1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 August 23, 2011 10 11 12 13 14 15 BUSINESS TAXES COMMITTEE 16 17 18 19 20 21 22 23 24 25 26 27 REPORTED BY: Kathleen Skidgel 28 CSR NO. 9039 1 1 P R E S E N T 2 3 For the Committee: Betty T. Yee Chair 4 Michelle Steel 5 Member 6 Jerome E. Horton Member 7 George Runner 8 Member 9 Marcy Jo Mandel Appearing for John 10 Chiang, State Controller (per Government Code 11 Section 7.9) 12 Diane G. Olson Chief 13 Board Proceedings Division 14 15 ---oOo--- 16 ITEM 1 STAFF 17 Susanne Buehler 18 Sales and Use Tax Department 19 Richard Parrot Special Taxes and Fees 20 Division 21 Phillip Bishop Special Taxes and Fees 22 Division 23 24 ---oOo--- 25 ITEM 2 STAFF 26 Susanne Buehler Sales and Use Tax Department 27 28 2 1 ITEM 3 STAFF 2 Susanne Buehler Sales and Use Tax Department 3 Cary Huxsoll 4 Legal Department 5 Kevin Hanks Sales and Use Tax Department 6 7 ---oOo--- 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 1 SPEAKER ITEM 1 2 NAME PAGE 3 Dennis Loper 6 4 ---oOo--- 5 SPEAKER ITEM 2 6 NAME PAGE 7 (No speakers for this item) 8 ---oOo--- 9 SPEAKERS ITEM 3 10 NAME PAGE 11 Johan Klehs 19 12 Robin Sturdivant 20 13 Christy Bouma 21 14 ---oOo--- 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 1 AGENDA ITEM 1 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 August 23, 2011 5 ---oOo--- 6 MR. RUNNER: Good morning. 7 MR. HORTON: Good morning. Try that again. Good 8 morning. 9 MR. RUNNER: Good morning. 10 MR. HORTON: Let us call today's Board of 11 Equalization meeting to order. 12 Ms. Olson, before we, uh -- before we take you, I 13 want to welcome Ms. Kathy Skidgel -- 14 MS. SKIDGEL: Yes. 15 MR. HORTON: -- as our new court reporter. Glad to 16 have you here. And we will do our best to be as clear as 17 possible, okay? 18 Ms. Olson, what's our first matter? 19 MS. OLSON: Our first item on today's agenda is the 20 Business Taxes Committee. Ms. Yee is the Chair of that 21 committee. 22 Ms. Yee. 23 MS. YEE: Thank you very much, Ms. Olson. 24 Good morning, Members. 25 MR. HORTON: Good morning. 26 MS. YEE: We have three items before the Business 27 Taxes Committee. And let me introduce the first item, 28 which is Proposed Amendments to Cigarette and Tobacco 5 1 Products Licensing Act Regulations. And we have one public 2 speaker on this matter. 3 Mr. Loper, do you wish to come forward? And I'll 4 have staff introduce the matter as you do so. 5 Good morning. 6 MS. BUEHLER: Good morning. I am Susanne Buehler 7 with the Sales and Use Tax Department. 8 We have three agenda items for your consideration 9 this morning. For agenda item one, Mr. Richard Parrot and 10 Mr. Phil Bishop from our Special Taxes and Fees Division 11 are with me today. 12 Staff seeks your approval to initiate an interested 13 parties process to discuss the proposed adoption of a new 14 regulation and amendments to existing regulations under the 15 Cigarette and Tobacco Products Licensing Act of 2003. 16 We would be happy to answer any questions you may 17 have after the speaker's presentation. 18 MS. YEE: Okay. Very well. Thank you very much. 19 Good morning, Mr. Loper. If you'll introduce 20 yourself for the record formally. You'll have -- 21 ---oOo--- 22 DENNIS LOPER 23 California Distributors Association 24 ---oOo--- 25 MR. LOPER: Dennis Loper, representing the 26 California Distributors Association. 27 Um, we have -- we have concerns about, um, the 28 issue that would allow -- or would codify the practice of 6 1 transferring product from one retailer to the other. We 2 would argue that that was never envisioned in AB 71. And 3 as the proponents of the bill, um, our members feel very 4 strongly that this is very and away from what the original 5 intent of the law was. 6 Uh, we understand that we'll have to deal with this 7 in committee, but I would argue that -- that the regulation 8 in itself, if we only speak to the regulation, presumes 9 that the practice itself is legitimate. And that's our 10 concern. 11 Thank you. 12 MS. YEE: Okay. Thank you very much, Mr. Loper. 