1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 MAY 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 Joann Richmond Chief, Board 13 Proceedings Division 14 15 For Staff: David Levine Tax Counsel 16 17 ---OOO--- 18 19 20 21 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 MAY 31, 2012 4 ---o0o--- 5 MS. RICHMOND: Would you like to take those 6 matters that were taken under submission? 7 MR. HORTON: Yes. 8 MS. RICHMOND: Our first item is C5, Cities of 9 Agoura Hills. 10 ---o0o--- 11 C5 CITIES OF AGOURA HILLS, et al. 12 LOCAL TAX REALLOCATION HEARING 13 ---o0o--- 14 MR. RUNNER: What was the title of that one? 15 MR. HORTON: C5. 16 MS. MANDEL: Moreno Valley. 17 MS. YEE: Yep. 18 MR. LEVINE: The Fillmore case, local tax. 19 MR. RUNNER: There we go. I wanted to make 20 sure I was on the right path. 21 MR. HORTON: Discussion, Members? 22 Hearing none, is there a motion? 23 MS. YEE: Move to adopt the staff 24 recommendation to reallocate. 25 MR. HORTON: Moved by Member Yee to adopt staff 26 recommendation to reallocate. 27 Second by Member Mandel. 28 Without objection, such will be the order. 3 1 MS. YEE: Mr. Chairman? 2 MR. HORTON: Yes -- 3 MS. YEE: With the -- 4 MR. HORTON: -- Member Yee. 5 MS. YEE: -- with heightened interest over 6 published decisions of late, I'm wondering if there's 7 room for one in this -- related to this matter? 8 And I'm -- we've heard some of the arguments 9 that were presented in this case before. And it seems 10 to me that there might be some room to memorialize, I 11 guess, the intent of Regulation 1699 and this whole 12 issue of -- of, you know, the buying company and the 13 issuance of a seller's permit. 14 And I think it was pretty much discussed in 15 footnote 39 of the D & R. And I just want to kind of 16 get the Appeals Division's sense of this. 17 But I think this might provide some guidance 18 for some future cases and I'm just wondering if this 19 might be one that we want to tackle. 20 MR. HORTON: Let's get the input of -- 21 MR. LEVINE: You said a memorandum opinion? 22 MR. HORTON: Memorandum opinion? 23 MR. LEVINE: On the one hand I think it's a red 24 herring argument, but it does -- it will probably be 25 repeated. So, it won't hurt to spell out the Board's 26 position in a memorandum opinion 27 MR. HORTON: I would only say that we have to 28 be somewhat careful. These M. S. A. agreements, they -- 4 1 they seem to vary, the fact patterns seem to vary. 2 MS. YEE: Yeah. 3 MR. HORTON: Even though conclusively the law 4 is the law, so -- 5 MS. YEE: I agree with that. I guess I'm not 6 even at that level. I am really looking to the specific 7 pro provisions of 1699. 8 MR. HORTON: -- okay. 9 MS. YEE: And how they've been kind of 10 conflated as the cases have been before us. 11 And, so, not really even necessarily getting to 12 the level of the contract or the agreements. 13 MR. HORTON: Okay. 14 MS. YEE: Yeah. 15 MR. LEVINE: You're just carving out that one 16 issue and we can do that. 17 MS. YEE: I mean that -- 18 MR. LEVINE: You don't have to address every 19 single issue presented in the case in the memorandum 20 opinion. You can tell us what you want us to cover and 21 that's what we cover. 22 MS. YEE: let me -- let me just point to, I 23 guess, two areas of the D & R. And, obviously, we'll 24 see a draft back before we approve anything. 25 But looking specifically at your -- I thought 26 very relevant discussion -- in footnote 39 on page 30 of 27 the D & R and then on the top of page 33 of the D & R, 28 where it speaks to the Department now accepting that the 5 1 retailer's a buying company that is entitled to be 2 respected as an entity separate from its parent for 3 purposes subject to the sales to the customer and 4 that -- whether the local tax for such sales should be 5 allocated to this particular situation in Fillmore is 6 not determined solely on the fact that the retailer's a 7 buying company but, instead, is based on whether a 8 permit can be issued to any particular California 9 location. 