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 FEBRUARY 2, 2012 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 5 Michelle Steel Vice-Chairwoman 6 7 Betty T. Yee Member 8 9 George Runner Member 10 11 Marcy Jo Mandel Appearing for John 12 Chiang, State Controller (per Government Code 13 Section 7.9) 14 Joann Richmond 15 Assistant Chief Board Proceedings Division 16 17 For Board Staff: Grant Thompson Tax Counsel 18 Anthony Epolite 19 Tax Counsel 20 ---oOo--- 21 22 23 24 25 26 27 28 2 1 5901 GREEN VALLEY CIRCLE 2 CULVER CITY, CALIFORNIA 3 FEBRUARY 2, 2012 4 ---oOo--- 5 MR. HORTON: Ms. Richmond, what is our next 6 matter? 7 MS. RICHMOND: That concludes -- that concludes 8 all our hearings for today. 9 Would you like to take those matters that have 10 been taken under submission? 11 MR. HORTON: Okay, pleased to. 12 MS. RICHMOND: Our first item is B1, Comcast 13 Cablevision Corporation of California, Taxpayer, and 14 Comcon Production Services, Inc., Assumer. 15 ---oOo--- 16 B1 COMCAST CABLEVISION CORPORATION OF CALIFORNIA, 17 TAXPAYER, AND COMCON PRODUCTION 18 SERVICES I, INC., ASSUMER 19 NO. 424198 20 ---oOo--- 21 MR. HORTON: Okay. I'm going to give the 22 Members a few seconds to sort of regroup here, including 23 the Chair. 24 MS. YEE: Bifurcate the issues. 25 MR. HORTON: Um, Members, why don't we 26 bifurcate the issues as we have discussed them. 27 MR. RUNNER: Yeah. 28 MR. HORTON: And in the same order. 3 1 Let's go with the termination fee, if you will. 2 Discussion, Members? 3 Hearing none, is there a motion? 4 MR. RUNNER: I'll move for the taxpayer. 5 MR. HORTON: Moved by Member Runner to grant 6 the termination fee. Second by -- 7 MS. STEEL: Second. 8 MR. HORTON: -- Member Steel. 9 Objection, Members? 10 MS. YEE: Yes. 11 MR. HORTON: Objection noted. 12 Ms. Richmond, please call the roll. 13 MS. RICHMOND: Mr. Horton. 14 MR. HORTON: No. 15 MS. RICHMOND: Ms. Steel. 16 MS. STEEL: Aye. 17 MS. RICHMOND: Mr. Runner. 18 MR. RUNNER: Aye. 19 MS. RICHMOND: Ms. Yee. 20 MS. YEE: No. 21 MS. RICHMOND: Ms. Mandel. 22 MS. MANDEL: No. 23 MS. RICHMOND: Motion fails. 24 MR. HORTON: Subsequent motion, Members? 25 MS. YEE: Move to sustain the Franchise Tax 26 Board. 27 MR. HORTON: Member Yee moves to sustain the 28 Franchise Tax Board. 4 1 Is there a second? 2 MS. MANDEL: Second. 3 MR. HORTON: Second by Member Mandel. 4 Ms. Richmond, please -- 5 Objection? 6 MR. RUNNER: I'm sorry. Did we go to issue 7 two? 8 MS. STEEL: It's just one. 9 MR. HORTON: We're still on issue -- the 10 termination fee. 11 I believe objection? 12 MR. RUNNER: I'll object, yes. 13 MR. HORTON: Okay. Objection noted. 14 Ms. Richmond, please call the roll. 15 MS. RICHMOND: Mr. Horton. 16 MR. HORTON: Aye. 17 MS. RICHMOND: Ms. Steel. 18 MS. STEEL: No. 19 MS. RICHMOND: Mr. Runner. 20 MR. RUNNER: No. 21 MS. RICHMOND: Ms. Yee. 22 MS. YEE: Aye. 23 MS. RICHMOND: Ms. Mandel. 24 MS. MANDEL: Aye. 25 MS. RICHMOND: Motion carries. 26 MR. HORTON: Members, we are now going to the 27 issue of unitary. 28 Discussion, Members? 5 1 MS. YEE: Uh -- 2 MR. HORTON: Member Yee. 3 MS. YEE: I guess just an observation. I think 4 we probably have had enough discussion on this. But, 5 uh, I appreciated the testimony on both sides on this 6 issue. And I really came in with a very, very open mind 7 on this. Um, but it seemed like we -- my focus, I 8 think, coming into this was really on the unities test. 9 But I -- the more I was hearing the testimony on both 10 sides with respect to the other issues, um, what really 11 became more front and center for me was the, um, 12 dependency or contribution test. And, um -- and 13 although it's very, very difficult to quantify the, um, 14 flow of value, I think there -- there definitely was 15 some value flow both ways. 16 That's my observation at this point. 17 MR. HORTON: So noted. 18 MS. YEE: But I'm -- I'm still open to hear 19 other thoughts on this. 20 MS. STEEL: I think flow of value, that you 21 have to really look at when Comcast had 12 percent, 1986 22 versus 1997 when they were, uh, major owner of 57 23 percent, there's no difference there. 24 So flow of value is not just going to Comcast 25 only, but it's going to other companies exactly same 26 condition. 27 So I'm not really, um, think that there's any, 28 um, control over QVC. I can't even say it. Um, Comcast 6 1 didn't have any control over that. So I thought, you 2 know, there's no unitary business relationship with 3 Comcast. 4 That's my observation. 5 MR. HORTON: Further discussion, Members? 6 Mr. Runner. 7 MR. RUNNER: I was going to say, you know, it's 8 clearly, at times, a very fuzzy line when the issue of 9 investment versus control and -- and -- um, you know, I 10 mean, obviously when somebody makes a major investment, 11 they're going to have a concern with what happens with 12 that investment. Now, does that mean that when you have 13 concern over that investment that you are indeed, um, 14 controlling then that other -- that other entity? 15 And it seems to me that through these 16 discussions it was clear that QVC was treated just, it 17 seems to me, much like, just like, um, the other 18 entities that found themselves in Comcast's array of -- 19 of -- of, uh -- of users. Um, and so I -- I'm satisfied 20 that at that point, um, with the argument by the 21 taxpayer. 22 MR. HORTON: Okay. Further discussion, 23 Members? 24 MR. RUNNER: Move to grant. 25 MR. HORTON: Move to grant by Member Runner. 26 Second by Member Steel. 27 Objection, Members? 28 MS. YEE: Yes. 7 1 MR. HORTON: Objection noted. 2 Ms. Richmond, please call the roll. 3 MS. RICHMOND: Mr. Horton. 4 MR. HORTON: No. 5 MS. RICHMOND: Ms. Steel. 6 MS. STEEL: Aye. 7 MS. RICHMOND: Mr. Runner. 8 MR. RUNNER: Aye. 9 MS. RICHMOND: Ms. Yee. 10 MS. YEE: No. 11 MS. RICHMOND: Ms. Mandel. 12 MS. MANDEL: No. 13 MS. RICHMOND: Motion fails. 14 MR. HORTON: Subsequent motion, Members? 15 MS. STEEL: I thought, you know, during the 16 hearing I thought they made it very clear about the 17 potential to control, um, and actual flow of value were 18 making very, very, um, clear here instead of potential. 19 Actual control was never happened here. 20 So I just really don't understand that, you 21 know, which direction that we are moving because I 22 thought they proved enough during the board hearing. 23 And I thought Franchise Tax Board was not really just 24 going all over and didn't really prove anything about 25 the flow itself. 