- on the wholesale -- wholesaler and the 5 distributor to create some sort of liability on that. 6 And what happens if we do that and we're able to 7 participate when they're prosecuted and there's revenues 8 and there's proceeds, we're able to participate because 9 there's a liability to the State. 10 Currently there is no liability when you arrest 11 these individuals as it relates to the State Board of 12 Equalization in the Sales Tax. So I think this would be 13 an extremely valuable tool as we go forward in dealing 14 with that. 15 Is there a motion? 16 MS. YEE: Move to adopt. 17 MR. HORTON: Moved by Ms. Yee. Second by -- 18 MS. MANDEL: Second. 19 MR. HORTON: -- Ms. Mandel. 20 Any objection, Members? 21 Hearing none, such will be the order. 22 ---oOo--- 23 24 25 26 27 28 20 1 ITEM 3-2. 2 MS. SHEDD: The next item is 3-2. This was 3 brought forward by Board Member Steel. It would 4 authorize the Members of the Board meeting as a public 5 body to relieve all or any part of interest imposed if 6 the members find in their discretion that a person's 7 late payment was due to extraordinary circumstances and 8 that it would be inequitable compute -- to compute 9 interest as re -- as the law currently requires. 10 Right now under current law the interest is 11 only relieved in the case of a disaster, such as a fire, 12 flood, tidal wave, earthquake or similar public calamity 13 or if there is an unreasonable error or delay by the 14 Board employee. 15 Under this proposal a condition for the relief 16 would be that the tax must be paid first. 17 MR. HORTON: Discussion, Members? 18 MS. YEE: Mr. Chairman. 19 MR. HORTON: Oh -- Madam Yee. 20 MS. YEE: I want to thank Ms. Steel for 21 bringing this forward. This is something that we do 22 struggle with when we hear cases before this Board. My 23 concern, however, is how we really put boundaries and 24 parameters around what constitutes extraordinary 25 circumstance. And I guess it's always kind of the 26 challenge of if you begin to enumerate what they are 27 it's never an exhaustive list and I just think this is 28 something that will be very subjective with respect to 21 1 how the Board would look at these various cases. So I'm 2 a little uncomfortable with the proposal because of 3 that. 4 I'm wondering if -- if -- one of the thoughts I 5 had was whether we might be able to direct staff and 6 the -- or the Department to look at where we've had 7 situations of circumstances of a taxpayer that appeared 8 to be beyond the control of that person, that party, so 9 we can kind of get a better feel of the types of 10 situations and maybe there's a better way to define what 11 those are. 12 But at this point it just seems to be pretty 13 wide open and -- and pretty subjective with respect to 14 how the Board would look at these types of matters. 15 MS. STEEL: If you need a little more study, 16 that's fine with me, but some of the cases that we 17 saw -- 18 MS. YEE: Uh-huh. 19 MS. STEEL: -- during last four years period 20 for taxpayers that, you know, we felt really bad, this 21 is going to give us a little more flexibility -- 22 MS. YEE: Yes. 23 MS. STEEL: -- instead of just penalty waived, 24 because a lot of cases unfortunate that we cannot really 25 waive any interest, but at the same time they have to 26 pay taxes first, so that's another deal. 27 But if you want to study, that's fine. 28 MS. YEE: I mean one situation that I am 22 1 sympathetic to was one that we had recently with respect 2 to delay on the part of the appeals process. And, you 3 know, part of that is due to limited resources and 4 staffing but I do think that we did see in one case 5 recently where there was, I thought, pretty unreasonable 6 delay but then, you know, do we assign a time period to 7 that? How do we define that? 8 So I'm sympathetic in terms of there being 9 circumstances that would be conducive for the Board to 10 think about -- well, to have the flexibility to relieve 11 all or part of interest. 12 I just don't particularly like kind of the wide 13 openness of this particular proposal. So if there's a 14 way to maybe do an inventory of the types of things 15 that -- the types of circumstances that have come before 16 this Board where we, you know, really I think struggle 17 about the lack of authority -- 18 MS. STEEL: So you want to send it back to 19 staff, that study, and put some guidelines -- 20 MS. YEE: Yeah. 21 MS. STEEL: -- for this? 22 MS. YEE: Yeah. I mean, I -- I would like to 23 see -- and -- and perhaps -- perhaps then, depending on 24 what those circumstances are, it's really more about 25 expanding on the special circumstances that are 26 currently in the statute rather than kind of looking at 27 enacting additional ones. 28 So, you know, for example a reasonable error or 23 1 delay by a BOE employee, we might want to maybe be a 2 little more specific -- 3 MS. STEEL: More specific. 4 MS. YEE: -- under that category. But I'd like 5 to get a little bit more information. I'm familiar with 6 the ones that we've heard -- 7 MS. STEEL: Uh-huh. 8 MS. YEE: -- but it just seems to me they kind 9 of run the gamut and I'm not sympathetic to many of them 10 but certainly the ones where we've caused some 11 unreasonable delay, I want to look at those further. 12 MS. STEEL: That's fine. 13 MR. HORTON: Further discussion, Members? 14 MR. RUNNER: I have a quick question just 15 again -- 16 MR. HORTON: Mr. Runner. 17 MR. RUNNER: -- just to understand the process 18 here, as we move these bills forward and then they are 19 then approved by the Board, I assume to be 20 Board-sponsored pieces of legislation, I -- I would 21 assume that what it is that we vote on here may be a lot 22 different than what it is that actually then ends up 23 being happening over in the Legislature. Even -- 24 MS. YEE: It does, yes. 25 MR. RUNNER: At least I've heard that that's 26 what happens sometimes over there. Even to the point to 27 where as the bill moves forward there may be input that 28 the Board may have in regards to refining the bill and 24 1 what not. 2 So I guess my question is not specifically to 3 this bill, but if indeed we move a bill out and we -- 4 and there are questions about that bill, saying, hey, 5 this is a good concept but I think what we need to do is 6 change and make sure the language does this, is that -- 7 is that -- is that how this sometimes works and so we -- 8 we may be able to move a bill forward based upon the 9 concept but say, hey, but we need to close up this, we 10 need to make this a little tighter, we need -- and again 11 not specific to this bill but just as -- from my 12 understanding as to how a piece of legislation moves 13 away from here into a sponsored bill. 14 MS. YEE: Uh-huh. 15 MR. HORTON: Yeah, the Legislature has its term 16 of art called spot bill, where the bill doesn't have any 17 real significant language, it is just a general 18 statement, and then as it moves through the process the 19 language is placed in the bill. Sometimes entirely new 20 language is placed in spot bills but -- and they serve a 21 different purpose. 22 So having that vehicle I -- I -- I would 23 imagine that Ms. Shedd has some thoughts about the 24 vehicle to be able to do that, but I would encourage -- 25 MR. RUNNER: But this would be a spot bill. 26 MR. HORTON: I would -- I would -- I mean, a 27 bill that we anticipate modifying and we have the 28 intellectual capacity, the -- the knowledge base, the 25 1 skill sets to get it right from the onset, I would 2 actually recommend that we invest the time and energy to 3 make sure that we get it right when we send it over 4 there. 5 It -- it will speak to our credibility as an -- 6 as an agency. 7 MS. YEE: Mr. Chair. 8 MR. HORTON: But is there -- are there -- are 9 there any other agencies that have this authority? Does 10 Franchise Tax Board have this authority? 11 MS. SHEDD: No. 12 MR. HORTON: Internal Revenue? 13 MS. SHEDD: Not that -- no. No. 14 MR. HORTON: Okay. 15 To what extent does our law currently allow us 16 to abate interest? 17 MS. SHEDD: In the case of a disaster, which is 18 a public calamity, and in the case where the failure to 19 pay the tax timely was due to an unreasonable error or 20 delay by a Board of Equalization employee. 21 MR. HORTON: Okay. And what other areas do you 22 believe would make sense based on the history of the 23 Board? Or is that something you want to think about? 24 MS. YEE: I don't think it was a -- 25 MR. RUNNER: That's a policy. 26 MS. YEE: It's not a staff-sponsored init -- 27 proposal -- 28 MR. HORTON: Yeah. 26 1 MS. YEE: -- so I think -- 2 MR. HORTON: You know, the challenge, Members, 3 that -- that -- is that the direction is going to come 4 from us. I think that's where I was going with that. 5 And so maybe we set aside some time to -- at some point 6 'til we can actually have some extensive conversations 7 about -- and staff can provide us the examples of 8 circumstances that we've dealt with over the -- 9 MR. RUNNER: Uh-huh. 10 MR. HORTON: -- last few years, and then bring 11 it back to us and we can have a little more extensive 12 conversation. I don't necessarily want to direct staff 13 to come back with a policy, is where I was going. Or it 14 is subjective and -- to the -- I agree with Member Yee, 15 to the point that we can codify the intent of this body 16 I think we ought to do that, and not leave it 17 open-ended. So -- 18 MR. RUNNER: Mr. Chair, I -- I assume that part 19 of this discussion is the fact that -- and, again, I -- 20 I hear stories. I don't -- I haven't been sitting on 21 this Board, obviously, but there are times when -- when 22 people have very compelling stories and situations. 