1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 5901 GREEN VALLEY CIRCLE 3 CULVER CITY, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 OCTOBER 26, 2011 10 CORPORATE FRANCHISE AND PERSONAL INCOME TAX HEARINGS 11 APPEAL OF 12 WILLIAM BOWES 13 NO. 559983+ 14 AGAINST PROPOSED ASSESSMENT OF 15 ADDITIONAL INCOME TAX 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 5 Betty T. Yee Member 6 George Runner 7 Member 8 Marcy Jo Mandel Appearing for John 9 Chiang, State Controller (per Government Code 10 Section 7.9) 11 Diane G. Olson Chief 12 Board Proceedings Division 13 For Board of 14 Equalization Staff: John Johnson Tax Counsel 15 16 For Franchise Tax Board: Suzanne Small 17 Tax Counsel 18 Jozel Brunett Tax Counsel 19 20 For Appellant: William Bowes Taxpayer 21 John Laszloffy 22 Witness 23 ---oOo--- 24 25 26 27 28 2 1 5901 GREEN VALLEY CIRCLE 2 CULVER CITY, CALIFORNIA 3 OCTOBER 26, 2011 4 ---oOo--- 5 MR. HORTON: Ms. Olson. 6 MS. OLSON: Next item is B17, William Bowes. 7 Please come forward. 8 MR. RUNNER: Look, a demand. 9 MR. HORTON: Surprise. 10 Mr. Johnson, would you please introduce the 11 issues in this case. 12 MR. JOHNSON: The issues in this case are 13 whether Appellant has demonstrated any error in the 14 proposed assessment issued by Respondent; whether 15 Appellant has established reasonable cause for the 16 abatement of the late filing penalty or the notice and 17 demand penalty; whether Appellant has shown that the 18 following enforcement fee should be abated; and whether 19 the Board should impose a friz -- sorry -- frivolous 20 appeal penalty under Revenue and Taxation Code Section 21 19714. 22 MR. HORTON: Thank you. 23 The Appellant will have 10 minutes to make 24 their presentation, commencing with their introduction. 25 We will return to allow you five minutes on rebuttal. 26 MR. BOWES: Thank you. Good afternoon, Board. 27 My name is William Bowes, and with me is my witness John 28 Laszloffy. 3 1 Uh, basically we've requested, uh, from the 2 Franchise Tax Board for determination, uh, on many 3 issues according to filing. And, uh, we sent -- I sent 4 a, uh, copy that we were served from the Franchise Tax 5 Board as far as, uh, documents and was sent as an 6 amendment to, uh, my appeal. 7 And with that, the Franchise Tax Board came 8 back and stated that they have no documentation for many 9 or all of the issues that we've asked for documentation 10 on which would determine filing requirements. 11 Thank you. 12 MR. HORTON: Thank you. Your witness? 13 MR. LASZLOFFY: I'll elaborate on that. 14 Bill and I were in the same boat. Both of us 15 have studied the law since the 1980s. We are nonfilers 16 because the law does not require us to file federal or 17 state income taxes. There are no liability statutes. 18 I've done exhaustive research in the law 19 library for over 20 years. I, uh -- that's my 20 expertise, is federal and state income tax; not on 21 deductions, but on the actual law itself. 22 I have written the IRS in the past and they 23 have responded on income tax, to show me the 24 documentation under Administrative Law and Public 25 Records Act where I have been made statutorily liable 26 for a California state income tax; where Franchise Tax 27 Board has jurisdiction over me; where I can make out a 28 tax return without waiving my First, Fourth, and Fifth 4 1 Amendment rights; where the Franchise Tax Board -- the 2 documentation where they get the required personam 3 jurisdiction for me; where, as a California resident, 4 that Section 17041 applies to California residents of 5 the state, in the state, applies to, means California, 6 State of California. 7 They have responded to me by three disclosure 8 officers, including the head disclosure officer. They 9 have no such documentation. There is no statute. In 10 fact, when you leave here tonight, go into your code 11 book in the index and look up "liability". It lists all 12 the different taxes there. Income tax is not listed. 13 Whether you use West Law or Lexis, it doesn't matter. 14 You have liability under other types of taxes 15 in California, like tomorrow you're going under use tax. 16 In your California Revenue and Taxation Code there is a 17 statute that makes an individual liable for the use tax. 18 There is no such statute in California income tax, 19 that's why it's voluntary. 20 We've -- I've presented this to the Board twice 21 and others have, too. They've ignored it and represent 22 the Franchise Tax Board. But now, since Bill has 23 received that same kind of documentation from a 24 different disclosure officer, four different disclosure 25 officers have stated in writing -- we have the originals 26 in a safe place -- that they have no documents to back 27 up their written statement of facts. What we have now, 28 I believe, is RICO, racketeering. 5 1 I have studied the racketeering statutes, the 2 federal racketeering statutes, Title 18, Section 1961 3 and 62, and the Franchise Tax Board fits all four 4 descriptions. And I -- we have the documentation now, 5 if we want to, to take it into federal court. 6 Should the Board sustain the Franchise Tax 7 Board -- because Bill has already written to the 8 Franchise Tax Board as of two months ago to withdraw, 9 um, this, based on the documentation that they have no 10 jurisdiction by their own written admission, or they can 11 find no documentation where he's been made statutorily 12 liable, or that as a resident of state that Section 13 17041 applies to him. And they continued that anyone 14 that attaches to this instant case, I believe, can be 15 sued as co-conspirators. 16 We rest our case. 17 MR. HORTON: Thank you very much. 18 MR. LASZLOFFY: This has been going on for 19 decades now, and it's time to bring it to an end. 20 MR. HORTON: Thank you very much. 21 The Franchise Tax Board will have 10 minutes to 22 make their presentation. Please commence with your 23 introduction, please, for the record. 