26 So I -- I -- I really don't know what direction 27 that we are taking today here. Ownership of shares, uh, 28 didn't mean anything for me here so -- 8 1 MR. HORTON: Member Yee. 2 MS. STEEL: It's -- 3 MS. YEE: Um, the test that I'm applying -- I 4 mean -- and I understand, from an operational 5 standpoint, the points that were being made about, um, 6 the operations, um, before, during and after the 7 ownership shares changed, uh, remaining the same. But I 8 have a really hard time crossing this hurdle of -- 9 particularly under the contribution test -- of, um, the 10 relationship between QVC and Comcast. And that is, um, 11 QVC provided programming content and Comcast provided 12 distribution of that content through its -- to its 13 subscribers. 14 And there's -- there's, um -- I mean, I think 15 under the contribution dependency test that's enough. 16 And I'm going -- and I'm -- Mr. Thompson, I'm going to 17 look at you again, because am I reading this wrong? I 18 mean, it just seems like such a threshold question 19 that's got to get addressed. 20 MR. THOMPSON: Well, whether it's enough, it is 21 the Board's discretion and judgment. You know, I think, 22 uh, the issue of, uh, the interlocking directors and 23 officers and to what extent, if any, that generated, uh, 24 control or an exchange of know-how or contributed to the 25 flow of value is an important question. 26 But the bottom-line question is this dependency 27 or contribution in flow of value test. And the 28 interlock of directors factors into that. The testimony 9 1 factors into that. The FTB's documentation factors into 2 that. And you may not find some of that persuasive, 3 depending on how you approach this evidence. But those 4 are all pieces of how you look at that control issue. 5 And then, of course, you also look at the inner 6 company sales and the joint marketing and, uh, the 7 issuance of stock options to, uh -- to, uh, Comcast 8 executives that were, uh -- uh, serving as on the board 9 or as officers, albeit in assistant positions often of 10 QVC. 11 MS. STEEL: But we have to look at one more, 12 special preferences that Comcast got it or not. All the 13 companies got the same commission. All the companies 14 got the same price. So it's not like Comcast got some 15 special treatment from QVC. 16 MR. THOMPSON: I think that's also a factor the 17 Board can weigh. I mean, I don't think it's necessary 18 to show the low cost sales. But it's certainly 19 something the Board can look at. 20 Um, and we do have cases where, uh, there have 21 been similar agreements with other participants, without 22 other arguably unitary ties, such as control. Control 23 meaning a majority ownership and interlocking Board of 24 Directors. And even though there are other similar 25 agreements out with third parties, uh, on the facts of 26 those cases, which of course involved different facts, 27 the Board has at times found unity. It doesn't mean 28 it's compelled here. But that's a possibility. I mean, 10 1 Dr. Pepper would be the lead example I could think of of 2 that. 3 MS. MANDEL: It -- it -- in response to your 4 question about whether the fact that QVC, um, provides a 5 show of some kind that is broadcast, whether you 6 characterize it as programming or a, um -- a -- as a, 7 um, retailing operation that -- that is conducted over 8 the, um, broadcast medium that is carried by -- on QVC 9 channels as it is carried on -- I mean, I'm sorry, as 10 carried on Comcast channels, as it is carried on 11 channels of other providers and, um, broadcasting 12 satellite, that the fact of acquiring majority 13 ownership, I think your question was, you know, are you 14 done at that point? 15 And I'm not, um -- I -- I really question 16 whether that in and of itself would mean that you were 17 done. Because if -- if that were the case, then it 18 seems to me that the presumption in the regulation for 19 steps in a vertical process, which is the way I 20 understand that, um, broadcasting of the QVC channel to 21 be, um -- that's how it's been characterized as that's 22 really the step in the vertical process. Whether you're 23 going from QVC to the subscriber or the subscriber back 24 to QVC, that my understanding is that's where the step 25 in the vertical process argument under the regulation 26 comes in. 27 And so if you were to say that all you needed 28 once you had that relationship was majority ownership, 11 1 then it seems that the pre -- that the regulation would 2 be a conclusive presumption rather than a, um -- a 3 presumption that a taxpayer could in fact rebut. 4 So, am I -- 5 MR. THOMPSON: No, I think that makes sense. 6 MS. MANDEL: Yeah. So I think that -- and 7 that, I guess, is why you started talking about that you 8 have to -- you really have to look at -- consider -- 9 it's not the only -- it can't be the only thing, um -- 10 and I -- my understanding, walking in, really was that 11 there was not a fight about the three unities test, that 12 that was a lot of noise. Because it was my 13 understanding that FTB was not asserting that some of 14 the necessary, uh, unities existed. And I always mix up 15 operations and use even after 30 years. 16 But, um, I think that FTB was not asserting the 17 three unities test exactly because of the very strong 18 testimony, um, and sort of the whole facts of the 19 separate, you know, separate legal, separate this, 20 separate that. 21 So, I don't think they really were ever 22 asserting, um, three unities. I think people have a 23 habit of discussing it because we always just -- you 24 know, everybody's a little academic and needs to explain 25 and that there was this three unities test. And a lot 26 of the recent case law, particularly when there were 27 diverse business cases, there's a lot of focus on three 28 unities because of centralized management. 12 1 But I thought that FTB was always trying to 2 argue contribution or dependency, and, um -- 3 MR. THOMPSON: I think all that's correct. 4 MS. MANDEL: Okay. But if that's the -- if -- 5 I don't think you just stop. I don't think you can just 6 stop with, I found steps in a vertical process and they 7 own a -- they own a majority, if that's what you were 8 focused on. 9 MR. RUNNER: Well, clearly, it seems to me, in 10 terms of the discussion, it's not if you own a majority. 11 It's not -- because we certainly have seen it outside of 12 that before. It's not that if you have programing and 13 you are -- you're a -- you're a cable company and they 14 do programming, that that ends the issue. 15 The issue comes down to all the various 16 information that we were getting in terms of the 17 relationship. Um, the one that was most compelling to 18 me was which would be the direct link, which would be 19 the issue of carriage, carriage. 