13 Um, in light of that concern, let me -- let me try 14 to respond to this. Um, what I'd like to do, uh, Members, 15 is to have this issue, um, go to an interested parties 16 process. 17 I think, um, there are several issues embedded in 18 what Mr. Loper has just described. Certainly going back 19 to, uh, the original statute enacted by Assembly Bill 71 by 20 our esteemed Chairman Mr. Horton, um, who authored the 21 bill. Although there weren't expressed prohibitions in the 22 bill with respect to, um, I think, retailers selling to 23 another unrelated retailer, um, there might be some 24 specific requirements that may have to be met. 25 And I just wanted to kind of get staff's 26 perspective with regard to where you believe we have 27 authority to move in this area, just for the Board's 28 informational purpose today. And what I'd -- I'd like to 7 1 do is to, with the BTC staff, help structure the discussion 2 in the IP meeting so that, um -- I think there may be some, 3 um, provisions of AB 71 if we were to look at this whole 4 transfer issue, it may require further statutory action. 5 But, uh, that's my own gut sense at this point. But if 6 staff could respond to, um -- 7 MR. BISHOP: I'm Phillip Bishop with the Special 8 Taxes and Fees Division, and -- 9 MS. MANDEL: Can you speak up? 10 MR. BISHOP: Yes. There is a -- Phillip Bishop 11 with the Special Taxes and Fees Division. 12 There is a statutory, um, provision in the R and T 13 Code that says that a retailer can only buy from a licensed 14 distributor or wholesaler. So there -- so there's a 15 prohibition against purchasing from another retailer. And 16 therefore, a retailer selling to another retailer, it's the 17 retailer that buys the product that has, um, violated the R 18 and T Code. And they, again, don't have evidence in the 19 Business and Professions Code under AB 71 to document that 20 they have paid tax to a wholesaler or a distributor because 21 that retailer they purchased the product from is not a 22 wholesaler or distributor. 23 And the wholesaler or distributor is required by AB 24 71 to issue a license or issue an invoice that includes the 25 license of every, um, retailer that they sell their product 26 to, and to include their license so that when, um, the 27 product is inspected, they know it's tax-paid, especially 28 the tobacco products as opposed to the cigarettes. 8 1 Cigarettes are stamped, but the tobacco products requires 2 going back to the invoice to find out if the taxes were 3 paid on it. 4 So although there's not a prohibition against, um, 5 necessarily selling to another retailer, there is a 6 prohibition by a retailer from buying from another 7 retailer. 8 But, uh, that's our statutory scheme. 9 MS. YEE: Okay. All right. 10 Um, are there questions by Members? I want to -- 11 Mr. Runner, please. 12 MR. RUNNER: Again, that's not the issue here 13 though, is it? 14 MR. BISHOP: Well, true. The issue is retailers 15 purchasing in bulk -- 16 MR. RUNNER: Right. 17 MR. BISHOP: -- multiple locations, and moving the 18 product from one location to another. 19 MR. RUNNER: Right. 20 MR. BISHOP: And when there are, um, our ID staff 21 or BOE staff that, um, inspects the location, is looking 22 for tax-paid -- a tax-paid product, they don't have 23 necessarily the invoice that accompanied that original 24 purchase. 25 MR. RUNNER: Right. Okay. 26 MR. BISHOP: Right. So this -- 27 MR. RUNNER: The core of this issue is the issue of 28 transfer in regards to a -- in terms of, uh, stores that 9 1 are owned by the same individual, correct? 2 MR. BISHOP: Correct. Correct. 3 MR. RUNNER: Okay. And I guess my -- I mean, I 4 think it should -- I think the interested parties is a good 5 direction to go to clarify this issue. 6 Um, I think the problem that we have is, uh, we 7 have been a bit ambiguous in regards to how we're handling 8 this issue. And so I guess regardless of one direction 9 we're going go, whether it's going to say, hey, this is 10 beyond what the statute allowed, or it isn't, either way 11 we've got to create some clarity, I think -- 12 MS. YEE: Yeah. 13 MR. RUNNER: -- for these cases coming forward. 