1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 REPORTER'S TRANSCRIPT 8 MAY 25, 2011 9 ITEM P 10 P3.1 SALES AND USE TAX 11 DEPUTY DIRECTOR'S REPORT 12 OVERVIEW OF THE SALES AND USE TAX DEPARTMENT'S 13 PROGRAMS AND ACCOMPLISHMENTS 14 15 16 ---o0o--- 17 18 19 20 21 22 23 24 25 26 27 Reported by: Juli Price Jackson 28 No. CSR 5214 1 1 P R E S E N T 2 3 For the Board Jerome E. Horton of Equalization: Chairman 4 5 Michelle Steel Vice-Chairwoman 6 7 Betty T. Yee Member 8 9 George Runner Member 10 11 Marcy Jo Mandel Appearing for John 12 Chiang, State Controller (per 13 Government Code Section 7.9) 14 15 Diane G. Olson Chief, Board 16 Proceedings Division 17 18 Jeff McGuire Deputy Director 19 Sales and Use Tax 20 21 ---oOo--- 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 MAY 25, 2011 4 ---oOo--- 5 MR. HORTON: Ms. Olson, what is the next 6 scheduled matter? 7 MS. OLSON: Our next scheduled matter is P3.1, 8 overview of Sales and Use Tax Department programs and 9 accomplishments. 10 MR. MC GUIRE: Good afternoon, Chairman and 11 Members, I'm Jeff McGuire with the Sales and Use Tax 12 Department. 13 I'll be providing a brief overview of the Sales 14 and Use Tax programs, some accomplishments, some coming 15 attractions and then I'll kind of conclude on a 16 discussion of the tax gap. 17 As I kind of start today, I just want to put 18 out kind of a thank you to the staff of the Sales and 19 Use Tax Department. These have been hard economic 20 times, the last couple of years, both for taxpayers and 21 for government agencies. 22 And there's been a lot of demands to do more 23 with less. And I think our Department and our staff 24 have maintained an outstanding level of customer service 25 and have attempted at every opportunity to meet the 26 needs of the business community while we still 27 efficiently and effectively administer our programs. 28 So, I just wanted to kind of make that opening comment. 3 1 Just an overview of the sales and use tax 2 program is -- this is 2009-10 data -- the sales and use 3 tax program generated $42.2 billion in revenue. Our 4 Department has 2800 employees, 750 of those are located 5 here in Sacramento in headquarters and the other over 6 2000 are out in our field offices. We do have 21 field 7 offices in California, as you know, and then three 8 out of state in Chicago, New York and Houston. 9 Our sales tax budget to run this program is 10 $378 million. It's broken down into our four core 11 functions -- registration, 79 million; return 12 processing, 74 million; audit, our most expensive 13 function, at 141 million; and then collections at 84 14 million. 15 So, historically, pretty consistent. Our 16 program generates about $100 for every basically 85 to 17 90 cents that the program costs the State. 18 Some of the accomplishments that we just wanted 19 to kind of touch on, as you know, we did our electronic 20 filing transition plan a couple of years ago. We were 21 actually recognized for that by the Center for Digital 22 Government just recently here in May. And we won the 23 award for the Green IT award. As you'll recall, that 24 was when we transitioned our taxpayers from paper filing 25 to e-filing. And we went from 3 percent e-filers up to 26 80 percent e-filers in an 18-month transition period. 27 The other thing that we did is in April we 28 rolled out our e-pay program. So, now taxpayers can go 4 1 online and make payments for any of their tax or fee 2 liabilities, including returns, accounts receivable, 3 pre-paid audit liabilities. And they can make that via 4 an ACH debit payment, which has no fee or cost to the 5 taxpayer to do that. 6 We have transitioned our law guides on our 7 website to HTML from PDF. If you're not a real techie 8 person like myself -- and I'm not a real techie 9 person -- but PDF documents are very difficult to search 10 on for your search engines and, so, moving to HTML's 11 making those a lot easier. 12 I actually tested it myself this morning to see 13 if I could find some of the sections I was looking for 14 and I actually was able to hit those right away in the 15 HTML. So, it's actually an improvement, not only for 16 our staff, but particularly for our taxpayers being able 17 to find the information that they need on our website. 18 We have also in the last year made some changes 19 to our website to try to make it a little more intuitive 20 and easier for our customers. We've moved to a lot more 21 transaction-centric on our website. So, if a taxpayer 22 wants to file a return, register for a permit, find -- 23 do a specific transaction, a number of that information 24 is on our web page. 25 What we're also doing in the Sales and Use Tax 26 Department is we're trying to transition our data to a 27 more industry-centric type of pages. So, if you're a 28 contractor or a restaurant or a manufacturer, there is a 5 1 page specifically for you that kind of combines all of 2 the data related to your industry, instead of having to 3 search through the silos like the law guides, the 4 publications, the notices and such. So, we're in a 5 transitional period on that. 6 We've also come into the 21st century and we do 7 have mobile apps now for people that are, you know, on 8 the move and want to actually get information using 9 mobile devices. And that's for IPhones, Blackberrys, 10 and Droids. 