20 You know, what I heard them say and what I 21 heard in testimony here under oath was we treated them 22 exactly the same as we treated anybody -- any other 23 programing. That there was no preference. There was no 24 differentiation. There was no deal in regards to 25 getting on to our channels. Um, and it seems to me that 26 would be one of the -- for me, one of the key functions 27 that we'd be looking for in regards to the issue of -- 28 of, um -- of separate and distinct operation, along with 13 1 various other things. 2 But that was, at least for me, one of the key 3 issues. They treated -- the same deals that went on for 4 anybody else's program went on for QVC. 5 MR. HORTON: Members, I want to, um, just for 6 the purpose of discussion, to assure that, at least from 7 my perspective, that we are comparing apples and oranges 8 here. 9 Mr. Thompson, you made reference to the shared, 10 uh, control by reference that the, uh, Board of 11 Directors were similar. 12 MR. THOMPSON: Mm-hmm. 13 MR. HORTON: Um, it seems to me the testimony 14 before us implied that -- and -- and -- and being 15 mindful that I'm -- I'm also kind of incorporating in 16 my mind here the Tenneco case. And so the -- which 17 seems to go to the issue of whether or not you had the 18 opportunity to control or versus the actual control. 19 And, um -- and then the testimony, if I 20 remember correctly, is that the testimony was is that 21 the Board of Directors were not compensated by QVC. And 22 I don't know that I heard testimony that they actually 23 exercised control. 24 If that was the case, would that change your 25 view? 26 MR. THOMPSON: You know, it -- it all goes into 27 the factual -- factual mix. You know, I think it would 28 be a worse fact for Appellant if they were paid by QVC 14 1 in the options and if they were contingent on continued 2 employment with QVC. So I could certainly imagine a set 3 of facts that, uh, made the existence those options 4 worse. 5 On the other hand, uh, you could take a look at 6 this and say that, uh, Comcast obtained a significant 7 benefit, uh, by being able to, uh, pay its executives, 8 uh, with options in this subsidiary. Um, and I think, 9 uh, you know, those are some issues to weigh with the 10 options. 11 And, of course, you know, I wish I had a silver 12 bullet either way because it would make all our lives a 13 lot easier. But it -- it all goes in the factual -- you 14 know, the facts and circumstances. 15 MR. HORTON: In, um, considering the 16 compensation and dependency test, um -- and I'm asking 17 this question to bring clarity to my recollection of the 18 case. I don't know if it was the Pennzoil case or A.M. 19 Castle. 20 But, um, in that consideration of the 21 compensation and dependency test, they also made 22 reference to the fact that, in addition to compensation 23 and dependency, that the courts found that two of the 24 unitary, uh, cases were also met; seemingly to imply 25 that they sort of overlapped itself. And I think the 26 courts specifically said that if one exists, so does the 27 other. 28 MR. THOMPSON: Mm-hmm. 15 1 MR. HORTON: And so the invert of that argument 2 would be, in and of itself, if the control issue isn't 3 there, possibly, or one of the three unitaries, uh, then 4 there's a lack of dependency. 5 MR. THOMPSON: Yeah. You know, I think some of 6 the courts' language is a little imprecise. Sometimes 7 they say, hey, you know, these should -- should -- 8 quote, "should lead to the same result." But the A.M. 9 Castle decision the Dental decision said very clearly 10 they're alternative tests. 11 Uh, I think the right way to think of this is 12 the -- the unities, when you talk about shared 13 facilities and you talk about control, all those things 14 you talk about in terms of the three unities, um, those 15 are also facts that you consider in weighing whether 16 there's sufficient dependency or contribution to warrant 17 a unitary finding. 18 Um, so there -- there -- there certainly is 19 overlap there. Um, but I don't think you can take away 20 from the overlap that you have to satisfy both tests. 21 That's not the way Appeals reads the case law. 22 MR. HORTON: Not necessarily satisfy both, but, 23 uh -- okay. 24 Further discussion, Members? 25 Is there a motion, Members? 26 MS. YEE: Can we come back to this issue? 27 MR. HORTON: Okay. Members, we will return to 28 this issue. 16 1 Let's go to the third issue which is dividend 2 received deductions. 3 Discussion, Members? 4 MS. MANDEL: We have, um, I think, binding 5 California Court of Appeal decisions on this issue. 6 MS. YEE: Mm-hmm. 7 MR. HORTON: Okay. Is there a motion? 8 MS. MANDEL: Sustain the Franchise Tax Board on 9 dividends received deduction. 10 MS. YEE: I'll second that. 11 MR. HORTON: It's been moved by Member Mandel 12 to sustain the Franchise Tax Board. Second by Member 13 Yee. 14 Without objection, Members, such will be the 15 order. 16 Penalty. Discussion, Members? 17 Further discussion, Members? 18 MR. RUNNER: Well, it seemed to me a lot of 19 this discussion or the issue around the table down there 20 was about, um, a disagreement on how it would be shown 21 and where it would be shown, as opposed to whether or 22 not, um, the actual, um -- uh, item was -- items were 23 actually put on the, um, on the returns, and 24 disagreements within that. 25 So, again, um, I'm -- I would find for -- I 26 would make a motion for the Appellant in the penalty 27 issue. 28 MR. HORTON: It's been moved by Member Runner 17 1 to grant in favor of the Appellant on the penalty issue. 2 Second by Member Steel. 3 Discussion, Members? 4 Is there an objection? 5 MS. YEE: Objection. 6 MR. HORTON: Objection noted. Um -- 7 MS. YEE: May I speak to this? 8 MR. HORTON: Yes. 9 MS. YEE: I think it's a little bit more than 10 how the penalty was reflected. 11 We're looking at our -- the exceptions, uh, and 12 what would, uh, support relief of the imposition of the 13 penalty. And there's a lot of discussion about 14 substantial authority. Um, and that darn Arthur 15 Anderson memo really kind of got, I think, everyone 16 tripped up on both sides. 17 But, um, I do think the, uh, reliance on that, 18 uh, I didn't think was appropriate. The 19 characterization of the Technical Advice Memorandum, um, 20 not knowing what the genesis of that particular TAM was, 21 um, I didn't -- I -- I -- I didn't find that argument 22 compelling. 