1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 REPORTER'S TRANSCRIPT 8 DECEMBER 14, 2011 9 10 LEGISLATIVE COMMITTEE 11 12 13 14 15 16 17 18 19 Reported by: Juli Price Jackson 20 No. CSR 5214 21 22 23 24 25 26 27 28 1 1 2 P R E S E N T 3 4 For the Board Jerome E. Horton of Equalization: Chairman 5 6 Betty T. Yee Member 7 8 Michelle Steel Member 9 Marcy Jo Mandel 10 Appearing for John Chiang, State Controller 11 (per Government Code Section 7.9) 12 Diane G. Olson 13 Chief, Board Proceedings Division 14 15 For Staff: Margaret Shedd Legislative Counsel 16 17 Sheila Waters Legislative Analyst 18 19 Jeff McGuire Deputy Director 20 Sales and Use Tax Department 21 22 Randy Ferris Acting Chief Counsel 23 24 ---oOo--- 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 DECEMBER 14, 2011 4 ---oOo--- 5 MR. HORTON: Welcome back, Members. 6 Ms. Olson, what is our next matter? 7 MS. OLSON: Our next matter is Legislative 8 Committee. Mr. Horton is the Chair of the Committee. 9 Mr. Horton? 10 MR. HORTON: Thank you, Members, welcome to the 11 Legislative Committee staff. We're going to turn it 12 over to you. 13 Please commence at will. 14 MS. SHEDD: Thank you, Mr. Chair and Members of 15 the Committee. My name is Margaret Shedd with the 16 Legislative and Research Division. 17 A couple of announcements, we do have a consent 18 agenda item, that's 4-1. 19 MR. HORTON: Is there a motion, Members? 20 MS. YEE: So moved. 21 MR. HORTON: Moved by Member Yee, second by 22 Member Steel. 23 Objection? None noted, such will be the order. 24 MS. SHEDD: And 3-8 has been pulled. That 25 leaves three remaining action items and a discussion 26 item. 27 The first one is 2-5. That was proposed by 28 Miss -- Board Member Steel. And it requires the Board 3 1 of Equalization to provide relief of liability when a 2 discharge from accountability has been granted. 3 Currently there is no statutory authority where 4 the Board can extinguish a tax liability when the debt 5 has been discharged. Even though it's been deemed 6 uncollectible, it does not have the effect of relieving 7 the taxpayer of the responsibility to pay. 8 This proposal would conform with those 9 provisions available to the Franchise Tax Board. And it 10 would relieve only those taxpayers that have liabilities 11 of under $500, are deceased with no probate, have a 12 permanent financial hardship or have liabilities of over 13 30 years old. We have identified a revenue loss of 14 about $220,000 a year. 15 MR. HORTON: Discussion, Members? 16 Member Steel? 17 MS. STEEL: This is a very simple proposal. 18 And Franchise Tax Board already has this ability. And 19 this will allow us to clear our books of uncollectible 20 accounts and create continuity between tax agencies. 21 So, I'm asking and request everybody's vote. 22 MS. YEE: Okay, Mr. Chairman? 23 MR. HORTON: Member Yee. 24 MS. YEE: Thank you, Mr. Chairman. 25 I applaud Ms. Steel for this proposal. I do 26 have a concern, though, however, and it relates to, I 27 guess, the behavior that we might not be wanting to 28 incentivize and that is the payment of a liability by a 4 1 taxpayer when it eventually, you know, could be wiped 2 out. 3 But I guess, more importantly, this Board 4 adopted a legislative proposal last month for a penalty 5 and interest reprieve program and I'm just trying to 6 figure out the relationship between the two proposals. 7 Seems to me that what we did last month may have the 8 potential of being undermined by this particular 9 proposal. 10 But -- is that -- have you looked at that? 11 MS. SHEDD: No, not really. I can get back to 12 you on that. 13 But this is -- these are those accounts that 14 have been discharged by the Board. And it would say 15 that under four circumstances it would then extinguish 16 that liability. 17 MS. YEE: Okay. So, I guess the two programs 18 relate to different types of accounts? 19 So, the penalty and reprieve program, I think, 20 was for the high risk collection accounts? 21 MS. STEEL: I think that was before this. This 22 is this already uncollectibles. We already discharged 23 them so we cannot find them and we cannot really collect 24 it. So, it's just lingering to our account collectible. 