23 And -- and the Board sometimes will then -- I -- I think 24 would probably end up saying something, you've got a 25 really compelling story but the law doesn't allow us to 26 do that. 27 And I think what this is attempting to do is to 28 try to create that little bit of leeway within the law. 27 1 MS. YEE: Uh-huh. 2 MR. RUNNER: Now, again, I don't know if it's 3 ready or not, whenever. But I -- but I think concept is 4 one that allows this Board not to have to look at 5 somebody's really compelling story and say our hands are 6 tied, we can't do it. 7 MS. YEE: I got a suggestion. 8 MR. HORTON: Madam Yee. 9 MS. YEE: Thank you, Mr. Chairman. Perhaps the 10 direction to staff could be looking at our business tax 11 appeals maybe over the period of the last, what, four 12 years in which interest abatement was an issue, and 13 seeing what the circumstances were. 14 Now I know the issues of a specific appeal may 15 not touch on a request to relieve interest. We've had 16 our own considerations about situations in which we 17 thought interest may be relieved, but that might be a 18 start in terms of what some of those circumstances were 19 that were raised in those appeals, and have that come 20 back. 21 I would agree with Mr. Horton, anything that 22 comes out of this Board as a Board-sponsored bill or a 23 Board-adopted proposal really should be in its best form 24 as possible substantively. We don't move spot bills and 25 I think even as it goes through the process we're going 26 to need to be ready to answer those specific questions 27 that we're asking staff to look at right now. 28 MR. HORTON: Okay. I think that's pretty good 28 1 direction. 2 MS. SHEDD: So we'll put this over -- 3 MR. HORTON: Just further act -- 4 MS. SHEDD: -- and report back to the Board on 5 the business tax appeals and those circumstances. 6 MS. YEE: Uh-huh. 7 MR. HORTON: Yeah, we'll note no action taken. 8 Next item, please. 9 ---oOo--- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 1 ITEM 3-5. 2 ---o0o--- 3 MR. HORTON: Next item, please? 4 MS. SHEDD: The next item is 3-5. This would 5 authorize the Board to request the Contractors State 6 License Board for a denial or a suspension of a 7 contractor's license for failure to resolve any 8 outstanding final tax or fee liabilities. 9 It would give the Board the same collection 10 tool that's currently available to the FTB for 11 delinquent income taxes and EDD for payroll and 12 delinquent payroll taxes for delinquent contractors. 13 And similar to those, this is a tool of last 14 resort, wherein they do not respond to the usual 15 enforcement tools such as liens, levies, warrants to 16 seize property and garnishment of wages. 17 Authorizing the Board to request this 18 suspension will serve as a strong incentive for 19 delinquent taxpayers to pay the tax due or enter into an 20 installment payment program. 21 FTB has an 85 percent compliance rate once the 22 request was made to suspend the contractor's license. 23 And our taxes are a little more -- they're different 24 from income tax because these are situations where the 25 contractors actually collected the tax from the 26 customer. 27 MR. HORTON: Thank you, Ms. Shedd. 28 Discussion? Madam Yee? 30 1 MS. YEE: Thank you, Mr. Chairman. 2 This proposal was previously before us. 3 MS. SHEDD: Yes, it was. 4 MS. YEE: Okay. And I think there was concern 5 about actually putting taxpayers on the street in terms 6 of taking their livelihood away relative to their 7 contractor's license. 8 And I'm actually supportive of this proposal 9 because it really is a means -- it's -- it's really one 10 of the last resorts. 11 And, I guess -- can you kind of back up for us 12 in terms of maybe summarizing the steps that would 13 actually get us to this point? 14 I think the compelling -- the other compelling 15 point is what Ms. Shedd just mentioned, in these cases, 16 unlike income tax, we have contractors who actually have 17 been paid sales tax and have not complied with remitting 18 that to the State -- reporting or remitting it to the 19 State. 20 What I'm looking for is just, you know, what -- 21 how many layers of notices and how many touches do we 22 have with the contractor before we actually kind of get 23 to this point? 24 Because even before liens, we have quite a bit 25 of back and forth with the taxpayer. 26 MS. SHEDD: My recollection that it takes about 27 a year and a half before we get to this point and that's 28 of telephone calls, of reaching out. 31 1 And I have Brad Miller here that may be able to 2 further elaborate on that. 3 MR. MILLER: Yes. Good morning, Members. Brad 4 Miller with the Sales and Use Tax Department. 5 As Ms. Shedd said, basically there's a lot of 6 steps that the Department goes through in working with 7 taxpayers and trying to collect any outstanding 8 liabilities before we would get to such a point where we 9 would be going after their contractor's license. 10 The collectors use an automated collection tool 11 and, basically, there's going to be telephone calls, 12 letters, liens, maybe, placed on property. Levies would 13 also be another tool that would be used prior to getting 14 to this step. 15 And, as she said, this is something that 16 would -- you know, we're talking a year, year and a half 17 out before we would get to this point. 18 Our goal, as always, is to work with the 19 taxpayers. If they have financial concerns, you know, 20 times are tough, installment payment agreements are 21 always something that are an option. 22 So, there's a lot of steps that can be taken 23 before this would be something where we would be going 24 after. 25 MS. YEE: Okay, thank you, Mr. Miller. 26 Thank you. 27 MR. HORTON: Further discussion, Members? 28 MS. STEEL: Mr. Chairman? 32 1 MR. HORTON: Madam Steel? 2 MS. STEEL: I'm very concerned about this bill. 3 It's -- what I heard from Ms. Shedd, it's most likely 4 it's a threat. But I think when tax agencies send out 5 the letter, it's a threat. 6 When they don't pay, they cannot pay, that's 7 why not they cannot pay. 8 When you take some license away from them, it's 9 like you are taking away, you know, the -- the earning 10 that, you know, they can make -- so, ability that we 11 taking it away. 12 I don't know how we going to improve the 13 collection that taking their license away and try to 14 get -- collect -- you know, try to collect more taxes on 15 it. 16 So, I don't think this -- this is -- I think 17 this is using our power to take somebody's license away 18 to collect taxes, this -- this is totally overdoing it. 19 That's the way I think. 20 MS. SHEDD: I think the response to that is 21 what we're really trying to do is to engage them to come 22 into the system. 23 We've amended it since it was heard in November 24 at the direction of Mr. Horton and Ms. Mandel, that if 25 they have already entered into an installment payment 26 plan, this -- it's off the table. 27 So, all they have to do is come forward and at 28 least acknowledge that we're -- that they're trying to 33 1 work with us. 2 MS. STEEL: But taking license away -- 3 MS. SHEDD: It wouldn't get -- 4 MS. STEEL: -- that's -- 5 MS. SHEDD: -- once they come forward and say, 6 "I want to work with you guys," then taking the license 7 away is off the table. 8 MS. MANDEL: They just need to get into an 9 installment payment plan? 10 MS. SHEDD: Right. 11 MS. STEEL: When they cannot pay and then you 12 take license away from them, I just -- I mean, it 13 doesn't really make sense to me that, you know, this is 14 totally overpowering. 15 MR. RUNNER: Mr. Chair? 16 MR. HORTON: Yes, Mr. Runner? 17 MR. RUNNER: Just a couple of questions. 18 Was -- in last year's bill that ran in the legislature, 19 did it -- did it have the additional language in regards 20 to the installment agreement? 21 MS. SHEDD: No, it didn't. 22 MR. RUNNER: Okay. So, this is different than 23 the bill that ran? 24 MS. SHEDD: Yes. 25 MR. RUNNER: I did not vote for this bill in 26 the legislature. 27 I think at this point I'm willing to kind of 28 get educated a bit in regards to the flexibility and the 34 1 issue of the installment process. 2 However, you know, these are challenging times 3 out there for individuals. And to remove someone's 4 ability -- and I am just not familiar, for instance, 5 enough to say if an installment plan could be zero 6 because I don't have any money -- and if I don't have 7 any money and you take my license away, then I don't 8 have the ability to make any more money nor employ 9 anybody nor do lots of other things. 10 So, I just don't know how much flexibility 11 there's in that. So, for right now I won't be able to 12 support this. 13 But, certainly, I would be willing to be 14 educated in regards to the kind of flexibility that 15 could be added to make this at least accomplish the goal 16 of somebody helping them make their obligation and, at 17 the same time, not removing from them their 18 livelihood. 19 MR. HORTON: Okay. 20 Maybe back to Ms. Yee's question, maybe you can 21 articulate -- take a couple of situations and sort of 22 walk us through that? 23 Starting with -- let's say there is a 24 nonremittance where they file the return but they, for 25 some reason, didn't send in the payment. 