23 If you look at the disclosure exception, um, it 24 was listed on the return, in the M-1, but there wasn't 25 anything beyond just the listing of the item. 26 Uh, on the reasonable cause and good faith, my 27 question's with respect to consistent reporting in all 28 the jurisdictions was to try to, um, get a little bit 18 1 more information with respect to the intent and 2 motivation -- actually the motivation -- and, uh, to be 3 sure that there was consistent, uh, reporting the 4 treatment of the item. 5 So I didn't -- though there was some response 6 back with respect to the knowledge about what happened 7 in some jurisdictions but not all, so I wasn't 8 satisfied. 9 MR. HORTON: Further discussion, Members? 10 Ms. Mandel. 11 MS. MANDEL: Yeah, um, you know, there are -- 12 there are a bunch of exceptions and it's -- it's, uh, I 13 don't know whether you start at the top or start at the 14 bottom. But, you know, it's just the bottom it's the 15 easiest. Um, if you start having struggles with the 16 ones at the top, you go to the bottom pretty fast. 17 So, um, I mean, there -- focusing on the 18 California return, there were, um, contemporaneous 19 documents that were prepared by the state tax, uh, 20 guy -- I don't remember exactly what his title was -- 21 um, which showed an intent to, um, use the nonbusiness 22 classification if it was in fact reported as -- were to 23 be reported as income on the return. 24 Um, they did, uh, report consistent with the, 25 um, then recently filed amended federal return. They 26 concluded that that -- putting on the M-1, um, as a book 27 to tax difference was the appropriate place to put it on 28 a return, that was the initial return, in order to be 19 1 consistent with the fed, most recent federal return 2 ultimately. 3 So it seems to me that in sort of considering 4 all of the facts and circumstances you consider not 5 only, um, the sort of original reporting of -- of, uh, 6 whether it was income in the first instance or not, 7 which was a decision that was, um -- uh, made really by 8 the federal guys in filing the federal return. 9 You got to look at the decision of, well, now 10 that that's the federal, um, position in the federal 11 filing, how do I file the California return? Um, what's 12 the best way to file that? Uh, and then, um, with the 13 knowledge that -- that what he was prepared to report, 14 were he to report it as income -- I say "he" but I 15 really mean the company -- on the California return 16 would be nonbusiness income. 17 Um, and considering sort of all of that as well 18 as the fact that, um -- uh, given a, uh, California 19 regulation that had it been reported as nonbusiness 20 income and they had the fight that they ultimately had 21 today of, um, business versus nonbusiness income, they 22 would not have a penalty. 23 So if you're the guy trying to fill out the 24 return and it's a zero tax impact either way, and 25 California has a regulation that would protect you on 26 nonbusiness, it might not be unreasonable to think that, 27 um, while the federal guys may be a bit worried about a 28 penalty, perhaps you don't need to be quite, um, as 20 1 worried about a penalty. 2 So, you know, I -- I don't know that I need to 3 get to thinking about whether they had substantial 4 authority at the end of the tax year, um -- and, by the 5 way, at the end of the tax year the -- the, um, one 6 Hoeschst Celanese case was out but not the Supreme Court 7 one. So, um, you know, they had some authority that 8 there was roiling out there in world on the termination 9 fee even though they lost it here today. 10 So I -- I think that you kind of have to 11 consider absolutely, um, everything that was -- that was 12 going on. And, um, the fact that there's not, um, a 13 specific itemization of a very large, you know, what's 14 in a very large number on what's probably kind of a lot 15 of big returns, that weighs into it a little bit. But, 16 um, you know, considering all the facts and 17 circumstances, I think you might be able to get there 18 under that last or next to last if the regulation is the 19 fourth, um, reasonable -- 20 MR. THOMPSON: Reasonable cause and good 21 faith. 22 MS. MANDEL: Reasonable cause and good faith. 23 Although I was saying reasonable cause before and you 24 told me reasonable basis, but -- 25 MR. THOMPSON: No, vice versa. 26 MS. MANDEL: Oh, okay. 27 MR. THOMPSON: But anyway. 28 MS. MANDEL: So that's kind of the, you know, 21 1 tortured thinking that I went through. Tortured 2 because, um, there's so many little facts to consider. 3 MR. HORTON: Further discussion, Members? 4 There's a motion and a second on the table. 5 Ms. Richmond, please call the roll. 6 MS. RICHMOND: Mr. Horton. 7 MR. HORTON: Aye. 8 MS. RICHMOND: Ms. Steel. 9 MS. STEEL: No. 10 MS. RICHMOND: Mr. Runner. 11 MR. HORTON: Well, strike that. 12 MS. YEE: Can you repeat the motion? 13 MR. HORTON: You may want to repeat the 14 motion. 15 MR. RUNNER: Grant. 16 MS. STEEL: Grant. 17 MR. RUNNER: Why don't we repeat the motion. 18 MS. RICHMOND: The motion was to grant the 19 penalty. 20 MR. HORTON: The motion was made by -- uh, 21 Mr. Runner to grant in favor of the Appellant. 22 MR. THOMPSON: Excuse me. Could we -- 23 Mr. Runner, would you be amenable to granting on the 24 basis of reasonable cause and good faith and we would 25 have the grounds as well? We don't have to do that. 26 But if that's your thinking. 27 MR. RUNNER: That is certainly the intent. 28 MR. THOMPSON: Okay. 22 1 MR. HORTON: Okay. Duly noted. 2 Ms. Richmond. 3 MS. RICHMOND: Mr. Horton. 4 MR. HORTON: Aye. 5 MS. RICHMOND: Ms. Steel. 6 MS. STEEL: Aye. 7 MS. RICHMOND: Mr. Runner. 8 MR. RUNNER: Aye. 9 MS. RICHMOND: Ms. Yee. 10 MS. YEE: I'm going to be a no. 11 MS. RICHMOND: Ms. Mandel. 12 MS. MANDEL: Aye. 13 MS. RICHMOND: Motion carries. 14 MR. HORTON: Members, that takes us back to 15 unitary. Um -- 16 Any subsequent discussion, Members? 17 Member Yee. 18 MS. YEE: I guess just an observation. There's 19 no neat and tidy way to look at this, but I really do 20 feel like, uh, the core consideration is this whole flow 21 of value concept. And I -- I'm not going to do it in 22 this case, but it would be, um, I think, really 23 beneficial for this Board to have, um, a sense of what 24 we can consistently rely on relative to the authority 25 around that particular concept going forward. 26 But that's where I'm hinging my -- 27 MR. HORTON: Okay. 28 MS. YEE: -- my take on this issue. 23 1 MR. HORTON: Further discussion? 2 Mr. Runner? 