BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 5901 Green Valley Circle, Room 207 Culver City, California REPORTER'S TRANSCRIPT JUNE 22, 2011 FINAL ACTIONS Reported by: Beverly D. Toms CSR No. 1662 1 1 2 P R E S E N T 3 4 For the Board Jerome E. Horton of Equalization: Chairman 5 Michelle Steel 6 Vice-Chairwoman 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: Lou Ambrose Appeals Division 16 Grant Thompson 17 Appeals Division 18 --oOo--- 19 20 21 22 23 24 25 26 27 28 2 1 ITEM B1 (From 6-21-11) 2 Culver City, California 3 June 22, 2011 4 ---oOO--- 5 MR. HORTON: Next item, Ms. Olson. 6 MS. OLSON: Our next item would be B1, Gerald 7 J. Marcil and Carol L. Marcil. It was held over from 8 yesterday. 9 MR. HORTON: Is there a motion, Members? 10 MS. YEE: Move to sustain the Franchise Tax 11 Board. 12 MR. HORTON: Motion by Ms. Yee to sustain the 13 Franchise Tax Board. 14 Is there a second? 15 I second the motion for discussion -- I 16 actually support it. 17 Discussion, Members? 18 Is there an objection? 19 MR. RUNNER: Yes. 20 MS. STEEL: Objection. 21 MR. HORTON: Objection by Member Steel and Mr. 22 Runner. Senator Runner. I just thought I'd say that. 23 Board Member Runner. 24 MR. RUNNER: George is okay. 25 MR. HORTON: George will work. Okay. 26 Objection noted. Ms. Olson, please call the 27 roll. 28 MS. OLSON: Mr. Horton. 3 1 MR. HORTON: Aye. 2 MS. OLSON: Ms. Steel. 3 MS. STEEL: No. 4 MS. OLSON: Mr. Runner. 5 MR. RUNNER: No. 6 MS. OLSON: Ms. Yee. 7 MS. YEE: Aye. 8 MS. OLSON: Ms. Mandel 9 MS. MANDEL: Aye. 10 MS. OLSON: The motion carries. 11 ---oOo--- 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 1 ITEM B16. 2 MR. HORTON: Next item, Ms. Olson. 3 MS. OLSON: The next item is B16, Klaus W. 4 Wang. 5 MR. HORTON: Is there a motion, Members? 6 MS. YEE: Move to sustain the Franchise Tax 7 Board. 8 MR. HORTON: Moved by Ms. Yee to sustain the 9 Franchise Tax Board. 10 Second? 11 MS. MANDEL: Oh, was that -- oh, you're asking 12 for one? Second. 13 MR. HORTON: Yes. Second by Ms. Mandel. 14 MS. STEEL: Objection. 15 MR. HORTON: Objection noted, Ms. Steel. 16 Ms. Olson, call the roll. 17 MS. OLSON: Mr. Horton. 18 MR. HORTON: Aye. 19 MS. OLSON: Ms. Steel. 20 MS. STEEL: No. 21 MS. OLSON: Mr. Runner. 22 MR. RUNNER: Aye. 23 MS. OLSON: Ms. Yee. 24 MS. YEE: Aye. 25 MS. OLSON: Ms. Mandel. 26 MS. MANDEL: Aye. 27 MS. OLSON: Motion carries. 28 ---oOo--- 5 1 ITEM B18 2 MS. OLSON: Our next item is B18, Richard 3 Palmquist. 4 MR. HORTON: Is there a motion, Members? 5 MS. MANDEL: Well, I asked so many questions 6 about whether he might have stuff and now I'm kind of 7 wondering whether the stuff he might have is a RAR -- it 8 sounds like -- like the original fight with IRS started 9 in 2002 and maybe they resolved it somehow by playing 10 around with 2005. So I'm a little bit confused about 11 what went on at the IRS level and I don't really know if 12 you'd have more information, but -- 13 MR. RUNNER: Part -- I was going to say part of 14 the conversation -- at least I thought I heard at the 15 end was that some of the information that I thought I'd 16 heard that somebody had asked for somehow he just -- 17 they were just made aware of in some way and that 18 somehow the son still had it. Maybe if they had some 19 time they -- they could get it. 20 MS. MANDEL: Yeah. So may as well give them 21 the little bit of time, see if they can figure out if 22 they have something. 23 MR. RUNNER: I would -- I don't know why we 24 wouldn't try to give them a little time. I wish -- I 25 wish he'd -- yeah. 26 I'd move a 30-30-30. 