1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 REPORTER'S TRANSCRIPT 8 SEPTEMBER 13, 2012 9 ITEM P OTHER ADMINISTRATIVE MATTERS 10 ITEM P1 EXECUTIVE DIRECTOR'S REPORT 11 ITEM P1.1 BOARD WORKLOAD INVENTORY 12 AND TRENDS FOR APPEALS AND SETTLEMENTS 13 14 15 16 17 18 19 20 21 Reported by: Juli Price Jackson 22 No. CSR 5214 23 24 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 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 13 Government Code Section 7.9) 14 15 Joann Richmond Chief, Board 16 Proceedings Division 17 Cynthia Bridges Executive Director 18 19 ---oOo--- 20 21 22 23 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 P, Other 6 Administrative Matters; P1, Executive Director's Report; 7 P1.1, Board Workload Inventory and Trends for Appeals 8 and Settlements. 9 MS. BRIDGES: Good morning, again. 10 MR. HORTON: Good morning. 11 MS. BRIDGES: Members of the Board, Cynthia 12 Bridges, Executive Director. 13 In anticipation of preparation of the 2013 14 Board calendar, the executive staff has been engaged in 15 conducting a review or analysis of the Board 16 Proceedings' workload and inventory. And I thought I 17 would just take a few minutes just to kind of share a 18 few of the statistics with you. 19 Overall, from a historical comparison of all 20 cases resolved by the Board, there is a downward trend. 21 And when I say all of the cases, that includes 22 nonappearance matters as well as settlements, in 23 addition to the oral hearings and et cetera. 24 As a result of Board Members' recommendations 25 for certain procedural changes, in an attempt to try to 26 resolve the cases earlier in the -- the appeals process, 27 we have also noticed that the Appeals and Settlement 28 Divisions have increased their production over the past 3 1 three years, which has lead to cases being resolved at 2 an earlier point in the appeals process. 3 Specifically, a review of the historical data 4 reveals that while a consistent stream of new cases 5 enter the Appeals Division, case inventory of the 6 Appeals Division has also increased the number of cases 7 completed. 8 The Settlement Division has also increased 9 their number of cases completed, just to maintain pace 10 with the steady increase of new cases received. 11 In fiscal year '11-'12 alone, the Settlement 12 Division realized a 54 percent increase in new cases 13 received over the prior period. 14 As it relates to oral cases that are being 15 heard by the Board, from a historical comparison, there 16 is also a downward trend over the past five years. But 17 we have noticed that that level has remained fairly 18 constant over the past three years. 19 Also over the past three years the number of 20 cases eligible to be heard by the Board in Southern 21 California has increased. And that is evident in a 22 monthly trend analysis by the spikes that the Board 23 hearings held in Southern California. 24 From a year to date historical perspective, 25 about 26 percent, or a quarter, of the petitioners that 26 request an oral hearing actually request -- actually 27 result in an oral hearing. And I think you've noticed 28 that over the past few months where we've had a number 4 1 of cases that tend to be removed from the agenda. 2 Also, as you know, the majority of oral 3 hearings requested relate to business tax appeals cases 4 and, historically, there has been an approximate 2 to 1 5 ratio of business taxes to FTB appeals cases heard by 6 the Board. 7 On average, 2 -- there has been a 26 percent 8 increase in the number of 2012 hearing notices mailed 9 for business tax cases. And we have also noticed a 23 10 percent decline in the number of 2012 hearing cases 11 mailed for ITB (verbatim) appeals cases. 12 Appeals Division case data also shows a steady 13 decline in the new FTB appeals cases received over the 14 past four fiscal years. And they have remained fairly 15 constant over the past two years. 16 And the reason for the decline, as indicated by 17 our communications with certain FTB representatives, is 18 that they too have implemented some procedural changes 19 to try to resolve or increase their resolution of cases 20 at lower levels of the appeals process. 21 And that basically concludes my report. We do 22 have some charts and graphs. So, if you all are 23 interested in those, just let me know and we'll supply a 24 copy of those to you later. 25 MR. HORTON: I'll take two. 26 MR. RUNNER: Yeah, do you have that -- in terms 27 of the numbers that you just went through? 28 MS. BRIDGES: Yes, I do. 5 1 MR. RUNNER: Okay. That would be good if we 2 could get the hard copy. 3 MR. HORTON: Yeah. 4 MS. BRIDGES: Sure, okay. 5 MR. HORTON: Discussion, Members? 6 I -- I just want to commend our staff and our 7 entire team at the Board of Equalization. The work that 8 we are doing to mitigate problems and resolve issues at 9 the earliest stage of the process is significant in a 10 number of ways. It reduces interest and penalties on 11 taxpayers. It accelerates the revenue to the State of 12 California. 13 And, so -- I mean, there is a couple of other 14 things that it does relative to the Board, but that -- 15 we'll -- that are not that -- well, anyway, leave that 16 alone. 17 But the -- you know, to -- we are proud to -- 18 to represent such an efficient agency. I mean, of all 19 of the State agencies, the Board of Equalization for 20 every 82 cents invested in the Board of Equalization, we 21 generate $100. 22 We administer over 53 billion -- up to 53 23 billion for the State of California for education and 24 public safetys and things of that nature. 25 And each of our employees are just outstanding 26 public servants in that without them, education would 27 not be funded, health care would have challenges and 28 public safety would have challenges in the State of 6 1 California. 2 So, each and every one of our employees play an 3 important role to the revitalization and the maintenance 4 of the State of California. 5 So, I just want to commend them on behalf of 6 the Board for this efficiency. So, we are victims of 7 our own efficiency, Members. 8 But in light of the changes in the marketplace, 9 we do anticipate -- we should probably anticipate an 10 increase in the workload as well because of the changes 11 as it relates to the underground economy and many other 12 pieces of legislation that have been passed over the 13 last year. 14 And the fact that we're currently auditing 15 somewhere around 2 percent of our universe, we may want 16 to look at -- not necessarily increasing that for the 17 purpose of generating revenue, but increasing that for 18 the purpose of increasing self-compliance. 19 So, thank you very much. 20 And those who are doing all the education 21 around the State, reaching out to taxpayers, informing 22 them and educating them, they're doing a yeoman's job. 23 And you are certainly contributing to this positive 24 results. 25 Thank you. 26 MS. BRIDGES: Thank you. 27 ---o0o--- 28 7 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 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 7 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: OCTOBER 16, 2012 17 18 19 ____________________________ 20 JULI PRICE JACKSON 21 Hearing Reporter 22 23 24 25 26 27 28 8