14 MS. YEE: I think, Mr. Runner, my sense of, uh, a 15 key focus of the interested parties process will be how we 16 can provide better guidance to retailers. 17 I think certainly we've seen, um, enough cases to 18 suggest that there's not clear direction or guidance. And, 19 uh, that would be, at a minimum, um, you know, one of the 20 things that I'd like to have come out of the interested 21 parties process. 22 But I do think, with respect to the authority 23 issue, whether it's statutory or regulatory, um, that we 24 need to come to grips with that. And I'd like to have a 25 fairly, um, thorough examination of that through the 26 interested parties process. I'm not convinced that, uh, 27 given the unwieldiness of the AB 71 statute, through no 28 fault of the Chairman, but certainly at the time that we 10 1 had the statutes enacted, and now having had them in 2 practice, uh, I think we've seen where there have been some 3 holes and in this particular issue on transfers. I'd like 4 to have a further exploration with respect to what latitude 5 this Board really has on that issue. 6 MS. STEEL: Just question. 7 MS. YEE: Ms. Steel. 8 MS. STEEL: How we going to invite these people, 9 like especially mom and pop stores, for interest parties? 10 MR. BISHOP: Well, we -- we did send to any 11 retailer that has multiple locations, we derived a 12 registration list and an address list out of our sales and 13 use tax database for -- we sent them a special notice 14 advising them how they could transfer product that we 15 would -- and document it -- that we would accept upon 16 inspection. 17 So we do have that group that we could invite. 18 There are also a number of associations, which Mr. Loper is 19 a representative of, that represent a number of these small 20 or other -- you know, whether it's a distributor or 21 retailer association. So we do have a list of associations 22 that we will -- we plan on inviting, most definitely. 23 MS. YEE: Okay. Other questions or comments? 24 Mr. Horton. 25 MR. HORTON: Um, part of the concern that I'd like 26 for us to address in the process is, is that when you're 27 transferring product from one entity to another, you run 28 the risk of what -- of blending occurring and the 11 1 commingling of legitimate product with illegal products. 2 And so the challenge that the agency has from a 3 auditing and control perspective is, unless you can go in 4 and control the inventory of both locations, 5 simultaneously, then as those -- as that product is 6 transferred from one spot to the other, and if that invoice 7 travels with that product, the difficulty becomes how do 8 you control the inventory, uh, to make sure that you don't 9 have, uh, the commingling of illegal products flowing in 10 and out? 11 In the absence of a -- of some stamp of some sort, 12 it is very challenging for the agency, uh -- and so now in 13 doing so we open up a, um -- we open up an opportunity for 14 criminal acts to occur. And therein is the major concern, 15 uh, when we do that. 16 But I look forward to trying to see if we can 17 address that. But I would say it's going to be extremely, 18 extremely challenging. But look forward to it. 19 MS. YEE: Okay. Thank you very much, Mr. Horton. 20 Um -- 21 MS. MANDEL: I have another different kind of 22 question. 23 MS. YEE: Yes, Ms. Mandel, please. 24 MS. MANDEL: Um, my question -- and I suppose staff 25 will be going back and reviewing this as well. My question 26 had to do with the, um, penalty, suspension period 27 reduction ones. And I suppose through interested parties 28 you'll go back and be talking about as well. There were 12 1 some reasons, I vaguely recall, as to why there were set 2 dates originally -- set periods originally in the 3 regulations of what things could be reduced to, and there 4 may have been some concerns about ensuring consistency and 5 where the Board is delegating. I just don't remember 6 everything. 7 And I know, of course, that was when we first 8 started with it. And so maybe now with experience you'd 9 have more experience in terms of what it ought to be. But 10 I would suggest that as part of that we go back and look at 11 what we were given as to why it was appropriate or in terms 12 of putting set periods in there. Just, you know, as sort 13 of historical background and education. 