27 MS. MANDEL: Second. 28 MR. HORTON: It's been moved by Mr. Runner to 6 1 grant 30-30-30. Second by Ms. Mandel. 2 Objection, Members? 3 Hearing none, such will be the order. 4 ---oOo--- 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7 1 ITEM 19. 2 MS. OLSON: Our next item is B19, Joe L. 3 Santos. 4 MS. MANDEL: Move to sustain the Franchise Tax 5 Board. 6 MS. YEE: I'll second. 7 MR. HORTON: Members, just for discussion, I'd 8 just like to sort of hear your -- 9 MS. STEEL: But partially -- okay. 10 MR. HORTON: -- opinion. 11 I kind of would -- the two months in which the 12 Franchise Tax Board rightfully so and -- stood down in 13 sending the information even though the taxpayer was 14 aware of their liability, as they are from the onset. 15 MS. MANDEL: Taxpayer has withdrawn its claim 16 with respect to those two months. 17 MR. HORTON: Two months, yeah. And it's an 18 established policy so it seems to me -- 19 MS. MANDEL: Yeah, it's -- 20 MR. HORTON: -- that the appropriate course of 21 action is to consider the policy and not the case. 22 Okay, I'm comfortable. 23 Discussion, Members? 24 Hearing none, is there -- 25 MR. RUNNER: Just -- just one observation. I 26 guess I'm -- I -- I just -- the idea of the -- the 27 ministerial function at some point having some aspect to 28 timeliness has just got to be -- I mean at some point 8 1 it's -- is -- is it -- is it four months it's acceptable 2 and seven months it isn't, or is it 24 months it's not 3 acceptable and 20 is? 4 You know, I -- I just feel like the -- the 5 open-endedness of this and responsiveness I -- I just -- 6 I'm concerned about. 7 MR. HORTON: I share your concerns, Mr. Runner, 8 and I would ask the Franchise Tax Board to do a -- an 9 analysis to make a determination on an overall basis the 10 impact of workload on the timeliness of resolving their 11 cases. I believe the Franchise Tax Board acted 12 expeditiously and was very conscious in their 13 decision-making process. But part of that consideration 14 was workload. And if in fact there's a way to 15 accelerate, as we've done here at the Board to the 16 dismay of the Attorney General, by the way, possibly we 17 could do the same at the Franchise Tax Board and provide 18 them some additional help somehow. 19 MS. YEE: Yeah. Mr. Hor -- Mr. Chairman. 20 MR. HORTON: Sure. 21 MS. YEE: Yeah, I think the biggest challenge 22 is that it is resource-driven and certainly the 23 constraints that they're relative to the budget, and I 24 will just point out that there were furloughs at the 25 Franchise Tax Board. So there's -- it's very much 26 driven by resources and -- 27 MR. HORTON: Yeah, the furlough -- 28 MS. YEE: -- decisions not -- not of their 9 1 (inaudible). 2 MR. HORTON: Yeah, I know. The -- the 3 furloughs are another -- 4 MS. YEE: I mean, it's not to say that it 5 affected this particular situation, but it's -- it's a 6 very -- 7 MR. HORTON: It's like having a company that 8 prints money and asking them to shut down the printing 9 press. 10 MS. YEE: Exactly. 11 MR. HORTON: At any rate, it is what it is. 12 Further discussion, Members? 13 Hearing none, is their an objection? 14 MS. STEEL: Objection. 15 MR. HORTON: Objection noted by Ms. Steel. 16 Ms. Olson, please call the roll. 17 MS. OLSON: Mr. Horton. 18 MR. HORTON: Aye. 19 MS. OLSON: Ms. Steel. 20 MS. STEEL: No. 21 MS. OLSON: Mr. Runner. 22 MR. RUNNER: No. 23 MS. OLSON: Ms. Yee. 24 MS. YEE: Aye. 25 MS. OLSON: Ms. Mandel. 