1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 5901 GREEN VALLEY CIRCLE 3 CULVER CITY, CALIFORNIA 4 5 6 7 8 9 REPORTER'S TRANSCRIPT 10 APRIL 26, 2016 11 12 13 ITEM F 14 PUBLIC HEARINGS 15 ITEM F2 16 BUSINESS TAXPAYERS' BILL OF RIGHTS HEARINGS 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 of Equalization: Fiona Ma, CPA 4 Chairwoman 5 Diane L. Harkey Vice Chair 6 Jerome E. Horton 7 Member 8 Sen. George Runner (Ret.) Member 9 Yvette Stowers 10 Appearing for Betty T. Yee, State Controller 11 (per Government Code Section 7.9) 12 13 Joann Richmond Chief 14 Board Proceedings Division 15 For Board of 16 Equalization Staff: Todd Gilman Taxpayers' Rights 17 Advocate 18 19 ---oOo--- 20 21 22 23 24 25 26 27 28 2 1 INDEX OF SPEAKERS 2 SPEAKER PAGE 3 Michael Zaldivar 5 4 Marc Brandeis 8 5 Edna Moreno 12 6 Joseph Broyles 13 7 Carmen Kane 33 8 9 ---oOo--- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 1 5901 GREEN VALLEY CIRCLE 2 CULVER CITY, CALIFORNIA 3 APRIL 26, 2016 4 ---oOo--- 5 MS. RICHMOND: Our next public hearing is 6 F2, Business Taxpayers' Bill of Rights Hearings. 7 And we do have several speakers for this 8 item. 9 MS. MA: Okay. Mr. Gilman, thank you. 10 How about the speakers, if we can have them 11 also come forward. 12 Michael Zaldivar. 13 MR. BROYLES: I'm Joseph Broyles. 14 MS. MA: Okay. 15 MR. GILMAN: And Michael Zaldivar, and Mr. 16 Marc Brandeis. 17 MS. MA: How about Edna Moreno? 18 MR. GILMAN: Ms. Moreno? 19 Okay. Good afternoon -- 20 MS. MA: Thank you. 21 MR. GILMAN: -- Chairwoman Ma -- this is 22 Todd Gilman, Taxpayers' Rights Advocate with the 23 Board of Equalization -- and Members. 24 This is the Business Taxes Taxpayer Bill of 25 Rights Hearing for Culver City, Tuesday, April 26th, 26 2016, where individuals have the opportunity to 27 present their ideas, concerns, and recommendations 28 regarding legislation, the quality of agency 4 1 services, and other issues related to the Board's 2 administration of its tax programs, including sales 3 and use tax, environmental fees, fuel taxes, excise 4 taxes, and any issues identified in the Taxpayers' 5 Rights Advocate's 2014-2015 Annual Report. 6 I believe our first speaker was 7 Mr. Zaldivar. So, Mr. Zaldivar, if you would. 8 MS. MA: Okay. Mr. Zaldivar, you have 9 three minutes. 10 ---oOo--- 11 MICHAEL ZALDIVAR 12 ---oOo--- 13 MR. ZALDIVAR: Thank you, Chairman Ma, 14 Vice Chairman Harkey, Member Runner, Member Stowers, 15 and Member Horton. I appreciate the opportunity to 16 appear here today to discuss Scoop, Scope or SCOP, 17 by whatever name, some of it has to stop. 18 Basically, I've been working in sales and 19 use tax for about 20 years, and started with the 20 Board of Equalization in the Torrance -- excuse 21 me -- the Torrance district. And since that time 22 have worked through public accounting, started our 23 own practice, and we focus exclusively on sales and 24 use tax. 25 We service large organizations across the 26 United States, and we also service small businesses 27 here in California. So I appear before you here 28 today upon the invitation of Mr. Todd Gilman, and 5 1 essentially come with ideas, concerns, and 2 recommendations. 3 We've had three specific SCOP cases come to 4 us, and we've been dealing with the issues since it 5 was made a formal permanent program in 2011. And, 6 without going into too much detail, some of the 7 issues we've dealt with have been absurd, 8 taxpayer-unfriendly, and in some cases I would call 9 it taxpayer abuse. And it is typically the small 10 business owner who is dealing with these SCOP 11 representatives who are essentially performing 12 audits or over-inquiring into the business 13 activities. 14 In May of 2013, Mr. Abe Golomb appeared 15 here before the Board and had some specific concerns 16 that I would like to enter here for the record, 17 without going into too much detail in the three 18 minutes. 19 Mr. Golomb's concerns had to do with 20 questioning employees rather than speaking to 21 business owners, having concerns with SCOP 22 representatives intimidating or threatening 23 taxpayers with audits, and then going beyond what 24 the original intent of SCOP was, and that's to check 25 permits. 