1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 SEPTEMBER 21, 2011 10 11 12 13 14 15 FINAL ACTIONS 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 Board Jerome E. Horton of Equalization: Chairman 4 Michelle Steel 5 Vice-Chairwoman 6 Betty T. Yee 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 For staff: David Levine Legal Department 16 17 ---oOo--- 18 19 20 21 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 SEPTEMBER 21, 2011 4 ---oOo--- 5 MR. HORTON: Ms. Olson. 6 MS. OLSON: Our next, um, item are those matters 7 that have been taken under submission. 8 And our first item is C1, Outlook United. 9 ---oOo--- 10 C3 OUTLOOK UNITED 11 NO. 469679 (BH) 12 ---oOo--- 13 MS. YEE: This is C3, right? 14 MR. RUNNER: C -- 15 MS. OLSON: C3. 16 MR. RUNNER: Yeah, there we go. 17 MS. OLSON: Thank you for the correction. 18 MR. RUNNER: Whew. Because I didn't have that tab. 19 Let's see. Let me, um -- are we there? 20 MR. HORTON: Okay. Discussion, Members? 21 MR. RUNNER: I would, um -- I'd be interested in 22 making an adjustment to -- again, this was -- this was 23 assumed on an 18 percent, uh, markup as opposed to a 15 24 percent. Fifteen percent has been dealt with in some other 25 areas with this issue. 26 I think it was no doubt that in our discussion that 27 was a pretty confusing issue in regards to some of the 28 assumptions in regards to kinds of phones and, uh -- and 3 1 some of the issues of -- of, uh -- well, just the nature of 2 it was, I think even in our discussions it was. 3 So this is a relatively small adjustment. I think 4 it was about two percent that it ends up being, as far as 5 what I can see in the calculations. 6 So I would -- I would move that we would, um, deal 7 with the staff recommendation with a recalculation of going 8 to the -- from fif -- from 18 to 15 percent. 9 MR. HORTON: Um, let me hear from Mr. Levine on 10 that. 11 MR. LEVINE: The 18 percent in the regulation is 12 exceptionally low. It was industry's wish, not 13 department's. And, quite frankly, it is way low. 14 The way the reg. is written, it says if a retailer 15 reports, voluntarily reports, on cost plus 18 percent, 16 we're going to accept it. It's a safe harbor. 17 MR. RUNNER: Right. 18 MR. LEVINE: The Department regards that as saying 19 when it goes in, that it's limited to 18 percent. The reg. 20 doesn't actually say that. It is a safe harbor for a 21 voluntary retailer reporting. 22 So the Department is already giving retailers a 23 break by accepting that the reg. imposes an 18 percent cap, 24 which I don't think it does. 25 Where a -- when the Department goes in and uses 18 26 percent, if the retailer can show that its actual markup is 27 less, then the actual markup is the proper thing. 28 Otherwise, 18 percent, in my view, is -- is already a very 4 1 favorable markup for almost all cell phone retailers. 2 MR. HORTON: Okay. Members, I would be concerned 3 if this was an issue before settlement and an issue of 4 litigation as it relates to the, um -- whether items are 5 obsolete or not obsolete, functionally obsolete or -- or 6 not. 7 And so -- and based on the conversation and the 8 testimony and the taxpayer, I think there is some obsolete 9 phones that have been sold and would ask the Department to 10 make a -- an adjustment for obsolescence of 10 percent. 11 MR. RUNNER: Ten percent on what? 12 MS. STEEL: Ten percent of total sales? 13 MR. HORTON: Mr. Levine, help us out here. 14 MR. LEVINE: I'm not clear -- 15 MR. HORTON: Um -- 16 MR. LEVINE: -- what 10 percent. 17 Quite frankly, there was no way he was selling 10 18 percent obsolete phones. Even he admitted that he was not. 19 But, in any event, I'm not sure what 10 percent 20 you're -- 21 MR. HORTON: On the base would be -- what the base 22 would be. 23 Um, okay. 24 MR. RUNNER: Mr. Chair, real quick in regards to 25 that. And that -- that was my observation, too. And 26 that's why I thought we could solve that with the issue of 27 going to -- to the markup, um, and, you know, and try to 28 make an adjustment there to -- to help, um, accomplish that 5 1 part of the concern in discussion. 