11 People can now verify a permit or find any 12 office location. And what they get at the office 13 location, it will give them turn by turn instructions on 14 how to actually get to the office from where they're 15 located. So, that's kind of exciting as we move into 16 the mobile app environment. 17 Some of the things that we do have coming up, 18 again kind of in the technology area, is online requests 19 for relief of penalty, extensions and declarations of 20 timely mailing will be online in August of 2011. 21 Taxpayers can then actually apply for those requests 22 right online and get instant responses to those instead 23 of waiting for paper forms to go through the mail and 24 responses to come back out. 25 E-registration, which will actually be not just 26 the Sales and Use Tax program, but all of our tax and 27 fee programs, licenses, and permits, will be coming 28 online in February of 2012. 6 1 And then we'll move to e-filing for cigarette 2 manufacturers and distributors in August of next year. 3 As we move towards the future, I know we've had 4 a lot of discussion just about office of the future and 5 again that is continuing. San Diego is picked as kind 6 of our pilot office to move to kind of a combination 7 self-service, full-service type of office environment 8 where taxpayers who are able to do some of the 9 transactions on their own will be afforded that 10 opportunity so they can move through quickly, while we 11 will still provide the full services. 12 I note the other thing that we've talked about 13 before is our no cash pilot. And that is starting 14 June 1st in three of our offices -- Oakland, San Diego 15 and Ventura. That will run for three months -- June, 16 July and August. And then we will evaluate how that 17 worked or didn't work and then make adjustments 18 accordingly and either expand or just drop that pilot. 19 The last thing I wanted to talk about today was 20 the tax gap. And, as you know, the tax gap is the 21 difference between what's owed, if everyone paid 100 22 percent of the taxes that due in our program, and then 23 what is actually collected by our program. And 24 traditionally we've broken that down into three parts in 25 the Sales and Use Tax program, the first being use tax, 26 underreported use tax. 27 And that kind of falls into two categories, 28 there's the business to consumer transactions, those are 7 1 the things where you and I, as individuals, maybe buy 2 things over the internet from out-of-state retailers 3 that don't have nexus in California. And that's really 4 37 million Californians who are potentially in that 5 population of purchasers. 6 Then we also have the other segment, which is 7 business to business transactions. And it's just 8 businesses doing the same kind of thing, buying things 9 over the internet. 10 That's always been identified, at least since 11 our last tax gap initiative in 2007 as the largest part 12 of our gap, a little bit over $1 billion a year. 13 The second part of our gap is really related to 14 our registered businesses and it's just underreporting, 15 either by not reporting the right amount of tax or not 16 being able to pay the taxes that are reported on your 17 return. And, so, that's kind of focused on our 18 traditional tax base business community. 19 And then the third portion is focused really on 20 the underground economy and those people who do not hold 21 permits and are not filing returns. 22 And, so, that's kind of where our tax gap looks 23 at. And, so, initially we did bring to the Board back 24 in 2007 a tax gap plan that -- and we were asked to 25 address all those areas. And at that time we had 26 several initiatives that was approved by Board and, 27 ultimately, by the legislature with some funding, was to 28 look at in-state service businesses related to use tax. 8 1 We did some expansion of bankruptcies and 2 out-of-state collections. We did some augmentation of 3 our audit and collection activities. And we also added 4 the SCOOP program, which is the compliance and outreach 5 program in 2007 with that -- that actually started in 6 2008. 