14 Thanks. 15 MR. BISHOP: Sure. 16 MS. YEE: Thank you, Ms. Mandel. 17 Before we take action on this, I want to go back 18 and further address the point that Mr. Runner had raised 19 with respect to, um, clarity. 20 One of the things I actually would like to see in 21 this whole tobacco and -- cigarette and tobacco products 22 area is perhaps a consolidated publication that speaks to, 23 um, those licensees or permittees that have any touch with 24 cigarette and tobacco products and, uh, what provisions 25 apply to them. 26 I think part of what we have been seeing in the 27 appeals that we've heard is there may be a particular 28 intent at the moment that a potential licensee comes in by 13 1 which they are seeking a license. But in practice, the 2 practice may be broader than being a retailer. But I do 3 think, um, having all of those provisions in one place for 4 anyone doing business that has any interaction with 5 cigarette and tobacco products may be appropriate. Okay. 6 All right. Without any further discussion, is 7 there a motion? 8 MR. HORTON: So moved. 9 MS. YEE: Okay. Motion by Mr. Horton to move this 10 item to the interested parties process. 11 Is there a second? 12 MS. STEEL: Second. 13 MS. YEE: Second by Ms. Steel. 14 Without objection, such will be the order. Thank 15 you very much. 16 ---oOo--- 17 18 19 20 21 22 23 24 25 26 27 28 14 1 AGENDA ITEM 2 2 MS. YEE: Our next item in the Business Taxes 3 Committee is relating to Technology Transfer Agreements. 4 I'll look to Ms. Buehler and Mr. Ferris to introduce the 5 issue. 6 MS. BUEHLER: Thank you. For the second item staff 7 seeks your approval to conduct a study and cooperation with 8 industry. This study would be to determine the feasibility 9 of developing an optional percentage which can be used in 10 estimating the fair market value of tangible personal 11 property in Technology Transfer Agreements involving 12 prewritten software transferred on tangible storage media. 13 I don't believe we have any speakers. So if you 14 have any questions, we'd be happy to answer them. 15 MS. YEE: Okay. 16 Questions, Members? Mr. Horton. 17 MR. HORTON: Just a statement, Member. 18 I would encourage the Department to -- to expand 19 the interested parties meeting, to actually go out to the 20 various different areas. I know in San Diego County there 21 are a number of industries that would very much be 22 interested in providing some input into the process, and we 23 might increase the participation by doing so. 24 So I would ask that you consider that. I know 25 Oracle, HP, and a few others are located down in that area. 26 There are other areas -- 27 MS. YEE: Yeah, Silicon Valley. 28 MR. HORTON: -- particularly in Silicon Valley and 15 1 so forth. 2 So this might be a discussion that we need to take 3 directly to the executives and chief financial officers of 4 the various corporations that could be impacted by this. 5 Because I personally would like to know that the interest 6 rises above the accountants in determining whether or not 7 we should establish a safe harbour and minimize the burden 8 and address the potential 17200 issue. 9 So that interest would be important to me. If the 10 interest is not there, I sort of hesitate to really engage 11 and establish a safe harbour that may create a windfall or 12 may not. So it's very important that we make that 13 determination at the highest level possible. 14 MS. YEE: Thank you, Mr. Horton. 15 I think what I would -- and I'm sure the staff is 16 mindful of this. But certainly in pursuing the study, the 17 study's not going to be done in a vacuum with respect to 18 the perspectives of the entities you've described. And I 19 think that can pretty much be done on a consultative 20 process as the study's being developed. And as we then 21 have the study concluded, um, they certainly are welcome to 22 also participate in the interested parties process with 23 respect to whether we proceed with using this optional 24 percentage. 