25 It's just bookkeeping, clear? 26 MS. MANDEL: Yeah, the discharge doesn't -- 27 they're not relieved of liability just because they're 28 discharged. 5 1 And, so, if there are assets that come to pass, 2 like if there is a -- somehow a lien springs up or 3 something, we do -- we make some collections on 4 discharged accounts, which is why you have some level of 5 a revenue loss associated, right? 6 MS. SHEDD: Uh-huh. 7 MS. MANDEL: But it's -- but the -- but the 8 high risk accounts are -- I thought those were the sort 9 of more active accounts that staff was looking at as 10 high risk, as opposed to -- 11 MS. YEE: Discharged -- 12 MS. MANDEL: -- discharged accounts. 13 MS. STEEL: These are like twenty, thirty years 14 old. 15 MS. MANDEL: Yeah, some of these are out or the 16 taxpayers -- there are -- as I understand it, there are 17 other circumstances under which we might discharge debt, 18 but that these four items are the only ones that are -- 19 the relief is being looked at, which is the same 20 provision that FTB has. 21 But in that context if you were to get this -- 22 and it's mandatory, I know it says -- you know, the 23 writeup all says it will allow, but the statutory 24 language is mandatory, it's a requirement, it happens. 25 MS. SHEDD: It's required. 26 MS. MANDEL: Some of the policies, like when 27 account balance is under 500 are written off, there may 28 be a disconnect between policies between the agencies. 6 1 We might write it off faster. 2 So, if this were enacted you might have to -- 3 you might want to look at the impact of some of those 4 policies and whether they are appropriate, considering 5 that it would now be an automatic relieve as opposed to, 6 you know, trawling for possibles on the discharge 7 level. 8 MS. YEE: Yeah. And I think that's really the 9 concern is to be sure that we understand what those 10 interactions may be in terms of the provisions of this 11 proposal and what we may already have in practice. 12 So, I appreciate that the proposal's narrow 13 and, so, I think that's -- that's fine. 14 So, perhaps, Mr. Chairman, we can ask the staff 15 to just look at that? 16 MR. HORTON: Sure. 17 MS. YEE: Okay. 18 MR. HORTON: In fact, we may want to actually 19 look at consolidating the two pieces of legislation. 20 MS. YEE: And I may have misspoke. I think 21 that the focus is on different types of accounts. And 22 this is kind of a narrower universe. 23 But I do think, as Ms. Mandel pointed out, my 24 concern is how this proposal overlays, you know, current 25 practice with respect to what we do. 26 MR. HORTON: Okay, so noted. 27 Is there a motion, Members? 28 MS. STEEL: So moved. 7 1 MS. MANDEL: I'll second that. 2 MR. HORTON: Moved by Member Steel, second by 3 Member Mandel. 4 MS. YEE: Without objection. 5 MR. HORTON: Without objection, such will be 6 the order. 7 MS. SHEDD: The next proposal, 2-6, is proposed 8 by Board Member Runner. It would amend the sales and 9 use tax law and the various special taxes and fee laws 10 to provide a daily computation of interest on late 11 payments of taxes, fees and surcharges administered by 12 the Board of Equalization. 13 Currently the FTB and the EDD, unlike -- are 14 unlike the Board of Equalization. The Board's provision 15 for late payments require the calculation of interest be 16 based on a monthly rather than daily basis. So that if 17 the payment is received, say, the 3rd or the 15th or the 18 28th of the month, the interest is charged for the 19 entire month. 20 This proposal of computing interest on a daily 21 basis would more closely reflect the actual charge for 22 the use of the funds. And it provides an incentive for 23 taxpayers to pay their liabilities on late payments 24 earlier in the month, rather than waiting until the end. 25 The staff has identified a revenue loss annually of $4.9 26 million. 27 MR. HORTON: Members, if -- if for some reason 28 we deem it necessary for additional clarification from 8 1 Mr. Runner, we can either put this over or commence the 2 discussion and then put it over or we can act upon it. 3 MS. STEEL: It's fine with me. 4 MR. HORTON: What's the desire -- 5 MS. STEEL: But I have just one question, but 6 we already do the daily interest calculation because we 7 just changed the -- is that law or regulation -- that 8 when they are late for one or two days with reason. 