26 MS. MANDEL: Aye. 27 MS. OLSON: Motion carries. 28 ---oOo--- 10 1 ITEM B20 2 MS. OLSON: Our next item is B20. I'm sorry, 3 I'm not pronouncing this name very well, Tawfik 4 Rizkallah. And I apologize. 5 MR. HORTON: Thank you, Ms. Olson. 6 Is there a motion, Members? 7 MS. YEE: Move to sustain the Franchise Tax 8 Board. 9 MR. HORTON: It's moved by Ms. Yee to sustain 10 the Franchise Tax Board. Second by Ms. Mandel. 11 Without objection. 12 MS. STEEL: Objection. 13 MS. MANDEL: With -- with the acknowledgement 14 that he seems like a fabulous grandfather. 15 MS. YEE: It does. 16 MR. AMBROSE: Hear, hear. 17 MR. HORTON: Objection noted by Ms. Steel. Ms. 18 Olson, please call the roll. 19 MS. OLSON: Mr. Horton. 20 MR. HORTON: Aye. 21 MS. OLSON: Ms. Steel. 22 MS. STEEL: No. 23 MS. OLSON: Mr. Runner. 24 MR. RUNNER: Aye. 25 MS. OLSON: Ms. Yee. 26 MS. YEE: Aye. 27 MS. OLSON: Ms. Mandel 28 MS. MANDEL: Aye. 11 1 MS. OLSON: Motion carries. 2 ---oOo--- 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 12 1 ITEM B23. 2 MS. OLSON: Our next item is B23, Maricel B. 3 Hernandez. 4 MR. HORTON: Is there a motion, Members? 5 MR. RUNNER: Did we -- just to clarify, did 6 we -- we did get a confirmation from the child care 7 provider that she did receive $150 from this appellant, 8 is that correct? 9 MR. HORTON: Yes. 10 MR. AMBROSE: Yes. Yes, sir. 11 MS. MANDEL: She just didn't want to be 12 identified as a provider. I don't -- 13 MR. AMBROSE: Right. 14 MS. MANDEL: -- understand that aspect of it. 15 MS. STEEL: I -- 16 MR. HORTON: But she was. 17 MR. AMBROSE: Yeah, I mean, that -- that was 18 FTB's -- 19 MS. MANDEL: Yeah. 20 MR. HORTON: Possibly Mr. Ambrose can speak to 21 our ability to grant the $150. 22 MR. RUNNER: And -- yeah. 23 MS. STEEL: But that -- that babysitter already 24 admitted that -- 25 MS. MANDEL: Right. 26 MS. STEEL: -- watch that baby for two weeks. 27 MS. MANDEL: Right. 28 MS. STEEL: You get paid -- 13 1 MR. AMBROSE: Right. 2 MS. STEEL: -- only 150 for two weeks; I'll 3 hire her. 4 MS. MANDEL: Right. 5 MS. STEEL: And then second thing is when tax 6 agency calls you and then you are not going to get into 7 trouble let us know exactly how much you got, do you 8 think they going to tell you the truth when they -- 9 after they get the cash? 10 I mean, 150 is totally unreasonable, that for 11 two-weeks period. 12 MR. HORTON: Let's see. Any reasonable numbers 13 out there? 14 MS. STEEL: Well, she -- okay, if we going to 15 give two weeks, she says she was getting -- she paid 16 what, $120 per week? 17 MR. RUNNER: It's the difference between 240 18 and 150 amount. 19 MS. STEEL: For ten weeks though -- 20 MR. AMBROSE: Not for ten weeks. 21 MS. STEEL: -- then we can just give -- well, 22 it's only what, $90 difference? 23 MR. RUNNER: Yeah. 24 MR. AMBROSE: Yeah. 25 MS. STEEL: But at least it's something is 26 going to help for a single mom there. 27 MR. HORTON: I mean I have a grandbaby and 28 we're looking at 250. 14 1 MS. STEEL: Yeah. 2 MR. RUNNER: Well, I don't -- yeah, it doesn't 3 seem like what it would be called a normal institutional 4 kind of care program going on there. But I would -- I 5 mean, I'm -- let me -- I mean at -- at this point what 6 would our motion be if we -- if the 250 -- or at -- at 7 2, whatever, 250 or 150, what's -- what's the -- 8 MR. AMBROSE: I don't know what the -- what the 9 amount would work out to be. Do you -- let me ask 10 Mr. Thompson. 