26 So in that light, I understand the response 27 to Mr. Golomb's concerns was Chapter 10 of the 28 Compliance Policy and Procedure Manual, which I do 6 1 believe could be improved in certain ways. And so 2 the questions I have here today are: 3 What have we done since? 4 What sort of training are we giving to our 5 SCOP staff, whether they be auditors, collectors or 6 what? 7 And how are they instructed to interact 8 with the taxpaying public? 9 So that's my first question. 10 I specifically have recommendations written 11 down -- I'm not going to go into them here -- about 12 how the letters can be revised in order to 13 communicate with the true intent of SCOP happens to 14 be. And, also, I would request, specifically on 15 behalf of Cafe Bello, a refund of the amounts 16 collected through their SCOP experience, and that's 17 about $12,000. 18 And then I would specifically request on 19 behalf of two other clients, Toy Crazy and Karma 20 Home Accents, that their SCOP investigation be 21 discontinued at this point in time. 22 So, with that, I'm here offering myself to 23 work collaboratively with the Board of Equalization, 24 or anybody who is interested in working to come up 25 with a better way to work this particular program, 26 whether it be Board employees or taxpayers. 27 So I appreciate the opportunity to appear 28 here before you today to speak about this important 7 1 subject. 2 Thank you. 3 MS. MA: Thank you. 4 I'm going to have all the speakers speak 5 first, and then we'll have Members chime in after. 6 So your next speaker. 7 ---oOo--- 8 MARC BRANDEIS 9 ---oOo--- 10 MR. BRANDEIS: My name is Marc Brandeis. I 11 have a -- in the interest of time, I have a similar 12 background to Mr. Zaldivar; we'll leave it at 13 that. 14 I would just like to, in some cases I'm 15 going to reiterate what he has already said, and 16 maybe in some instances add to. 17 With respect to SCOP, we have several cases 18 pending with SCOP in various districts. And it's 19 been our experience that SCOP is essentially 20 conducting audits. They won't call them audits, but 21 they will use threats of intimidation to pressure 22 taxpayers into amending their returns. 23 So in that case they don't officially call 24 it an audit; however, they conduct some background 25 information and prepare -- they essentially prepare 26 the amended returns that they want the taxpayers to 27 then complete in their own handwriting and sign. 28 The information that I'm getting from these 8 1 taxpayers is that SCOP has threatened them with, if 2 they find some minor discrepancy, going to the IRS, 3 going to other State agencies. 4 I think, in my opinion, this would be a 5 gross violation of the Taxpayers' Bill of Rights, 6 the right to confidentiality, if they were to act 7 upon these threats. 8 But we have another longstanding tradition 9 that I think is being violated and that is the 10 separation between audit and compliance. You know, 11 the SCOP Unit is essentially conducting audits. And 12 then when a -- a Notice of Determination is issued 13 based on the amended returns and a petition is 14 filed, if the taxpayer later chooses to petition the 15 amounts, where does it go? Does it go back to the 16 SCOP Unit? If they made payments, does it go to the 17 Audit Department? I mean, we're muddying the waters 18 here. 19 Another issue that I'd like to talk about 20 has to deal with the Petitions Unit. We have 21 several cases that are in Petitions where, once we 22 have filed a Petition for Redetermination, in some 23 cases a year goes by before a hearing is scheduled, 24 which we think is an extraordinary amount of time 25 just to get a hearing. Then the Board has 90 days 26 to issue a D&R. 27 So there seems to be a deadline to -- from 28 once the -- that a hearing is had, to have a D&R. 9 1 But there needs to be some sort of a deadline from 2 the time that a Petition for Redetermination is 3 filed and for an actual hearing to be held. 4 Now, I'm not an insider to the Petitions 5 Unit. I'm a former BOE Auditor, so I know how the 6 Audit Department works. How the Petitions Unit 7 works is a little bit of a mystery to me, but I made 8 some phone calls up there on some of these cases 9 that were just