9 MS. SHEDD: Yes, that's correct. If they're 10 late one day, EFT, and they can make a case -- 11 MS. STEEL: Right. 12 MS. SHEDD: -- before the Board, they will be 13 just charged one day. 14 MS. STEEL: One day, okay. 15 MS. MANDEL: I think her question was about the 16 reprogramming costs because we'd already -- 17 MS. STEEL: Because we -- 18 MS. MANDEL: -- she was just wondering about 19 that aspect. 20 MS. STEEL: -- we already have a program that 21 calculating daily interest charges for each taxpayers, 22 so -- 23 MS. WATERS: Perhaps I can give some clarity to 24 that? 25 When the staff was considering that that daily 26 interest for the one day grace, we anticipated just a 27 relative handful of taxpayers would actually request 28 relief and get relief from the Board. 9 1 So, in light of that, the staff determined that 2 they wouldn't make all the necessary programmic 3 (verbatim) changes in the computer system. It would be 4 just a manual application of the daily interest for 5 those few cases. Whereas in this proposal 6 every taxpayer that has a late payment would have a 7 daily interest charge. And that would require the 8 interest calculation system to be completely modified, 9 so that we could just automatically be able to calculate 10 the daily interest for every return that's filed late. 11 MS. STEEL: That's going to cost over $700,000? 12 I mean, it's a computer system that you just change one 13 thing and then you already have that one day, you not 14 going to do manually for those interest charges, using 15 computer to do that. 16 So -- because when I asked for that daily 17 interest, you guys came up with $750,000, went down to 18 $15,000, the cost. So, I think you should recalculate 19 that programming cost is going to be over 700, it really 20 doesn't make any sense to me. 21 MS. WATERS: Yes. And I actually asked TSD 22 about those significant disparities and that $700,000 23 cost was prepared in '07. 24 And since then the -- there have been changes 25 made to the interest calculation modules in our system 26 that has enabled work with that system to be more 27 efficient, so that it doesn't require so many 28 programming errors to make those changes. And then also 10 1 since then programmers have just become more proficient 2 in making modification changes to the system. 3 So, for this proposal for daily interest, 4 rather than the 700,000 cost, it has been brought down 5 about 135,000 for just programming costs alone and then 6 there's additional costs. 7 MS. STEEL: I'd love to look at those 8 breakdowns, if I can? 9 MS. WATERS: Okay. I'll send you those. 10 MS. MANDEL: Okay. So, now it's 135? Because 11 I had 50 to 250. 12 MS. WATERS: Yeah, they've -- they went back 13 and I asked them to try to narrow it down. And, so, 14 it's actually 135 for in-house programming and then with 15 contracts with OTECH there might be ongoing of about 16 193,000. 17 So, the first year 135, ongoing about 193. 18 MS. MANDEL: Okay, thank you. 19 MR. HORTON: Okay. Members, in order to gain 20 further clarification of the essence of this proposal, 21 let's put it over until the next Board meeting. 22 MS. YEE: Can I ask one simple -- well -- 23 MR. HORTON: And allow Mr. Runner to be present 24 to provide us that. 25 And any additional direction to staff, we can 26 obtain that? 27 MS. YEE: Just a question -- maybe I missed 28 it. 11 1 I thought one of the stated intent of the 2 proposal was to have this interest provision mirror that 3 of the Franchise Tax Board and the Employment 4 Development Department. Was that -- did I read that -- 5 did I not read that correctly? 6 MS. SHEDD: No, it is. It's to do simple 7 interest, where they have compounded. 8 MS. YEE: So, it's not really mirroring what 9 they do? 10 MR. HORTON: It's different. 11 MS. SHEDD: No, but it's doing it on the daily 12 basis rather than a monthly basis -- 13 MS. YEE: Okay. 14 MS. SHEDD: -- which they do. 15 MS. YEE: Okay. All right and then -- 16 MR. HORTON: Simple versus compound. 