10 I think that whole discussion, seems to me, 11 could be memorialized. And then we can look at, you 12 know, the specifics of any particular agreement or 13 contract. 14 MR. RUNNER: Okay, just a procedural question? 15 MR. HORTON: Sure. 16 Ms. Mandel. 17 MS. MANDEL: I don't know, it might be the same 18 procedural question. 19 MR. HORTON: Okay. 20 MS. MANDEL: So, why don't we see if -- 21 MR. RUNNER: Yeah, my procedural question -- 22 MR. HORTON: Ready? Go. 23 MR. RUNNER: -- well, and that is in the choice 24 of publishing at that point and that is -- is -- is the 25 process for this that we would request then the staff to 26 identify and look at and maybe work with the issue of -- 27 the issues whether or not they are significant and 28 helpful to be published and then would come back for us 6 1 to then make a subsequent decision on that? 2 Is that what we would anticipate -- 3 MR. HORTON: That -- 4 MR. RUNNER: -- how that process would work? 5 MR. LEVINE: If the motion is to draft a memo 6 opinion, that's what we do. 7 We just draft the memo opinion. We bring it 8 back. If you like what we -- 9 MR. RUNNER: okay. 10 MR. LEVINE: -- have exactly, then you adopt it 11 or you send it back for revisions or you make some 12 revisions on the fly or you say, "Never mind -- 13 MR. RUNNER: Okay. 14 MR. LEVINE: -- bad idea." 15 MR. RUNNER: Okay, that clarifies. 16 MS. YEE: Mr. Levine, to the decision that 17 we've just made in this matter? 18 Does it -- 19 MR. LEVINE: No, our policy -- unless you 20 direct otherwise, you can -- but the general way we do 21 it is you make the decision. It's -- we send out the 22 notice in due course, which won't take too long. 23 And the memorandum opinion is separate. We do 24 it differently than the Franchise does. 25 MS. MANDEL: Okay. So, the -- so, the special 26 rule on -- that's only in the rules on the Franchise 27 because of the -- 28 MR. LEVINE: That's correct. 7 1 MS. MANDEL: -- time period to -- 2 MR. LEVINE: That's correct. 3 MS. MANDEL: Well, that -- 4 MR. LEVINE: We've had a couple examples where 5 the Board held up its decision, but that's the 6 exception -- 7 MS. YEE: Right. 8 MS. MANDEL: Okay. 9 MR. LEVINE: -- for sales tax. 10 MS. YEE: Yeah, and to clarify it, our decision 11 will stand. 12 And then we can have a separate consideration 13 with respect to -- 14 MS. MANDEL: Okay. 15 MS. YEE: -- whether to pursue -- 16 MR. RUNNER: Publishing? 17 MS. YEE: -- publishing. 18 MR. RUNNER: Yes. 19 MS. MANDEL: Then we'll -- but then -- you do 20 some kind of something to the taxpayer because in the 21 case -- the other case that we granted the rehearing -- 22 I mean, it was granted for a variety of reasons, I'm 23 sure -- but one of the -- you know, when the taxpayer -- 24 or not the taxpayer, whatever we call them -- the 25 jurisdiction filed the petition, they had a variety an 26 of reasons that they filed a petition. 27 One of their reasons was that they didn't -- 28 they -- they weren't sure what they were really filing a 8 1 rehearing petition on because of the type of notice that 2 they got. So -- 3 MR. LEVINE: That's what they argued. 4 MS. MANDEL: That's what they argued. 5 I just want to -- 6 MR. LEVINE: It's just like in this case, I 7 think the record is clear what the Board decided. 8 And we will try and reflect that in the -- the 9 notice that goes to the taxpayer. 10 But since the Board doesn't adopt an opinion, 11 we try and be very careful that we don't go beyond what 12 we know the fine -- the conclusion is. 13 So, we'll still be brief, but if you're worried 14 about how this would impact if the jurisdiction files a 15 petition for rehearing, it's going to take a while to 16 get the petition for rehearing back. 17 And I think that if they file a petition for 18 rehearing and we're going to do a memorandum opinion, 19 we'll figure out how -- maybe bring them back at the 20 same time or -- we won't do the petition for rehearing 21 before the memorandum opinion. 