24 MS. SMALL: Good afternoon, Chairman, Members 25 of the Board. My name is Suzanne Small. I represent 26 the Franchise Tax Board. And to my right is Jozel 27 Brunett, my colleague. 28 In this particular case, Mr. Bowes failed to 6 1 file a 2008 tax return. 2 MS. YEE: Pull the microphone right up 3 against -- 4 MS. SMALL: Better? 5 MR. HORTON: Yes. 6 MS. SMALL: Okay. Failed to file a 2008 tax 7 return. We received information that he had a 8 contractor's license. Based on contractors licensed in 9 the same manner who had filed tax returns for the year, 10 we made an assessment of income for him for that year, 11 and that is what's before you at this point. 12 Um, as far as filing history, Mr. Bowes has 13 never filed a California tax return. We have issued 14 NPA's to him for '94 through '98, 2000, 2002, 2005 and 15 2007, all of which are final. 16 MR. HORTON: Thank you. 17 On rebuttal. 18 MR. LASZLOFFY: Before they can have any 19 jurisdiction, they have to have a statutory 20 jurisdiction. 21 I'm very familiar with the California 22 Constitution, Article XIII, on which the law gives 23 Congress, you people there, the right to make laws. But 24 you've made no law. 25 If you read California Government Code, uh, 26 Section 18, it defines state, quote, "State means the 27 State of California, and as an alternative includes the 28 District of Columbia and its territories." 7 1 There's five different California codes, like 2 the Department of Fish and Game, that has the exact same 3 definition. When you get into the California Revenue 4 and Taxation Code, they state, state 17018 as "state 5 includes the District of Columbia and its territories." 6 California's not mentioned. 7 We've requested numerous times under the 8 Freedom of Information Act, under Administrative Law and 9 the California Public Records Act where of the state, in 10 the state, for purposes of income tax revenue code for 11 part ten applies to California residents? They said we 12 can find no documentation. 13 The burd -- if I understand my law correctly, 14 and I represent myself in federal court and state court 15 all the time due to my own pleadings and, uh, motions 16 and such, but isn't the burden of proof always on the 17 accuser? How did this get flipped around, that the 18 burden of proof is on the defendant? We're not on trial 19 here. 20 Prove the jurisdictional issue and then you 21 have -- then we have no argument. But until you can 22 prove where we've been made statutorily liable as a 23 matter of law -- and by the way, when I say this, the 24 federal government has stated that any time, under the 25 Privacy Act, that any time a government under an 26 executive branch of government asks for information, it 27 is mandatory that they tell you whether it's voluntary 28 or mandatory. If it is a mandatory, they're required to 8 1 quote the law that makes the questions they ask for 2 mandatory. 3 The IRS in their Privacy Act uses Statute 6001, 4 6011 and 6012. 6001 and 6011 are very lengthy. The 5 first sentence says it all: "Any person made liable, 6 required to file for any tax". Both those statutes say 7 the same thing. It doesn't make anyone liable. 8 There are statutes in Title 26 that make people 9 liable for alcohol, firearms and tobacco, and for 10 wagering. Subtitle eight makes no one liable. 11 Your own code book, if you look under index, 12 you'll find no statute that makes anyone liable for a 13 state income tax. In fact, on your own Board of 14 Equalization website, you'll go into great lengths about 15 alcohol, firearms and tobacco, about gasoline tax, sales 16 tax which is mandatory. And then when you list all your 17 taxes and fees from A to Z, all your taxes, income tax 18 is not listed. 19 Same way with the Franchise Tax Board. You go 20 on their website, they'll into great lengths on other 21 kinds of taxes. And we're not tax protesters. I 22 believe in paying my fair share. I believe in paying my 23 property taxes because there are services rendered. 24 I voted years ago for an increase in gasoline 25 sales tax to increase our roads. Those are mandatory 26 taxes. But we will not pay for things we don't lawfully 27 owe or made statutorily liable for. 28 But go into your code book and find out where 9 1 we've been made statutorily liable. We're putting the 2 burden of proof back on you. 3 Rest our case. 4 MR. HORTON: Thank you very much, sir. 5 Discussion, Members? 6 Hearing none, is there a motion? 7 MS. YEE: Move to take the matter under 8 submission. 9 MR. HORTON: Moved by Member Yee to take the 10 matter under submission. Second by Mr. Runner. 11 Without objection, Members, such will be the 12 order. 13 Thank you so very much for appearing before us 14 today. The Board will take your matter -- 15 MR. LASZLOFFY: Did she take illness? 16 MR. HORTON: -- under consideration later on in 17 the process and send you a written report of our 18 discussion. 19 I would ask that you, um -- let's see, who's in 20 the office? Ask Mr. Shaw your question. 21 MR. LASZLOFFY: Pardon? 22 MR. HORTON: Direct your question to Mr. Shaw, 23 and we'll try to -- 24 MR. LASZLOFFY: No, I was asking is Mrs. Steel, 25 um -- did she take sick because she was here this 26 morning? 27 MR. HORTON: Thank you very much for the 28 inquiry, sir. We really appreciate that. 10 1 Um, the Board will take your matter under 2 submission later on this evening and send you a written 3 report -- I mean during the process, send you a written 4 report of our discussion. Thank 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 11 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 October 26, 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 11 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: November 9, 2011 17 18 19 ____________________________ 20 KATHLEEN SKIDGEL, CSR #9039 21 Hearing Reporter 22 23 24 25 26 27 28 12