7 In 2010 we also added some additional items, 8 which was the collection program enhancements, which 9 again augmented our collection program a little bit. 10 We also participate now in the high -- high 11 intensity financial crimes area, which is focused on the 12 underground economy and some more efforts in that area. 13 And then to kind of speed along some of our 14 appeals and move through some of the things that are 15 currently disputed tax liabilities is we created the 16 Southern California Appeals and Settlements Units, just 17 at the end of last year. 18 One of our favorite programs, I say that kind 19 of jokingly, that was created just a year -- two years 20 ago, starting in 2010, actually, just started in 2010, 21 was the qualified purchaser program. That requires all 22 service businesses with gross receipts over $100,000 to 23 register with the Board for use tax permits and then 24 file returns on the same cycle as people file income tax 25 returns. This past year we have currently 500,000 26 businesses now registered under that program. 27 Some of the other things that we've done 28 related to the tax gap that have kind of been some older 9 1 efforts or just ongoing efforts, is in 2004 there was a 2 use tax line added to the Franchise Tax Board return. 3 We also have the in-state service businesses that I had 4 mentioned before. 5 We also have the US Customs program that looks 6 at imports through Customs and possible items subject to 7 use tax. 8 Our ag inspection station is where we work with 9 Food & Ag and they actually identify goods coming into 10 California that may be subject to use tax. 11 Our out-of-state registration program looks at 12 potential out-of-state taxpayers who may have nexus in 13 California. Our out-of-state office actually contacts 14 them and gets those registered that do have nexus. 15 And then we have a voluntary disclosure 16 program, both for in-state and out-of-state taxpayers 17 where they can limit their liability and look back for a 18 period of three years instead of the traditional eight 19 years. 20 So, what we're working on currently -- and I 21 wanted to give the -- conclude with this is that we are 22 working on what we call tax gap 2, I guess kind of the 23 sequel to tax gap 1, and, so, we are looking at what 24 kind of had been the efforts of our tax gap program, 25 where do we still have our gaps that we can look to 26 address? And it's really reevaluating kind of our prior 27 efforts, determine what other things we could do to 28 improve. It's listening ideas both externally and 10 1 internally. 2 And what we kind of look at, our original plan, 3 we primarily did things that were from own department 4 and our own staff and primarily was kind of adding staff 5 to do additional work in areas that hadn't been touched 6 before. 7 This time we're hoping to take a little bit 8 different or broader approach is looking at legislative 9 and regulatory changes where maybe we have problems for 10 compliance with our taxpayers because of the complexity 11 of some of our laws and regulations. 12 We do want to look potentially if there's new 13 compliance efforts or areas that we haven't had activity 14 in that maybe would should that would help close the 15 gap. Looking at our current programs and do we need to 16 make modifications to those current programs? 17 Changes -- things that would make them more efficient 18 and effective and actually help us actually, you know, 19 close some of that gap. 20 And then, finally, really, how can we do a 21 better job of education and outreach so that we can 22 reach those taxpayers that do have obligations under our 23 program so they can report accurately? 24 As part of this, we actually are holding some 25 stakeholder meetings and we did hold two meetings last 26 week, on Wednesday here in Sacramento, on Friday in 27 Culver City, where we invited industry or industry 28 representatives to come in and provide input they had on 11 1 areas of the tax gap or complexities that they thought 2 should be addressed and changed. 3 We've also solicited our staff. And so far we 4 have received over 100 ideas from our staff and a number 5 from those interested parties meetings. 6 We're going to be putting all of that 7 information together and then have some follow-up 8 meetings with our stakeholders on June 27th and 28th to 9 actually go over the ideas that have been suggested, any 10 written submissions that we've had in addition to that 11 and kind of trying to kind of focus down the program so 12 that in August we will be bringing to you a tax gap 13 proposal of how we plan to move forward in the future of 14 either making some changes and addressing some of the 15 other things to help us close the tax gap in our 16 program. 17 So, really, I don't have anything for you to 18 vote on today, but I would be looking towards the Board 19 if you have any direction or guidance on things that you 20 would like related to our program and specifically 21 related to things that maybe we should consider as we 22 move forward looking at the tax gap and specifically. 