3 MR. RUNNER: Um, well, I think that I made it 4 clear I think that the -- that the -- the operations 5 were separate, that it seems to me that they, uh, met 6 the previous -- 7 Well, again, our difficulty when we get into 8 these issues is that we get into conflicting 9 interpretations of court cases. I think we have great 10 arguments on both sides, um, you know, in terms of that. 11 And -- and they are difficult. Um, and I think at times 12 this goes to sometimes our core as to how we got here 13 and what we do here. 14 Um, you know, and I think that's a challenge at 15 times. I mean, I've -- since I've been here I've said, 16 you know, when things are difficult and things are a 17 challenge and there's disagreement, honest disagreement, 18 honest good arguments on either side, uh, my tendency 19 will always say when there's confusion and lack of 20 clarity, I give benefit to the taxpayer. 21 I think the taxpayer deserves the ability to 22 understand law clearly, make their decisions and not be 23 caught up in terms of difficult legal arguments at 24 times. And it seems to me -- and -- and these are. 25 These are very difficult. 26 So I understand that this is a very difficult, 27 challenging issue for us as Board Members. We come into 28 it with our own kind of lenses that we -- that we look 24 1 at issues through. 2 To me, the arguments were made well enough. 3 Um, flow of value, I don't know if we could come up with 4 what this Board could agree on flow of value. Um -- 5 MS. YEE: The courts have. 6 MR. RUNNER: You know. Well, but the courts 7 disagree at times. And that's why we have cases before 8 us that deal with those issues. 9 So -- so I think it's always just not that 10 clear. And so at this point I'm -- as I look at the 11 totality of it, and I look at the issue of how -- again, 12 how it is that other competing programers were treated, 13 look at what it is -- how it is that, for instance -- 14 how it is that Comcast could have gotten involved in 15 control and made -- made decision after decision not to, 16 um, just indicates to me, once again, that they were 17 trying to purposefully not cross that line. 18 MS. YEE: Mr. Chairman. 19 MR. HORTON: Uh, Member Yee. 20 MS. YEE: I think one of the challenges that we 21 have here is that, um, many of the prior decisions, and 22 even some of the court cases, really have involved 23 companies that are engaged in activities that are a 24 little bit more, um, conducive to quantifying value. So 25 they're manufacturing or they're producing something. 26 And, um, which obviously in this case is much tougher 27 to, um, look at how you would, um -- uh, do a 28 quantitative analysis. So I think that's one of the 25 1 challenges. 2 Um, having said that, um, you know, the 3 Franchise Tax Board determines that there was a unitary 4 relationship that existed. And our charge is to decide 5 whether the taxpayer has, um, met its burden of proof to 6 determine -- for us to determine otherwise. 7 And, um, so it is as Mr. Thompson says, you 8 know, there are a lot of factors to consider. Um, it is 9 not a neat and tidy analysis. Um, I think all of the 10 things that we've each identified have merit and it is 11 going to be, you know, really a situation of where we're 12 weighing all the, uh, different factors and 13 considerations to determine whether, uh, unity existed 14 here. 15 So it's challenging. Um, I just, um, one of 16 the things that I'm always mindful of is how consistent 17 we're going to be in ruling in these cases from case to 18 case. And, uh, there's -- I think, the tendency is 19 always to look at the different authorities, whether 20 they're court decisions or published decisions of this 21 Board for either side to make, you know, its best 22 arguments. Um, and I just hope that as we look at this 23 issue of unity going forward, particularly in this new 24 world of where we're talking about companies that aren't 25 manufacturing that really are harder to grasp with 26 respect to applying a quantitative analysis, that we can 27 have some consistent way of looking at, you know, how -- 28 how -- the considerations and factors to be weighed. 26 1 I don't think it's answered necessarily with 2 this case, but it is a frustration, I think, going 3 forward. 4 MR. HORTON: Further discussion, Members? 5 Hearing none, is there a motion? 6 MS. YEE: I will move to sustain the Franchise 7 Tax Board. 8 MR. HORTON: Moved by Member Yee to sustain the 9 Franchise Tax Board. 10 Is there a second? 11 Further discussion, Members? 12 Ms. Mandel. 13 MS. MANDEL: It's -- it's, um -- it's quite a 14 struggle of a case because of the way they ran the 15 company. And, um -- because my, uh, general 16 recollection is always so focused on cases where the 17 fight is about whether the subsidiary really operated as 18 an independent company and didn't have to get the say-so 19 or buy-in of the parent. 20 And, um, the reason it's kind of a struggle is 21 because it's not a case where FTB engaged on that 22 particular battlefield. Um, so they're really trying to 23 look at something that, you know, it seems -- maybe I've 24 just been away from the stuff for a long time. But it 25 seems a more different, uh, than the types of fights 26 that I remember. And so that's why it's kind of a 27 struggle. 28 Or am I just tired, Mr. Thompson? 27 1 MR. THOMPSON: I don't know. I -- I -- I'm not 2 sure FTB, uh -- they certainly didn't argue strong 3 control, obviously. 4 I think their view, as I understood it, was 5 that, uh, you could draw an inference of, uh, some 6 exercise of control from, uh, the fact that the Comcast 7 people made up the Board of Directors and the officers 8 for QVC. And I think, uh -- I don't think we heard it 9 here today, but I think FTB argued in the briefs that, 10 uh, it was significant in their view that the management 11 of QVC, uh, received, uh, what they characterized as 12 suggestions from the parent and then made presentations 13 to the parent, uh, to persuade the parent those 14 suggestions weren't a good idea and were successful. 15 And, uh -- so, uh, that may not be the way the 16 Board looks at it. But, uh, I just, uh -- you know, I 17 think they were, uh, of the view that there was, uh, a 18 level of oversight here that you can draw from the 19 interlock and even to some extent from the affidavits 20 from the other side. 21 MR. RUNNER: So, and at times that core 22 discussion comes down to whether that's a protection of 23 investment, right? Or -- or whether or not that is 24 actually engaged in that business. 