22 MS. YEE: What's the timing, Mr. Levine, on 23 getting a draft back -- 24 MR. LEVINE: We'll try and get it back as -- 25 MS. YEE: -- before us? 26 MR. LEVINE: -- soon as we can. 27 MS. YEE: Okay. 28 MR. LEVINE: It won't be June. I think we 9 1 should be able to do it by August since July, I believe, 2 is -- 3 MS. YEE: Culver City. 4 MR. LEVINE: -- Culver City. 5 MS. YEE: Okay, all right. 6 MR. HORTON: All right, so -- 7 MS. MANDEL: Well -- 8 MR. HORTON: -- motion? 9 MS. MANDEL: -- yeah, I'm just going to stay 10 out. 11 I -- I didn't even consider -- think about that 12 aspect. So, I will just stay off that part of it 13 MR. HORTON: Okay. There is motion by Member 14 Yee to draft a specific memorandum. 15 MS. STEEL: Second. 16 MR. HORTON: Second by Member Steel, noted 17 abstention by Member Mandel. 18 Without objection, such will be the order. 19 ---o0o--- 20 21 22 23 24 25 26 27 28 10 1 MS. RICHMOND: Our next item is C7, 888-Auto 2 Corporation. 3 ---o0o--- 4 C7 888-AUTO CORPORATION 5 NO. 414664, 443238 (GH) 6 ---o0o--- 7 MR. HORTON: Discussion, Members? 8 Hearing none, is there a motion? 9 MS. YEE: Move to adopt the staff 10 recommendation. 11 MR. HORTON. It's been moved by Member Yee to 12 adopt staff recommendation. Second by Member Steel. 13 Without objection, Members, such will be the 14 order. 15 ---o0o--- 16 17 18 19 20 21 22 23 24 25 26 27 28 11 1 MS. RICHMOND: Our next -- 2 MR. HORTON: Ms. Richmond. 3 MS. RICHMOND: -- item is C8, Swertfeger's 4 Equipment, Inc. 5 ---o0o--- 6 C8 SWERTFEGER'S EQUIPMENT, INC. 7 NO. 420299, 431085 (EH) 8 ---o0o--- 9 MR. HORTON: Discussion, Members? 10 MS. STEEL: I have a question to Mr. Levine. 11 If it was leased, then this taxpayer is not 12 liable for those taxes. 13 MR. LEVINE: We kind of have two things going 14 on here. 15 MS. STEEL: Right. 16 MR. LEVINE: If we didn't have the Report of 17 Sale issue, which is a separate thing, and we -- 18 everything was clean and otherwise done properly and if 19 the transaction was a lease to this taxpayer, yes, there 20 would be no tax on the lease. 21 The person who purchases mobile transportation 22 equipment for purpose of leasing is the consumer and 23 person can even -- either pay tax up front or, if making 24 a timely election, pay it on rental receipts and then it 25 can collect that use tax -- a use tax reimbursement from 26 the customer. 27 The problem here is that the records indicate 28 that registration was transferred by way of this 12 1 taxpayer's Report of Sales. And that makes this 2 taxpayer the retailer with respect to that transaction, 3 even if it wasn't the retailer. That's in the law and 4 it's -- because logic, we -- the DMV looks at that, we 5 look at that to determine who to go after for tax. 6 MS. STEEL: But if it was -- the title 7 transferred to the lessee or buyer, then the -- the 8 seller has to be responsible for sales tax here, to 9 collect the sales tax. 10 MR. LEVINE: Yes, the seller's responsible and 11 by operation of law, this person becomes the seller by 12 using its Report of Sales, by effecting registration -- 13 by being the dealer who effects registration it becomes 14 the -- the seller. 15 Because if you just had a -- one transaction 16 and someone makes a sale to you and they put it on a 17 Report of Sale, you don't go into the DMV and register 18 it. So, you don't -- the DMV doesn't collect use tax 19 from you. 20 MS. STEEL: Okay. 21 MR. LEVINE: And that's the basic theory behind 22 it. 23 MR. HORTON: Further discussion, Members? 24 Is there a motion? 25 MS. YEE: Move to adopt the staff 26 recommendation. 27 MR. HORTON: Moved by Member Yee to adopt staff 28 recommendation, second by Member Mandel. 