26 What happens then? 27 MR. MILLER: Generally at that point it's going 28 to be assigned to a collector in a District office. And 35 1 at that point, firstly -- usually the first thing that 2 happens is a phone call to the taxpayer. And -- 3 MR. HORTON: And that within itself could be 4 90 days to a year before -- 5 MR. MILLER: -- usually at that point we're 6 usually probably about three months out when there's a 7 liability, a nonremittance. 8 MR. HORTON: Ninety days? 9 MR. MILLER: Yeah. So, at that point, you 10 know, we're establishing contact with the taxpayer and 11 we're trying to obtain information as far as, you know, 12 what's the problem? What can we do to work with you so 13 that you can be in compliance? 14 MR. HORTON: And what happens at 90 days and we 15 issue a billing based on historical information? 16 MR. MILLER: Well, typically, like you said, 17 they issued a nonremittance, meaning they filed a 18 return. They've established what the amount of tax that 19 is due, they just haven't paid that amount of tax. 20 MR. HORTON: No, I mean, what happens if after 21 90 days of trying to get their attention and collect the 22 funds, what actions does Compliance take? 23 MR. MILLER: The Compliance functions, at that 24 point, I mean, again we're going to work with taxpayer 25 as much as we can. 26 We're going to try to get them into an 27 installment payment agreement. If they're saying, "I 28 don't have any money." We're going to say, "How much do 36 1 you have? What can we get from you now?" 2 And if, you know, if it's a minimal amount, 3 we're going to take what we can get at that point. We 4 may pursue additional collection activities, such as 5 liens and levies. 6 MR. HORTON: We have the authority to do that 7 now? 8 MR. MILLER: Yes, we do. 9 MR. HORTON: Then what are the rights of the 10 taxpayer? 11 Let's say they file a nonremittance and we're 12 in the process of liening their home or liening their 13 business assets, which, in effect, puts them out of 14 business as well -- could. 15 What are their rights? Can they appeal? Can 16 they challenge us? 17 MR. MILLER: They do have rights, yes. They do 18 have rights to appeal. 19 With a lien, they have a right to have the lien 20 reviewed to -- as far as the validity of the lien. And 21 a lien isn't going to take their property, it's just 22 going to attach, you know, a lien against the property. 23 Levy is when we actually go in and -- 24 MR. HORTON: Yeah, but more often than not, 25 contractors are looking to -- I mean, the -- they're 26 looking to finance and they use their -- they use 27 everything that they can -- 28 MR. MILLER: If they're leveraging their 37 1 property -- 2 MR. HORTON: -- to go in and qualify -- 3 MR. MILLER: -- then they're going to run into 4 a problem. 5 MR. HORTON: -- to provide the insurance in 6 order to get the deal. 7 So, if they can't get the deal, they're out of 8 business because their property's liened and nobody will 9 finance them or give them insurance, so -- 10 MR. MILLER: That's true. That could happen, 11 yes. 12 But, again, we try to work with them as best we 13 can. We -- our goal isn't to put them out of business, 14 our goal is to get them to be -- 15 MR. HORTON: No, I mean -- 16 MR. MILLER: -- in compliance. 17 MR. HORTON: -- going back to their rights, I 18 think the point I'm trying to share is that under 19 existing law, the taxpayer, knowledgeable of the 20 process, can delay this -- can delay collections for 21 quite a long time and stall this process quite a long 22 time, even on the nonremittance. 23 This is a situation where they actually have 24 said to the State of California, 25 "We owe you X amount of dollars, but we don't 26 have the money to pay you." 27 What happens under an audit situation? 28 MR. MILLER: An audit situation, obviously, 38 1 they have appeals rights with regards to the audit 2 liability itself. 3 You know, as long as they file a timely 4 petition within the 30 days after the Notice of 5 Determination, then they're in the Appeals system. And 6 we typically don't pursue collection when it's in 7 Appeals. 8 So, they can go through the whole Appeals 9 process and we're not going to pursue collection on them 10 at that point. 11 MR. HORTON: And then the Appeals process, 12 their rights -- they can delay it, I've seen audits that 13 finally get to us that are 15 years old. 14 MR. MILLER: That would be an extreme example, 15 but, yes, it can take a quite a while. 16 MR. HORTON: Certainly two or three years -- 17 MR. MILLER: Yeah. 18 MR. HORTON: -- is sort of common when you -- 19 when you understand the Appeals process and you want to 20 go through the Appeals process. 21 And, so, the Board, under this circumstance, 22 wouldn't be able to take the license because they're in 23 the Appeals process or -- 24 MR. MILLER: We -- 25 MR. HORTON: -- are we proposing to do 26 otherwise? 27 MR. MILLER: I don't anticipate that we would 28 use this tool in a case where they're in an Appeals 39 1 process. 2 This would be the case where we have a final 3 liability. 4 MR. HORTON: I would recommend that we not be 5 able to use it in the Appeals process, not able to use 6 it when they're in any process -- 7 MS. MANDEL: I think -- 8 MR. HORTON: -- for resolution, but I think by 9 law currently, we can't. 10 There's not anything we can do once they're 11 there. 12 MS. MANDEL: Yeah, I think -- 13 MR. MILLER: Just to clarify it, it does say it 14 is specific to final outstanding liabilities. 15 MS. MANDEL: Don't make me nervous. 16 MR. HORTON: Right. Okay, yeah. 17 So, in order for the liability to go final, it 18 just -- it takes -- the taxpayer has existing rights 19 that someone that is knowledgeable of those rights can 20 delay this process for quite sometime. 21 And a taxpayer who is interested in complying 22 or having an installment agreement, typically within two 23 or three years, can kind of figure out a way to get the 24 liability paid. 25 Is there a situation that you can think of 26 where the taxpayer owes the Board -- the State of 27 California and we truncate this whole process somehow 28 and go in and take the license? 40 1 I can't think of any. 2 MR. MILLER: I can't either. 3 That's something that would be -- not something 4 that we contemplate doing. 5 MR. HORTON: No, I don't think you can. 6 MR. MILLER: Yeah -- no, I mean, it's -- 7 MR. HORTON: I don't think the law allows you 8 to get to a final determination. 9 There is so many steps that you have to go 10 through to get to a final determination. 11 So, when I looked at this, I had the same 12 concerns that Ms. Steel shared and Ms. Yee shared, but 13 then as I went back and sort of looked at the Appeals 14 process under the various different circumstances where 15 a fee or a liability would occur, their existing rights 16 are so extensive, knowledge of those rights allows you 17 to delay, to challenge, to -- to appeal any action of 18 the Board of Equalization. 19 And, on the other side, you know, after looking 20 at it, we need to do a little refining, a little 21 retooling so we can accelerate collections when we have 22 a little more criminal activity, but we'll talk about 23 that later. 24 So, I'm supportive of the concept for that 25 reason is that -- 26 MR. RUNNER: This wouldn't be a spot bill, 27 though, right? 28 MR. HORTON: And, you know -- no. 41 1 I think we're -- I think we're -- the proposal is that 2 the liability has to go final and pursuant to existing 3 law. 4 And I think what I'm sharing is that in order 5 for it to go final, there's a lot of activity that has 6 to take place. 7 And that's always been interesting to me how 8 the -- supportive of the Taxpayers' Bill of Rights, but 9 how the rights of the taxpayer can delay an -- the 10 finalization of an audit for 15 years before it comes 11 before us and then they can file a claim for refund and 12 get it caught up in the courts, although they have to 13 pay it, but they can file a claim for refund and get 14 caught up in the courts before we can really finalize 15 the transaction. 16 Okay. 17 MR. RUNNER: Can I just ask a quick procedural 18 question here? 19 MR. HORTON: Mr. Runner? 20 MR. RUNNER: The ability to go after these 21 individuals now, the Board has ability to go after them 22 with a levy? 23 MR. MILLER: That's correct. 24 MR. RUNNER: And a lien? 25 MR. MILLER: Correct. 26 MR. RUNNER: A levy would include -- help me 27 understand -- a bank account? 28 MR. MILLER: Bank accounts, we could also go 42 1 after inventory. 2 MR. RUNNER: Okay. So, right now we've got the 3 ability to go after these individuals to their bank 4 account and get their money, right? 5 MR. MILLER: That is correct, yes. 6 MR. RUNNER: So, would -- I guess I'm 7 struggling as to if we've got the ability to go in and 8 get the money, why do we worry about taking away 9 their -- their license if we've got the ability to 10 actually collect the money? 11 The question I have is -- what I fear is 12 what'll happen is the issue of removal of license will 13 move up to the front, before liens and levy. 14 And, so then, what you're going to end up with 15 then is the ability then to say, 16 "This is the easiest one. This is going to 17 have the most effect on your business. So, 18 therefore, we're going to use this before we go 19 to the issue of just actually collecting the 20 money." 