25 MR. THOMPSON: I think that's a great point. I 26 mean, you know, added to all this difficult 27 line-drawing, um -- you know, this is, uh -- when they 28 acquired majority control, for example, you know, 28 1 Appellants, I think, said very strongly, we were 2 protecting our investment. We didn't want to be 3 deluded, uh, and that's consistent in their view with 4 the argument, uh, that they're just protecting their 5 investment, your point. 6 Of course FTB said no, no, no, no, no, you 7 thought this acquisition of CVS was a bad idea and you 8 stepped in to stop it, and you stopped it. 9 And so, you know, I think those lines are 10 pretty difficult to draw. 11 MR. RUNNER: I'd try my motion again. 12 MS. STEEL: So there's a motion out there or 13 not? 14 MS. YEE: There's a motion without a second. 15 MR. HORTON: There's a motion on the floor 16 without a second. 17 Is there a second, Members? 18 Okay. Is there -- 19 Okay. We've got proposed, uh, actions in 20 consideration that seem to reflect both perspectives. 21 Am I left to presume that there's something in the 22 middle? 23 MR. RUNNER: Can we -- is there a path -- is 24 there a path to the middle? I mean, it seems to me you 25 either are or you aren't. 26 MR. THOMPSON: I haven't seen a suggestion of 27 that from the parties. 28 MR. RUNNER: I mean, to try to argue anything 29 1 in the middle would argue that all of a sudden you're -- 2 you argue against your own argument for either side. 3 Both arguments are based upon the facts that they feel 4 like they've got the facts. 5 MR. HORTON: Be cognizant, Members. This is 6 the Chair speaking at this point. So which basically 7 means that we're attempting to get all of the, uh, 8 evidence on the table and to make sure that there is no 9 improper inference as it relates to what the taxpayer 10 actually said and what the Franchise Tax Board said. 11 So, um, I'm seeking a consensus of the body. I 12 certainly have my own perspective of where we are. And, 13 for the record, I'm not confused. But, uh, seeking to 14 make a decision primarily based on the facts as 15 presented here before us as opposed to my personal 16 interpretation of the court cases, but the facts as they 17 are presented here before us and briefings that we've 18 had to read, which is voluminous at, uh -- at best, 19 so -- 20 Okay, the motion to grant in favor of the 21 taxpayer, uh, was made. It was second, and it died on a 22 3-2 vote. 23 MS. MANDEL: Your -- your thoughts, Mr. Chair? 24 MS. STEEL: Mr. Chair. 25 MR. HORTON: There are -- 26 Member Steel. 27 MS. STEEL: Board Member Runner's, uh, motion 28 died. So can I make same motion? Then it's going to be 30 1 different one because it's coming out from me, not from 2 Board Member Runner. 3 MR. HORTON: That's right. 4 Well, actually, um, Mr. Runner could make the 5 same motion. Once the motion is made and it's handled, 6 it can actually come up in a number of different ways, 7 number of opportunities. 8 But I think the question is my -- my -- you 9 know, my perspective of the law is that the facts as 10 they have been presented here today, uh, demonstrate a 11 number of variables that would reflect compensation, 12 mutual compensation, mutual benefit to the degree that, 13 uh -- as well as control. 14 So under the compensation and dependency test, 15 I certainly have some concerns about the unity -- unity, 16 the three unities tests, and whether or not they have 17 been satisfied as presented here today. 18 So, um, my inclination is to -- would be to 19 rule in favor of the Department. And unless there is 20 some arguments to the contrary -- 21 Does that help? 22 MS. MANDEL: Is that a -- are you seconding 23 Ms. Yee's motion? 24 MR. HORTON: You know, Members, um, I am not 25 going to allow us to prolong this. So, in the interest 26 of bringing some resolution to this, um, yes, I will 27 second Ms. Yee's motion. 28 So there's a motion and a second to Ms. Yee's 31 1 motion. 2 Discussion, Members? 3 MS. STEEL: Objection. 4 MR. HORTON: Objection noted. 5 Ms. Richmond, please call the roll. 6 MS. RICHMOND: Mr. Horton. 7 MR. HORTON: Aye. 8 MS. RICHMOND: Ms. Steel. 9 MS. STEEL: No. 10 MS. RICHMOND: Mr. Runner. 11 MR. RUNNER: No. 12 MS. RICHMOND: Ms. Yee. 13 MS. YEE: Aye. 14 MS. RICHMOND: Ms. Mandel. 15 MS. MANDEL: Aye. 16 MS. RICHMOND: Motion carries. 17 ---oOo--- 18 19 20 21 22 23 24 25 26 27 28 32 1 MR. HORTON: Okay. Ms. Richmond, what's our next item? 2 MS. RICHMOND: Our next item is B4, Donald L. 3 Maxted and Jan E. Maxted. 4 ---oOo--- 5 B4 DONALD L. MAXTED AND JAN E. MAXTED 6 NO. 558105 7 ---oOo--- 8 MR. HORTON: Discussion, Members? 9 MR. RUNNER: Um, yeah, real quickly. I just -- 10 MR. HORTON: Deep breath. 11 MR. RUNNER: On to the next item. 12 Um, I -- I certainly was convinced that there 13 was the reduction of value in the individuals' property, 14 um, and affected them in their ability. And I was 15 certainly not convinced that it was on a short term 16 basis. 17 So I would find in favor of the taxpayer. 18 MR. HORTON: Mr. Runner moves to -- moves to 19 grant in favor of the taxpayer. 20 Is there a second, Members? 21 MS. STEEL: Second. 22 MR. HORTON: Second by Member Steel. 23 Objection, Members? 24 MS. YEE: Yes, objection. 25 MR. HORTON: Objection noted. 26 Ms. Richmond, please call the roll. 27 MS. RICHMOND: Mr. Horton. 28 MR. HORTON: Oh, strike that. 33 1 Discussion, Members? 2 MS. YEE: Mm-hmm. 3 MR. HORTON: Member Steel -- I mean Member 4 Yee. 5 MS. YEE: Uh, I didn't find the appraisals 6 particularly compelling, uh, particularly with respect 7 to the comparable sales that were noted. Um, I think 8 the, uh -- the circumstances were very different with 9 respect to the properties that were identified in the 10 appraisals as compared to the properties at issue in the 11 appeal. So -- and, um, I wish there had been a, uh, an 12 appraisal that could have been, um, just a little bit 13 more on point. 14 MR. HORTON: Members, my -- just to get it out 15 on the table because of the time, my concern sort of 16 went to the deliberation around the Boswell case and the 17 reliance on that case. Um, the case itself seemed to, 18 uh, not be supportive of FTB's position once we were 19 able to flush it out as it relates to the fluctuation, 20 the necessity of the fluctuation and the property being 21 able to come back to its natural form. Um, and this 22 property, based on the testimony before us, does not 23 seem to have come back after five years, and it's shown 24 no indications that it will come back. 25 I would, uh, not be supportive of the 26 taxpayer's position if we were just speaking about the 27 mitigation of this property being used for mitigation 28 purposes. 