2 So I'm obviously -- I'm certainly in favor of 3 seeing some kind of reduction because of that. So if 4 there's another way to do it besides moving from the 18 to 5 15, that's fine. I just don't know, when you say 10 6 percent, what you mean 10 percent on. 7 MR. HORTON: Well, I would say that 10 percent of 8 the product that is -- well, let's say -- Mr. Levine seems 9 to be closer to the -- to the industry than I am currently. 10 So let's reduce it down to five percent of the product that 11 was sold was in fact, uh, economically obsolete and, 12 therefore, fall within the provisions of the law that 13 categorize that product. 14 MS. STEEL: I like 10 percent better. 15 MR. RUNNER: Again, I'm trying to figure out what 16 number we're coming off of. 17 MR. HORTON: Well, I mean with -- I'd have to sort 18 of pull the audit up to give you guys a number. Um, that's 19 why I'm trying to rely on the -- 20 MR. LEVINE: Can -- when a retailer -- this 21 regulation is much simpler than what we did before. 22 Because the reason for this -- as I think the Members 23 understand, but it bears explaining -- is that the retailer 24 gets the money from the consumer and, when selling with the 25 service contract, gets a payment from the service provider. 26 We used to just tax on those additional 27 commissions. And, in fact, they were paid monthly in the 28 old days and we would tell the retailer, "You have to keep 6 1 paying tax monthly." 2 So it was a complicated system, but we were trying 3 to follow the law, gross receipts. 4 When a retailer sells a phone with a bundled 5 transaction, it can't be obsolete because -- for purposes 6 of the reg. because the retailer is getting money from the 7 service provider, which is what the reg. is attempting to 8 capture by the 18 percent cap; it's the additional money 9 that the retailer's getting for the sale. 10 If the retailer sells a phone and the customer 11 agrees to get service in return for the lower price, the 12 retailer's getting that lower price and more. And that's 13 what the regulation taxes. The rule for obsolescence is 14 that we only tax the actual amount that's paid. So if it's 15 a bundled transaction by definition, it's not an obsolete 16 phone. 17 MR. HORTON: Yeah, see, therein -- therein is where 18 I differ. Um, and that is a -- I don't even know if it's a 19 rule. I haven't read that anywhere. Um, and I certainly 20 would be -- would welcome an opportunity to see it codified 21 somewhere. 22 I think it's a practice, and I happen to disagree 23 with the practice that you have to have -- to be able to 24 sell the phone, when you sell the phone and it's -- and 25 you're able to sell the service at the same time, therefore 26 the phone is not obsolete. 27 And of course I wasn't necessarily privy to the 28 original debate and all of those who discussed it. But if 7 1 you look at the regulation, and when the regulation is 2 open-ended and it was going in and that matter was to be 3 taken into court, I would -- I would believe that the court 4 would use the layman's perception of what obsolescence is 5 and say that a reasonable person would have perceived this 6 to this be obsolete by virtue that it's no longer 7 manufactured. There is no longer -- there is an economic 8 disadvantage in purchasing, in acquiring the property, 9 irrespective of the ability to tie it into. 10 So unless there is -- unless there is some 11 documentation other than practice, we're talking about the 12 practice and policy of the agency, and I just, uh, would 13 differ there. 14 So, Mr. Levine, is there -- 15 MR. LEVINE: I don't think -- 16 MR. HORTON: Can someone help me out? 17 MR. LEVINE: I don't think the reg. supports that. 18 I think, especially when you understand the underlying 19 purpose of it, it can't be up -- we're taxing what the 20 retailer gets. 21 MR. HORTON: No, no. I'm not -- I'm not really 22 asking what -- 23 MR. LEVINE: Oh. 24 MR. HOROTON: -- I think or what you think or -- 25 What I want to know is, what does it say? Does it 26 define functional obsolescence in the way that we have -- 27 MR. LEVINE: No, no, no. It says economically -- 28 MR. HORTON: One second, please -- in the way that 8 1 we have traditionally interpreted? 