23 MR. HORTON: Discussion? 24 Member Yee? 25 MS. YEE: Just a comment. 26 I wanted to thank Mr. McGuire for the overview. 27 And we've got a lot going on and it's actually kind of 28 some exciting things. 12 1 I guess one thing I just wanted to mention, 2 because we've had these proposals, particularly with 3 respect to the tax gap, come to us before the Board and 4 I think one thing I'd like to see, certainly given this 5 current fiscal environment, is some different types of 6 ideas that aren't PY heavy. I think this is really a 7 tough time to justify positions, new positions. 8 And I think certainly with the additional tools 9 that we've got to work with and, I think, learning what 10 worked well -- what's working well and what's not 11 working as well, there might be a different way of 12 deploying our existing, you know, resources that we have 13 in these programs. 14 But I think I'm going to be finding it very, 15 very difficult to justify adding additional positions, 16 you know, going forward. 17 And I'll just mention this with respect to the 18 SCOOP program, this is something that I think ought to 19 be built into our ongoing compliance activities and not 20 have it be kind of a special program that we seek 21 separate funding for. I always think that's a target 22 when we do that. And yet what the program provides 23 really is something I want to see built into the ongoing 24 compliance activities of this organization. 25 MR. HORTON: Further discussion, Members? 26 MR. RUNNER: Yeah, a couple of questions I 27 have. 28 Just in regards to -- let's go to that favorite 13 1 program, the qualified purchaser. 2 MR. MC GUIRE: Okay. 3 MR. RUNNER: Just a quick couple of 4 observations. 5 You know, as I've gone out to the District 6 offices and talking to individuals out there, talk to 7 members of the SCOOP team, it really seems to, at least 8 in their opinion, that the initial threshold of $100,000 9 seems to have -- be a bit low, I guess. 10 And I assume that those are the kinds of issues 11 that we're considering when it comes this, 'cause again 12 what I'm concerned about that point is not that that's 13 grown to a half a million people, that's a half a 14 million people we have now asked to annually fill out 15 this new tax form. And I'm not sure if we've done the 16 numbers, but I would assume that a good number of those 17 that are coming back zero are those maybe in that lower, 18 you know, grossing 100 to 250,000 or some number like 19 that. 20 So, I'm just trying to get to the point to 21 where understanding and feel like we need to be 22 sensitive to the taxpayer out there and that we've given 23 them a burden and wondering about what kind of dollars 24 that that's actually creating in regards to the program. 25 So, I assume that's kind of the -- one of the 26 considerations? 27 MR. MC GUIRE: We have the exact same concerns 28 that you do related to the program. And we're doing an 14 1 analysis of it currently to see if the thresholds should 2 be changed or if there is -- if there is another way to 3 focus on the right, you know, group of taxpayers that 4 actually do have use tax liability. 5 MR. RUNNER: Maybe even by professions or other 6 kinds of -- 7 MR. MC GUIRE: Right. 8 MR. RUNNER: -- focus groups? 9 Okay, good. 10 The other issue, I guess, that I want to talk a 11 moment about and that is in regards to the tax gap as it 12 relates to, for instance, the accounts receivable. And 13 see if I got this right, but I have accounts -- I have 14 three categories and maybe a fourth category of accounts 15 receivable out there that, at least I've gotten some 16 numbers on. 17 Ballpark figure is that we have about 18 $1.6 billion in accounts receivable. We have $87 19 million that we are -- that we would put in a category I 20 think we call is a pending write-off. And then we have 21 $518 million that has been written off as of 2007. 22 And then I assume -- there is another number, I 23 think, which we're working, trying to find, and I don't 24 know if you it now, but I know it's being looked at and 25 that is a number out there that is written off prior to 26 2007, whatever that number may be. 27 MR. MC GUIRE: Right, I don't have that last 28 number. 15 1 MR. RUNNER: Okay. But I think -- I think 2 we're attempting to get that, I think. 3 MR. MC GUIRE: Right. 4 MR. RUNNER: Is that correct? 