34 1 Quite frankly, I think if it was vacant it 2 still be could used for mitigation purposes, its mere 3 location and proximity to the developments in the area. 4 It is the conservation aspect of it and the, uh, the 5 environmental aspect of it that I just don't think that 6 even time is going to -- time is going to allow. 7 And then, uh, the notion of the windfall, 8 ultimately if they get the credit -- if they don't, 9 fine -- but if they get the credit, ultimately, they end 10 up selling the property, recognizing the income, 11 altering the base, uh, to reflect so. I really don't 12 think it gets lost in the mix as far as the Franchise 13 Tax Board. In fact, I think they actually flagged this 14 for future consideration. 15 But that's what made it difficult, I mean, just 16 on the testimony that was here. The reference to the 17 Boswell case just threw me for a whole loop. 18 MS. YEE: Mm-hmm. 19 MR. HORTON: I mean it's, like, wow. 20 MS. YEE: Mr. Chairman. 21 MR. HORTON: Yes, Member Steel -- Member Yee. 22 I'm sorry. 23 MS. YEE: That's okay. 24 MR. HORTON: Ms. Steel is looking at me -- 25 looking at me through those glasses. 26 MS. YEE: We are starting to look alike at this 27 hour. 28 MR. HORTON: No. No, no, no. 35 1 She's -- she's -- I'll tell you, my wife, uh, 2 she will lower her glasses and begin to have those 3 conversations and you pay attention. 4 Ms. Steel does the same thing. She lowered her 5 glasses so I was looking dead at her. 6 Okay. 7 Member Yee. 8 MS. YEE: I think the Boswell case, um, even 9 though FTB had raised it to, um, support a statement 10 that had been made, um, it really related to 11 agricultural land that produces income, right? 12 MR. HORTON: Right, right. So you can 13 measure. 14 MS. YEE: So you can measure the disruption of 15 activity when there's been damage. So -- 16 MR. HORTON: That's a good point. 17 MS. MANDEL: Well, um, yeah, it would have been 18 helpful if someone's going to rely on a case that they 19 have not submitted, that they actually submit the case, 20 rather than just come and try to tell us about what they 21 think it says so that some of us have to look it up on 22 the computer. 23 Um, and, uh -- I mean, I've read it fast. And 24 I just don't find it as -- I don't know if you were able 25 to read it fast, but I just don't -- I mean, the 26 taxpayer, um, in that case, his ultimate claim, um, was 27 that he thought that -- that he was going to be limited 28 on being -- how much cotton he was going to be able to 36 1 plant because from time to time in the 1950s there were 2 limitations on that. But, um -- and that's the part 3 that the court thought was, you know, just really 4 speculative. We're not going to give it to you. 5 And he had bought other properties that were 6 under water, so they didn't really buy the under water 7 theory. And he had remediated properties that had been 8 under water and had salt issues. So they were like, 9 well, we gave you those expenses and now the property's 10 remediated so you don't really have a loss. 11 I don't know, it's very troubling when they 12 bring something in like that at the, um, last minute. 13 MR. EPOLITE: What concerned me about that case 14 was -- 15 MR. HORTON: Sorry, Mr. Epolite. 16 Ms. Mandel. 17 MS. MANDEL: And, um -- wow. Now I can't even 18 hardly see anymore. 19 And, uh -- what was the other piece here? 20 Right. And then also when he was trying to claim that 21 there was damage from salt, they said, well, but it's 22 just in like one little part and you can't -- you 23 haven't really proven that whatever damage from salt 24 that you think there is -- which we think, based on your 25 history of other properties, that you can fix -- you 26 didn't even prove that that related to the flood that 27 you're talking about. It could have happened anywhere 28 from -- I forget what it was in here -- 1948 to 1952. 37 1 You're not showing it was the 1952 flood. 2 So, I mean, I think I see why he's trying to 3 use it. But I didn't see it as, um -- it just didn't 4 seem the same. It would seem that if there was really 5 something much about fluctuation of value that there'd 6 be something he could find after 1962 that was more 7 comparable. Fires are not an unusual -- I mean, even if 8 it was regs or something. 9 So, I -- I -- I wasn't, just from looking at 10 this, you know, since he cited it, I didn't -- I wasn't 11 sure that it really helped him on the FTB side. 12 And they, uh, really did talk quite a lot about 13 what comes back might not be what was there. And they 14 might not be able to get that mitigation, um, 15 designation. And that's what the appraisals, I think, 16 went to, right? That they couldn't -- that they -- that 17 there was not -- no vegetation and little animals and 18 things running around at the moment that could be 19 measured, and who would know if they -- if and when they 20 would come back. 21 I mean, when I walked in, my understanding was 22 they just didn't -- FTB didn't like the -- you know, 23 didn't like the appraisals because they thought, you 24 know, um, grass grows and flowers bloom. But I thought 25 the point of the taxpayer's position was, yeah, but it 26 might not be the right stuff. So -- 27 MR. RUNNER: That, and trees take a longer 28 time. 38 1 MS. MANDEL: Yeah, and I think she did say that 2 they looked into what it would cost to remediate, and 3 that the cost to remediate, which is essentially the 4 deduction that the guy in Boswell got, but here the cost 5 to remediate, she said, was something like over 6 $6 million, which they have not spent. So they 7 wouldn't -- I guess FTB would rather they spend 8 $6 million than take a deduction for remediation. I'm 9 sorry. I'm getting punchy. 10 MR. HORTON: Um, I think there may be a couple 11 of questions out there that Mr. Epolite could answer 12 questions, not an opinion. 13 If you need some assistance, maybe we can help 14 frame a question for you. 15 MS. MANDEL: Um, is the, uh -- is there -- is 16 there, um -- you know, leaving aside this late Boswell, 17 is there something that is, uh -- discusses more closely 18 or definitively this idea of fluctuating value? Because 19 nobody seemed to cite anything else. 20 MR. EPOLITE: Not that I'm aware of, no. 21 MS. MANDEL: Did I have another question, 22 Mr. Horton? Do I have another question? 23 MR. HORTON: What impact does the 24 income-producing aspect of it have on the deduction? 