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 JANUARY 31, 2012 10 11 12 13 14 15 FINAL ACTIONS 16 17 18 19 20 21 22 23 REPORTED BY: JULI PRICE JACKSON 24 CSR NO. 5214 25 26 27 28 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 Chiang 10 State Controller (per Government Code 11 Section 7.9) 12 Diane G. Olson Chief, Board 13 Proceedings Division 14 For Staff: David Levine Tax Counsel 15 16 17 18 ---OOO--- 19 20 21 22 23 24 25 26 27 28 2 1 5901 GREEN VALLEY CIRCLE 2 CULVER CITY, CALIFORNIA 3 JANUARY 31, 2012 4 ---o0o--- 5 MR. HORTON: Ms. Olson. 6 MS. OLSON: Our next are those items that have 7 been taken under submission. 8 The first item is C1 -- 9 MR. HORTON: Ms. Olson? 10 MS. OLSON: -- Fidelity Asset Management, Inc. 11 MR. HORTON: Members, let's take a five minute 12 break. 13 (Whereupon a brief recess was had.) 14 MR. HORTON: Thank you very much. Ms. Olson. 15 MS. OLSON: Our first item is C1, Fidelity 16 Asset Management, Incorporated. 17 ---o0o-- 18 NO. C1 FIDELITY ASSET MANAGEMENT, INC. 19 NO. 348657 (OH) 20 ---o0o--- 21 MR. HORTON: Is there a motion, Members? 22 MS. YEE: Move to deny the claim for refund. 23 MR. HORTON: It's been moved to deny the claim. 24 Is there a second? 25 Second by Mr. Runner. 26 MR. RUNNER: No, no, I object. 27 This was an object. 28 MR. HORTON: This is an auction, Mr. Runner. 3 1 MR. RUNNER: Yeah, yeah, I'll get in trouble 2 with that. 3 MR. HORTON: Is there a second? 4 MS. MANDEL: Second. 5 MR. HORTON: Second by Ms. Mandel. 6 MR. LEVINE: That's going to be a unfair catch 7 penalty. 8 MR. HORTON: Discussion, Members? 9 Hearing none, objection noted. 10 Ms. Olson, please call the roll. 11 MS. OLSON: Mr. Horton? 12 MR. HORTON: Aye. 13 MS. OLSON: Ms. Steel? 14 MS. STEEL: No. 15 MS. OLSON: Mr. Runner? 16 MR. RUNNER: No. 17 MS. OLSON: Ms. Yee? 18 MS. YEE: Aye. 19 MS. OLSON: Ms. Mandel? 20 MS. MANDEL: Aye. 21 MS. OLSON: Motion carries. 22 ---o0o--- 23 24 25 26 27 28 4 1 MR. HORTON: Ms. Olson. 2 MS. OLSON: Our next item is C2, Frangi's 3 Restaurant, Incorporated. 4 ---o0o--- 5 NO. C3 FRANGI'S RESTAURANT 6 NO. 433581 (AS) 7 ---o0o--- 8 MS. STEEL: We voted. 9 MS. OLSON: No, we did C3. 10 MR. RUNNER: Yes, we took them out of order. 11 MS. OLSON: C3 we granted. 12 MR. HORTON: Members? 13 MS. YEE: Move to redetermine. 14 MR. HORTON: Move to redetermine by Member Yee. 15 Second by Member Mandel. 16 Objection, Members? 17 Hearing none, such will be the order. 18 ---o0o--- 19 20 21 22 23 24 25 26 27 28 5 1 MS. OLSON: Our next item is C4a, Vincent 2 Millhouse and C4b, Vincent Millhouse and Lisa Denise 3 Smith.. 4 ---o0o--- 5 NO. C4a VINCENT MILLHOUSE 6 NO. 450539 (AS) 7 NO. C4b VINCENT MILLHOUSE AND LISA DENISE SMITH 8 NO. 434902 (AS) 9 ---o0o--- 10 MR. HORTON: Members? 11 MR. RUNNER: Did we end up with some new 12 numbers? 13 MR. LEVINE: Some, some. 14 MR. RUNNER: Okay, I'm sorry. I thought it was 15 a little -- 16 MR. HORTON: Mr. Runner? 17 MR. LEVINE: Let me give you what I have. The 18 total for all three -- you asked for three adjustments, 19 reducing the price to $19, increasing the spoilage to 20 30 percent and allowing 10 percent -- 21 MS. MANDEL: Wait, wait, wait -- 22 MR. HORTON: The train going by? 23 MS. MANDEL: Thank you. Yes, the train going 24 by my ear. 25 MR. LEVINE: That was part of my presentation. 26 MS. MANDEL: Okay, I'm sorry. Go ahead. 27 MR. LEVINE: Reducing the price to $19, 28 increasing the spoilage to 30 percent and allowing 10 6 1 percent for consumption by donation -- that would reduce 2 the measure of tax by 46,672 per year, a total of 3 140,016 for the total -- everything that's involved. 