5 MR. MC GUIRE: Yes, we are looking at that. 6 MR. RUNNER: Okay. My question is this, 7 because, obviously, there is -- I mean, as we deal about 8 these issues of tax gap, one of the tax gaps, obviously, 9 is money that taxpayers owe and have not paid yet. 10 So, help me understand -- can you give me an 11 idea of the kind of collection efforts that go into like 12 each of these accounts, you know, in terms of these -- 13 for instance, when something -- versus those that are in 14 the process that we're negotiating with and working 15 with? 16 For instance, the difference between the $1.6 17 billion in collections or in accounts receivable and 18 then if you could just tell me a little bit about when 19 something moves off to the write-off category? 20 MR. MC GUIRE: Right. 21 MR. RUNNER: What -- is there any collection at 22 all there or what's the process? 23 MR. MC GUIRE: Okay, sure. You know, we take 24 our normal collection actions up to a point and once the 25 account ages to a certain point and we've taken a number 26 of steps and it doesn't seem like it's really worth the 27 State's time to continue to put more efforts towards 28 that accounts receivable, it goes into what we call 16 1 pending write-off status, which is the reference that 2 you made. 3 And that's where we, as the Board of 4 Equalization, internally have put it into a category 5 where it's not being actively worked by our staff 6 any more. 7 And it's not until it's officially approved by 8 the Controller that it's actually a write-off account. 9 So, we actually have to send those to the Controller and 10 get approval. And, so, when it's in pending write-off 11 status, we're not pursuing it. Same thing when it's in 12 write-off status. 13 The only thing I would like a caveat, while 14 we're not pursuing anything, some of our, what I would 15 maybe categorize as passive collection actions, like if 16 we had filed a lien, the lien is still active and out 17 there. So, if someone who we weren't pursuing actively 18 did sell real property and that real property has a lien 19 on it, that then would come into play at that point. 20 But we aren't actively sending notices, contacting the 21 taxpayer or doing anything when it's either in pending 22 write-off or once it's in write-off, it is completely 23 off of at least the Board of Equalization's active books 24 to take any action on. 25 I hope that answers. 26 MR. RUNNER: It does, it does. And I -- for 27 instance, on the accounts receivable, the $1.6 billion, 28 are -- is the nature of some of those accounts more 17 1 active in regards to collection than other parts of to 2 it? Is there an aging process? Not all accounts 3 receivable are equal in terms of the amount of time and 4 effort spent on them? 5 MR. MC GUIRE: Oh, absolutely, right. We have 6 a -- we have a collection model that looks at the 7 accounts and the likelihood of the dollars at risk and 8 to likelihood of collecting those as well. 9 And, so, you know, the 1.6 billion, a number of 10 those are aged, like corporate liabilities where there's 11 really no assets with the corporation, but we still are, 12 you know, continuing to pursue those up to the point 13 that they move into a -- like a write-off status. 14 We have a lot of active businesses who maybe 15 have filed returns but haven't made payments. Those are 16 very active, ongoing collections where we're working 17 with the taxpayer to resolve the debt. 18 And then, you know, there is some that maybe 19 have been closed out for short periods of time and, you 20 know, depending on the ownership type -- sole 21 proprietors versus corporations versus LLCs -- there is 22 different, you know, things that would going on with 23 those. 24 MR. RUNNER: But not all of the accounts 25 receivable would kind of be in the same nature of -- 26 MR. MC GUIRE: Absolutely not. 27 MR. RUNNER: -- opportunity of collection? 28 MR. MC GUIRE: Absolutely not. 18 1 MR. RUNNER: Okay, okay. 2 Has there been any attempt to try to bundle 3 that together and try to kind of decide or, you know, 4 put that into terms of a marketable paper to see if 5 somebody would just not -- I am not talking about having 6 private collectors come collect, but I'm just -- say, 7 "Hey, here's some paper and just sell it out in the 8 market."? 9 MR. MC GUIRE: It's something that we haven't 10 pursued. Again there's been, in the past, discussions 11 of, you know, contracting out maybe some of the 12 collections that they age to a point and like the 13 Franchise Tax Board does it where they actually contract 14 some out to a private collection agency. 15 MR. RUNNER: Right. 16 MR. MC GUIRE: Actually just completely selling 17 the accounts receivable? 18 MR. RUNNER: Right. 