21 It seems to me if, indeed, they've got the 22 money, we've got the ability to take it from them 23 through the current law, without having to deal with 24 that. 25 The other issue I'm concerned about and that is 26 if we go down the license issue, it's more than just the 27 issue of how we're affecting their current need of -- 28 our current collection, we're actually, then, putting a 43 1 question mark in their future as people then look at who 2 they want to have do their contracting. They'll say, 3 "Oh, this guy had his licensed removed." So, now we are 4 actually -- we actually are creating a problem for him 5 and his future incomes. 6 So, I guess I'm a bit baffled. If we can go in 7 and get the money, why do we need to mess around with 8 trying to take their license? 9 MR. MILLER: That's an excellent point, 10 Mr. Runner. 11 And our intention is not to go after his 12 license if we can get the money. And, you know, if we 13 can levy his bank account. 14 MR. RUNNER: Well, if you -- again, let me ask 15 that, if he's -- the way for not going after his license 16 is for him to collect it and do an installment plan, 17 right? 18 MR. MILLER: That's correct. It's one of his 19 options. 20 MR. RUNNER: One of his options. 21 MR. MILLER: Yes. 22 MR. RUNNER: If he doesn't have any money, 23 because we can go and get the money -- because he didn't 24 have any money, then how does he do an installment plan? 25 MR. HORTON: Mr. Runner, if I may -- 26 MS. YEE: Yes. 27 MR. HORTON: -- Members? 28 I mean, that would be an excellent restriction, to say 44 1 that this cannot be in -- this -- this -- this tool can 2 not be used until you've exhausted all of the existing 3 remedies. 4 And there are -- and then, you can codify it, 5 you can take whatever the section says and list them, or 6 however we do that, so that we're sure that the agency 7 will not use this tool of taking the license until 8 they've liened the bank accounts, they've liened the 9 property, they've set up for an installment -- all of 10 the existing tools that we have. 11 But I -- I would share because, you know, I 12 offered similar legislation that was actually signed by 13 the -- no, it wasn't signed, but -- well, it was, strike 14 that -- similar legislation for notification of contract 15 license when there was a tax liability. 16 And the goal of this legislation, as I see it, 17 because it is so restrictive and there are so many 18 protective barriers for the taxpayers before you can 19 actually use this tool, is when you are dealing with 20 contract -- the quote, unquote, underground economy, 21 you've got individuals who are intentionally not paying 22 their payroll taxes, not paying their income taxes and 23 then we're part of a larger sting and there happens to 24 be a sales tax liability that is out there as well. 25 And, so, you've got -- you've got individuals 26 that are sort of elevated from a taxpayer that can't pay 27 their liability and, therefore -- but has desire to pay 28 it, to a taxpayer who has a dispute over the amount of 45 1 the liability or feels that their deductions should be 2 more than what -- they don't agree with the law, to a 3 criminal, who intentionally sets up a financial 4 structure that allows them to avoid paying the law -- I 5 mean, paying their fair share of the tax to the State of 6 California. 7 And I think that number here -- in LA County is 8 in the billions of dollars that is being lost in LA 9 County as a result of contractors who are operating in 10 the underground economy. 11 And, so, under our current system, when you 12 have a legitimate operator, it is just -- I don't 13 really -- it's going to be -- it's going to be extremely 14 difficult for the Board to actually use this tool when 15 you're dealing with legitimate operators. 16 But -- any further discussion, Members? 17 MS. STEEL: Just one more question. 18 I saw couple of cases that we taken money from 19 the bank more than they owe us some taxes. So, if we 20 take their licenses away and then we found out that was 21 our mistakes, then what happen after that? 22 MR. MILLER: If -- if we were to take to 23 license in error, you mean? Is that what you're asking? 24 MS. STEEL: Uh-huh. 25 MR. MILLER: Yeah, we would, obviously, notify 26 the Contractors State License Board that that was done 27 in error and reverse that. And so that their license 28 would be reinstated. 46 1 I mean, if it's -- if it's done in error, then 2 we're going to correct the error. 3 MS. SHEDD: And just to clarify, we don't 4 actually suspend the license, we ask the Contractors 5 State License Board if they will. 6 MR. HORTON: Procedurally, they probably just 7 go ahead and do it. 8 MS. YEE: Yeah. 9 MS. STEEL: So, when we ask, they going to do 10 it? 11 MS. SHEDD: (Whereupon Ms. Shedd nods head.) 12 MR. HORTON: Madam Yee? 13 MR. RUNNER: If it's the law. 14 MS. YEE: I'm intrigued by this discussion. 15 You know, one of the things that I think is 16 going to continue to happen while we are facing severe 17 fiscal constraints with our State budget is, you know, 18 more pressure on this agency to generate revenue -- not 19 necessarily from enacted tax increases, but better ways 20 of our being able to do our business. 21 And this particular proposal -- and the reason 22 that I support it -- is that it really is a collection 23 tool that we can have in our belt to be really effective 24 in going after one of the segments of our economy that 25 has been a major problem with the perpetuation of the 26 underground economy. 27 I'm not saying all contractors are bad actors, 28 but this is a particular segment of the economy where we 47 1 have some pretty unique -- unique problems. 2 I want to go back something that Ms. Shedd said 3 and that is the Franchise Tax Board's experience. And I 4 thought I heard you say that there was 85 percent 5 compliance as a result of its ability to use this tool? 6 MS. SHEDD: That's -- 7 MS. YEE: So that, in other words, in 8 85 percent of the cases where they've requested the 9 Contractors State License Board to suspend a license, 10 taxpayers have come forward to try to make arrangements 11 to satisfy their liability. Is that what I'm hearing? 12 MS. SHEDD: That's correct in that we contacted 13 FTB and in the period between August '09 and February 14 '10. There were 139 licenses that were referred for 15 suspension. All but twenty of them came forward and 16 came into compliance, which was 119, so, it's 85 percent 17 of that. 18 MS. YEE: Okay. I'm going to -- there is 19 another proposal coming up and I will make similar 20 comments and, that is, our collectors in this 21 organization really have limited tools beyond a certain 22 point. And I have no problem with expressly stating 23 that this is a last resort effort to collections if we 24 need to do that, since we have other tools available. 25 To Mr. Runner's question about any taxpayer 26 that doesn't have any money to even enter into an 27 installment payment, there are all kinds of assets and 28 other things that we look in. 48 1 There may not be bank accounts, but there may 2 be other assets that could be liquidated, similar to 3 what we do in some of our other payment programs where 4 we look at the financial situation of our taxpayers. It 5 could be a loan from a relative. It could anything. 6 But I think we would be very shortsighted if 7 didn't continue to add tools to our collectors, you 8 know, kind of efforts to try to bring in revenue. 9 I don't think anybody's interested in taking anyone's 10 livelihood away. All we're asking with this particular 11 tool is that the taxpayer engage us. Just contact us, 12 we'll work with you. 13 MS. SHEDD: And I'd also like to point out that 14 when this bill was going through the process last year, 15 we contacted the major contractors and they did not 16 oppose it because they want the bad apples off the 17 street. 18 MS. YEE: Yeah. 19 MS. SHEDD: Because they're operating at a -- 20 MS. YEE: That's right. 21 MS. SHEDD: -- competitive disadvantage to the 22 ones that are paying their taxes. 23 MR. HORTON: Okay. Members? 24 MS. STEEL: Mr. Chairman, I have a short 25 statement -- 26 MR. HORTON: Sure. 27 MS. STEEL: -- to make. 28 Yes, I understand -- 49 1 MR. HORTON: Madam Steel? 2 MS. STEEL: -- that we have to take bad apples 3 out and yes, we have to go after underground ground 4 economy. I totally agree. 5 But we have all the tools there. And this one 6 is, to me, expansion of tax agency's power. So, I 7 really cannot go for it. 8 Thank you. 9 MR. HORTON: Thank you, Madam Steel. 10 Any other discussions? 11 Possibly, just in closing, I get the essence of 12 the concern. And it's more about the unusual situation 13 where you have some -- a member of our team that goes 14 after the license without some subjective review by 15 the -- the administrative team in the Board of 16 Equalization. 17 So, maybe we can look at something that says 18 that it has to be approved by some level of hierarchy to 19 insure that there is some evaluation, some conscious 20 evaluation of that and that this tool is -- that we -- 21 this tool is not something that we give to just anyone 22 within the Board of Equalization. 23 It's reviewed by the District reviewer or 24 approved by the District Administrator, or something of 25 that nature? 26 If we can kind of move in that direction -- 27 MS. YEE: I think that's -- 28 MR. HORTON: -- that would be helpful. 50 1 MS. YEE: -- the practice with most every other 2 approach right now, yes? 3 MR. MILLER: Yes, that's correct. 