13 1 Objection? 2 None noted. Such will be the order. 3 ---o0o--- 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 14 1 MS. RICHMOND: Our next item is C10, Elizabeth 2 Shutters, Inc. 3 ---o0o--- 4 C10 ELIZABETH SHUTTERS, INC. 5 NO. 538185 (EH) 6 ---o0o--- 7 MR. RUNNER: I'll make a motion to grant. 8 MS. STEEL: I second that. 9 MR. HORTON: Moved by Member Runner to grant. 10 Second by Member Steel to grant. 11 Objection, Members? 12 MS. YEE: Objection. 13 MR. RUNNER: Yeah, just a little discussion on 14 this. 15 MR. HORTON: Objection noted. Discussion? 16 MR. RUNNER: Yeah. You know, we had some 17 discussion in regards to how when things were applied, 18 you know, whether the cabinet rule is applied, how broad 19 if it -- you know, and how narrow. 20 During the -- during the break time, or since 21 then, I've got -- again I can -- I've got a copy of the 22 letter that we had sent out to contractors dealing -- 23 that's why we were asking specifically in regards to 24 countertops -- where we identified countertops as an 25 item that we kind of defined pre -- pre -- 26 pre-fabricated means 90 percent of the total cost. 27 And, so, we used the -- again, it appears to me 28 that we used that 90 percent rule on the issue of 15 1 countertops. You know, clearly the discussions that we 2 had here it seems to me that these particular use and 3 application of these -- of these shutters have 4 significant effort and time and cost in regards to the 5 installation. They, to me, meet that. 6 And, again, I think at least here there is 7 another indication that we have -- at least in the 8 history provided -- some kind of look at a little more 9 broader definition of the issue of a 90 percent rule. 10 And it seems by definition nobody disputes that because 11 the discussion was all around the issue of usage. 12 But I -- I -- I think that this is certainly an 13 issue to which we need to find for the -- for the 14 taxpayer. 15 MR. HORTON: Further discussion, Members? 16 Ms. Richmond, please call the roll. 17 MS. RICHMOND: Mr. Horton? 18 MR. HORTON: No. 19 MS. RICHMOND: Ms. Steel? 20 MS. STEEL: Aye. 21 MS. RICHMOND: Mr. Runner? 22 MR. RUNNER: Aye. 23 MS. RICHMOND: Ms. Yee? 24 MS. YEE: No. 25 MS. RICHMOND: Ms. Mandel? 26 MS. MANDEL: No. 27 MR. HORTON: Subsequent motion, Members? 28 MS. YEE: Move to adopt the staff 16 1 recommendation. 2 MR. HORTON: Moved by Member Yee to adopt the 3 staff recommendation. Second by Member Mandel. 4 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 MR. HORTON: Members, if you would indulge me? 18 I mean, I -- I am -- it stands as we acted on 19 it, but I just wanted to share with the Department, our 20 presentation made this extremely and unnecessarily 21 confusing in not relying on the law and what the law 22 says and implying that the use of these items, in and of 23 itself, will determine the taxability of it. 24 And it didn't appear as if, though, the 25 taxpayer had -- was provided a clear understanding of 26 where we differentiate, where it is separated, at what 27 point do you separate the frame, if you will, from the 28 actual shutter. Is that part of it? 17 1 And then saying that the -- that the 2 traditional cabinet rule or philosophy doesn't apply 3 anywhere. There's -- when, in fact, it is a measurement 4 of determining materials and so forth. 5 So, that just made it unnecessarily confusing. 6 And we've got to do a better job. Because if it happens 7 here, the presumption is that it's happening at the 8 audit level and as they proceed through the -- through 9 the process. And sometimes a little extra edification, 10 if you will, might resolve these matters. 11 Some of the the matters that we see before us, 12 Members, is more of an issue of a lack of understanding. 13 MR. RUNNER: Well -- 14 MR. HORTON: But, anyway, one person's opinion. 