4 If we reduced the price to 19 and allowed 10 5 percent charitable -- consumption by charitable giving 6 and kept the spoilage at 5 percent, that would be a 7 total reduction for the entire dispute of 101,592. 8 If you looked only at the charitable -- 9 changing the charitable 10 percent consumption by 10 charity, that would be a total adjustment of 13,015. 11 We can give the other numbers too, but I don't 12 have them, just for -- that's enough for discussion 13 MS. STEEL: How about 2004 that he didn't sell 14 fireworks? 15 MR. LEVINE: I'm sorry. 16 The fireworks would be 27,721 is the amount 17 that was assessed for that year. So, that would be the 18 reduction for that. 19 MS. MANDEL: 7,000 -- what's the number? 20 MR. LEVINE: 27,000 -- 21 MS. MANDEL: 27,000? 22 MR. LEVINE: -- 721. 23 MR. HORTON: Okay. Members, I would share 24 that -- some concern about reducing the -- or presuming 25 there's no sales in 2004, only because the fireworks 26 permit is like gold and -- meaning that you're going to 27 make a profit, just by virtue that you have a permit. 28 The neighboring cities -- there are very few 7 1 cities in Los Angeles County that actually allow 2 fireworks sales, irregardless of where you're located, 3 you're still going to make a profit. 4 And for someone to spend the money and not take 5 advantage of that is a little challenging. 6 I would also ask that we possibly consider 7 allowing the sales for resale. If, in fact, he is 8 selling quantities of -- his resale policy is to only 9 wholesale greater than 10 items, irrespective of the 10 failure to have a resale card, it's still a resale. 11 In fact -- 12 MR. RUNNER: Was there any estimate as to how 13 many trees that were actually moved out to resale? 14 MR. HORTON: He had -- there were three 15 transactions. And if we presumed the number of 30 that 16 the Department noted, that would be 30, they're on 17 record. 18 MR. RUNNER: Trees? 19 MR. HORTON: I heard him mention a possible 50 20 or something like that. 21 MR. RUNNER: Out of 900? 22 MR. HORTON: It's an unknown number, all I can 23 go by is what the testimony seems to have been. 24 MR. RUNNER: Well, I guess I'll start. 25 I would make a motion with the adjustments to 26 the average sales price of $19 dollars, 30 percent 27 spoilage fee and an additional 10 percent for charity 28 donation. 8 1 MS. STEEL: Second. 2 MR. HORTON: How about a friendly amendment for 3 an additional 50 trees sold for resale? 4 MR. RUNNER: I'm good. 5 MS. STEEL: Okay. 6 MR. HORTON: Okay. Mr. Runner moves a 7 reduction of the sales price of the trees to 19.95, I 8 believe? 9 MR. RUNNER: Geeze. 10 MR. HORTON: Or $19. 11 MR. LEVINE: 19 is the number I gave you. 12 MR. HORTON: Okay, 19, 30 percent and a 10 13 percent -- 30 percent spoilage and 10 percent 14 self-consumption and 50 trees sold for resale. 15 Second by Member Steel. Without objection, 16 such will be the order. 17 ---o0o--- 18 19 20 21 22 23 24 25 26 27 28 9 1 MR. HORTON: Ms. Olson 2 MS. OLSON: Our next item is C7, Glenn Alan 3 Olson and Sheila Olson. 4 ---o0o--- 5 NO. C7 GLENN ALAN OLSON AND SHEILA OLSON 6 NO. 475832 (KH) 7 ---o0o--- 8 MR. HORTON: Members? 9 MS. MANDEL: Well, this -- this was one where 10 there was still a question about, I take it, it was the 11 former wife being on the permit until mid '06. 12 And staff said, well, if they gave us something 13 more than her on the phone, because if this goes final 14 against the partnership for the whole period, if she -- 15 they could go after her, even for the later period; is 16 that right? 17 MR. LEVINE: That's correct. 