25 But I would hope the staff -- and they're nodding 26 their heads -- 27 MS. BUEHLER: Yes. 28 MS. YEE: But I know we've had conversations 16 1 before. The industries will definitely be consulted. 2 MS. BUEHLER: Yes, they will. 3 MS. YEE: Yes. Thank you. 4 Other questions, Members? 5 Hearing none, is there a motion? 6 MR. HORTON: Move adoption. 7 MS. YEE: Motion by Mr. Horton to approve, uh, 8 directing staff to conduct the study. 9 Is there a second? 10 MS. MANDEL: Second. 11 MS. YEE: Second by Ms. Mandel. 12 Without objection, such will be the order. 13 Thank you very much. 14 ---oOo--- 15 16 17 18 19 20 21 22 23 24 25 26 27 28 17 1 AGENDA ITEM 3 2 MS. YEE: Okay. And our third item before the 3 Business Taxes Committee are proposed amendments to 4 Regulation 1807 relating to Petitions for Reallocation of 5 Local Tax, and Regulation 1828 relating to Petitions for 6 Distribution or Redistribution of Transactions and Use Tax 7 Filing and Processing Local Tax Petitions. 8 Thanks. Okay. Let me have staff introduce the 9 issue, please. 10 MS. BUEHLER: For agenda item three, Mr. Cary 11 Huxsoll from our Legal Department and Mr. Kevin Hanks from 12 the Sales and Use Tax Department are with me today. 13 MS. YEE: Great. 14 MS. BUEHLER: Staff seeks your approval and 15 authorization to publish proposed amendments to Regulations 16 1807, Petitions for Reallocation of Local Tax, and 1828, 17 Petitions for Distribution or Redistribution of 18 Transactions and Use Tax. 19 This issue is a continuation from the April 26, 20 2011 Business Taxes Committee meeting where the item was 21 sent back to staff. 22 Since the April meeting, staff has been working 23 with several of the interested parties to review and 24 clarify the petition process. As part of this review, 25 staff recognized the need to improve some of the processes 26 at the allocation group level. Most of the changes 27 proposed by staff will be included in future revisions to 28 the Board's procedural manuals. However, two are included 18 1 in the staff recommendation -- recommended revisions to 2 Regulation 1807 and 1828. 3 With regard to the regulation revisions, both 4 Mr. Johan Klehs and the HdL Companies have indicated that 5 they now support the staff recommendation. 6 With regard to the form and procedure manual 7 changes, staff will continue to work with interested 8 parties as the proposed changes go through the revision and 9 approval processes. 10 We have speakers on agenda item three, and we would 11 be happy to answer any questions you may have after their 12 presentations. 13 MS. YEE: Thank you very much, Ms. Buehler. 14 We do have three public speakers on this item. I 15 will ask each of you to introduce yourselves formally for 16 the record, and you have three minutes each. 17 ---oOo--- 18 JOHAN KLEHS 19 City of Livermore 20 ---oOo--- 21 MR. KLEHS: My name is Johan Klehs. We represent 22 the City of Livermore. 23 We support the staff recommendation. And we thank 24 the Board Members and their staff and the senior BOE staff 25 of moving the process along and inserting more deadlines 26 into the process. 27 Second of all, we would like if the Board would 28 just somehow acknowledge how they plan to handle the 19 1 expectations -- Exhibit 1, pages 1 through 5 -- excuse me, 2 1 through 5, yes, in the process here. 3 And third, we had mentioned that we wanted an 4 additional staff person assigned to handle the potential 5 backlog that might take place. Chief Counsel Randy Ferris 6 has told us that the Board is cross-training someone for 7 that purpose, so we're thankful for that. 8 And I'd be happy to answer any questions. 9 MS. YEE: Thank you very much, Mr. Klehs. 10 Next speaker, please. 11 ---oOo--- 12 ROBIN STURDIVANT 13 HdL Companies 14 ---oOo--- 15 MR. SCHUTZ: Good morning, Members. My name is 16 Robin Sturdivant with the HdL Companies. 17 And first of all, um, I'd like to say that we 18 really appreciate the time that staff and both the 19 Allocation Group and the Legal Department, um, took to meet 20 with us and sort of hash over the issues. And we are in 21 support of the proposed regulatory changes. 