15 Member Yee, then Member Runner. 16 MS. YEE: Yeah, I don't disagree that it was 17 probably one of the cases where the Petitioner probably 18 left without any clear understanding of -- of what the 19 rules may be. 20 But there is a lot embedded in Regulation 1521 21 and I think maybe what might be helpful for the 22 Department is to, you know, just walk us through what 23 each of those provisions are. 24 There are exceptions within the regulation. 25 There are examples that I think were raised that are 26 covered by other sections of the regulation. 27 But it is -- I do have to say, the Petitioner, 28 I think, also contributed to part of that confusion 18 1 because -- 2 MR. HORTON: Yeah. 3 MS. YEE: -- yeah and when you go back and 4 forth it's awfully hard, but I think for the Department 5 it would be great to just have -- since the regulation 6 at issue is 1521, to just really give us a better sense 7 of what which provisions -- which provisions apply and 8 where are there exceptions. 9 MR. HORTON: Yeah, and I apologize to the body 10 because I normally ask for that prior to the hearing. 11 For some reason I thought this 1521 was clear 12 and that that would be the defense, if you will, it 13 would be the totality of the regulation, not just one 14 single aspect of it. 15 Mr. Runner. 16 MR. RUNNER: Well, I think reality is there 17 that it is -- it is a bit of a gray area. That's why it 18 is in 2006 we gave this clarification to contractors 19 regarding 1521 and in an effort to try to try to create 20 some clarity with the issue of counters. And we 21 actually then used this test, the 10 percent test on 22 that. 23 This discussion today was we're not going to 24 use the 10 percent test because we're going to go to the 25 use. 26 So, we totally left that arena and just 27 basically went to the old regulation, which was the 28 issue of the use, the issue of light coming in and out. 19 1 And we -- and we -- and the staff did not, as 2 they said, use this test because they didn't -- because 3 they felt the previous regulation gave clarity to it. 4 But, again, I would suggest that times change, 5 materials change, applications change and, therefore, at 6 times then what was done 60 years ago may not apply 7 today. 8 And, so, that's why I'm disappointed that we're 9 not able to use then the 10 percent test, because 10 clearly if we would, the taxpayer would win. 11 MR. HORTON: I don't want staff -- I don't want 12 staff -- from my perspective, the Regulation 1521 is 13 clear. I understand it. You know, I understand the 14 various variables. 15 It was the presentation that I had a little 16 more concern about. And I believe that the Department 17 acted in accordance with the law, as well as the 18 regulation and their process was pretty sound. It's the 19 presentation that created the confusion for me. 20 ---o0o--- 21 22 23 24 25 26 27 28 20 1 MR. HORTON: Ms. Richmond, next item?. 2 MS. RICHMOND: Our next item is C12a, Lafi 3 Faletoese and C12b, Vini Faletoese and Lafi Liz 4 Faletoese. 5 ---o0o--- 6 C12a LAFI FALETOESE 7 NO. 486189 (BH) 8 C12b VINI FALETOESE and LAFI LIZ FAELTOESE 9 NO. 486167 (BH) 10 ---o0o--- 11 MR. HORTON: Members -- 12 MR. RUNNER: Just a moment. 13 MS. STEEL: This was a nonappearance. 14 MR. RUNNER: This was a nonappearance item. 15 MR. HORTON: Nonappearance item. 16 MR. LEVINE: Waived item. 17 MS. YEE: Yeah. 18 MR. LEVINE: Waived appearance. 19 MS. RICHMOND: Waived appearance. 20 MR. HORTON: Okay, all right. 21 Members? 22 MS. YEE: Yeah, I'll move to adopt the staff 23 recommendation and direct staff to inform Petitioner of 24 the Offers and Compromise program. 25 MR. HORTON: Moved by Member Yee to adopt staff 26 recommendation and direct staff to inform the taxpayer 27 of the Offer-In-Compromise. Second by Member Steel. 28 Without objection, Members, such will be the 21 1 order. 