hanging out there for eight, nine 10 months with no activity. And the word that I'm 11 getting from the folks in the Petitions Unit is that 12 when the Petition for Redetermination is filed, they 13 send a request for a memo to the district for them 14 to respond and if they recommend any changes to the 15 audit that was petitioned. And apparently there's 16 no deadline for the -- for the Department, for the 17 district to respond, and nobody is tracking how long 18 a case sits before the district responds, if ever. 19 So I think the only way to really address 20 this is to -- is to start imposing deadlines on the 21 Department from the time, once a valid petition is 22 filed, how long the Department would have to 23 schedule a hearing. 24 Another issue that I'd like to speak to has 25 to deal with -- and, you know, I'm going to use a 26 non -- a term that I've made up. I honestly believe 27 that the Petitions Unit is rubber-stamping. They're 28 rubber-stamping the decisions that come from the 10 1 districts. And there's reasons that I say that. 2 We have cases that we feel strongly that 3 our case is -- shouldn't make it past the Petitions 4 Unit. Sometimes the district becomes emotionally 5 involved in a case, and this is really once it goes 6 to the Petitions Unit is the first time that 7 somebody outside the district who didn't do the 8 field work, who has no emotional attachment to a 9 case, can hear the case. And we bring spot-on 10 guidance from the Audit Manual, from the regulation, 11 that refutes the position that a Board -- the 12 Department has taken. And in every case we've lost. 13 Every single one. And, I mean, we're just 14 flabbergasted. 15 And then we get to a Board hearing and the 16 decisions's overturned at the Board level, in some 17 cases 5 to 0. 18 So, you know, do I have irrefutable 19 evidence that they're rubber-stamping? No. But 20 something in my gut is telling me that there's 21 something not right here. I think there is too much 22 coziness between the Petitions Unit and the 23 districts and the Department. 24 Other reasons I would bring that, make that 25 statement, I've had cases where we've had the 26 hearing and then I know we're supposed to be getting 27 a D&R in 90 days, and 120 days, 160 days, half a 28 year goes by and we haven't heard anything. And 11 1 we'll send an email to the hearing officer: 2 "What's going on?" 3 "Oh, well, the Department asked for an 4 extension, and so we granted it." 5 It would've been nice if they would have 6 said something to us and let us know what's going 7 on. 8 So, you know, there's communication going 9 on behind the scenes that affects the case, affects 10 these deadlines, and the -- we, as the taxpayer, 11 apparently have no right to know and no right to -- 12 unless we make an inquiry. 13 So, again, I think there may already be 14 that policy in place. It may just be a matter of 15 enforcing a policy. But there has been several 16 cases where we've gone over the 90-day deadline. 17 There's email communication going on behind the 18 scenes, and we're not privy to it. 19 MS. RICHMOND: Time's expired. 20 MS. MA: Okay. We may come back and ask 21 you more questions. Thank you. 22 Next speaker. Edna, Ms. Moreno. 23 ---oOo--- 24 EDNA MORENO 25 ---oOo--- 26 MS. MORENO: Hi. Good afternoon. 27 I represent small business owners, 28 specifically from the San Fernando Valley. I used 12 1 to be a small business owner. 2 My question maybe is, as small business 3 owners we're dealing with a lot of underground 4 economy, people who sell on the streets, who don't 5 have permits, who don't charge sales tax, and I -- 6 we can't compete. 7 And my question to you is, How are you 8 addressing that problem? It's an ongoing problem. 9 Thank you. 10 MS. MA: Okay, thank you. 11 And Mr. Broyles. 12 ---oOo--- 13 JOSEPH BROYLES 14 ---oOo--- 15 MR. BROYLES: Hi. I'm Joseph Broyles. 16 Pleasure to appear before you, Chairwoman Ma and the 17 rest of the Board. 18 I come here to report on my past 13 years' 19 experience working as a tax professional in the 20 community, working with and through the Taxpayer 21 Rights Advocate that Todd Gilman has run for the 22 last 13 years. 