19 MR. MC GUIRE: The State, as far as I know, 20 hasn't embarked on that. But that was one of the items 21 that came up in our tax gap meeting last week was there 22 was a discussion that maybe the State should sell of 23 some of its kind of written-off accounts because they're 24 not taking any action on them any more. 25 So, that's something we are going to look 26 into. 27 MR. RUNNER: Okay, good. 28 And then in the last item, the issue of 19 1 education. Obviously, you know, I am of a strong 2 opinion that -- that a big part of our tax gap when it 3 comes to the use tax is that folks just don't understand 4 it. They don't understand it. They don't believe they 5 owe it -- and because they don't understand it. 6 And, you know, obviously I think we're -- all 7 kind of understand that the hardest tax to collect is 8 one that somebody doesn't think they owe, and especially 9 if it's also hard to find, makes for a really, really 10 tough combination. 11 And, so, one of the issues that I guess I'm -- 12 I would ask is, that is, have we -- is there any kind 13 of -- you know, as we think about those who are out 14 there who -- who are not paying tax on use tax, and 15 it's -- I mean, what have we got, like 99 percent 16 noncompliance rate -- determined, for instance, you 17 know, what is the -- why? You know, why aren't they 18 paying it versus, you know -- there's got to be a group 19 out there that believes that they owe it but they just 20 don't want to pay it because they don't think it's 21 right. There's got to be a group out there who believes 22 that if I bought it on the internet, it's -- the 23 internet isn't taxed, so, therefore, I don't owe it. 24 There has got to be another group that they're just 25 dumbfounded. They didn't know that it even was in 26 that -- in that category. 27 Because it seems to me that especially if we 28 want to do education, that we have got to understand 20 1 how -- you know, what our focus is, you know, who are we 2 trying to target with that education? 3 Have we -- do we have any data or any 4 information that would -- in regards to that? 5 MR. MC GUIRE: I know we've done just some 6 preliminary research in our office and there's lots of 7 data about what -- segments of the population, if we're 8 referring to consumers in particular -- 9 MR. RUNNER: Right. 10 MR. MC GUIRE: -- of who does most of the 11 internet purchasing, what type of activities they have, 12 those kinds of things. 13 So, we kind of know, at least dollarwise or 14 transactionwise, where those -- those, you know, groups 15 are. 16 As far as finding out exactly why they aren't 17 currently reporting use tax, we haven't, you know, done 18 any kind of -- at least ourselves -- kind of some 19 educated like surveying or talking to people to find out 20 why they haven't reported use tax if they had to do it 21 versus they just don't think they'll get caught or just 22 they're -- they just don't think they owe it, like you 23 said, or, you know, they just were completely unaware of 24 it. 25 So -- but those are some things we're trying to 26 figure out how do we focus and target on that better. 27 And that's some of the research that we're working on as 28 part of the tax gap package and any proposals that we 21 1 bring back in August. 2 MR. RUNNER: And I guess in a follow-up, the 3 last question that I kind of have in regards to, again, 4 dealing with the issue, going back to the accounts 5 receivable, and that is, you know, in the past my 6 understanding was that there was an attempt to do some 7 kind of a, I guess, reprieve in the -- in the history of 8 the BOE. There was an attempt to try to collect a bunch 9 of accounts receivable in -- and, you know, communicated 10 to these people, some reprieve of some kind, deep 11 discounts, whatever those issues were and they had so 12 much time to respond to that. 13 My understanding is that particular program 14 wasn't all that successful -- maybe because some of the 15 primers attached to it, may not be because of the 16 concept. Is there any discussion in regards to that, 17 you know, actively looking at that as some kind of an 18 issue to try to accelerate the accounts payable? 19 MR. MC GUIRE: We would -- we can definitely 20 look at that, yeah. You're talking about out interest 21 and penalty reprieve program from about four years ago, 22 five years ago? And it was where we looked at -- I 23 can't remember the definition exactly, but they were I 24 difficult collection cases or unlikely to be collected 25 anyway. So, we did notify people and gave them the 26 option and they would have -- if they paid the tax -- 27 their penalty and interest would be, you know, expunged. 28 Again, because they were difficult collections 22 1 and they were the type of accounts that really maybe 2 didn't have any assets, that's primarily why there 3 wasn't, you know, a big response to that, because they 4 just didn't have the resources to pay, whether it was 5 tax only or, you know, even something less than that. 6 MR. RUNNER: Okay. 7 Okay, thank you. 8 MR. MC GUIRE: Sure. 9 MR. HORTON: Further discussion, Members? 