2 MS. MANDEL: You mean -- you mean the backup 3 information that went before adopting the reg.; is that 4 what you're looking at? Because the reg., I think, just 5 has the one sentence. 6 MR. LEVINE: Well, two. Two. 7 MS. MANDEL: Or two sentences. 8 MR. LEVINE: Two references tops. 9 MS. MANDEL: Right. But the same -- 10 MR. LEVINE: And I don't remember what the -- like 11 the issue paper, and we can look at that. 12 MR. HORTON: Yeah, see, one recommendation that I 13 would make, and maybe we need to do this as well, is just 14 that the taxpayer's sort of caught in the middle. Uh, the 15 recommendation would be to revisit this and to take a look 16 at what, uh, what the industry and what, uh, the -- what a 17 layperson or what the courts might interpret it. And what 18 we may need to do very well is to further define that in 19 the regulation so that we have that protection. 20 Um, it just concerns me that that is a practice; 21 and the practice appears to be, from my perspective, 22 inconsistent with, uh, what's occurring currently in the 23 marketplace. 24 MR. RUNNER: Just -- just a follow-up question in 25 terms of one of the answers that you had given to the 26 Chair, Mr. Levine. Did I hear you say that -- that the 27 assumption is if somebody sells an obsolete phone that's 28 bundled, that -- that the seller is getting some additional 9 1 money for that phone from the provider? 2 MR. LEVINE: That's the reason it's bundled. 3 MR. RUNNER: Okay. 4 MR. LEVINE: That's the whole reason we have this 5 regulation. 6 MR. RUNNER: Right. 7 MR. HORTON: Yeah. 8 MR. RUNNER: Is that -- 9 MR. HORTON: That's it. 10 MR. LEVINE: That's bundled. That's what bundled 11 means. 12 MR. RUNNER: And the value of the phone or the -- 13 MR. LEVINE: I'm sorry, I missed that. 14 When it's bundled, you go in and you say I want to 15 buy that phone -- 16 MR. RUNNER: Right. 17 MR. LEVINE: -- for $50 and they say two-year 18 service plan -- 19 MR. RUNNER: Yes. 20 MR. LEVINE: Well, I just want the phone for $50. 21 That phone without the service plan is $250. Because they 22 literally -- they get money from service plans. 23 MR. RUNNER: Okay. You're right. I get that. But 24 if I -- if I buy my iPhone for a hundred bucks, I get the 25 fact that that's a value for the -- but if I buy a -- if I 26 buy a old phone and I'm actually buying -- if I actually 27 pay the value of that old phone, okay, and -- and yet I'm 28 buying it bundled, so I'm not -- I'm not -- the provider 10 1 isn't underwriting the value of that phone at all. I'm 2 paying the cost of that phone. It's not like a new 3 iPhone. 4 MR. HORTON: Yeah. I may be able to help clear it 5 up, uh -- because I kind of agree with Mr. Levine in 6 relation to the test. The test didn't reflect any obsolete 7 transactions. And so the presumption that was made by the 8 test was, is that as a result of this test, there are no 9 direct sales of obsolete phones, and they all fall into the 10 categories as -- as set up by the test, the sample here. 11 And the taxpayer's testimony, as I recall, without 12 going back and looking at transcripts, is that: 13 "Do you purchase used phones?" 14 "Yeah." 15 "Do you sell phones, uh, periodically without, uh, 16 the service agreement?" 17 "Yeah." 18 "Um, what percentage?" 19 Well, his percentage was extremely high. And so 20 then the Department's response: 21 "Well, it doesn't exist. It couldn't exist because 22 you've always got to sell the phone with the service 23 agreement." 24 And the test indicated as such. 25 I believe that -- that he sold obsolete phones, 26 based on his testimony, and would say that the -- a direct 27 five percent adjustment on taxable sales to reflect sales 28 of obsolete phones, or some adjustment based on the will of 11 1 this body, um, would be in order. Uh, or we send it back 2 to verify whether or not that testimony can be 3 substantiated, uh, with documentation. 