23 I have had several experiences with his 24 office and wanted to let you know what, in my 25 opinion, a good job his office is doing. 26 I've called upon Mr. Gilman's help in cases 27 in audits, collection, and at least once in a -- in 28 a large settlement. And I think that settlement 13 1 case is one, it's good to mention as an example. My 2 client had proposed a form of settlement that was 3 contrary to the rules of the BOE settlement program. 4 One of the rules of the BOE's settlement program is 5 that whatever amount is agreed upon must be paid in 6 full. Payment in full is a condition of the 7 settlement. 8 Well, this was a $1.1 million settlement 9 and my client didn't have $1.1 million in cash, and 10 that was the primary reason that the offer was being 11 rejected. 12 Mr. Gilman came in, spoke with the people 13 that ran that office and got them to agree to a 14 two-year payout of that $1.1 million. The 15 alternative would have been my client would have 16 filed bankruptcy. In liquidation, its assets may 17 have been worth $300,000. So the Board ended up 18 getting an extra $800,000. And my client did pay in 19 full over the two-year period. So that worked out 20 well, and it would not have but for the good work of 21 Mr. Gilman. 22 A couple years ago a Chevron gas station 23 owner hired me. You know, there was a LA County 24 Sheriff's officer in his business collecting every 25 dollar that came in, paying it over to the BOE. I 26 contacted the compliance people out in West Covina, 27 and they were livid with that taxpayer and said 28 we're not -- we're not backing down. We're not 14 1 taking the minder out. He's done. And I asked them 2 to work with me. I'm new to the case. No, they 3 were done. 4 I called Mr. Gilman, and he spoke with 5 them. A week later we had an installment agreement 6 in place with a $20,000 down payment and a $7,000 7 per month monthly payment that that client is 8 still -- or that taxpayer is still making. 9 So these are cases where, you know, 10 sometimes there's an easier, you know, softer way to 11 get things done. And, you know, I will say that 12 oftentimes it's the taxpayers who have created a 13 situation where the local enforcement or auditors 14 aren't being nice to them, and the local folks are 15 being heavy-handed because the taxpayer has 16 caused -- has caused the situation. 17 And it's been my experience that, you know, 18 when that's the case, the Taxpayer Rights Advocate 19 can come in and resolve the situation in a way 20 that's to the benefit of both the taxpayer and the 21 State of California. And I wanted you to know what 22 a good job he's doing. 23 MS. MA: Well, thank you. I'm sure 24 Mr. Gilman's going to get a lot more calls after 25 this. 26 And I do want to share, all the public 27 speakers, that all of the personnel who was in 28 charge of all the departments you are talking about 15 1 are also listening intently. 2 So I think we'll probably have some 3 comments from Board Members. 4 Ms. Stowers. 5 MS. STOWERS: I'll go first. I'll start 6 with the SCOP program. 7 Mr. Gilman, what's the purpose of this 8 program again? And how is it supposed to be 9 managed? 10 MR. GILMAN: The primary purpose was to 11 educate taxpayers, but also to make sure they 12 understood what their responsibilities were when it 13 came to being a retailer in California. But we also 14 were tasked with the responsibility of looking at 15 our underground economy. Which, as we all know -- 16 and the Members have commented about this for years 17 now -- that's a real challenge to make sure we bring 18 these people into compliance. 19 But what I can say is that what 20 Mr. Zaldivar is saying and what Mr. Brandeis is 21 saying sounds like the Board has a problem on their 22 hands. These could be violations of the Taxpayer 23 Bill of Rights. And we only have one Compliance 24 Policy Manual, that Chapter 10, which my staff and I 25 worked on. I mean, we worked into the late hours of 26 the evening sometimes trying to get what we thought 27 was the right narrative to put into that Policy 28 Manual. 