22 Um, we do have some concerns about the informal 23 issue paper, the staff reported on, on expectations. Um, 24 again, we'd like clarification on how those procedures and 25 policies will be implemented. 26 Um, we were a little concerned that a couple of 27 items mentioned in here were sort of slipped in, um, after 28 the interested parties process, and we weren't really 20 1 afforded the opportunity to discuss them. 2 Um, there's -- there's some concerns with it, the 3 revisions of the forms that we use to submit those 4 allocations. We'd like to be involved with staff, um, when 5 they're going through that process. We have suggestions 6 that we think would be useful for both sides. 7 Um, and we'd also like to, um, really have more 8 time discussing the threshold, um, issue that's mentioned. 9 Um, in the past it was $50. Staff has proposed raising it 10 to 250. We think that's a little excessive. We understand 11 that it would mirror, um, the audit process. But it is a 12 little bit different in that the audit process you're 13 looking to collect that 250. 14 Um, in this case the money's already been paid by 15 the taxpayer; it's just been paid to the wrong person. So 16 it's not a matter of collecting. So we do think that 250's 17 a bit high. We think a hundred is more reasonable. 18 MS. YEE: Okay. 19 MS. STURDIVANT: Um, and again, we thank the staff 20 and the Board Members for their time on this issue. Thank 21 you. 22 MS. YEE: Thank you, Ms. Sturdivant. 23 Next speaker, please. 24 ---oOo--- 25 CHRISTY BOUMA 26 Muniservices 27 ---oOo--- 28 MS. BOUMA: Madam Chair, Members, Christy Bouma 21 1 representing Muniservices Company. 2 We'd just like to come before you and thank you 3 for the time and staff commitment, um, that you 4 demonstrated when this issue came before you in the spring. 5 I know that we sort of concurred with the general 6 feeling of the Board that the process governed by 7 Regulation 1807 was, I would say, dramatically revamped and 8 that, um, some of the indictments about backlogs maybe 9 didn't belong to the revised process, that maybe just 10 needed more time to operate under that process, which is 11 what was required. 12 But, um, as the Board continues to do, demonstrate 13 an interest in continuing the conversations we participated 14 in the process, had an opportunity to share and vent a lot 15 of ideas. And I think the improvements recommended by 16 staff are just that, improvements. 17 And we look forward to continuing to work on the 18 revisions that are now being pushed to the Procedures 19 Manual. 20 And, again, thank you for your time and staff's 21 efforts. 22 MS. YEE: Thank you, Ms. Bouma. 23 Let me just add also, very appreciative of all 24 parties working together on this. I think we have a much 25 improved process with, um, prescribed deadlines. 26 Um, I want to echo the sentiment of several of the 27 speakers with respect to the, um, expectations about future 28 improvements. Um, to the extent that you all are getting 22 1 along so well now, um, I would encourage that the 2 discussions about some of these expectations, um, do take 3 place in an interested parties process before, um, these 4 items are addressed in a manual or elsewhere. 5 I think there should just be clear understanding. 6 We've made some great headway with respect to streamlining 7 this process. One of the areas that I'm particularly 8 concerned about has to do with the furnishing of 9 information. 10 Uh, there's a lot of expectations, kind of 11 front-loaded in this process. To the extent that we want 12 petitions to be robust when we receive them, uh, I think 13 one of the areas I can still see being a little bit of a 14 concern is how much information is enough? And if there 15 isn't enough information, particularly as it relates to the 16 amounts -- and on occasion we're dealing with a taxpayer 17 that may have multiple locations, and so that may not be 18 clear. But some articulation, or perhaps even a question 19 from the petitioning -- of the petitioning entity that 20 speaks to what attempts have been made to try to get this 21 information so that the staff, by the time you get the 22 petition, know pretty much where things have been left off 23 and can pick up the petition, rather than having this 24 back-and-forth process start over again with the rejection 25 of the petition outright. 