4 If we were to get such a law to pass, we would 5 definitely incorporate some policy and procedures into 6 our Compliance Policy Manual with regards to actual 7 steps that have to be taken before this can happen. 8 MR. HORTON: I understand that we would do it 9 after the fact. 10 The legislature may -- may appreciate the fact 11 that we are indicating that this shall -- consistent 12 with other -- I'm trying to think of consistent with 13 other tools, it has to go through the Board of 14 Equalization policy as established by Section so on and 15 then the policy, the FAM, or something like that. 16 You guys write the language. 17 MS. YEE: Are you suggesting that go in the 18 bill itself? 19 MS. MANDEL: To me that sounds -- 20 MS. YEE: We're really micromanaging here. 21 And I'm -- 22 MR. HORTON: Yeah. 23 MS. YEE: -- and oppose that. I oppose that. 24 We have practices in place that have been 25 longstanding that work. 26 MS. MANDEL: Right. 27 MS. YEE: All we're looking for is a last 28 effort collection tool here, that doesn't even kick in 51 1 until every other darn practice is put into place. 2 MR. HORTON: Yeah. 3 MS. MANDEL: Yeah, that -- 4 MS. YEE: I mean, it really makes us look 5 inept, I'm sorry and I will say it. 6 MR. HORTON: Yeah, I appreciate that. 7 So, why don't we -- you know, as the bill goes 8 forward -- I certainly wasn't intending to -- as a 9 former legislator, I certainly wasn't intending to write 10 legislation that was 50 pages long. 11 The intent of that is to somehow communicate as 12 we go forward in the process that it is the intent of 13 this body to conform to our historical practices of -- 14 of assuring that this is not -- that our existing 15 policies that we have will be applied to this law -- not 16 codified into law, but somehow in the intent as we sort 17 of articulate this in the process. 18 With that, is there a -- is there a motion, 19 Members? 20 MS. YEE: I move support of this proposal as 21 proposed. 22 MS. MANDEL: Second. 23 MR. HORTON: It's been moved and second. 24 No further discussion. Members, I am presuming 25 there might be objection, so, Ms. Olson please call the 26 roll. 27 MS. OLSON: Mr. Horton? 28 MR. HORTON: Aye. 52 1 MS. OLSON: Ms. Steel? 2 MS. STEEL: No. 3 MS. OLSON: Mr. Runner? 4 MR. RUNNER: No. 5 MS. OLSON: Ms. Yee? 6 MS. YEE: Aye. 7 MS. OLSON: Ms. Mandel? 8 MS. MANDEL: Aye. 9 MS. OLSON: Motion carries. 10 MR. HORTON: Thank you. 11 ---o0o--- 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 53 1 ITEM 3-6 2 ---o0o--- 3 MR. HORTON: Next item, Ms. Shedd? 4 MS. SHEDD: Next item is 3-6. This is 5 provision was also in AB 2676 last year that was vetoed 6 because of the use tax budget issue. 7 It would conform with an LAO recommendation 8 that the BOE use the new employee registry information 9 maintained by the EDD for tax enforcement purposes. 10 Currently we use their online wage and employment 11 information, which is based on quarterly employment 12 returns filed by employees. This information isn't 13 available to us until the end of each quarter. So, it's 14 relatively old when compared to the new employee 15 registry information, which is four to six months more 16 current. 17 EDD and FTB currently have this tool. They -- 18 according to FTB, the new employee registry has been a 19 valuable enforcement resource in allowing them to 20 identify delinquent taxpayers and begin collection 21 action shortly after those taxpayers have started a new 22 job. 23 This simply conforms with that. I think this 24 was also before you in November. Mr. Horton had a 25 question, could we look at other conformity items and 26 put it into the bill where FTB, EDD had data sharing, 27 data warehousing and exchange of information. 28 We looked at the LAO report. We are in 54 1 constant meetings with the FTA and continue to work with 2 them. Right now, according to staff and where we are in 3 technology, this is the only remaining one left on that 4 conformity list. 5 MR. HORTON: Excellent. 6 Discussion? Is there a motion, Members? 7 MS. STEEL: Mr. Chairman? 8 MR. HORTON: Let me see if I can get a motion 9 on it? 10 MS. MANDEL: I'll move it. 11 MR. HORTON: All right. 12 MS. YEE: I'll second it. 13 MR. HORTON: It's been moved by Ms. Mandel, 14 second by Ms. Yee. 15 Discussion, Members? 16 MS. STEEL: This new employee registry was 17 created for just one reason, they tried to catch parents 18 who were not paying child support and then expanded to 19 FTB and expanded to, I guess, EDD. And this is 20 another -- the expansion of government power that we 21 should not keep expanding, the government gets bigger 22 and they are powerful. 23 That being said -- and we have a -- this 24 afternoon the CROS program coming up, that -- is that 25 going to help any cross information sharing with the 26 EDD? 27 MS. WATERS: I don't -- 28 MR. MILLER: I'm not familiar with exactly the 55 1 specifics of CROS as far as to how that would be 2 improved. 3 MS. YEE: I think potentially down the road 4 what the objective of CROS is really to try to update 5 and improve upon our current legacy systems. 6 MS. STEEL: Okay, thank you. 7 MR. HORTON: Further discussion, Members? 8 MR. RUNNER: Just to clarify, the estimated -- 9 MR. HORTON: Mr. Runner? 10 MR. RUNNER: -- new revenue as a result of this 11 policy is $500,000? 12 MS. SHEDD: Yes. 13 MR. RUNNER: Half a million dollars? 14 MS. SHEDD: Yes. 15 MR. HORTON: I'll take it. 16 It has been moved and second. 17 Objection, Members? 18 MR. RUNNER: Yes. 19 MS. STEEL: Objection. 20 MR. HORTON: Madam Secretary -- I mean, 21 Ms. Olson, please call the roll. 22 MS. OLSON: Mr. Horton? 23 MR. HORTON: Horton, aye. 24 MS. OLSON: Mr. Horton? 25 MR. HORTON: Aye. 26 MS. OLSON: Aye. 27 Ms. Steel? 28 MS. STEEL: No. 56 1 MS. OLSON: Mr. Runner? 2 MR. RUNNER: No. 3 MS. OLSON: Ms. Yee? 4 MS. YEE: Aye. 5 MS. OLSON: Ms. Mandel? 6 MS. MANDEL: Aye. 7 MS. OLSON: Motion carries. 8 ---o0o--- 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 57 1 AGENDA ITEM 3-14 2 MS. SHEDD: The next item is 3-14. And this 3 was brought forward by Board Member Yee. 4 MR. HORTON: Members, this is technical in 5 nature. 6 MS. YEE: I wish. 7 MR. HORTON: Do we want to go through it? 8 Any objections? Is there a motion? 9 Well, okay, Ms. Shedd, go right ahead. I 10 tried. 11 MS. SHEDD: This would allow the Board of 12 Equalization to refuse to issue a seller's permit to any 13 person -- 14 MR. HORTON: Oh. 15 MS. SHEDD: -- who has an outstanding liability 16 with the BOE and has not entered into an installment 17 payment agreement. 18 It also provides due process in that there 19 would be a hearing consistent with the hearing in a 20 revocation proceeding if that was disallowed. 21 Since the permit has not been revoked by the 22 Board, the Board now currently lacks the authority to 23 refuse issuance of the permit. The only recourse of the 24 Board is to require the posting of the security deposit. 25 MS. MANDEL: So -- okay. 26 MR. HORTON: Thank you, Ms. Shedd. 27 MR. HORTON: Discussion -- Ms. Mandel. 28 MS. MANDEL: Oh. 58 1 MR. HORTON: I thought? 2 MS. MANDEL: No, I was -- 3 MR. HORTON: I couldn't hear -- 4 MS. YEE: Let -- 5 MR. HORTON: Madam Yee. 6 MS. YEE: Thank you, Mr. Chairman. Let me just 7 say at the outset, this may not be the approach that we 8 will want to take but let me at least speak to the 9 problem that I was seeking to solve or address, and that 10 is -- and I think it's one that you've had an interest 11 in, Mr. Chairman, with respect to our growing Accounts 12 Receivables. 13 MR. HORTON: Uh-huh. 14 MS. YEE: And this actually came out of the 15 informal collections task force that convened a couple 16 of years ago at the direction of this Board, and a 17 number of the collectors in the field expressed concern 18 about the practice of this agency to continue to issue 19 seller's permits to parties who have outstanding 20 liabilities with this organization, with the State. But 21 perhaps under a different corporate form or legal 22 entity, but what we're doing here is essentially 23 perpetuating potentially uncollected -- or accounts -- 24 or liabilities that may not be able to be collected -- 25 MR. HORTON: Uh-huh. 26 MS. YEE: -- perpetuating that into the future. 27 So, this is really an attempt to try to figure out how 28 do we try to minimize that from happening. Again, I'm 59 1 not interested in certainly preventing anyone from 2 having a livelihood with respect to the business they my 3 want to get into. On the other hand, one of the biggest 4 frustrations of collectors is on the one hand trying to 5 really work an account and at the same time see that a 6 party to that account has actually been able to open up 7 a completely new business perhaps under a different name 8 and likely will see it become an Accounts Receivable 9 down the road. So that's really the -- the problem. 10 MR. RUNNER: Mr. Chair. 11 MR. HORTON: Mr. Runner. 12 MR. RUNNER: Yeah, I actually see this 13 differently and I know that there's some parallels to 14 the issue of the contractor, but I actually see this a 15 little bit differently and am -- am open to this thought 16 and discussion, because I think it's different in 17 regards to somebody who has an obligation who -- who's 18 out there and then chooses to go ahead and get a new 19 government kind of permit or license. I think that's a 20 different issue. 