16 1 As Mr. Zaldivar or Mr. Brandeis mentioned, 2 I can't remember which, we had a tax practitioner 3 come before the Board in 2013, I believe, Mr. Abe 4 Golomb. And he brought these issues to the Board's 5 attention. We worked with our Tax Policy Division 6 who did finally craft policy and put that in the 7 manual, and then it was adopted in 2014 for our 8 staff to follow. 9 So, I really think it's a matter of maybe 10 looking at our policy again and seeing if there's 11 any enhancements or improvements that we can make on 12 our existing policy. 13 And furthermore, reminding our staff that 14 they need to follow what we have as written policy. 15 So if there's any of these kind of heavy-handed 16 tactics, for lack of a better way of saying it, that 17 are going on, they're unacceptable. We shouldn't be 18 doing that to taxpayers. 19 MS. STOWERS: I absolutely agree. 20 Actually, I would say -- I'm sorry, it's not my 21 districts, but maybe we need a staff training. Not 22 just talking and reminding them about policy, but 23 training on how they should conduct themselves, 24 especially with respect to the SCOP program. 25 MR. GILMAN: Right. 26 MS. STOWERS: At least. 27 And then what you did say, address the 28 lady's opinion, the question about what are we doing 17 1 about tackling the underground economy, the SCOP 2 program should address that, but we need to respect 3 taxpayer's rights. 4 MR. GILMAN: Right. And -- and to Ms. 5 Moreno's point, I mean, you can go anywhere in 6 California, downtown LA, you'll see these street 7 vendors. That's part, I would assume, part of what 8 SCOP's responsibility is, to also address these 9 street vendors to see whether they have a sales tax 10 permit or not. If they are selling flowers or 11 whatever, you know, they should be permitized. 12 MS. MA: I think the food trucks are a 13 problem, also. 14 MR. GILMAN: Well, that's another issue. I 15 think Mr. Brandeis -- I don't know if I'm speaking 16 out of order here, but I don't know if you've had 17 some clients that are food truck -- or caterers. 18 MR. BRANDEIS: Several. 19 MS. MA: They should all have permits and 20 they all should be paying -- 21 MR. BRANDEIS: And they all do. 22 MS. MA: -- sales taxes. Okay. That's 23 good. 24 MS. HARKEY: I have -- 25 MS. STOWERS: I have one more comment then 26 I'm done, on the issues. 27 This thing about a Petition for 28 Redetermination and the timelines, do we have 18 1 policies set in place on when Petitions should be 2 responding? And especially, most importantly, when 3 the D&R is due and the Department has asked for 4 additional time, why aren't we communicating back to 5 the taxpayer that the Department asked for 6 additional time? It seems to be miscommunication 7 here. 8 MR. GILMAN: Yeah, I think that kind of 9 ties in with the rubber-stamping comment, right? 10 MS. STOWERS: Yeah. 11 MR. GILMAN: Okay. 12 MS. STOWERS: That's that comment, yeah. 13 MR. GILMAN: You know, I'm not aware of any 14 rubber-stamping. I know there's improvements. I 15 don't know whether they have a timeline or not, for 16 example. I know they used to have, I think it was a 17 60-day rule, that when a taxpayer protested an audit 18 or petitioned an audit and when it was sent out to 19 the districts, they had 60 days to respond as to 20 what their plan was going to be to address that 21 petition. 22 MS. STOWERS: Mm-hmm. 23 MR. GILMAN: I don't know if that's still 24 in practice. I don't know if they still follow that 25 rule. That might be one area that we can look into. 26 Again, there's probably a number of areas that we 27 can improve upon when it comes to staying engaged 28 with our taxpayer as far as what's going on 19 1 throughout the appeals process. 2 The one thing he did touch on, which I 3 think is interesting, is if a case is pulled by the 4 Board, you know, what is the timeline for the BOE to 5 respond or let the taxpayer know that that case has 6 been pulled? Is it 24 hours, 48 hours? And I know 7 it's work product, I get that. But is there -- is 8 there anything that we can provide the taxpayer, 9 something substantive as to why it was pulled? 10 I think it would be helpful for taxpayers 11 to know that. I've hear from a number of 12 practitioners. In fact, I think you got a letter 13 for one just recently that's planning on appearing 14 at the Bill of Rights Hearing next month -- and if 15 you haven't, it's on its way -- with respect to, you 16 know, how cases are pulled and how we communicate 17 with the tax practitioners and taxpayers. 