26 So things like that, which I think can really be 27 addressed easily. But I would like all those expectations 28 to be discussed further in an interested parties process so 23 1 that we're all very clear about what they are. 2 Okay. The other thing is, um, I'll raise this 3 after the discussion, but we have a number of pending cases 4 and I wanted to just kind of get staff's perspective as it 5 relates to how the proposed reg. may overlay on the pending 6 cases that are in the pipeline. 7 Okay. But let me entertain questions first. 8 Mr. Runner. 9 MR. RUNNER: Yeah, I concur with Member Yee on that 10 issue in regards to clarity in regards to expectations. 11 And, um, I'm assuming that as we go ahead and move through 12 the staff recommendation and vote to approve the staff 13 recommendation, if that's how this goes, um, that then the 14 understanding is that in the expectation issues those 15 will -- will kind of be used then and put forward to an 16 interested parties meeting before any of those then would 17 be implemented. So that we -- not only those who are 18 concerned about some of those issues and talked through 19 those can be done, but also that we might be able to 20 reflect back on those as they would be implemented. 21 Is that kind of the understanding that you're 22 hearing? 23 MS. BUEHLER: Yes. As we incorporate items into 24 our manuals, they are open for public comment. And we can 25 certainly do that in an interested party format. 26 MR. RUNNER: And, therefore -- and as a result of 27 that, let me just clarify then. 28 MS. BUEHLER: Mm-hmm. 24 1 MR. RUNNER: When you say they're going to be in -- 2 before they go to an interested party or are input, before 3 they go into the manual, remind me of what are -- how is 4 the Board then reviewing those? 5 MS. BUEHLER: I -- I -- it's my understanding that 6 they are, um, sent to the Board Members and posted to the 7 web for comment. 8 MR. RUNNER: Okay. So these -- 9 MS. BUEHLER: And they are given a certain amount 10 of time for comment, and then we come back and make 11 revisions. And if necessary, repost again. 12 MR. RUNNER: Okay. So my understanding, just to 13 clarify, is that -- I don't know whether it's the three-day 14 review or the -- 15 MS. BUEHLER: No. 16 MR. RUNNER: -- 24-hour review or which review 17 process that is. But just for clarity then, before any of 18 those issues of expectations would be implemented, uh, that 19 would then be done through the interested parties 20 process -- 21 MS. BUEHLER: That's correct. 22 MR. RUNNER: -- and then reported back to Members 23 within that review process so that we can make comment or 24 withhold on those. 25 MS. BUEHLER: Right. 26 MR. RUNNER: Okay. Thank you. 27 MS. YEE: Okay. Thank you, Mr. Runner. 28 MS. STURDIVANT: Excuse me, Ms. Yee. 25 1 MS. YEE: Yes. 2 MS. STURDIVANT: Ms. Yee. When those are posted on 3 the Board's website, is there any notification that goes 4 out to any of the interested parties, or do we just need to 5 check daily? 6 MS. YEE: Well, actually, what I'm going to suggest 7 with respect to these expectations is that it be part of 8 how we normally do the interested parties process so that 9 there is notification. 10 I don't think this is going to take very long. I 11 mean, these are all issues that you're all familiar with. 12 I think it really is about coming to agreement about what 13 the practice will be. 14 So I think, Mr. Runner, this is going to look very 15 much like a traditional interested parties process. I 16 anticipate probably one meeting can really resolve a lot of 17 the lack of clarity, and that we would have this back to us 18 for approval pretty quickly. 19 MR. RUNNER: Thank you. 20 MS. YEE: Okay. Thank you. 21 Other questions, Members? 