17 MS. YEE: -- compound it, okay. 18 MS. MANDEL: Right. 19 MS. YEE: But daily, okay. 20 MR. HORTON: Different. 21 MS. YEE: And, so, what remains outstanding is 22 then the interest calculations for deficiencies, as 23 opposed to overpayments? 24 That's still a discrepancy? 25 MS. SHEDD: Right. 26 MS. YEE: Okay, fine. 27 Okay, thank you. 28 MR. HORTON: Further discussion? 12 1 All right, Members, we'll put this over and 2 take it up and have additional discussion at the next 3 Board meeting. 4 MS. SHEDD: Should we also put over 2-7, which 5 is also Mr. Runner's? 6 MR. HORTON: Why don't you make your 7 presentation? Let's listen to the discussion and we'll 8 go from there. 9 MS. SHEDD: Okay, this is 2-7, which would 10 extend the authorization for the Board of Equalization 11 to adopt a uniform policy to insure voluntary compliance 12 with the due dates prescribed by law for submission of 13 remittances, claim for refunds, documents returns, to 14 also include electronic transmissions. 15 Currently the Board does have statutory 16 authority to provide a grace period for returns and 17 remittances sent through the mail. There's a -- it will 18 be deemed timely if postmark is the next day, just in 19 case there's problems with that. However, there is not 20 a grace period for EFT and other types of electronic 21 transmissions. This would give the Board authority in 22 statute to also have a grace period that's uniform. 23 MR. HORTON: Member Yee. 24 MS. YEE: So, have we had a problem that gave 25 rise to this with respect to our system having crashed 26 on e-filers? 27 MS. SHEDD: I think the issue that Mr. Runner 28 wants to address mostly is the EFT that missed the 13 1 3 o'clock deadline by one minute. 2 MS. YEE: So, it's really more of an extension 3 then? 4 MS. SHEDD: It would allow the Board to come up 5 with a grace period that is similar to the grace period 6 that you've promulgated for mail-in returns. 7 MS. MANDEL: Can you explain what the -- where 8 the 3 o'clock deadline comes from? 9 I mean, because it's a -- you have to pay on a 10 certain day, can you -- can you just maybe address it, 11 Sheila -- 12 MS. WATERS: I'm not that familiar -- 13 MS. MANDEL: -- so we understand? 14 MS. WATERS: -- with the banking system, but I 15 know that to effectuate -- 16 MR. HORTON: Mr. McGuire's coming. 17 MS. WATERS: Pardon? 18 MR. HORTON: Mr. McGuire's coming. 19 MS. MANDEL: Or is it something else in the 20 statute besides -- 21 MS. WATERS: Oh, it is the statute. 22 MS. MANDEL: -- day or -- 23 MS. WATERS: The statute requires for the 24 mandatory and voluntary electronic funds transfer 25 taxpayers -- those are taxpayers in the sales and use 26 tax program that have a $10,000 or more tax liability 27 per month. So, the larger taxpayers have to remit funds 28 by electronic fund transfer. 14 1 So, we have to approve the means by which that 2 fund transfer's made. And we have approved an ACH debit 3 transfer and an ACH credit transfer and a -- a fed wire 4 transfer that's not widely used. 5 But when you do an ACH debit transfer, that is 6 where a taxpayer instructs the Board of Equalization to 7 take the money out of my bank at -- you know, for this 8 reporting period. So, that particular transfer, if the 9 taxpayer waits on the due date to make that transfer -- 10 I mean, they can actually warehouse that, they can ask 11 the bank -- 12 MS. MANDEL: Yeah, you're going -- you're going 13 down the road before the first part. 14 MS. WATERS: Okay. 15 MS. MANDEL: Was there something -- I mean, 16 when I -- you know, when we file a return or when I 17 discover late on April 15th that I actually owe the feds 18 money and I don't have enough money in my bank account 19 and I want to charge it, I mean then I just charge it. 20 Is there something in the statute on when they 21 have -- on what their due date is when they have to pay? 22 Is their due date not -- is there something about the 23 statute besides pay it on, you know, July 31st, that 24 makes it an issue for people paying by EFT? 25 Because I could take my stuff and go to the LAX 26 midnight post office and get a postmark. But there's 27 this 3 o'clock thing. And is that somehow a function of 28 the statute and -- 15 1 MS. WATERS: Yes. 2 MS. MANDEL: -- and the banking system? 