4 So I -- so I agree with you, Mr. Levine, relative 5 to if there's a service agreement as -- as indicated or by 6 the test period, but they didn't look at this on an actual 7 basis. The testimony says it does exist. I believe it can 8 exist. And fortunately -- 9 MR. LEVINE: I'm sure the Department will be happy 10 to take another look at it. 11 I didn't hear -- maybe I wasn't paying attention. 12 I didn't hear his testimony -- his statement the same way. 13 I understood him to say that almost all of his -- the 14 Department found that virtually -- there were hardly any 15 phones that were not sold with the plan and that he paid 16 the same amount. 17 MR. HORTON: But that was -- that was -- my 18 apologies for interrupting. But that was -- their 19 statements, all of their statements are based on that 20 sample period. I believe the period was February. Uh, 21 this test, admittedly so on their part, was not done on an 22 absolute basis. And so they made certain presumptions 23 based on that test. 24 MR. LEVINE: I'm sure the Department will be happy 25 to take another look with whatever instructions you give. 26 MR. HORTON: Okay. 27 MR. RUNNER: Can't we come up with an amount? 28 MS. STEEL: Yeah, just have a valid amount and -- 12 1 MR. HORTON: I mean, as I said, Members, I believe 2 it exists. I mean, I happen to be one of those, uh, 3 abnormal individuals that go in and buy an obsolete 4 phone. 5 MS. STEEL: Actually, during the hearing, he was 6 talking about obsolete phones. 7 MR. HORTON: Yeah. 8 MS. STEEL: So, yeah. 9 MR. RUNNER: Quantify it in a motion. 10 MS. STEEL: Yeah. So by percent -- 11 MR. HORTON: Well let me see. 12 MS. STEEL: 5,000 -- 13 MR. HORTON: I don't want to -- I don't want to 14 drive a motion. But based on what Mr. Levine has shared, 15 what seems to be relatively close, 10 percent seems to be 16 high, um, and five percent's -- we split -- five percent is 17 reasonable and I would certainly be supportive of a motion 18 that allowed the five percent adjustment for obsolescence, 19 adjustment to the sales -- to the taxable sales for the 20 sale of obsolete phones. 21 MS. MANDEL: Okay. That's even different than what 22 you said before. Five percent adjustment to taxable sales, 23 they'll take five percent off the taxable sales. 24 MS. STEEL: From the taxable -- right. 25 MR. LEVINE: If you're -- if you're -- if that's 26 five percent of the sales were obsolete phones, then we -- 27 a sale of an obsolete phone will be accepted, even if it's 28 under 50 percent. That's the critical rule in the reg. -- 13 1 MS. YEE: Right. 2 MR. LEVENE: -- is if you sell a phone for other -- 3 under 50 percent, we regard you as a consumer, taxable on 4 cost, except -- 5 MR. HORTON: When you sell an old phone. 6 MR. LEVINE: -- if you sell an obsolete phone 7 because you can't sell it. 8 MR. HORTON: Right. 9 MS. YEE: Mm-hmm. 10 MR. LEVINE: So even if you sell it under half. So 11 basically the rule is sell an obsolete phone, whatever you 12 get, even if it's less than 50 percent of your cost, which 13 is normally a long time ago -- you don't sell something for 14 under 50 percent that you just bought. 15 MR. HORTON: Well, everyone agrees that that 16 happened. I mean, that's -- that's not an unknown. 17 MR. LEVINE: Oh, yeah, that certainly happens. 18 They have -- have things on their shelf, and if they can 19 get under 50 percent, that's better than the alternative. 