22 MS. MANDEL: Um, I just have one. 23 MS. YEE: Ms. Mandel. Yes. 24 MS. MANDEL: And it maybe really has more to do 25 with the way that this regulation shows on our website and 26 in the Business Taxes Law Guide. And it came to my 27 attention because of the staff say -- on the transition 28 rules saying it's repealed and readopted. And Muniservices 26 1 was wanting to say that it was amended back in 2008. 2 And I did get an explanation that although the 3 Board had written in its rulemaking file that it was 4 amending the regulation in 2008, that when OAL approved the 5 regulation -- because it was a complete strike-out of the 6 old reg. and a complete -- you know, lots of words new, 7 that OAL approved it as a repealer and new section filed. 8 And that's why the staff recommendation has "repealed and 9 readopted". 10 My question is, on our website, when I look at that 11 regulation and go to the bottom and it gives me the 12 history, it says "amended", so -- which may be why they 13 picked up and said it should say "amended". 14 And I'm just wondering if -- if OAL winds up saying 15 it's a repealer and a new section, why do we say "amended" 16 in our material that we publicly post? Is that -- 17 MR. HANKS: I'm not positive other than it could 18 have been an oversight due to the fact that the initial 19 notice in the rulemaking file indicated that it was being 20 amended, but the final official version does say repealed 21 and new section filed. So we could look into whether we 22 need to change the history on our website in the law 23 guide. 24 MS. MANDEL: Okay. So can you just look into that? 25 Because I think that's where that misunderstanding probably 26 came up. 27 MR. HANKS: Okay. 28 MS. YEE: Thank you, Ms. Mandel. Good point. 27 1 Thank you. 2 Mr. Hanks, can you comment on my earlier question? 3 So we have these proposed amendments. We have pending 4 cases. Is there -- what's the feasibility of actually 5 applying some of these provisions to our pending cases, if 6 appropriate? 7 MR. HANKS: Right. Ms. Yee, we look forward, 8 actually, to implementing some of the changes and 9 modifications in our procedures that we've been able to 10 jointly discuss with the consultants. We're thinking that 11 this is going to streamline our process, and in so doing 12 reduce a backlog that we have of aged petitions. 13 We note that within the past year 13 percent of 14 those aged petitions have been eliminated. We're 15 anticipating, with the hiring of a new Associate Tax 16 Auditor as a gatekeeper, that that person's going to assist 17 us and triage these cases too, assigning them to the 18 correct persons. And I think through this entire process 19 we're going to be able to manage that backlog, reduce it to 20 a manageable level. And we're anticipating seeing actually 21 a large reduction in the numbers of cases within the next 22 year. That's our goal. 23 MS. YEE: Okay. All right. All right. Thank you. 24 I really appreciate the attention to the resources to 25 facilitate this improved process. And what we may do is 26 ask for an update then with respect to what our caseload 27 looks like in a few months. Thank you. 28 Other questions, Members? 28 1 Hearing none, may I have a motion, please? 2 MR. HORTON: So moved. 3 MS. YEE: Motion by Mr. Horton. 4 Is there a second? 5 MS. MANDEL: Second. 6 MS. YEE: Okay. We have a motion by Mr. Horton to 7 approve the amendments and authorize publication. Second 8 by Ms. Mandel. 9 Without objection, such will be the order. Thank 10 you very much. 11 MR. HANKS: Thank you. 12 MS. BUEHLER: Thank you. 13 MS. YEE: Thank you, staff. 14 That adjourns the Business Taxes Committee. Thank 15 you. 16 ---oOo--- 17 18 19 20 21 22 23 24 25 26 27 28 29 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, KATHLEEN SKIDGEL, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 August 23, 2011 I recorded verbatim, in shorthand, to the 10 best of my ability, the proceedings in the above-entitled 11 hearing; that I transcribed the shorthand writing into 12 typewriting; and that the preceding pages 1 through 29 13 constitute a complete and accurate transcription of the 14 shorthand writing. 15 16 Dated: August 30, 2011 17 18 19 ____________________________ 20 KATHLEEN SKIDGEL, CSR #9039 21 Hearing Reporter 22 23 24 25 26 27 28 30