11 MS. MANDEL: Well, I guess the -- would the -- 12 would the motion be -- would the motion be to grant her 13 claim to the extent that -- let's just use the l50, that 14 the -- what the credit would be if she had -- 15 MR. RUNNER: Yeah. 16 MS. MANDEL: -- with the $150 as the payment to 17 the provider? Because it's a mathematical thing, I 18 guess, that FTB would run through her return. 19 MR. AMBROSE: Right. 20 MR. THOMPSON: Thank you. 21 MS. MANDEL: I believe. 22 MR. RUNNER: I think that would be the safest. 23 MS. MANDEL: Is that -- 24 MR. AMBROSE: Yeah. 25 MR. THOMPSON: I think it might be 20 percent 26 but I don't want to go on "I think it might be's." 27 MR. AMBROSE: Right. 28 MR. THOMPSON: I think the safer way is the way 15 1 you suggest. 2 MR. RUNNER: Yeah, I think -- we're better off 3 just to I think identify the amount and let the formula 4 take care of itself. 5 MR. THOMPSON: Right. 6 MR. AMBROSE: Right. 7 MR. RUNNER: So I'll -- I'll make a motion -- 8 MR. HORTON: Was -- was the period of time two 9 weeks, is that what we're looking at or are we presuming 10 that the testimony of the -- of the care provider is not 11 quite accurate given her potential concern about 12 receiving payment under the table and any other issues 13 that may be attributed to that? 14 MS. STEEL: So let's trust taxpayer half and 15 then the other side half, so why don't we just give 600 16 credit then? 17 MR. RUNNER: That's your motion? 18 MS. STEEL: Yeah, that's my motion. 19 MR. HORTON: Ms. Steel -- 20 MS. STEEL: Something. 21 MR. HORTON: -- moves that we allow $600 in 22 child care credit. 23 MS. MANDEL: Well -- 24 MR. AMBROSE: Expenses. 25 MR. HORTON: Expenses, my apologies. And the 26 credit be computed by the FTB. 27 MR. RUNNER: That would be a big win for her, 28 wouldn't it? 16 1 MR. HORTON: Second -- second by Mr. Runner. 2 MR. RUNNER: Yeah. 3 Objection, Members? 4 Hearing none, such will be the order. 5 ---oOo--- 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 17 1 ITEM B25. 2 MR. HORTON: Ms. Olson. 3 MS. OLSON: Our next item is B25, Dennis LeVine 4 and Dawn LeVine. 5 MR. HORTON: Is there a motion, Members? 6 MS. MANDEL: I'd move a 30-30-30 for him to get 7 the information about -- that we were talking about 8 during the hearing, and I think I saw him talking to FTB 9 afterwards a little bit. So, -- but I'd like to get 10 that information. 11 MR. AMBROSE: The -- okay, so it would be a 12 30 -- 13 MS. MANDEL: Well, what -- you know whatever we 14 would have, we were -- I was particularly focused on 15 when he -- when he was -- when he was gone and then how 16 that's going to fit into the -- 17 MR. AMBROSE: Situation. 18 MS. MANDEL: Yeah, he might not know how it's 19 going to fit into that Soldiers Act thing, but -- 20 MR. AMBROSE: Uh-huh. 21 MS. MANDEL: -- the -- the -- that information 22 about when he was gone during those time periods -- 23 MR. AMBROSE: Uh-huh. 24 MS. MANDEL: You're looking at me like, Marcy, 25 I don't want to have to watch the whole tape again. 26 MR. AMBROSE: No, I don't mind at all. 27 No, but -- okay, so -- but I'm just -- just to 28 clarify, it's -- it's as it would affect the demand 18 1 penalty and then -- 2 MS. MANDEL: Well, it's -- it's -- 3 MR. AMBROSE: -- perhaps -- 4 MS. MANDEL: I mean everything is -- it sounded 5 like everything is potentially still in play -- 6 MR. AMBROSE: Oh, okay. 7 MS. MANDEL: -- because of how much -- 8 MR. AMBROSE: Right. 9 MS. MANDEL: -- he was gone and when he might 10 have been gone. And to the extent he had other 11 information that could be more specific to his wife's 12 condition and what was going on during that '07, '08, 13 early '09, you know, that whole thing. 