18 MS. MANDEL: So, it almost seems like we should 19 give them -- I mean, maybe he doesn't -- you know, 20 that's his ex-wife, apparently, according to these 21 returns -- the returns that -- income tax returns he 22 gave us were for him and Pamela, I guess and that's 23 Sheila. 24 So -- but since the appeal's in the name of the 25 partnership, it almost seems to me like some opportunity 26 should be given for Sheila to be able to get her name 27 off of it for the -- 28 MR. LEVINE: That was not issue we considered. 10 1 I had asked the conference holder, she doesn't recall it 2 being argued before her. 3 And the Department presented it a little bit 4 differently. He said that we've always argued she was 5 never a partner. 6 The Department presented it a little bit 7 different case that she was on the permit and they had 8 talked to her and she was getting off from being a 9 partner and that if she proved it, they would let here 10 off. 11 MS. MANDEL: Right. 12 MR. LEVINE: If you want to allow 30 or 60 days 13 or whatever to have the Department contact her and see 14 if -- 15 MS. MANDEL: Yeah, because it's got to be 16 through her. If he's not married to her any more, it's 17 -- it's really her interest, it's got to be to her. 18 MR. LEVINE: And if you want -- 19 MR. RUNNER: Is that mother or ex-wife? 20 MR. LEVINE: Ex-wife, it was the ex-wife -- 21 that's my understanding. 22 MR. RUNNER: We had -- 23 MS. MANDEL: Did you think it was someone else, 24 the Sheila? 25 MR. RUNNER: I was going to say the mother. 26 MS. MANDEL: Oh, the mother? 27 MS. STEEL: I heard she was remarried, is that 28 what -- 11 1 MR. LEVINE: Yeah, that's what I heard. I 2 thought it was his wife, but -- 3 MS. MANDEL: Well, maybe not, yeah. 4 I mean, okay, maybe we can get clarification on 5 that then? 6 Because I don't want it to go final -- does it 7 say it in there that it's his mother? 8 MR. LEVINE: Either way, it's the same -- 9 MS. MANDEL: Same issue that if she's -- 10 MR. LEVINE: You can make them -- 11 MS. MANDEL: -- off the permit. 12 MR. LEVINE: -- you can either have it come 13 back or you can make a motion, tell the Department, take 14 the 60 days before you let this go final and just make 15 your motion so it doesn't have to come back and -- 16 MS. MANDEL: Right. 17 MR. LEVINE: -- give the Department time to -- 18 MS. MANDEL: Verify with her -- with the 19 Sheila? 20 MR. LEVINE: -- see if she can give them enough 21 information that the Department is satisfied to pull her 22 off the permit back to whenever. 23 MS. MANDEL: Okay. 24 MR. LEVINE: In which case would make it final 25 as to the -- we'd have to do two -- probably two 26 redeterminations. 27 MS. MANDEL: Okay. 28 MR. LEVINE: We'd figure out how to do it. 12 1 MS. MANDEL: So, if it's the mother, it's 2 slightly different than the thing I was thinking about 3 but still if she's -- if she was supposed to be gone 4 from the partnership and he just didn't do the -- 5 MR. LEVINE: That's the Department -- since we 6 didn't -- I haven't haven't considered the issue with 7 the new partnership act and -- 8 MS. MANDEL: Right, and they're the ones who 9 said it, so, that's why -- 10 MR. LEVINE: The Department said that had she 11 established that she was removed that they'd be 12 satisfied. 13 So, I assume that is what they would be willing 14 to do. And then the determination to her would be for a 15 shorter period. 16 So, I'd recommend maybe 60 days if you want the 17 Department to have plenty of time and then to -- 18 MS. MANDEL: Okay. Well, that -- 19 MR. LEVINE: -- investigate. 20 MS. MANDEL: -- that was the only issue that I 21 saw. So, that would be my motion. 22 MR. HORTON: So moved by Member Mandel, second 23 by Member Runner. 