21 And so, you know, I -- I -- I think that this 22 is an issue to which there ought to be some good 23 discussion about, I think indeed. Again, if you've got 24 issues available and you got payment paths and all those 25 other things, then maybe that's something to be looked 26 at. But, again, this is an extension of somebody doing 27 something new as opposed to taking away what their 28 current livelihood is. 60 1 And to me that's where I kind of make the 2 distinction that's -- that that's a little different. 3 Again, I'm a little confused exactly in regards 4 to actually where -- if we're actually approving 5 specific language here, or if we indeed are talking 6 about concepts. And again we have the earlier 7 discussion that we don't want to do spot bills. I don't 8 want to do spot bills, either. 9 But none of what we've been dealing with here 10 are considered spot bills. 11 Now, there are some issues of trying to nuance 12 language -- 13 MS. YEE: Yes. 14 MR. RUNNER: -- that I think is important, and 15 I think -- my question is that once a bill leaves here 16 are we still involved in those nuances of language in 17 order to make sure that it's appropriate? 18 MS. YEE: Yeah. Mr. Runner, maybe -- let me 19 clarify. With Legislative Committee agenda we get the 20 summary of the proposal as well as the proposed 21 language. So, it is before us as drafted language. 22 Now, certainly as the discussion ensues and if 23 there is direction back to the staff upon ratification 24 of this body to revise that language the staff will -- 25 will accordingly do so. But the language is before us. 26 MR. RUNNER: And how are we informed as the 27 language changes, both -- maybe by the staff and their 28 involvement or in the Legislature, itself? 61 1 MS. YEE: Uh-huh. 2 MR. RUNNER: What's the -- what's the process 3 to which we are -- Members are kind of informed about 4 how that works? 5 MS. YEE: Yeah, that's Ms. Shedd's -- 6 MS. SHEDD: Margaret. 7 MR. RUNNER: Okay. 8 MS. YEE: -- job, yes. 9 MS. SHEDD: Every week when the Legislature is 10 in session I will keep the Board Members informed on all 11 actions taken on Board-sponsored bills. 12 MR. RUNNER: Okay. 13 MS. SHEDD: And if there's a big issue I'll 14 bring it back to the Board. 15 MR. RUNNER: If it changes dramatically the 16 intent of what the Board was dealing with, okay. Thank 17 you. 18 MR. HORTON: Although it's outside of our 19 purview at that point. But, let me -- let me just -- 20 just share the problem -- one problem here. In the 21 Norwalk office there's a team that focuses on the 22 underground economy as it relates to used car dealers. 23 And you will have a criminal who is laundering money 24 through a used car dealership, vehicles that are not 25 necessarily registered properly and they call them gray 26 market cars, just a lot of different -- in some cases 27 stolen cars. And in some cases just unscrupulous 28 activity taking place. 62 1 But they will come -- they will come and 2 they'll close out and there will be a liability, and 3 they'll open up again under the same name, same 4 location. And so this certainly can be a valuable tool. 5 So it's been moved and second. 6 MS. STEEL: Question. 7 MR. HORTON: Discussion? 8 MS. STEEL: It's a great intention but let me 9 ask you one thing that when it used to be corporation or 10 other lot of different names and then one person comes 11 out and wants to open up the seller's permit, then what 12 happen? 13 MR. MILLER: As drafted the language 14 specifically addresses a situation where you have 15 parties, individuals that were a member or -- had a 16 controlling interest in -- in the previous entity that 17 incurred the liability, and -- and this language would 18 address that situation and say -- and say that they 19 would not be able to -- to obtain that new permit in -- 20 MS. STEEL: So even they are like innocent -- 21 MR. MILLER: Well, if they're -- if they're 22 innocent then -- I mean that's -- they have to be 23 personally liable for the liability. And so if they're 24 innocent then that wouldn't be the case. 25 MS. STEEL: Then how you going to figure it out 26 that they are innocent or they are personally liable for 27 that? 28 MR. MILLER: In a situation where we're talking 63 1 about a corporation or a limited liability company -- 2 MS. STEEL: Or a partnership. 3 MR. MILLER: -- or some other -- or 4 partnership, we -- under provisions of Revenue and 5 Taxation Code 6829 we can establish personal liability 6 against an individual under specific circumstances. 7 MS. STEEL: But it takes long time to realize 8 that who's liable for those corporations at that point. 9 So if somebody comes out, wants to open up the shop and 10 their name was on it but we were not really sure that 11 that person is personally liable or not then he cannot 12 open up -- that mean he cannot have a seller's permit? 13 MR. MILLER: In -- in that situation of what 14 you're describing, that individual be able to obtain a 15 permit because we have not established personal 16 liability against that individual. 17 MS. YEE: Right. 18 MR. MILLER: We would have to establish that 19 first before we could say that that person would not be 20 able to obtain a new permit. 21 MS. STEEL: Okay. So the personal liability 22 issue is going to be settled then we know that who's 23 personally liable for those corporations first and then 24 it's been set up, then they cannot get the permit? 25 MR. MILLER: That is correct. 26 MS. STEEL: So meanwhile when they close down 27 they still owe us taxes, then they come out and they 28 want to open up -- they want to open up the shop with 64 1 seller's permit then they can do it any time? 2 MR. MILLER: They -- it -- as drafted -- 3 MS. STEEL: So there is going to be the gap. 4 MR. MILLER: As drafted currently that -- that 5 there would be a gap in there, that's correct. Yeah, 6 and I'm not sure how we would close that gap. That's a 7 technical issue that we would have to look at. 8 MS. YEE: Yeah. 9 MR. RUNNER: Just for clarification, these 10 wouldn't be on appeal, these would be after a final 11 determination, right? I mean -- 12 MR. MILLER: Correct, this is a final liability 13 only. 14 MS. YEE: Yeah, it's the final liability, 15 right. 16 MR. RUNNER: Right, right. So these -- these 17 individuals have gone all the way through the process, 18 they've been -- they've exhausted their appeals. They 19 have still been -- been found to have owed those 20 dollars, right? 21 MR. MILLER: Correct. 22 MR. RUNNER: So -- so, again, nobody's in 23 appeal, nobody's in dispute at that point. It's at the 24 end of the system -- 25 MR. HORTON: Uh-huh. 26 MR. RUNNER: -- and now they want to go out and 27 do something different? 28 MR. MILLER: That's correct. 65 1 MS. YEE: Or the -- or the -- 2 MR. RUNNER: Get a new seller's permit. 3 MS. YEE: Or the same thing. 4 MR. HORTON: Or the same thing. 5 MR. RUNNER: Or -- or -- well, I mean -- 6 MS. YEE: Under a new seller's permit. 7 MR. RUNNER: -- get a new -- I only say that, 8 and to get a new -- a new permit, a different permit. 9 MS. YEE: Yes. 10 MR. RUNNER: Okay. Okay. 11 MR. HORTON: All right, Members. 12 MS. MANDEL: They want to beat the revocation. 13 MR. HORTON: Yeah. 14 MS. MANDEL: That's what they want to do. 15 MS. YEE: Right. 16 MS. MANDEL: Because if we revoke -- 17 MS. YEE: Then they -- 18 MS. MANDEL: -- then they can't reopen. 19 MS. YEE: Right. 20 MR. HORTON: Okay. 21 MS. MANDEL: So I'll move it because I'm not 22 sure -- 23 MR. HORTON: Okay, it's been moved and 24 second -- 25 MS. YEE: Second by Yee. 26 MR. HORTON: -- by Ms. Yee. Ms. Olson, please 27 call the roll. 28 MS. OLSON: Mr. Horton. 66 1 MR. HORTON: Horton aye. Aye. I'm sorry. 2 MS. OLSON: Ms. Steel. 3 MS. STEEL: Aye. 4 MR. HORTON: With Mr. Runner here I do this 5 legislative thing. 6 MR. RUNNER: Aye. 7 MS. OLSON: Mr. -- Mr. Runner. 8 MR. RUNNER: Aye. 9 MS. OLSON: Ms. Yee. 10 MS. YEE: Aye. 11 MS. OLSON: Ms. Mandel. 12 MS. MANDEL: Aye. 13 MS. OLSON: Motion carries. 14 ---oOo--- 15 16 17 18 19 20 21 22 23 24 25 26 27 28 67 1 AGENDA ITEM 4-1. 2 MS. SHEDD: Okay, the next item is 4-1. This 3 would remove the requirement from -- for the Board of 4 Equalization to publish in its meeting minutes the 5 emergency telephone users' surcharges rate that has been 6 set by the California Technology Association. 7 The -- this is brought forward by Special Taxes 8 and Fee Division. It is to reduce the amount of time 9 that the public is aware of this. Right now we're 10 putting that rate out on our web site as soon as we get 11 it. 12 I -- I -- there may be some questions on this. 13 MR. HORTON: Sure. Discussion, Members? 14 MS. YEE: Yes. 15 MR. RUNNER: Just a quick -- oh. 16 MR. HORTON: Madam Yee, then Mr. Runner. 17 MS. YEE: If we were to remove this is there 18 any other public proceeding related to this rate 19 elsewhere? 20 MS. SHEDD: No, there is -- the public -- 21 Cindy, go ahead. 22 MS. WILSON: Members, Cindy Wilson in the 23 Legislative Section. No, there isn't. The rate is set 24 by the -- the CTA and they have an advisory committee 25 and they meet and the rate setting process is not -- not 26 done during their committee meetings. So, no. 27 MS. YEE: Okay. So, by removing the 28 requirement for us to publish this in our meeting 68 1 minutes I guess what's the -- how do people know, I 2 guess, aside from just having to look on the web site, 3 ultimately? 4 MS. BARTOLO: Lynn Bartolo, Special Taxes and 5 Fees. 6 When -- when the CTA notifies our division we 7 prepare it for publishing in the Board minutes. 