14 I mean, it's sort of like all still open. 15 Personally from what I heard I got very interested in 16 the times that he was deployed but he might have other 17 things that affect the particular time period to address 18 his main point, which had been his wife's condition. 19 And -- 20 MR. AMBROSE: Okay. 21 MR. HORTON: Members, I -- Mr. Runner, go 22 ahead. 23 MR. RUNNER: I was -- yeah, I mean I agree with 24 that. I'm just thinking, also, is there a way that in 25 the midst of all that conversation that was held, the 26 unique issues between the deployments, the -- the wife's 27 health situation, all of those that if indeed that FTB 28 could find that there could be some aspect of settlement 19 1 in between, too -- I mean, is that -- can that be a part 2 of this 30-30-30? 3 I mean, I -- and I think the uniqueness of the 4 role, it seems to me I'm not sure he's going to -- 5 MR. HORTON: Why don't we answer that -- or 6 have Mr. Ambrose answer that from a technical 7 perspective. 8 MR. RUNNER: Okay. 9 MR. AMBROSE: Well, from -- 10 MR. RUNNER: Yeah, that would be good. 11 MR. AMBROSE: -- our -- our role would be to 12 ask the parties to provide the information and -- and -- 13 MR. RUNNER: Right. 14 MR. AMBROSE: -- to brief the issues. You 15 know, if in the course of that, you know, they decide -- 16 you know, FTB -- 17 MR. RUNNER: FTB. 18 MR. AMBROSE: -- contacts him or they're aware 19 that, you know, there's some basis for coming to an 20 agreement then of course -- 21 MR. RUNNER: Okay. 22 MR. AMBROSE: -- we would -- 23 MR. RUNNER: Well, maybe that -- 24 MR. AMBROSE: -- welcome that. 25 MR. RUNNER: Maybe just that thought and 26 comment would help expedite that kind of a choice, too. 27 MS. STEEL: And I -- I hope the Franchise Tax 28 Board understands that brain surgery that my mom just 20 1 had it on March, and I just asked doctor, it takes about 2 ten years to bring those memories back. 3 So, you know, within a couple of years period 4 it's not going to help. 5 So, you know, she had a problem for all the way 6 through and if she's alive right now that I'm very glad 7 that -- you know, what he went through. Because exactly 8 same thing I'm going through. 9 MR. HORTON: Yeah. I'd like to share a 10 situation, as well, just for consideration. It's a very 11 traumatic experience, brain surgery. A friend of mine 12 had that and wasn't able to recover for some time. And 13 I personally had what they -- wasn't really brain 14 surgery wasn't necessary, but it was Bell's Palsy which 15 caused a -- me -- wherein I only actually recovered 90 16 percent. So, I'm very understanding of that. And with 17 the passing of my father-in-law and then my 18 mother-in-law soon after you come to understand what 19 trauma of this type does to you. It causes you to put 20 out the fires in front of you even though you can see 21 the flames beyond those fires. 22 And so it's understandable that one would see 23 the fire in front of them, whatever return they need to 24 do let's do it and let's get it out and move forward. 25 I've got to be deployed, and all these other things that 26 are going on. 27 So, I actually ponder the cost benefit in that 28 I believe the testimony put before us of the 30-30-30. 