24 Objection, Members? 25 Hearing none, such will be the order. 26 ---o0o--- 27 28 13 1 MS. OLSON: Our next item is C8 Charlie Lee. 2 This is a waived appearance. 3 ---o0o--- 4 NO. C8 CHARLIE LEE 5 NO. 497366, 572712 (AS) 6 ---o0o--- 7 MR. HORTON: Members? 8 MS. YEE: Move to adopt the staff 9 recommendation. 10 MR. HORTON: Moved by Member Yee to adopt staff 11 recommendation. Second by Member Mandel. 12 Objection? 13 None noted. Such will be the order. 14 ---o0o--- 15 16 17 18 19 20 21 22 23 24 25 26 27 28 14 1 MS. OLSON: The next item is C9, Team Post-Op, Incorporated. 2 ---o0o--- 3 NO. C9 TEAM POST-OP, INC. 4 NO. 447342, 448811 (EA) 5 ---o0o--- 6 MR. HORTON: Members? 7 MS. YEE: Move to redetermine. 8 MR. HORTON: It's moved been by Member Yee to 9 redetermine, second by Member Mandel. 10 Objection, Members? 11 MS. STEEL: Objection. 12 MR. HORTON: So noted. 13 MR. HORTON: Ms. Olson, please call the roll. 14 MS. OLSON: Mr. Horton? 15 MR. HORTON: Aye. 16 MS. OLSON: Ms. Steel? 17 MS. STEEL: No. 18 MS. OLSON: Mr. Runner? 19 MR. RUNNER: No. 20 MS. OLSON: Ms. Yee? 21 MS. YEE: Aye. 22 MS. OLSON: Ms. Mandel? 23 MS. MANDEL: Aye. 24 MS. OLSON: Motion carries. 25 ---o0o--- 26 27 28 15 1 MS. OLSON: Our next item is C10, Carlos Martin Escobar. 2 3 ---o0o--- 4 NO. C10 CARLOS MARTIN ESCOBAR 5 NO. 473069 (EH) 6 ---o0o--- 7 MR. HORTON: Members? 8 MS. YEE: Move to adopt the staff 9 recommendation and I will ask staff to refer the 10 petitioner to the Offers-In-Compromise program. 11 MS. MANDEL: That reminds me -- okay. 12 I'll second that. 13 MR. HORTON: Moved by Member Yee to adopt the 14 staff recommendation and suggested reference to 15 Offers-In-Compromise, second by Member Mandel. 16 Objection, Members? 17 MR. RUNNER: Yes. 18 MR. HORTON: So, noted. 19 Ms. Olson, please call the roll. 20 MS. OLSON: Mr. Horton? 21 MR. HORTON: Aye. 22 MS. OLSON: Ms. Steel? 23 MS. STEEL: No. 24 MS. OLSON: Mr. Runner? 25 MR. RUNNER: No. 26 MS. OLSON: Ms. Yee? 27 MS. YEE: Aye. 28 MS. OLSON: Ms. Mandel? 16 1 MS. MANDEL: Aye. 2 MS. OLSON: Motion carries. 3 MS. MANDEL: Mr. Horton? 4 MR. HORTON: Yes, ma'am? 5 MS. MANDEL: The -- all that I remembered -- I 6 mean, sometimes we say this about Offer-in-Compromise, 7 but like the Christmas tree one where he kept saying he 8 didn't have the money, I mean, I assume that -- I am 9 hoping that staff just advises people sort of generally 10 of those -- 11 MR. HORTON: Of the -- 12 MS. MANDEL: -- options. 13 MR. HORTON: -- options. 14 MS. MANDEL: Yeah. 15 MS. YEE: Especially a terminated business. 16 MR. HORTON: Maybe discussion on the Customer 17 Service Committee, okay, or -- 18 MS. YEE: Just a practice. 19 MS. MANDEL: Yeah, I mean, that's -- I mean 20 I'm -- not that everybody comes here and just says, "I 21 don't have any money," but sometimes we say it and 22 sometimes we don't and not -- I mean, I would if I 23 had -- if I was thinking about it I might have said it 24 for that guy, but -- 25 MR. LEVINE: I can tell you what -- what I do 26 is when you say it, I either put in the notice or 27 normally I just confirm with the Offer-In-Compromise 28 group that they will or have contacted. 17 1 Normally the response, "Well, we heard that and 2 we did already," or "We're in the process." 3 But I follow-up only when you tell me. I don't 4 know what Offer-In-Compromise policy is. I think that 5 they listen to the hearings. 6 MS. YEE: And unless -- 7 MS. MANDEL: Well, then -- 8 MS. YEE: -- the Petitioner applies, we won't? 9 MR. LEVINE: I'm not sure -- 10 MS. YEE: -- I would think -- 11 MR. LEVINE: -- what their policy is. 12 MS. MANDEL: -- I would think that just based 13 on -- I don't know. I would have said it, I think, for 14 for the Millhouse case as well. 15 MS. YEE: Yeah, I would agree. 