2 ---o0o--- 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 22 1 MS. RICHMOND: Our next item is C13, Richard Emil Navone 2 and Daniel Joseph Navone.. 3 ---o0o--- 4 C13 RICHARD EMIL NAVONE AND DANIEL JOSEPH NAVONE 5 NO. 336683 (KH) 6 ---o0o--- 7 MR. HORTON: Okay, Members, let's take up the 8 issue of Richard Navone. 9 MR. RUNNER: Can we start with Daniel? 10 MS. STEEL: Daniel. 11 MR. HORTON: Okay. If it's easier for you 12 guys? 13 MR. RUNNER: Yeah. 14 MR. HORTON: Okay. 15 MR. RUNNER: At least the logic for me is 16 easier to start with Daniel. 17 MR. HORTON: There you go. 18 Let's start with Daniel then. Members, 19 discussion? 20 MR. RUNNER: I would move that we move -- that 21 we give Daniel 100 percent relief from the tax, interest 22 and penalty. 23 MS. STEEL: Second. 24 MR. RUNNER: Some discussion? 25 MR. HORTON: It's been moved by Mr. Runner to 26 grant in favor of the Petitioner 100 percent, second by 27 Member Steel. 28 Objection? 23 1 None noted. 2 MS. YEE: Hold on. 3 MR. HORTON: Discussion? 4 MR. RUNNER: Yeah, just a little discussion 5 here. 6 It seemed to me that -- again, there's clearly 7 a dispute of something that took place in regards to the 8 events of what was happening within -- within the 9 business or what had appeared to take place in the 10 business. 11 I -- I believe that this -- that we could 12 have -- if we believe that Daniel had an interest in 13 that business, we could have done more to help establish 14 that. There could have been more work done with trying 15 to identify other tax documents, other things to tie him 16 into the fact that he actually had an interest in and 17 was receiving benefit as a result of some kind of 18 partnership in that regard. 19 I think there was a lot of confusion over the 20 partnership phrase because of the previous partner that 21 was there. And, so, I think -- I think in that sense 22 there could have been a issue where we have or the 23 agency -- where we, the Department -- or the BOE -- you 24 saw the word "partner" and assumed that the partner was, 25 indeed, the son, when, indeed, it may have, at times, 26 been referenced to others. 27 I -- I just do not feel like we have done or we 28 could have demonstrated well enough to the point to 24 1 where we would create that kind of liability on a 2 taxpayer that we had done well enough in establishing a 3 partnership that, indeed, this individual's a part of. 4 And, in fact, the basic thing that we have that 5 creates the partnership is mostly the father, at one 6 point, saying he was a partner. And no other -- 7 almost -- very little other documentation, including the 8 fact that maybe there might have been some forgery done 9 in documentation to do that and then the father then 10 stepping back and saying, "No, he wasn't." 11 So, I -- I just don't feel like we have 12 established the -- the partnership secure enough in 13 Daniel's part in order to create liability for him in 14 this discussion -- or in this decision. 15 MS. MANDEL: And I -- 16 MR. HORTON: Member Mandel. 17 MS. MANDEL: -- in the -- it seems a little bit 18 like there was a slightly different story today than I 19 remember reading in the file, where in the -- you know, 20 today Daniel says, "He never asked me." And in the file 21 it was, you know, that his dad did ask him to be a 22 partner and -- but that then he, you know, told him he 23 didn't want to be. 24 So -- I mean, we do have the seller's permit 25 and now there seems to be -- it has always -- it was 26 always just, "I don't remember. I don't remember 27 signing. I don't remember signing." 28 And today there seemed to be an intimation that 25 1 that somebody else may have tried to sign that name. 2 MR. RUNNER: I don't -- did Daniel ever say he 3 didn't remember signing? 