18 Sometimes taxpayers are making arrangements 19 to travel here, you know, and it can be within days 20 of a Board hearing. That now has to be suspended 21 and arrangements made based on whatever it is 22 they've tried to line up to come to the hearing. 23 So, anyway, I think we could make some 24 improvements regarding that recommendation or 25 comment that he made as well. 26 MS. STOWERS: Okay. Thank you. 27 MS. MA: Okay. Mr. Horton. 28 MR. HORTON: Thank you, Madam Chair. 20 1 First, let me thank our visitors for coming 2 and sharing their thoughts. It's always extremely 3 helpful to have the constructive criticism I think 4 is very helpful. And I know it takes more than the 5 normal efforts to come before the Board and do that. 6 And I believe your comments should be treated as if 7 though you speak for a group of folks far greater 8 than yourselves. So in that regard thank you very 9 much. 10 The underground economy and the SCOP team, 11 I would agree with Ms. Stowers, the one thing I want 12 to make sure is that the numbers, the statistics, 13 say some of this is the exception and not the rule, 14 and I want to be clear about that. 15 SCOP -- the SCOP team is doing an 16 exceptional job in dealing with the underground 17 economy, which is the worst element of our society 18 and the greatest threat to our economy, both 19 socially and morally. And when they deal with those 20 issues, they may have a tendency when they run into 21 an honest taxpayer to apply the same strategies that 22 they applied to the dishonest taxpayers. 23 And in that degree, I agree with Ms. 24 Stowers that that's going to require hands-on 25 training, as well as supervision of those exceptions 26 to the rule. 27 The SCOP team is one of the best units that 28 we've implemented over the years. They're doing an 21 1 exceptional job. The Appeals Unit is supposed to 2 notify all parties. And if there's a breakdown 3 there, we may need to revisit that. 4 Mr. Gau, we may need to revisit that if 5 there's a breakdown there. But I think it's 6 important that we do our best to sort of quantify 7 this so that we can get right to the problem and not 8 taint the entire organization because the exceptions 9 may not have received adequate training in order to 10 accomplish these objectives. 11 Thank you, Madam Chair. 12 MR. RUNNER: She stepped out and she asked 13 me to go ahead and go next. 14 MR. RUNNER: Oh, go ahead. 15 MS. HARKEY: Go ahead. 16 MR. RUNNER: Let me just ask real quick a 17 couple of things. You know, one of the things that 18 has always been a concern for me and that is the 19 role of SCOP in our communities. For me, as an 20 elected Board Member, it is actually one of the -- 21 maybe the only BOE personnel that many of my 22 constituents come in direct contact with. It's 23 their first contact oftentimes with the BOE. As a 24 result of that, how they do their job and how they 25 perform and the methods to which then they deal with 26 taxpayers is really important to me. 27 As a result, I meet at least, I would say, 28 for the last few years at least once or twice a year 22 1 with my SCOP teams in order to communicate that. 2 And, you know, a lot of what I believe takes place, 3 it's just like auditors, just like a lot of other 4 staff that we may have; you know, it -- it -- it's 5 how you deal with your job, it's how you present 6 yourself, it's how you enter into the room that has 7 a great deal to do with the effectiveness of what it 8 is that you're about to do. And so I -- I spend 9 time with them. I think it's very important. 10 You know, at the beginning of the SCOP 11 team, SCOP teams were actually assigned State-wide, 12 did not have a direct relationship back to the 13 district. We asked for a change on that, and we got 14 that. So that now -- because what I honestly didn't 15 want is I didn't SCOP teams coming in from one -- 16 you know, from one place, going into my district and 17 dealing with taxpayers in my district that I didn't 18 have any relationship with. 19 So that was changed. So now SCOP teams are 20 assigned by district and gives us the opportunity to 21 get involved with expectations in regards to those 22 issues. 