25 MR. EPOLITE: Well, you're making a comparison 26 between the fair market value immediately before and 27 immediately after the casualty. And here we do not have 28 income-producing property. We have bare land. So I 39 1 don't think an analogy to income-producing property 2 would be appropriate in this instance. 3 MR. HORTON: Yet it seems to have merit in that 4 trying to determine what the loss is. I mean, there's a 5 loss certainly attributed to the destruction of the 6 vegetation and the habitat. And the income being the 7 ability to place it in mitigation or the conservation 8 program. It doesn't appear that they actually attempted 9 to do that. And I know that's not a -- not something 10 that we -- the courts have traditionally taken under 11 consideration. 12 MS. STEEL: What's our motion? 13 MR. RUNNER: To grant, right? 14 MR. HORTON: Yes, the motion is to -- is to 15 grant. 16 MS. STEEL: Okay. 17 MR. HORTON: The challenge for me, Members, is 18 is that it's sort of incumbent upon the parties to 19 represent themselves and present the facts as they exist 20 in this room, and for us to give weight and 21 consideration to the briefing information and all the 22 facts that we received in written communication. 23 And so when there's new facts presented and the 24 articulation of those facts and some sense of reliance 25 on those facts as it was in the Boswell case, it just 26 does appear to me that the FTB representatives were 27 indicating that, okay, we're relying on the Boswell 28 case, we're relying on the fact that the fluctuation of 40 1 value has some significance to our determination and 2 that reliance proved to be -- at least the fact patterns 3 proved to be inconsistent with the fact patterns before 4 us. Which would, in my mind, cause me to discount that 5 testimony in trying to weigh the preponderance of the 6 evidence and the facts here. And then question whether 7 or not the Department has now in addition to their 8 arguments related to the Boswell case, what are they. 9 And I, quite frankly, didn't hear those. And it may be 10 a lack of presentation one way or the other. 11 Um, is there anything in the briefings that, 12 uh, aside from fluctuation and value, that -- that I may 13 have missed in the oral testimony as it relates to the 14 Franchise Tax Board's case? Because given the -- given 15 the position -- in a position to only make a decision 16 based on their presentation here, I have to go back to 17 the brief and now re-read the brief to see what their 18 actual briefing was and what the facts were in that case 19 that supported their position. 20 So, can you help me? 21 MR. EPOLITE: I believe the FTB looked to the 22 assessor's assessed values of the property and 23 questioned, in general, whether there was any actual 24 loss in value to the properties and questioned that the 25 fire damage did not actually result in any loss that 26 resulted in a decline in value after the causality. 27 MR. HORTON: Would the -- given this to be a 28 fact, would the fact that the property could no longer 41 1 be used for mitigation or the conservation program, 2 would that in and of itself influence value? Or are we 3 to determine that this is just raw land? 4 MR. EPOLITE: No. I think then you're looking 5 at the issue of highest and best use, uh, in driving the 6 determination of what fair market value is in 7 Appellants' argument that under highest and best use 8 analysis prior to the causality, it qualified for this 9 mitigation bank opportunity. But because of the kind of 10 damage that occurred, that potential use was no longer 11 available so that it changed the character of the 12 property. 13 MR. HORTON: Mm-hmm. And in the, uh -- in the 14 Palmer case, which is the case that was cited by FTB, 15 the highest and best use was not one of the variables 16 that they seemed to rely on. Uh, they seemed to -- 17 Well, strike that. They did say highest and 18 best, but they didn't rely on the most profitable and -- 19 Did the appraisal consider the most profitable 20 use? 21 MR. EPOLITE: Yes, I believe so. 22 MR. HORTON: Or -- or -- or they're one in the 23 same, highest and best actually -- 24 MR. EPOLITE: Highest and best should be 25 getting you to the most profitable. 26 MR. HORTON: Profitable. Okay. 27 All right. Further discussion, Members? 28 Mr. Runner, none. 42 1 MR. RUNNER: I was going to -- no, I'm done. 2 I'm done. 3 MR. HORTON: Okay. There's a motion on the 4 floor to grant the petition. 5 Objection, Members? 6 MS. YEE: I object. 7 MR. HORTON: Objection noted. 8 Ms. Richmond, please call the roll. 9 MS. RICHMOND: Mr. Horton. 10 MR. HORTON: No. 11 MS. RICHMOND: Ms. Steel. 12 MS. STEEL: Aye. 13 MS. RICHMOND: Mr. Runner. 14 MR. RUNNER: Aye. 15 MS. RICHMOND: Ms. Yee. 16 MS. YEE: No. 17 MS. RICHMOND: Ms. Mandel. 18 MS. MANDEL: Aye. 19 MS. RICHMOND: Motion carries. 20 MR. HORTON: Place me as an "aye" as well. My 21 apologies, Members. I misunderstood where I was. 22 ---oOo--- 23 24 25 26 27 28 43 1 MS. RICHMOND: Our last item is B8, Citation Development 2 Company. 3 ---oOo--- 4 B8 CITATION DEVELOPMENT COMPANY 5 NO. 567630 6 ---oOo--- 7 MR. HORTON: B8. Discussion, Members? 8 MR. RUNNER: Seems like it was hours ago. 9 MS. STEEL: Yeah. 10 MR. HORTON: Hearing none, is there a motion? 11 MR. RUNNER: Hold on. Hold on. 12 MR. HORTON: Moved by Member Yee to sustain -- 13 MS. YEE: Yeah, thank you. 14 MR. HORTON: -- the FTB. Second by Member 15 Mandel. 16 Objection, Members? 17 MR. RUNNER: Objection. 18 MS. STEEL: Objection. 19 MR. HORTON: Objection noted. 20 Ms. Richmond, please call the roll. 21 MS. RICHMOND: Mr. Horton. 22 MR. HORTON: Horton, aye. 23 MS. RICHMOND: Ms. Steel. 24 MS. STEEL: No. 25 MS. RICHMOND: Mr. Runner. 26 MR. RUNNER: No. 27 MS. RICHMOND: Ms. Yee. 28 MS. YEE: Aye. 44 1 MS. RICHMOND: Ms. Mandel. 2 MS. MANDEL: Aye. 3 MS. RICHMOND: Motion carries. 4 MR. HORTON: Ms. Richmond. 5 MS. RICHMOND: That concludes our business for 6 today. 7 MR. HORTON: Thank you, Members. And thank you 8 so very much for your time and conscious deliberation 9 and engagement. I know that all of you have spent 10 countless hours reviewing this and going over this 11 material. And so to that extent it's been extremely 12 rewarding to the people of the State of California. 13 The meeting of the Board of Equalization is 14 hereby adjourned. 15 ---oOo--- 16 17 18 19 20 21 22 23 24 25 26 27 28 45 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 February 2, 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 45 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: February 10, 2012 17 18 19 ____________________________ 20 KATHLEEN SKIDGEL, CSR #9039 21 Hearing Reporter 22 23 24 25 26 27 28 46