20 MR. HORTON: Mm-hmm. 21 MR. LEVINE: Um, that certainly happens. I don't 22 think it happens a lot. 23 But anyway, if we were going to regard five percent 24 of the sales as obsolete, then it would be taxed based on 25 what the customer paid. It wouldn't be an adjustment. I 26 mean, as Mr. Runner said, you can make -- you can take into 27 account, however you want, whether it's a reduced markup or 28 whatever. But if it were just accept five percent sales as 14 1 obsolete, the adjustment would be to go in and accept five 2 percent sales based on whatever the customer paid for the 3 phone and ignore any amount -- any of the rest of the reg., 4 any amount paid. 5 MR. HORTON: Well, it seems to me that the 6 simplicity of doing it would be to say that the test 7 resulted in a, um -- in a taxable sales ratio of -- I mean, 8 a taxable amount in this case -- I don't have the numbers 9 in front of me, but X. And that that is reflective of the 10 entire audit period. So, therefore, if five percent should 11 have been sold at the price that it was sold, that we 12 should just go in -- we could just go in and adjust the 13 taxable measure by five percent. 14 MS. MANDEL: If you just adjust the taxable measure 15 by five percent, then you're not messing around with -- 16 MR. HORTON: -- with all -- 17 MS. MANDEL: -- five percent of phone sales. And 18 they probably weren't all at the same cost price. And what 19 cost prices are you going to pick as being the five 20 percent? I think that's why he's going with the 21 simplistic five -- or simpler, simpler. 22 MR. RUNNER: Yeah, I think -- I think we all 23 recognize there's some -- there's some fuzziness in this 24 issue. 25 MR. HORTON: Right. 26 MR. RUNNER: And so whatever we can do. And it 27 seems to me, I would certainly be supportive of reducing 28 the taxable sales by five percent because of it. That 15 1 certainly is a way to get -- 2 MR. HORTON: So moved. Is there a second? 3 MS. MANDEL: Okay. Yes. 4 MR. HORTON: Second by Ms. Mandel. 5 MS. MANDEL: Oh. No, I thought I heard a second 6 down there. 7 MR. HORTON: Second by -- 8 MS. STEEL: I second. 9 MR. HORTON: -- Member Steel. 10 Objection, Members? 11 Hearing none -- 12 MS. YEE: No objection. May I make a comment? 13 MR. LEVINE: Can I just clarify what -- the audit 14 taxable sales were 810,000. 15 MS. YEE: Mm-hmm. 16 MR. LEVINE: And he reported a little bit less than 17 half of that. So the deficiency is 431. 18 Is this five percent off the 810,000, reducing 19 audited taxable sales by five percent? 20 MS. STEEL: Yes. 21 MR. RUNNER: Mm-hmm. 22 MR. HORTON: That's six and a half dozen, one way 23 or the other. I mean, I don't know if that makes a 24 difference. But let's go with-- 25 MR. LEVINE: It makes a big difference which number 26 we apply it to. 27 MR. HORTON: Okay. Let's go with that. That 28 works. 16 1 MS. YEE: Mr. Chairman. 2 MR. HORTON: So -- Member Yee. 3 MS. YEE: Um, I didn't ask the question, but I 4 assume that this, um, petitioner is still in business, 5 Mr. Levine? 6 MR. LEVINE: I believe so. 7 MS. YEE: I didn't get the sense, when he walked 8 away from this hearing, that he understood really how the 9 law applies. And I would love some -- 10 MR. LEVINE: Mm-hmm. 11 MS. YEE: -- focused attention to help him. He's 12 very focused on the market prices. 13 MR. LEVINE: We'll ask the Department to sit down 14 with him. 15 MS. YEE: All right. Thank you. 16 MR. HORTON: What's that? Oh, flight? Oh. 17 There's a motion and a second. 18 Objection, Members? 19 Hearing none -- thank you very much, Mr. Levine. 20 Appreciate your input -- such will be the order. 21 ---oOo--- 22 23 24 25 26 27 28 17 1 MR. HORTON: Ms. Olson. 2 MS. OLSON: Our next item is C4, Cherie Rose, 3 Incorporated. 4 ---oOo--- 5 CHERIE ROSE, INCORPORATED 6 NO. 466880 (GH) 7 ---oOo--- 8 MS. MANDEL: Okay. 9 MR. HORTON: Discussion, Members? 10 Member Mandel. 11 MS. MANDEL: Sure. This was one -- this was the 12 one where we had all the documents coming in, in the last 13 week or so. The Department views that they kind of looked 14 at everything, um, but they didn't really sit down with the 15 taxpayer. And it sounded like there were multiple periods 16 of time during the audit period as the taxpayer's person 17 became more familiar with the systems that she was using or 18 needing to use. 19 And I was wondering if Mr. Levine had any 20 particular thoughts. 21 MR. HORTON: How about a reaudit? 