23 The other issues that we take seriously are 24 issues with investigations that take place within 25 tax issues in our district. I can give you an 26 example, for instance, of a SCOP team that we -- we 27 had a SCOP team in our district that was in the 28 field. While they were in the field, we got a call 23 1 from a business that said that they were being 2 abused by the SCOP team that was actually in doing 3 work in their -- in this community. 4 I contacted the BOE or staff at that point 5 and I asked them to immediately remove that SCOP 6 team from that area and let's investigate to see 7 what's going on. Because, again, we take very 8 seriously that issue. 9 What we did, we found out something 10 interesting. We went in, along with the BOE staff 11 and our staff, we went ahead and reviewed other 12 people who they were visiting. And, quite frankly, 13 we found out everybody else was just fine. We just 14 ended up with one taxpayer who just was having a 15 hard time, which is okay. And we're fine -- we get 16 that. But at the same time, I didn't want to 17 overreact and say, "Hey this is how SCOP's going and 18 acting everywhere." But at the same time, I wanted 19 to make sure we weren't abusing taxpayers in that 20 process. So we took the time to do that. And, like 21 I said, it goes back to what we feel is the 22 importance of that. 23 A couple of things I just want to ask the 24 reps dealing. Since these are your reps -- these 25 are people who you represent, the thing that I find 26 oftentimes solves problems is knowing when these 27 events take place so that they can be dealt with. 28 And so I would encourage you, as you deal 24 1 with your -- as you deal with the folks who you 2 represent, when there is a case like that, when 3 there is an event that takes place where a SCOP 4 team, or if we can talk about any other BOE employee 5 for that matter, ends up doing that, I would 6 recommend that you immediately would call and deal 7 with both, either the administrator of that office 8 that they came out with and certainly the Board 9 Member's office. 10 Because it's really impossible -- for 11 instance, right now, I don't know which SCOP teams 12 you're talking about, where they are in California. 13 I don't know anything about how to solve your 14 problem. So I think what I would like to do is 15 actually try to solve the problem rather than 16 somehow try to feel like this whole program is no 17 good. 18 MR. GILMAN: Yeah. 19 MR. RUNNER: Because I think there's a lot 20 of validity in there, and I think we do a lot of 21 good things, at least how we operate SCOP and how we 22 work within our district. 23 The other thing I want to just try to 24 clarify, and that is, I think by my looking at the 25 BC -- original BCP, in reality the SCOP team has far 26 more responsibility or -- or in the process than I 27 think what you believe that they do. 28 MR. HORTON: Yeah. 25 1 MR. RUNNER: I mean, the original BCP says, 2 ". . . enhanced outreach component, this program is 3 essential in the BOE efforts to serve the needs of 4 business owners and perform necessary registrations, 5 audit, compliance, and enforcement" actions -- or 6 "functions." 7 So that's much broader than just checking 8 out permits. And that was in the original BCP. 9 So, you know, I think maybe you might -- in 10 your view you might have a very much more narrower 11 view of what SCOP actually does. Now that doesn't 12 mean that they can't do all those things correctly 13 and with the right attitude in order to find 14 compliance. 15 And our objective, and my belief is, trying 16 to find future compliance. 17 MR. GILMAN: Right. 18 MR. RUNNER: I believe that, in my opinion, 19 that should be the objective. Not trying to go get 20 gotchas, not trying to find things. Now clearly if 21 they run across some taxpayer that's clearly, you 22 know, mis -- not misunderstanding the law, but 23 misapplying the law purposefully, that's a different 24 issue. But my concern is that we actually look into 25 future compliance and conform behavior in the 26 future. 