16 MR. LEVINE: Shall we refer that one? 17 MR. RUNNER: I think it's been said. 18 MS. MANDEL: Thank you. 19 I'll try to remember these things when we're 20 doing them next time. 21 MR. HORTON: Thank you, Ms. Mandel. 22 ---o0o--- 23 24 25 26 27 28 18 1 MR. HORTON: Ms. Olson.. 2 MS. OLSON: Our next item is C11, TJ's Metal 3 Manufacturing, Incorporated. 4 ---o0o--- 5 NO. C10 TJ'S METAL MFG., INC. 6 NO. 469958 (AA) 7 ---o0o--- 8 MR. HORTON: Members? 9 MS. YEE: Move to adopt the staff 10 recommendation. 11 MR. HORTON: Move to adopt the staff 12 recommendation by Member Yee. 13 Second? 14 MR. LEVINE: There was a revised -- 15 MS. STEEL: It was revised -- 16 MR. RUNNER: There was a revised -- 17 MR. LEVINE: There was a revised 18 recommendation. 19 MS. YEE: Yes, yes. 20 MR. LEVINE: Reduced by 75,000 is what I 21 understood. 22 MS. STEEL: Yes. 23 MS. YEE: Yeah, revised staff. 24 MR. HORTON: So noted. 25 Is there a second, Members? 26 Second by Member Runner. 27 Objection? Hearing none, such will be the 28 order. 19 1 MS. OLSON: Our next item is C14, Brandi R. 2 Paris. 3 ---o0o--- 4 NO. C14 BRANDI R. PARIS 5 NO. 491278 (EA) 6 ---o0o--- 7 MS. YEE: Move to redetermine. 8 MR. HORTON: Move to redetermine by Member Yee, 9 second by Member -- 10 MS. STEEL: Objection. 11 MR. HORTON: -- Mandel. 12 Objection noted by Member Steel. 13 Ms. Olson, please call the roll. 14 MS. OLSON: Mr. Horton? 15 MR. HORTON: Aye. 16 MS. OLSON: Ms. Steel? 17 MS. STEEL: No. 18 MS. OLSON: Mr. Runner? 19 MR. RUNNER: Aye. 20 MS. OLSON: Ms. Yee? 21 MS. YEE: Aye. 22 MS. OLSON: Ms. Mandel? 23 MS. MANDEL: Aye. 24 MS. OLSON: Motion carries. 25 ---o0o--- 26 27 28 20 1 MS. OLSON: Our next item is C16, Mohammad 2 Honorary. 3 ---o0o--- 4 NO. C16 MOHAMMAD Honorary 5 NO. 482560 (EA) 6 ---o0o--- 7 MR. HORTON: Members? 8 MS. YEE: Move to redetermine. 9 MR. HORTON: Ms. Yee moves to redetermine, 10 second by Member Mandel. 11 MS. STEEL: Can we do OIC for this one? 12 MR. HORTON: Offer-In-Compromise recommended, 13 part of the motion. 14 MS. YEE: Uh-huh. 15 MS. STEEL: Yes. 16 MR. HORTON: So be it. 17 No objection noted, such will be the order. 18 ---o0o--- 19 20 21 22 23 24 25 26 27 28 21 1 MS. OLSON: The next item is C17, Jeff Block. 2 ---o0o--- 3 NO. C17 JEFF BLOCK 4 NO. 447296 (EH) 5 ---o0o--- 6 MR. HORTON: Mr. Runner? 7 MR. RUNNER: Yeah, wish I knew what to say -- 8 it's a sad story, isn't it? 9 MR. HORTON: Discussion, Members? 10 Is there a motion? 11 MS. STEEL: Adopt the staff recommendations 12 except purchase allowance for 5 percent instead of 1 13 percent. 14 MR. HORTON: It's been been moved by 15 Member Steel to adopt staff recommendation, with the 16 modification of the -- 17 MS. YEE: Tax paid. 18 MR. HORTON: Tax paid -- 19 MS. STEEL: Tax paid from -- 20 MR. HORTON: -- from 1 percent to 2 percent? 21 MS. STEEL: 5 percent. 22 MR. HORTON: -- 5 percent, 1 percent to 5 23 percent. I don't know why I'm being so stingy. 24 MS. STEEL: Well, it's -- it's very 25 reasonable. 26 MR. HORTON: I am saying me, not -- 27 MR. RUNNER: Second. 28 MR. HORTON: -- 5 percent is good. 22 1 Second by Mr. Runner. 2 Objection, Members? 3 Hearing none, such will be the order. 4 ---o0o--- 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 23 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 JANUARY 31, 2012 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 23 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: FEBRUARY 8, 2012 17 18 19 ____________________________ 20 JULI PRICE JACKSON 21 Hearing Reporter 22 23 24 25 26 27 28 24