4 MS. MANDEL: That's what the file -- that's 5 what I remember the file -- 6 MR. RUNNER: I thought he denied -- I thought 7 the file was that he denied signing it. 8 MS. STEEL: And then father -- 9 MR. RUNNER: And that the confusion was on the 10 part of the father whether or not he had signed. 11 MS. STEEL: I think -- 12 MR. RUNNER: Was there -- 13 MS. MANDEL: I think he came here today, and at 14 least his counsel was saying he didn't -- he didn't sign 15 it. 16 But my recollection was that -- prior of it was 17 always couched in not remembering signing it. 18 MR. RUNNER: Well, I don't remember reading 19 that he actually didn't remember. I thought it was 20 always a denial that he didn't sign it. 21 I didn't think that was a part of the dispute. 22 MS. YEE: Yeah, I thought he had made the 23 assertion his father had admitted he signed it, yeah. 24 MR. RUNNER: Had signed it, yeah. 25 MS. YEE: Yeah. 26 MS. MANDEL: Okay. 27 MR. HORTON: Mr. Levine, any recollection as to 28 what the D & R says? 26 1 MR. LEVINE: No. I don't find a reference. I 2 find it easier if I boot up my computer. 3 MR. RUNNER: Word search a little bit. 4 MR. LEVINE: Yeah, I don't remember 5 specifically. 6 I think part of the problem is we did have a 7 couple other documents in the file -- 8 MS. MANDEL: Oh. 9 MR. LEVINE: -- Petitioner -- Petitioner had an 10 explanation. I don't -- still don't understand why we'd 11 have those -- the copy of the seller's permit and the 12 Social Security number. 13 MS. STEEL: The Social -- 14 MR. RUNNER: Well, the argument that they said 15 and that they said under oath was that the father had 16 access to those things. 17 MR. LEVINE: And something about the guarantee. 18 I can understand why the bank would have them. 19 I just don't understand why they would have 20 been provided to us. I understand what you're saying, 21 that the father may have -- 22 MR. RUNNER: Right, right. 23 I mean, again, depends what scenario you want 24 to go down, but there -- the idea was the father clearly 25 said he had access assist to those documents. 26 MR. LEVINE: Right. 27 MS. STEEL: And the one person who has all of 28 those at the household -- I have all of my daughters' 27 1 and my husband's and my Social Security cards, original 2 ones. So, you know, it's -- depends on who owns it. 3 But it's really interesting to see that even 4 the Department said that signature seems same, but, you 5 know, you can imitate anything there and Department 6 never hired the expert. 7 MR. RUNNER: Well -- 8 MS. MANDEL: Yeah, their -- their brief, 9 they're saying he had no recollection or knowledge of 10 signing and that he had declined to be part of the 11 business. 12 And then they assert that Richard has 13 admitted -- 14 MR. RUNNER: Yeah. 15 MS. MANDEL: -- that he signed the name. 16 That's the taxpayer's opening brief. 17 MR. HORTON: Sure. 18 MS. YEE: Can I ask a question? 19 MR. HORTON: Member Yee. 20 MS. YEE: These personal guarantees that I 21 think it was that Daniel had signed? 22 MR. HORTON: Mr. Levine? 23 MS. YEE: I mean, even though it doesn't 24 identify him in those documents as a partner, but he -- 25 he signs on as a personal guarantor -- or an individual 26 guarantor, does that suggest anything? 27 I mean, I'm trying to kind of fit these pieces 28 together. 28 1 MR. LEVINE: I can see a son signing as a 2 guarantor for this father, doesn't prove that he's a 3 partner. 4 It's troubling that the word "partner," is in 5 there and -- 6 MS. YEE: Yeah. 7 MR. LEVINE: -- you think you read things. 8 Their -- it's not that their explanation makes no sense, 9 but I wouldn't sign something like that that wasn't 10 correct. 11 MS. YEE: Yeah. 12 MR. LEVINE: But that's me. 13 MR. HORTON: Your son would. 14 MR. LEVINE: I don't have a son, so -- 15 MR. HORTON: Further discussion, Members? 16 MS. YEE: You have a motion? 17 MR. HORTON: Sure. Moved by -- motion as 18 stated on record. 19 MS. RICHMOND: We have a motion by Mr. Runner, 20 second by Ms. Steel to relieve 100 percent of the 21 penalty. 