3 MS. WATERS: Both. 4 MS. MANDEL: What's the statutory -- before you 5 get -- 6 MR. McGUIRE: Maybe -- this is Jeff McGuire -- 7 MS. MANDEL: Make it simple. 8 MR. McGUIRE: -- Sales and Use Tax Department. 9 This -- the EFT statute requires that the money 10 settle into the State's bank account after -- the day 11 after the due date. Therefore, the taxpayer has to 12 initiate the transaction in time for that to happen. 13 On an ACH debit payment, the way that the 14 banking system works and through our third party vendor, 15 is the taxpayer needs to complete the transaction by 16 3 o'clock, which is the cut-off for them to tran -- to 17 actually conduct the transaction overnight so that the 18 money settles into the State's bank account the 19 following day. 20 MS. MANDEL: So, it's a -- it's kind of an 21 unusual due date in the sense that it's not just you 22 have to send the money on this date, we have to get it 23 at a certain -- 24 MR. MC GUIRE: Right, the EFT is really about 25 when the State receives the money more than when you did 26 it because in a credit transaction, which is what the 27 taxpayer authorizes their bank to actually send us the 28 money, we don't know when they initiate that, the only 16 1 think we know is when the money shows up into the 2 State's bank account. And, again, it has to show up in 3 the State's bank account the day after the due date to 4 be considered timely under the EFT statute. 5 MS. WATERS: Sometimes even the credit 6 transaction, the taxpayer is not bound by the 3 o'clock 7 deadline, they might be bound with their bank two days 8 ahead of the due date -- 9 MR. McGUIRE: Right. 10 MS. WATERS: -- to make it timely. 11 MS. MANDEL: So, it's not -- it's not really 12 that you have to pay on July 31st, it's that the State 13 has to get the money on the next banking day? 14 MS. WATERS: And that's for -- 15 MS. MANDEL: That's driving it? 16 MS. WATERS: -- EFT. 17 MS. MANDEL: As opposed to what we think of 18 normally 'cause we're all paying our -- you know, filing 19 and paying income tax forms and it's the function of the 20 special EFT -- 21 MS. WATERS: Just for these specially -- 22 MS. MANDEL: Yeah. 23 MS. WATERS: -- larger taxpayers. 24 MR. MC GUIRE: Right. We only do that for our 25 mandatory EFT accounts, some of our voluntary -- we have 26 voluntary EFT accounts and then a lot of our e-filers 27 pay electronically. 28 Those accounts that are voluntary EFT or just 17 1 pay us electronically, they have up until midnight on 2 our e-file system to complete their transaction. 3 MS. MANDEL: Because it doesn't have that 4 requirement of -- 5 MS. WATERS: Right. 6 MS. MANDEL: -- we must have the money -- 7 MS. WATERS: Settling. 8 MS. MANDEL: -- the next banking day. 9 MR. McGUIRE: Right and -- 10 MS. MANDEL: Okay. 11 MR. MC GUIRE: -- we have kind of looked at 12 that 'cause some of our statutes are a little bit 13 conflicting on that and we're kind of looking to see if 14 there is some leeway for us to give at least the ACH 15 debits the opportunity to actually go 'til midnight on 16 the due date. 17 MR. HORTON: Member Yee. 18 MS. YEE: Speaking of conflicting statutes, 19 we're probably, likely, going to put this over, but when 20 these proposals come back, I'd love to see a visual 21 about what actually happens to these different types of 22 payments. 23 Because we just had a proposal that talked 24 about changing the interest. And, so, now we're looking 25 here at providing a grace period. 26 So, I'd just kind of like to know with respect 27 to any type of filer what happens when payments are late 28 and just kind of with these proposals, how that -- how 18 1 if there are potential interactions between the two, 2 there may not be, but I think we may kind of hurt 3 ourselves if we don't get clear. 4 MR. McGUIRE: Yeah, we can maybe do a chart, 5 kind of like we did with the use tax -- 6 MS. YEE: Yeah. 7 MR. McGUIRE: -- and all the different due 8 dates for everybody, depending on -- 9 MS. YEE: That would be great. 