8 MS. YEE: Yes. 9 MS. BARTOLO: We're finding that it's difficult 10 to coordinate the dates and times of the meetings to 11 ensure that we can meet the November 15th cutout. 12 That's -- that's the first issue that we have. 13 MS. YEE: Okay. 14 MS. BARTOLO: And then -- but as soon as we do 15 publish them in -- in the Board's minutes -- 16 MS. YEE: Uh-huh. 17 MS. BARTOLO: -- then we have our outreach 18 where we send a notification to every registrant. We 19 publish it on our web site -- 20 MS. YEE: Okay. 21 MS. BARTOLO: -- as well so that that 22 information is out there. 23 MS. YEE: Okay. I guess to your first concern 24 about trying to synch the meeting dates, I'd like to 25 address that problem but I really have a problem with 26 removing the requirement for any kind of public 27 proceeding around this. I just think that's something 28 that ought to remain, you know, part of our charge, and 69 1 if the timing is the issue let's deal with that. And I 2 don't know what the answer is at this point, but 3 particularly if there's no other public proceeding 4 elsewhere in State government around this rate. 5 MS. MANDEL: We have -- we don't have any power 6 to set the rate, right? 7 MS. SHEDD: No. No. 8 MS. YEE: But we may have flexibility with 9 respect to the timing or maybe there's another way to 10 respond to that. But has -- have there been discussions 11 around just that issue, how we might be able to resolve 12 the timing issue? 13 MS. BARTOLO: Well, for instance, the -- 14 MS. YEE: It's a statutory date, right? 15 MS. BARTOLO: Yes. 16 MS. YEE: Okay. 17 MS. BARTOLO: November 15. 18 MS. YEE: Can we change the statutory date? 19 MS. BARTOLO: Yes. 20 MS. YEE: Let's do that. 21 MS. BARTOLO: Okay. 22 MS. YEE: I real -- this is transparency, we 23 need transparency, yeah. 24 MR. HORTON: Right. 25 MS. YEE: I think. 26 MR. HORTON: I agree. Mr. Runner. 27 MR. RUNNER: Just a quick question in regard -- 28 and more procedurally, again, when an item like this is 70 1 going to tweak some of the process a little bit, and 2 this come -- this is -- this comes up from some part of 3 the agency, what is the involvement that interested 4 parties have to -- to hear about this? 5 You know -- I -- I don't know what the 6 ramifications of this is. I'm sure there -- there may 7 not be any, there may be some, other than the ones 8 that -- that Ms. Yee has pointed out. 9 But I mean in terms of how the -- it affects 10 industry. I don't know if it does or not. I'm just 11 wondering, is there a process to where these are then 12 sent out to interested parties who are in -- who could 13 be caught up inadvertently to say, hey, what do you 14 think of this; this is coming out from one of our 15 agencies, so we get that now as opposed to when we have 16 a piece of legislation down the street and all of a 17 sudden the opposition starts piling on? 18 MS. YEE: I would suspect that the interested 19 parties would be focused on the activities of the CTA 20 with respect to the rate setting, but I think not 21 everyone is involved in that process and -- and my only 22 concern about removing this requirement is that those 23 who aren't involved in that process just have some 24 ability to -- 25 MR. RUNNER: Yeah. 26 MS. YEE: -- know. 27 MR. RUNNER: No, no, again mine -- mine's a 28 broader question. 71 1 MS. YEE: But -- but I don't -- but with 2 respect to this issue I don't know that we have our own 3 process around -- 4 MR. HORTON: Maybe -- 5 MS. YEE: -- rate setting. 6 MR. HORTON: -- staff can speak to the 7 notification that goes out prior to it being agendized 8 on -- 9 MS. YEE: On our -- okay. 10 MR. HORTON: -- on our agenda. I mean, we -- 11 we have some items here that people are coming to speak 12 before -- speak on before the Board. 13 MS. SHEDD: Well, generally they hear about it 14 when they see the agenda. We have had a couple of calls 15 on this one. One was from Cal-Tax, one was from a 16 chapter of the 911 Association, and they have the same 17 issue of how would they be notified and so we suggested 18 change in -- Cal-Tax had recommended and we tweaked the 19 language to say that it's going to be posted on our web 20 site. 21 MR. RUNNER: Again, go back to my question 22 then, okay -- okay, so -- so they are notified then when 23 the agenda comes out? 24 MS. SHEDD: Yes. 25 MS. YEE: Yeah. 26 MR. RUNNER: So we don't make an attempt to try 27 to say, hey, we have this idea, how does this affect 28 your industry? They're -- they're identified when the 72 1 agenda goes out. Now -- 2 MS. SHEDD: Unless we know before, yeah. 3 MR. RUNNER: Well, right, unless maybe you know 4 or -- but not -- not seeking it unless you already know 5 it. 6 So when did -- when were people notified of 7 this particular language when -- when did this come out 8 in the agenda and when would people have been able to be 9 aware of this language? 10 MS. SHEDD: Well, this one was discussed in 11 November. So -- 12 MR. RUNNER: Okay 13 MS. SHEDD: -- they've been aware -- 14 MR. RUNNER: Okay. 15 MS. SHEDD: -- of it since November. 16 MR. RUNNER: Okay, others weren't? 17 MS. SHEDD: There's some on here that this is 18 the first airing of them. 19 MR. RUNNER: And so for those when would people 20 have been aware of that and been able to -- 21 MS. SHEDD: Ten days ago. 22 MS. YEE: The publish -- 23 MR. RUNNER: The ten days ago is when they 24 actually would see that language. Okay, thanks. 25 MS. YEE: Yeah. 26 MR. HORTON: Yeah, okay. Further discussion, 27 Members? 28 MS. YEE: Let me -- 73 1 MR. HORTON: Madam Yee. 2 MS. YEE: I want to be sure we're giving staff 3 appropriate direction here. With respect to the 4 statutory date, when does the rate actually take effect? 5 MS. BARTOLO: January 1. 6 MS. YEE: Okay. So if were even to move it to 7 December does that give us enough time? 8 MS. BARTOLO: It gives enough time to find a 9 Board meeting that will synch up. 10 MS. YEE: Okay. But then -- 11 MS. BARTOLO: But doesn't give enough -- 12 MS. YEE: But it's -- 13 MS. BARTOLO: -- time to industry. 14 MS. YEE: But the window's narrower in terms 15 of -- 16 MS. BARTOLO: Correct. 17 MS. YEE: -- before the effective date. 18 MS. BARTOLO: Now, CTA gives us the information 19 October 1st and we kind of circle the airport until we 20 can get it published at a meeting. So we -- we're not 21 able to put it out -- publish it -- 22 MS. YEE: Uh-huh. 23 MS. BARTOLO: -- otherwise until the Board's 24 public agenda notice. 25 MS. MANDEL: So -- so -- 26 MR. HORTON: Ms. Mandel. 27 MS. MANDEL: I'm sorry. So they give us the 28 info by October 1st? 74 1 MS. BARTOLO: Yes. 2 MS. MANDEL: And we have no power to set the 3 rate, but is there something that -- but -- but -- but 4 we're going to take it up at our next available meeting 5 by the deadline to adopt the rate. Is there something 6 that says we're not allowed to let anyone know what the 7 proposed rate from -- from the other agency is that will 8 be taken up at the next available Board meeting before 9 the -- whatever the deadline is? Or are we not allowed 10 to -- 11 MS. BARTOLO: I don't know that that was 12 considered that we could put out something -- publish 13 something before the -- the Board does it officially. 14 MS. YEE: Because when they do it by October 15 1st we already know when our next Board meeting is 16 because we set the Board meeting dates, you know, 18 17 months in advance. But you're just saying it wouldn't 18 go out with the agenda. 19 MS. YEE: That -- 20 MS. MANDEL: Your comment confused me, that's 21 all. 22 MS. YEE: Yeah. 23 MS. BARTOLO: Well, for instance -- 24 MS. MANDEL: Because we know what the Board 25 meeting dates are. 26 MS. BARTOLO: Yes. So, for instance this year 27 the first Board meeting in November is November 15th. 28 That's the statutory date to have it published in the 75 1 Board's minutes. 2 MS. YEE: What -- 3 MS. BARTOLO: And normally the Board does not 4 take up these rate setting items on the first day. So 5 that's something we'll have to coordinate -- 6 MS. YEE: Well, I -- I -- okay, Mr. Chairman. 7 MR. HORTON: Yeah, go ahead. 8 MS. MANDEL: Sorry. 9 MS. YEE: This is really -- 10 MS. MANDEL: It's going in a circle. 11 MR. HORTON: Yeah. 12 MS. YEE: I -- I get -- I get the issue. This 13 is a meeting planning issue and I thought -- and Ms. 14 Olson, you can remind me, I thought all of the workplan 15 meetings that we engage in take into consideration not 16 only Board Members' individual schedules, but also all 17 of the statutory deadlines by which this Board has to 18 act on various rates -- 19 MS. OLSON: That's correct. 20 MS. YEE: -- on other types of, you know, 21 statutorily mandated types of -- of provisions that we 22 have to comply with before the end of the calendar year, 23 you know, at various points during the calendar year. 24 MS. OLSON: That's correct. 25 MS. YEE: We keep -- we seem to keep revisiting 26 bumping up against deadlines like this. I remember one 27 year where we had to actually call an emergency meeting 28 to adopt a rate. I don't want to have that as the 76 1 practice. But why are we not planning for this ahead of 2 time? 3 If we're getting this information from CTA 4 around October 1st -- 5 MS. BARTOLO: Yes. 6 MS. YEE: -- why can't we do it in October? 7 MS. MANDEL: In Culver City. 8 MS. BARTOLO: Yes. 9 MS. YEE: And -- and if it's just a rate 10 adoption we can take that in Culver City. But, you 11 know, I feel like we're being inflexible with our own 12 meeting planning, workplan rules, to where we're going 13 to change the law, eliminate a public's right to know 14 just because we can't fit it into a meeting schedule? 