22 MR. HORTON: Objection, Members? 23 None noted, such will be the order. 24 MR. RUNNER: To the father now. 25 Here's my problem right now. And again I -- I 26 was so focused in this conversation trying to figure out 27 relationship between father and son on that issue, I 28 honestly did not necessarily get down to the 29 1 (unintelligible) in regards to some of this other 2 issue -- in regards to these out-of-state sales and all 3 those other issues, you know, and, so, I -- I don't know 4 what's possible here, but I'd almost want a 30-30-30 to 5 come back -- or to have them go back and review what 6 they have because, again, I -- I was more focused on 7 this issue and -- and the length of time we were dealing 8 with rather than trying to get more detail on regards to 9 these out-of-state sales. 10 I mean, some of the arguments made sense to me, 11 but I wouldn't -- but I don't feel like I'm adequately 12 prepared to vote for the taxpayer, but the idea that 13 somebody could have a California address and own a home 14 in -- on Lake Tahoe and, therefore, take delivery of the 15 boat sounds pretty logical to me. 16 MS. STEEL: But this is a 1999 case and I don't 17 know how much document -- 18 MR. RUNNER: He may have? Yeah. 19 MS. STEEL: -- that he can really bring it, 20 yeah. 21 He had a chance in 2005 and didn't do it, so -- 22 MR. HORTON: I don't know if any additional 23 time -- 24 MR. RUNNER: Okay. 25 MR. HORTON: -- is going to be helpful in this 26 case. 27 MR. RUNNER: Okay. 28 MR. HORTON: Is there a motion, Members? 30 1 MS. YEE: Move to adopt the staff 2 recommendation. 3 MR. HORTON: Moved by Member Yee to adopt staff 4 recommendation. Second by Ms. -- 5 MS. YEE: And I'll -- direction to staff about 6 the OIC program. 7 MS. STEEL: Yeah. 8 MR. HORTON: Okay, moved by Member Yee to adopt 9 staff recommendation, notify taxpayer of the OIC 10 program, second by Member Mandel. 11 Without objection, none noted, thank you very 12 much. 13 Such will be the order. 14 MR. RUNNER: Can I go back real quick just on 15 one item? 16 MR. HORTON: Do I need to -- for discussion 17 only? 18 MR. RUNNER: Yeah, just to clarify, not -- not 19 back on this, not the decision. 20 I just want to clarify what the motion was that 21 we did on Daniel. There's somebody had heard something 22 a little bit different so I wonder if we could hear 23 that? 24 MR. LEVINE: It was a motion to grant. 25 Just for clarification, when you said, 26 "relieve," I heard "grant." 27 MR. RUNNER: Okay. 28 MR. LEVINE: There's no relief, you found he 31 1 wasn't a partner, is what I believe was -- 2 MR. RUNNER: Okay, thank you. 3 MR. LEVINE: -- not what you found. 4 MR. RUNNER: Okay, thank you. 5 MR. HORTON: Right. 6 MS. RICHMOND: That concludes our business for 7 today. 8 MR. HORTON: For a while. 9 MR. RUNNER: Yeah, we're not coming back 10 tomorrow. 11 MR. HORTON: Members and guests, the meeting of 12 the Board of Equalization is hereby adjourned. 13 You know, I just want to leave you with this 14 quote, it's a quote I can't remember who said it, but it 15 says a drop of water will erode even the hardest rock -- 16 a drop of water will erode even the hardest rock -- 5 17 percent of the time. 18 MR. LEVINE: Many drops. 19 MS. STEEL: Many drops. 20 MR. HORTON: Many drops, is that what -- that's 21 it, many drops? 22 MR. LEVINE: Well, I don't know but it's got to 23 be a single drop, one at a time for a long, long time. 24 MR. HORTON: Many drops of water, there you go. 25 All right. 26 ---o0o--- 27 28 32 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 MAY 31, 2012 I recorded verbatim, in shorthand, to the 10 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 31 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: JUNE 6, 2012 17 18 19 ____________________________ 20 JULI PRICE JACKSON 21 Hearing Reporter 22 23 24 25 26 27 28 33