10 MR. McGUIRE: -- the scenario. 11 MS. YEE: Yeah, thank you. 12 MR. HORTON: Yeah. Noting the revenue loss, I 13 would encourage us to take a real hard look at the 14 policy. 15 And, typically, the first step in advancing 16 policy is to articulate the problem. And, so, I think I 17 concur with Member Yee in that regard and look forward 18 to the elaboration by Mr. Runner. 19 So, again, I think we ought to put this over to 20 give him an opportunity to articulate the problem as he 21 sees it and encourage staff to work up a proposal 22 focusing on, "Here's the problem, this is why we think 23 this is a solution." 24 Next item. 25 MS. SHEDD: The next item is a discussion only 26 item having to do with the federal nexus legislation. 27 At the October Board meeting in Culver City 28 there was direction from the Chair for us to provide the 19 1 Members with an update on federal legislation relating 2 to the nexus issue. 3 A side-by-side comparison analysis is -- was 4 linked in the Legislative Committee agenda. I have 5 additional copies, if you want one. 6 In summary, there are four bills now. There 7 are two in the Senate and two in the House. All four 8 are still in their introduced version and none of them 9 have been heard in the first committee yet. 10 The Congressional two-year session adjourns in 11 2012. So, these bills have until the end of then to be 12 heard and enacted. 13 Two of the bills, S 1452 and HR 2701 are 14 identical and they authorize member states of the 15 Streamlined Sales and Use Tax Agreement to require 16 larger remote sellers to collect and remit sales and use 17 tax with respect to remote sales sourced to the member 18 state. There are 24 member states. And for a variety 19 of reasons, which I'm sure you're all very aware, 20 California is not a member. 21 So, the other two bills which would apply to 22 California are HR 3179 and S 1832. These are similar 23 and they authorize nonmember states to require larger 24 remote sellers to collect and remit sales and use tax 25 with respect to the remote sales made into the state. 26 Of these two, only HR 3179 has California co-authors. 27 There are four, Representatives Chu, Sanchez, Speier and 28 Waters. 20 1 In its current form this bill is probably more 2 favorable to California than S 1832 in that under 3179 3 the states have more flexibility in determining their 4 tax rate. The states have more flexibility in deciding 5 the size of exempt small sellers. This bill provides a 6 state must provide adequate software to remote sellers 7 to collect the tax. 8 The other bill provides that the state may also 9 certify non state providers to provide that software to 10 the remote sellers. 11 And the current text of HR 3179 is open to 12 interpretation with respect to the uniform tax base 13 requirement and whether partial exemptions would be 14 acceptable. As you know, California has several items 15 that are exempt from the State rate, but not the local 16 rate. 17 And as these bills move through Congress, we 18 will update this analysis and provide it to you and keep 19 you apprised of the status of these bills. 20 MR. HORTON: Discussion, Members? 21 Member Yee. 22 MS. YEE: Thank you. Just thank the staff for 23 providing this side by side. 24 I anticipate there'll be quite bit of activity 25 on these bills into next year. My question really 26 relates to the streamlined sales tax project and 27 whether -- has there been much activity with respect to 28 the member states on these bills? I mean, has there 21 1 been, I guess, more intense focus on the part of the 2 SSTP about how they're going to weigh in on this 3 legislation? 4 We're not a member. 5 MS. SHEDD: Right. 6 MS. YEE: So, I know that we were still 7 monitoring what the project was doing. 8 But do you have a sense of whether the member 9 states are getting geared up in any way to -- 10 MS. SHEDD: I can check that out. Those were 11 the first two bills that were introduced and there has 12 not been any movement. They haven't been heard. 