22 MR. LEVINE: I recommend a reaudit, and the 23 Department is amenable, too. 24 I see three periods. There was the early period 25 where -- 26 MR. HORTON: I think we have the support, 27 Mr. Levine. 28 MR. RUNNER: Mm-hmm. 18 1 MR. HORTON: Moved by Mr. Runner. Second by Ms. 2 Mandel. 3 Without objection, such will be the order. Thank 4 you. 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 19 1 MR. HORTON: Ms. Olson. 2 MS. OLSON: Our next item is C5, S.J. Toons, 3 Incorporated. 4 ---oOo--- 5 S.J. TOONS, INCORPORATED 6 NO. 49139 (GH) 7 ---oOo--- 8 MR. HORTON: Members? 9 MS. MANDEL: This one has the revised staff 10 recommendation. 11 MS. YEE: Move to adopt the staff recommendation as 12 revised. 13 MR. HORTON: As revised? 14 MS. YEE: Mm-hmm. 15 MR. HORTON: Been moved by Member Yee to adopt 16 staff recommendation as -- as revised. 17 Is there a second? 18 MS. STEEL: What was the revised one? 19 MR. HORTON: Uh, the revised was to 15 percent on 20 the mixed drinks, taking a two percent -- 21 MS. MANDEL: Two ounces. 22 MR. HORTON: Two ounces -- 23 MS. YEE: Yeah. 24 MR. HORTON: -- on the mixed drinks. 25 MS. MANDEL: And delete the negligence penalty. 26 MR. HORTON: Delete the negligence penalty. 27 MS. STEEL: I think markup is the way too high. 28 MR. HORTON: Okay. Let's see if we can put that on 20 1 the table, and then we'll discuss it. 2 Is there a second to the motion? 3 MS. MANDEL: I'll second. 4 MR. HORTON: Second by Ms. Mandel. 5 Discussion, Members? 6 MS. STEEL: I think average markup is about 300 7 percent, for this one came off for 420 percent. So I think 8 that's the way too high. 9 So I just object. 10 MR. HORTON: Further discussion, Members? 11 Objection noted -- 12 MS. STEEL: Objection. 13 MR. HORTON: -- Member Steel. 14 Ms. Olson, please call the roll. 15 MS. OLSON: Mr. Horton. 16 MR. HORTON: Aye. 17 MS. OLSON: Ms. Steel. 18 MS. STEEL: No. 19 MS. OLSON: Mr. Runner. 20 MR. RUNNER: No. 21 MS. OLSON: Ms. Yee. 22 MS. YEE: Aye. 23 MS. OLSON: Ms. Mandel. 24 MS. MANDEL: Aye. 25 MS. OLSON: Motion carries. 26 ---oOo--- 27 28 21 1 MS. OLSON: Our next item is C6, Family Leisure 2 Products, Incorporated. 3 ---oOo--- 4 FAMILY LEISURE PRODUCTS, INCORPORATED 5 NO. 491614 (OH) 6 ---oOo--- 7 MS. MANDEL: Oh -- 8 MR. HORTON: Is there a motion, Members? 9 MS. MANDEL: -- this is the one that didn't come. 10 Move the staff recommendation. 11 MS. YEE: Second. 12 MR. HORTON: Move staff recommendation by Member 13 Mandel. Second by Member Yee. 14 Objection, Members? 15 Hearing none, such will be the order. 16 ---oOo--- 17 18 19 20 21 22 23 24 25 26 27 28 22 1 MR. HORTON: Ms. Olson. 2 MS. OLSON: Our next item is C Saven (verbatim) -- 3 excuse me, C7, Jacob Zachariah. 4 ---oOo--- 5 JACOB ZACHARIAH 6 NO. 437728 (JH) 7 ---oOo--- 8 MR. HORTON: That's cute. 9 Is there a motion, Members? 10 MS. YEE: Move to adopt the staff recommendation. 11 MR. HORTON: Moved by Member Yee to adopt staff 12 recommendation. 13 Second by Ms. Mandel. 14 Discussion? Objection? 15 MS. STEEL: Is that fraud penalty still on? 16 MR. LEVINE: Yes. 17 MS. YEE: Yes. 18 MS. STEEL: Is that going to be on the record of 19 this taxpayer, if he doesn't pay it? 20 MR. LEVINE: Well, it's on our record, but it's 21 confidential. 22 MS. STEEL: But not on his record. Okay. 23 MR. LEVINE: Well, except that this hearing isn't 24 confidential, so it could be found. Someone could search, 25 look at the minutes. 26 MS. STEEL: But it doesn't go on to the personal. 27 MR. HORTON: Yeah, it won't affect him 28 financially. 23 1 MR. LEVINE: I don't know what happens in the 2 credit report, but it seems unlikely to me -- 3 MS. STEEL: Okay. 4 MR. LEVINE: -- that this could get into that. 5 MS. STEEL: Okay. 6 MR. HORTON: There's a motion and a second. 7 Objection, Members? 8 Hearing none, such will be the order. 9 ---oOo--- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 24 1 MR. HORTON: Next item, Ms. Olson? 2 MS. OLSON: Next item is D1, Atik Aman and Rangina 3 Aman. 4 ---oOo--- 5 RATIK AMAN AND RANGINA AMAN 6 NO. 468086 (MT) 7 ---oOo--- 8 MS. STEEL: Can we -- 9 MR. HORTON: Members? 