1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 SEPTEMBER 13, 2012 10 11 12 ITEM I 13 TAX PROGRAM NONAPPEARANCE MATTERS 14 ITEM I3.1 15 LOCAL TAX REALLOCATION MATTERS 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 Chief Board Proceedings Division 16 17 ---oOo--- 18 For the Staff: Trecia Nienow 19 Tax Counsel IV Legal Department 20 Randy Ferris 21 Chief Counsel Legal Department 22 23 ---oOo--- 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 SEPTEMBER 13, 2012 4 ---oOo--- 5 MS. RICHMOND: Our next item is I3, Local Tax 6 Reallocation Matters. 7 MR. HORTON: Is there a motion, Members? 8 Would you like to have, uh, staff's brief 9 report on this? 10 MS. YEE: Yeah. 11 MR. HORTON: Okay. 12 Please. Welcome. 13 MS. NIENOW: Um, Chairman Horton, Members, good 14 morning. Trecia Nienow from the Appeals Division. 15 This is a nonappearance matter to consider 16 adopting a Memorandum Opinion regarding when a seller's 17 permit should be issued to a buying company, and staff 18 has provided two options for your consideration. 19 MS. YEE: Okay. Mr. Chairman. 20 MR. HORTON: Member Yee. 21 MS. YEE: Uh, first, I want to thank the staff 22 for, uh, bringing the options forward. Um, I am, uh, 23 looking favorably at Alternative B, um, but I was hoping 24 that the discussion could focus more narrowly on just 25 the buying company permit requirement issue. Uh, and I 26 don't know if that's possible given that we're 27 developing this opinion related to a specific case. 28 But, um -- is that -- 3 1 MS. NIENOW: Um, are you saying that 2 Alternative B does that? And, if that's so, that is 3 certainly an option. 4 MS. YEE: I'm looking at, uh, just being a 5 little bit more narrow with respect to what 6 we're issue -- what we're going to be -- 7 MS. MANDEL: Oh, okay. 8 MS. YEE: -- publishing. 9 MS. MANDEL: It gets -- 10 MS. YEE: So to foc -- focus it just really on 11 the buying company permit requirement issue. 12 MS. NIENOW: And we thought Alternative B did 13 that. 14 MS. YEE: Did that? 15 MS. NIENOW: Yeah. 16 MS. YEE: Okay. 17 MS. MANDEL: There's a -- there's a lot of 18 words in Alternative B. 19 MS. YEE: Yeah, that's why I was -- 20 MS. MANDEL: And there may be parts that are, 21 um, just more words. But -- but, ultimately, um, you do 22 want any opinion to be on the narrowest possible 23 grounds. That's what any court would do, so that's a 24 good standard rule. Um -- 25 MS. NIENOW: And we're certainly open to any 26 suggestions -- 27 MS. YEE: Yeah. 28 MS. NIENOW: -- with respect to deletions of 4 1 Alternative B. 2 MS. YEE: Yeah, and I think if we focus on the 3 crux of, uh -- I -- uh, what's, uh, contemplated with 4 respect to Regulation 1699, subdivision (h), uh, and 5 really having that be, um, the center focus. Um -- 6 MS. NIENOW: Are you suggesting that we remove 7 the information regarding subdivision (a)? Because 8 the -- 9 MS. MANDEL: They don't -- I don't think 10 it's -- you can -- I mean, I think that the -- the -- 11 it's -- it's a lot of words, so that may be what's just, 12 you know, driving the comment. But I'm just guessing. 13 Um, certainly my understanding of, um, the 14 opinion request was -- of Ms. Yee's opinion request was, 15 on the 1699(h), as not being, um -- as being a -- a, 16 uh -- uh, it is a requirement to recognize buying 17 companies that meet the standards in that subdivision. 18 But that it's not, um, independent of the legal 19 requirement that you need to have a business location, 20 that the seller's permits are issued as to the business 21 location which is the "A" requirement, right? 22 MS. NIENOW: Mm-hmm. 23 MS. YEE: Right. 24 MS. MANDEL: So, I -- it -- 25 MS. NIENOW: And the uses. 26 MS. MANDEL: And the -- and the -- I'm sorry? 27 MS. NIENOW: And the uses at that location. 28 MS. MANDEL: Right. Right. 5 1 Um, and so I think that's why some of the other 2 language that was in "A" was taken out for "B," this 3 Alternative B because -- 4 MS. YEE: Yeah. 5 MS. MANDEL: -- there was -- there was 6 extraneous information there and it, um -- um, it -- it 7 may just be that -- that -- I'm guessing -- that your 8 reaction to this "B" is that it didn't -- it didn't -- 9 that -- that -- that the, um, explanation of (h), um, 10 wasn't stated as plainly, perhaps, as you might have -- 11 MS. YEE: Clearly. 