13 MS. YEE: The bills haven't moved, but I'm just 14 wondering if there's been increased discussion with -- 15 among the member states about strategy or timing or -- 16 MS. MANDEL: That would probably be through the 17 through the -- through the governing board. 18 MS. YEE: Right, right. 19 I don't want to just monitor the bills and then 20 have blind ear to what the SSTP is doing going forward, 21 even though we're not a member, I think we are getting 22 reports from the -- is it the MTC or FTA or one of 23 the -- 24 MS. MANDEL: MTC, I thought was going to be -- 25 MS. YEE: Yeah. 26 MR. FERRIS: Randy Ferris, Acting Chief 27 Counsel. 28 There are discussions in the FTA that involve 22 1 the big states like us that have not participated in the 2 streamlining agreement and in the streamlined states. 3 MS. YEE: Yeah. 4 MR. FERRIS: So, there is discussion. There is 5 some concern among the streamlined states that, given 6 that they've invested so much time and energy, that -- 7 that the lower the threshold is for states to be able to 8 benefit, the more it feels like they have lost that 9 effort -- 10 MS. YEE: Right. 11 MR. FERRIS: -- they've put in. 12 MS. YEE: Right. 13 MR. FERRIS: However -- I mean, I think it's 14 clear for us and for other non streamlined states that 15 the goal of any federal legislation should be to level 16 playing field for all of the businesses and to make sure 17 that all states can immediately benefit from Congress 18 acting to abrogate Quill. 19 So -- so, there is a fundamental tension that's 20 there between the states that have invested. 21 MS. YEE: And that's exactly right. 22 And my -- the only reason I'm raising this is 23 that the tension -- I think there's going to be 24 potential movement on part of member states and non 25 member states and we're going to have some particular 26 issues with some of the, I think, the mandates and, you 27 know, whether it's under compensation or anything else, 28 but I just wanted to be sure that we weren't proceeding 23 1 without having a fairly good pulse on what the member 2 states' deliberations are, that's all. 3 MR. FERRIS: Yes, through our MTA involvement, 4 we're -- 5 MS. YEE: All right. 6 MR. FERRIS: -- very aware of -- 7 MS. YEE: Okay. 8 MR. FERRIS: -- what those concerns are. 9 MS. YEE: Okay, good, thank you. 10 Thank you, Mr. Chairman. 11 MR. HORTON: Further discussion, Members? 12 Let me just share, I'm very much concerned 13 about the uniform tax base relative to California. We 14 have a number of exemptions that were created for 15 obvious reasons -- farmers and motion picture -- as a 16 means in which to stimulate California's economy in that 17 particular area. And, so, the definition, as it 18 evolves, is something we should be very cognizant of and 19 watch very carefully. 20 The other concern is the -- the requirement or 21 the appearance that there is a requirement, that there 22 is an external system, accounting system or computerized 23 program that provides an opportunity for others to 24 profit from the filing and possibly could create a 25 financial impediment to some of our filers here in the 26 State of California. That's a concern -- concerning. 27 And, so, we want to watch that, even to the 28 extent that the state may very well want to consider 24 1 creating a method or a system by which -- to make it 2 easier for taxpayers to comply with the law. 3 So, please keep us posted on this as it 4 proceeds. Thank you very much -- 5 MS. SHEDD: Thank you. 6 MR. HORTON: -- for your presentation here 7 today and we truly appreciate it. 8 MS. SHEDD: Thank you. 9 MS. OLSON: That concludes the Committee 10 meeting. 11 MR. HORTON: Okay. Legislative Committee is 12 hereby adjourned. 13 ---o0o--- 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 25 1 REPORTER'S CERTIFICATE. 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, JULI PRICE JACKSON, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 DECEMBER 14, 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 25 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: MARCH 6, 2012 17 18 19 ____________________________ 20 JULI PRICE JACKSON 21 Hearing Reporter 22 23 24 25 26 27 28 26