10 MS. STEEL: Can we release just two years of 11 interest? You know, Department sent the owner a letter on 12 April 2005, and then Department waited until September 7 -- 13 uh, 2007. So there is about two and a half years, um, 14 difference there that Department waited too long. 15 So if we can just waive that interest during that 16 period, but I give Department about three months after 17 first letter goes out. So July of 2005 to September of 18 2007. I don't know how much that is, but just interest 19 only. 20 MR. HORTON: Okay. 21 MS. STEEL: That's my motion. 22 MR. HORTON: The motion -- 23 MR. RUNNER: Second. 24 MR. HORTON: Well -- 25 MS. STEEL: Motion is -- 26 MR. HORTON: Move by Member Steel. Second by 27 Mr. Runner. 28 I'm going to ask Mr. Levine to sort of codify the, 25 1 the, the, the -- 2 MS. STEEL: I can do that. 3 Adopt the staff recommendation -- 4 MR. HORTON: No, no. I mean the law as it 5 results -- 6 MS. STEEL: Oh. 7 MR. HORTON: Just give us the law as it results to 8 the Board waiver. 9 MR. LEVINE: You have the authority to relieve 10 interest if you find that there was an unreasonable 11 delay. 12 MR. RUNNER: Mm-hmm. 13 MR. HORTON: Okay. 14 Motion? 15 MS. STEEL: So, adopt the staff recommendation for 16 the fee and late payment penalty, but abate interest from 17 July 1st, 2005 to August 31st, 2007. 18 MR. HORTON: On the basis of unreasonable delay. 19 MS. STEEL: Yes. 20 MR. HORTON: Second by Mr. Runner. 21 Objection, Members? 22 MS. MANDEL: Um, yeah. 23 MS. YEE: Yeah. 24 MR. HORTON: Uh, okay. 25 MR. RUNNER: I think the whole issue there was the 26 notification process, right? Isn't that what the concern 27 was, is that -- 28 MS. STEEL: That's what we corrected. 26 1 MR. RUNNER: And we've actually corrected the 2 notification process now. 3 MS. STEEL: Yeah. Because we were wrong, and now 4 we are doing better practice. 5 So I think this taxpayer deserves a little bit of 6 interest for delay. 7 MR. HORTON: There was a period of time -- and I 8 apologize on my cognizance of that -- a period of time that 9 the Board admittedly said, hey listen, we should have 10 followed up and there should have been notice. 11 MR. RUNNER: Mm-hmm. 12 MR. HORTON: Maybe Mr. Levine can give us some -- 13 MR. LEVINE: I don't know if there's been an 14 admission of that. 15 This program has been evolving. 16 MR. HORTON: Well, we didn't because we didn't have 17 the funding, and then we finally got the funding. 18 MR. LEVINE: Things were way worse when it first 19 started and the Board has gotten -- 20 MR. HORTON: Better. 21 MR. LEVINE: -- staff, the support to get more -- 22 MR. HORTON: It's not our fault. 23 MR. LEVINE: And has insisted on better back and 24 forth, so now they're doing it. 25 Yeah, things could have been better. 26 MR. HORTON: I agree. 27 MR. LEVINE: But it was a learning process for 28 everyone. 27 1 MR. HORTON: No, I think our team did a fabulous 2 job. I just think we just didn't have the proper funding, 3 staffing support to get it done. But such be the case. 4 Objection, Members? 5 Hearing none, such -- 6 MS. MANDEL: Yeah, um -- 7 MR. HORTON: -- will be the -- 8 MS. MANDEL: Yeah, just abstain. 9 MR. HORTON: So -- in such case, Ms. Olson, please 10 call the roll. 11 MS. OLSON: Mr. Horton. 12 MR. HORTON: Aye. 13 MS. OLSON: Ms. Steel. 14 MS. STEEL: Aye. 15 MS. OLSON: Mr. Runner. 16 MR. RUNNER: Aye. 17 MS. OLSON: Ms. Yee. 18 MS. YEE: No. 19 MS. OLSON: Ms. Mandel. 20 MS. MANDEL: Abstain. 21 MS. OLSON: Motion carries. 22 MR. LEVINE: That's July -- beginning of July to 23 the end of August? 24 MS. STEEL: July 1st through -- yeah -- August 25 31st. 2005 to 2007. 26 ---oOo--- 27 28 28 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 September 21, 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 1 13 through 28 constitute a complete and accurate transcription 14 of the shorthand writing. 15 16 Dated: September 26, 2011 17 18 19 ____________________________ 20 KATHLEEN SKIDGEL, CSR #9039 21 Hearing Reporter 22 23 24 25 26 27 28 29