15 That's absurd. 16 So, we need to do better planning. So, I think 17 why don't we go back -- I would suggest going back and 18 seeing whether -- if we get this information from CTA 19 around October 1st, let's see when the October Board 20 meeting is. I would like to give as much notice as 21 possible before the January effective date. If we can 22 get it on the October agenda whether it's here or in 23 Culver City, let's do it. If we can't, then it's -- 24 we're well ahead of the November Board meeting. 25 MS. MANDEL: Yeah. 26 MS. YEE: And if -- and if it's -- the 27 statutory deadline for us to adopt the rate is November 28 15th, let's get it before us before November 15th. 77 1 MS. MANDEL: Culver City is October 25 through 2 28 -- 3 MS. YEE: Plenty of time -- 4 MR. HORTON: Right. 5 MS. YEE: -- in terms of public agenda notice. 6 MR. HORTON: Thank you, Members. Without 7 getting into the details, so let -- we're going to put 8 this item -- 9 MS. YEE: Actually, the -- 10 MR. HORTON: -- put this item over and I -- and 11 I think we've given staff direction that this seems to 12 be a scheduling issue and that you guys tackle the 13 problem and see if you -- at the end of the day you 14 really don't need legislation as the body seems to be, 15 and I concur with that. It seems like this is a 16 scheduling matter. 17 So unless you come back and say something else, 18 all right, so be it. 19 Madam -- Ms. Sheel -- Shedd. 20 ---oOo--- 21 22 23 24 25 26 27 28 78 1 ITEM 4-2. 2 ---o0o--- 3 MR. HORTON: Ms. Shedd? 4 MS. SHEDD: The next item is 4-2. This is 5 brought forward by Board Member Steel. It would amend 6 the underground storage tank maintenance fee law to 7 allow the Board to limit the period to three years from 8 eight to which a deficiency determination may be issued 9 or adjusted with respect to qualified absentee owners of 10 underground storage tank. 11 This has been the owner operator problem that 12 we've had since the law went into effect. The Board did 13 adopt a proposal around 2001. At that time it had a 14 $500,000 revenue loss. We were unable to get an author. 15 Since then we have done a lot of outreach and education 16 but there still seems to be that issue. 17 MR. HORTON: All right. Discussion, Members? 18 MS. STEEL: Mr. Chairman. 19 MR. HORTON: Madam Steel? 20 MS. STEEL: Last four years that, you know, 21 these underground storage tank cases coming up and just 22 amazingly see that some of retired people, they just 23 came from vacation and they see huge bill that they 24 didn't even know and they can't even pay for. 25 So, that's the reason that I'm introducing this 26 bill, that only the owner meets the criteria for a 27 qualified absentee owner, that they didn't have a 28 include that what was going on. 79 1 I think this is fair for those people. And 2 then, you know, we just give them the time limit from 3 eight years to three years. 4 Thank you. 5 MR. HORTON: Further discussion? 6 Member Yee? 7 MS. YEE: Thank you, Mr. Chairman. 8 I am sympathetic to this class of feepayers. 9 We have seen many of these cases come before the Board. 10 I am concerned about the precedent this sets 11 with respect to limiting the period to three years for 12 determination of a deficiency. 13 And more times than not when these cases have 14 come before the Board, I think we've referred them to 15 the Offers-In-Compromise program once there has been a 16 determination by this Board. 17 I actually would like to see some -- and I 18 don't know how many more cases are in the pipeline with 19 respect to underground storage tank fees, but I actually 20 would like to see them expedited to come before this 21 Board so that we can get them through the OIC program as 22 quickly as possible. 23 But I think the precedent this sets with 24 respect to changing the deficiency determination period 25 from eight years to three years is setting a bad 26 precedent that I don't want to see applied to our other 27 program areas. 28 MR. HORTON: Further discussion, Members? 80 1 MR. RUNNER: I would move Item 4-2 to be a part 2 of our legislative agenda. 3 MS. STEEL: Second. 4 MR. HORTON: It's been moved and second. 5 Members, I would share that we have the 6 authority, I think, to try to fix this somehow. 7 All right, it's been moved and second. Any 8 other discussions? 9 Ms. Olson, please call the roll. 10 MS. OLSON: Mr. Horton? 11 MR. HORTON: No. 12 MS. OLSON: Ms. Steel? 13 MS. STEEL: Aye. 14 MS. OLSON: Mr. Runner? 15 MR. RUNNER: Aye. 16 MS. OLSON: Ms. Yee? 17 MS. YEE: No. 18 MS. OLSON: Ms. Mandel? 19 MS. MANDEL: Aye. 20 MR. HORTON: Motion carries. Such will be the 21 order. 22 ---o0o--- 23 24 25 26 27 28 81 1 ITEM 5-1 2 ---o0o--- 3 MR. HORTON: Our next item? 4 MS. SHEDD: The next item before you is 5-1. 5 We discussed that also in November. It would 6 specifically provide that the Board of Equalization 7 shall accept registered warrants as payment for any tax, 8 surcharge or fee liability to the Board if the 9 registered warrant is issued specifically to that 10 taxpayer. 11 MR. HORTON: Discussion, Members? 12 MS. STEEL: So moved. 13 MR. HORTON: It's been moved by Ms. Steel. 14 MS. YEE: Second by Yee. 15 MR. HORTON: Second by Ms. Yee. 16 Any further discussion? 17 Hearing none, it's been moved and second. 18 Without objection, Members, such will be the 19 order. 20 ---o0o--- 21 22 23 24 25 26 27 28 82 1 ITEM 5-2 2 ---o0o--- 3 MR. HORTON: Next item? 4 MS. SHEDD: The final item is 5-2. 5 MR. HORTON: Whoa, excuse me, I'm sorry. 6 MS. YEE: That's a different item. 7 MR. HORTON: I can't quite read this, 8 Ms. Olson. 9 MS. OLSON: We have a speaker. Her name is 10 Ashley Martinez. 11 MR. HORTON: Okay, I have another item here, 12 but it's -- I don't know if it's an S or J or a 5. 13 Is it J? 14 MS. MANDEL: That's J. 15 MR. HORTON: Okay, good. 16 Members, on Item 5-2, we are honored with the 17 presence of Ms. Ashley Martinez, speaker. 18 Uh-oh -- that's all right, that will work too. 19 All right, sir? 20 ---o0o--- 21 ASHLEY MARTINEZ 22 ---o0o--- 23 MR. MARTINEZ: My mom is a huge "Gone with the 24 Wind" fan. 25 MR. HORTON: Okay. 26 MR. MARTINEZ: Good morning, Mr. Chairman and 27 Board Members. 28 MR. HORTON: Good morning. 83 1 MR. MARTINEZ: My name is Ashley Martinez. And 2 I'm here on behalf of SEIU Local 1000. We represent the 3 employees who work in the current headquarters building. 4 And I would like to express our support for 5 legislative proposal 5-2, which would allow DGS and BOE 6 to begin the process of finding a new headquarters 7 building. 8 We support this proposal because an adequate, 9 safe and healthy work space is extremely important to 10 our members and their productivity. 11 We also support this proposal because an 12 adequate headquarters will assist the BOE in generating 13 the much-needed revenues that the State of California 14 needs at this time. 15 And the current headquarters building has a 16 history of safety and health issues. 17 So, for these reasons, we support this proposal 18 and we ask for your support. 19 MR. HORTON: Thank you very much. 20 MR. MARTINEZ: Thank you. 21 MR. HORTON: Appreciate that. 22 MS. STEEL: So moved. 23 MR. HORTON: It's been moved by Ms. Steel, 24 second by Ms. Yee. 25 MR. RUNNER: Mr. Chair, quick comment? 26 MR. HORTON: Discussion, Mr. Runner? 27 MR. RUNNER: I am supportive of this. I was 28 part of the bill last year that we actually tried to 84 1 give the BOE the ability to make -- be in charge of some 2 of its own facility decisions. 3 I look at this as kind of, I guess, half best. 4 Our challenges have been sometimes with the challenges 5 with DGS and partnering with them, I hope, will solve 6 the problem, maybe. 7 But it's certainly, I guess, is taking a look 8 at trying to get half a loaf out of this and needs to 9 maybe be what has to move forward, but certainly I 10 believe a -- it's unfortunate that a constitutionally 11 established agency does not have its own ability to go 12 in and deal with its own facility and property issues. 13 MR. HORTON: Thank you very much, Mr. Runner. 14 Any other discussion, Members? 15 It's been moved and second. 16 Without objection, such will be the order. 17 Thank you very much, Ms. Shedd. We appreciate 18 it. 19 Members, this concludes the Legislative 20 Committee. 21 ---oOo--- 22 23 24 25 26 27 28 85 1 . 2 REPORTER'S CERTIFICATE 3 4 State of California ) 5 ) ss 6 County of Sacramento ) 7 8 I, BEVERLY D. TOMS, Hearing Reporter for the 9 California State Board of Equalization certify that on 10 January 27, 2011 I recorded verbatim, in shorthand, to 11 the 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, 14 pages 1 through 29 and pages 58 through 78 constitute a 15 complete and accurate transcription of the shorthand 16 writing. 17 18 Dated: April 20, 2011. 19 20 21 ____________________________ 22 BEVERLY D. TOMS 23 Hearing Reporter 24 25 26 27 28 86 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 January 27, 2011 I recorded verbatim, in shorthand, to 10 the best of my ability, the proceedings in the 11 above-entitled hearing; that I transcribed the shorthand 12 writing into typewriting; and that the preceding pages, 13 pages 30 through 57 and pages 79 through 85 constitute a 14 complete and accurate transcription of the shorthand 15 writing. 16 17 Dated: April 20, 2011 18 19 20 21 22 ____________________________ 23 JULI PRICE JACKSON 24 Hearing Reporter 25 26 27 28 87