21 1 However, if that's the will of the body I will 2 certainly -- 3 MR. RUNNER: Help me understand what you're 4 saying there, Mr. Chair. Are you saying that the -- 5 that -- that you would be leaning for the claim? I 6 mean, I -- I mean, I would -- I don't mean to put that, 7 I'm just trying to clarify. Because I mean clearly I 8 would -- I would tend to have this -- 9 MR. HORTON: Difficult to put words in my 10 mouth, so go right ahead. 11 MR. RUNNER: And I don't mean to. I apologize 12 for that, but -- 13 MR. HORTON: Go right ahead. 14 MR. RUNNER: -- you know, here's -- I mean I -- 15 to me the story is the story and it's compelling on a 16 lot of levels. And in my -- you know, I look at a 30-30 17 as maybe giving him another chance. But quite frankly I 18 believe you're right in the sense that if we're going to 19 go back through it and we're going to have to start 20 defining issues and trying to see where these dates are 21 and all those issues when I think the story is the 22 compelling story and the situation is very unique. 23 And I would use the 30-30 as a fallback if 24 indeed there was not support for just go ahead and -- 25 and refund the claim. 26 MR. HORTON: Well, mine would be the perception 27 of facts, and so I -- not the story. I mean, I'm -- 28 MS. YEE: Yeah. 22 1 MR. HORTON: -- sympathetic to the story, but 2 it's my perception of the facts and -- and to that end 3 I'm very appreciative of Ms. Mandel's articulation or 4 extraction of those facts, and would just like to have 5 an understanding of what -- 6 MR. RUNNER: Yeah. 7 MR. HORTON: -- the Members' perception of the 8 facts were. 9 MR. RUNNER: And when I use -- 10 MS. YEE: Yeah, Mr. Chair. 11 MR. RUNNER: When I use the phrase "story" I 12 don't mean story as in make believe. I mean the story 13 as in the facts of the situation. 14 MR. HORTON: No, I believe it's true. I 15 mean -- 16 MR. RUNNER: Yeah. 17 MS. YEE: Yeah. 18 MR. HORTON: -- I believe what he said was 19 true. 20 MS. YEE: Mr. Chairman. 21 MR. HORTON: Yes, Ms. Yee. 22 MS. YEE: You raise the cost benefit and it was 23 definitely something that kind of was on my mind 24 throughout the whole hearing. For the dollars that are 25 at issue, the amounts of the penalties, I think I heard 26 enough and I -- this is something I -- you all know 27 this, I don't do very often at all, which is I don't 28 feel like we have the full information to the extent 23 1 that there might be more that the appellant can provide 2 but certainly the -- what has been presented and looking 3 at, you know, the difficulties that -- of their 4 circumstances at the time that they were expected to 5 file their return I think -- I mean, I'm -- I'm prepared 6 to -- I'm -- 7 MS. MANDEL: You want me to withdraw my motion? 8 MS. YEE: I'm -- I'm prepared to grant the 9 refund. 10 MS. MANDEL: I'll -- I'll withdraw the motion. 11 MS. STEEL: And then I second that. 12 MR. HORTON: Okay. Given the facts before us 13 the motion is to grant the -- in favor of the Appellant. 14 Second by Ms. Steel. 15 Without objection, Members, such will be the 16 order. 17 MS. OLSON: That concludes our business for 18 today. 19 MR. HORTON: Members, we are in recess until 20 tomorrow. 21 ---oOo--- 22 23 24 25 26 27 28 24 1 REPORTER'S CERTIFICATE. 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, BEVERLY D. TOMS, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 June 22, 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 24 13 pages constitute a complete and accurate transcription 14 of the shorthand writing. 15 16 Dated: June 29, 2011. 17 18 19 ____________________________ 20 BEVERLY D. TOMS 21 Hearing Reporter 22 23 24 25 26 27 28 25