12 MS. MANDEL: -- thought. 13 MS. YEE: Yeah. 14 MS. MANDEL: So, I -- I was trying to take a 15 hand at doing a little editing on the end, but -- 16 MS. YEE: Yeah. We can give -- we can give you 17 some changes as well, yeah. 18 MS. NIENOW: And we can consider that. 19 MS. MANDEL: But if that's -- 20 MS. NIENOW: And bring it back. 21 MS. MANDEL: I mean, otherwise "B" -- you know, 22 the Alternative B does generally just, um, talk about 23 (h) and that (h) is a, um, firm recognition by the Board 24 that it must recognize buying companies that are in 25 fact, um, separate legal entities under the law. And, 26 um, that that is not, um -- uh -- that that's a sort of 27 belt-and-suspenders requirement of recognizing buying 28 companies but not something that just is itself 6 1 independent of the general requirements that apply to 2 when and where a seller's permits get issued. 3 MS. YEE: Right. 4 MS. MANDEL: And you just didn't think that 5 that was as apparent from reading it, as plainly as you 6 might have wanted? Is that what you're saying? 7 MS. YEE: That's exactly right. That's exactly 8 right. 9 MS. NIENOW: If you would like to provide some 10 guidance, that would be -- 11 MS. YEE: I'd be happy to. 12 MS. MANDEL: But at the end, I think you do 13 need to conclude that the location they're asking for, 14 that the -- that -- that it didn't then meet those, in 15 order to -- I mean, you got to have that at the end -- 16 MS. YEE: Mm-hmm. 17 MS. MANDEL: -- I would think. 18 MS. NIENOW: To make the Memorandum complete. 19 MS. STEEL: I have actually -- 20 MR. HORTON: Member Steel. 21 MS. STEEL: -- I have a, uh, draft here that -- 22 I mean, um, yeah, it -- it is long and some -- actually 23 some on, um, Alternative B, there's some language that 24 we really don't even need. It's very long here. 25 And I have a draft here. So we can help you, 26 and with other Board Members, and we going to give you 27 more specific language here. 28 So I can go for "B" with some of the changes. 7 1 Not changes, but some of the -- 2 MS. MANDEL: Just editing. 3 MS. STEEL: -- paragraphs that we are giving. 4 MS. MANDEL: Just use a little editing maybe, 5 right? 6 MS. YEE: Yeah. 7 MS. STEEL: That's good. 8 MS. YEE: Yeah. 9 MR. HORTON: Okay. Um, in -- in such case, 10 Members, we will, um, put the matter over until 11 November? 12 MS. YEE: Yeah. 13 MR. HORTON: Does that work? 14 MS. NIENOW: That works. 15 MR. RUNNER: Just a quick -- quick question, 16 just to clarify -- 17 MR. HORTON: Sure. 18 MR. RUNNER: -- on the "B." I don't have any 19 big issues with -- with Alternative B. And if we can 20 clean it up, that'd be good. 21 But I'm just wondering, um, always being one 22 who thinks it's good to publish, um, let me just ask a 23 more specific question. And that is, is the fact 24 pattern that we're going through here, in this case and 25 in this process, um -- how does that -- how -- how 26 helpful and how, um, much direction do we believe this 27 memo will have? And how many cases do we have out there 28 that we think this could aid in -- in -- in resolving? 8 1 MS. NIENOW: I think the direction that would 2 be provided by this memo would be significant. There 3 are a number of cases that are currently out there with 4 this same fact pattern. 5 MR. RUNNER: Okay. And we can be specific 6 enough within this case to -- to -- to -- to capture 7 those? 8 MS. NIENOW: I think the general rule is 9 specific enough to capture those. 10 MR. RUNNER: Okay, thanks. 11 MR. HORTON: Welcome, Mr. Ferris. 12 MR. FERRIS: Thank you. 13 And -- and as you, uh, submit revision, uh, 14 suggestions, I just want to encourage you all to make 15 it, uh, only to the Appeals and do not copy each other. 16 MR. RUNNER: Gotcha. 17 MR. FERRIS: Otherwise there would be 18 Bagley-Keene issues. 19 MS. YEE: Right. 20 MR. RUNNER: Okay. 21 MS. STEEL: Mm-hmm. 22 MS. MANDEL: I knew that's why you were running 23 up here. 24 MR. HORTON: Okay. Such will be the order. 25 ---oOo--- 26 27 28 9 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 September 13, 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 9 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: September 25, 2012 17 18 19 ____________________________ 20 KATHLEEN SKIDGEL, CSR #9039 21 Hearing Reporter 22 23 24 25 26 27 28 10