10 I would just offer -- first, good job. I mean, 11 the State Board of Equalization continues to be, as a 12 government agency, the best investment in the State of 13 California. For every 80 cents taxpayers invest in our 14 operation, we generate $100. You can't get that 15 anywhere in the world. So, our team of employees is 16 doing a yeoman's job for the State of California in that 17 regard. 18 Can we be more efficient? Yes, we can. I 19 would encourage the Department to look on the front 20 end. I'll give you an example. On the -- I think it's 21 referred to as the nonremittance, when the taxpayer 22 sends in a return, but fails to send in the payment with 23 it or sends in a zero return, but no payment, it can 24 take up to, I believe, 90 days before we begin 25 collection activity. 26 And when these types of entities fall within 27 the categories where we have our exposures, closeouts, 28 corporations and so forth, that should prompt some 23 1 concern and particularly when we have the legal 2 authority after 30 days to impute an amount just for the 3 purpose of beginning collection activities so that we 4 can acknowledge in the process and identify whether or 5 not the tax -- the tax dollars are at risk. 6 You know, I, for one, am very conscious of the 7 fact that we're all human beings, subject to human 8 error. And, so, our goal is to try to enhance 9 compliance and help correct that human error. 10 In the stakeholders' meetings possibly we can 11 kind of try to address some of the concerns that 12 Mr. Runner has shared. 13 The -- I would recommend that we take a look at 14 soliciting the cooperation of the enrolled agents and 15 practitioners, tax practitioners, out there as our 16 partners in participating in this process and some way 17 of encouraging them to encourage their clients to comply 18 with the law enough -- I mean, quite a bit of 19 information is now in place. They can file on the 20 return. The tax table seems to be going through the 21 legislature. And everyone's -- most pundits seem to 22 concur that it provides a windfall to the taxpayer to 23 use the chart, with the exception of a Member or two of 24 this Board. So, overall we're doing a yeoman's job. 25 And the agency is to be commended, especially these 26 tough economic times when salaries are being cut, people 27 are being laid off -- we're still the -- one of the, if 28 not the, most efficient government agency in California. 24 1 And, so, you are to be commended for that. 2 But can we do a better job on the front end 3 identifying this? Let's focus on that as well. 4 Thank you very much for your presentation. 5 MR. RUNNER: Can I just follow up, just one 6 quick -- again on the issue -- I think you had given me 7 a history -- a little history of the reprieve issue in 8 the past. 9 My understanding is that actually is almost ten 10 years ago since we did that. 11 MR. MC GUIRE: Sorry. 12 MR. RUNNER: So, it's been a while. You know, 13 so, it's been a long time. 14 I guess what I'd be interested in is hearing 15 back, maybe in an upcoming -- you know, an upcoming 16 Board meeting, kind of what happened with that program, 17 why it may or may not have been successful and what we 18 might want to do in order to present -- or develop a 19 reprieve program that could be. 20 I mean, to me it's pretty obvious here that, 21 you know, as we're -- as we're talking about the budget 22 shortfalls, you know, that's happening, and if we can 23 somehow -- somehow accelerate dollars that are right now 24 on that accounts receivable, then those monies can go to 25 all kinds of purposes. And they certainly are monies 26 that are sitting out there owed by taxpayers. 27 And, you know, my opinion is when somebody owes 28 you money, a taxpayer owes money, at the same time we're 25 1 talking about going to other taxpayers and trying to get 2 more from them, it just isn't fair. 3 And, so, maybe in the next -- in a meeting here 4 in the -- later in the summer that we could kind of hear 5 back what was that program, why it worked or why it 6 didn't work, because my understanding is it didn't and 7 maybe what are the kinds of parameters that might be put 8 together to make a reprieve program successful? 9 MR. MC GUIRE: Absolutely. 10 MR. RUNNER: Thank you. 11 MR. HORTON: Okay, thank very much, 12 Mr. McGuire, for your presentation. 13 ---o0o--- 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 26 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 MAY 25, 2011 I recorded verbatim, in shorthand, to the 10 best of my ability, the proceedings in the 11 above-entitled hearing; that I transcribed the shorthand 12 writing into typewriting; and that the preceding pages 1 13 through 26 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: June 6, 2011 17 18 19 ____________________________ 20 JULI PRICE JACKSON 21 Hearing Reporter 22 23 24 25 26 27 28 27