27 And so I think that -- I think we can do 28 that. And I think we need to make sure that we are 26 1 indeed doing that. And I would -- I would hope that 2 maybe we can work with a broader discussion in 3 regards to how it is that we can do that. 4 And, again, I would encourage anybody, when 5 they have an individual issue with an individual BOE 6 employee that they feel has abused the taxpayer, let 7 us know so that we can solve the problem now, rather 8 than waiting for an annual report of, you know, 9 taxpayer concerns. Because I know that's how our 10 office would prefer to operate in that regard. 11 So, I mean, those are my observations. 12 Again, if we need to, and if there's a concern, I 13 don't mind at all for the Customer Service Committee 14 to go ahead and take a look at SCOP again, to review 15 to make sure we have proper guidelines. But, you 16 know what, we can even have the proper guidelines, 17 but it's the attitude of the individual who goes 18 into the business that makes the difference. And I 19 can't create a guideline for a proper attitude. But 20 I can deal with an attitude that all of a sudden is 21 a problem and deal with it that way. 22 So, we certainly are open to that. And, 23 quite frankly, we will, we will go ahead and take a 24 look at a broader discussion in regards to SCOP and 25 how we can more effectively ensure that proper 26 training is done at the same time. 27 The other issue I just want to say is, our 28 SCOP teams do leave cards and ask the individuals to 27 1 evaluate the SCOP experience, what they just had. 2 And, again, by far, they're pretty positive, at 3 least the ones that I get in my district. 4 So, again, it's hard for me to understand 5 exactly what may be going on, and in fact there are 6 opportunities to the deal with that. So, those 7 would be my observations and we'll be glad to take 8 that on. 9 MS. MA: Can I jump in on SCOP as well? 10 MR. RUNNER: Yeah. 11 MS. MA: You know, SCOP, one of my mentees 12 or my one mentee is Robert Chadwick, and he is with 13 the SCOP team in my district. And, similar to 14 Mr. Runner, I've met with them. They're supposed to 15 be going out to educate. Back in the good old days 16 I think they had a lot of publications -- 17 MR. GILMAN: Yes. Right. 18 MS. MA: -- that they could hand out, and 19 they're starting to do that again for taxpayers. 20 MR. GILMAN: Right. 21 MS. MA: You know, again, many of them are 22 doing rotations. So if they're in the audit or 23 compliance, they're rotating into SCOP as well, so 24 they kind of understand, you know, the different 25 roles. And, you know, I think it's true, for the 26 most part, I mean the people in the SCOP department 27 like going out and meeting with taxpayers. And if 28 we need to do a little more education and kind of 28 1 understanding of what the program's all about, I 2 think Mr. Runner's committee is a good one. 3 You also mentioned about the lack of check 4 and balance. That also does concern me that when 5 you have an appeal officer hearing, for example, 6 it's the same people that have been in the process, 7 who approved it, you know, who's going to sit there 8 and, you know, represent the BOE at the appeals 9 process. And, you know, I think there isn't a lot 10 of outside independence, someone to look at a case, 11 you know, before it gets, you know, escalated to the 12 next level. 13 And I don't know if that's something that 14 we could look at. I'm looking at our Executive 15 Director here. Because I think when taxpayers, you 16 know, want to have an appeal conference or hearing 17 officer, they expect that someone is going to take a 18 fresh look at the case, and I think that that would 19 be very beneficial -- 20 MR. GILMAN: Sure, yeah. 21 MS. MA: -- you know, to this process. 22 MR. GILMAN: Yes. 23 MS. MA: So those were just my two cents in 24 terms of what I heard. 25 MR. GILMAN: Okay. Um -- 26 MS. MA: And Ms. Harkey. 27 MR. GILMAN: Member Harkey? 28 MS. HARKEY: Thank you, Todd. 29 1 I would just like to say that we have been 2 reviewing the SCOP processes in our district and in 3 others because we get -- we, periodically, will get 4 communication from other offices. And some of the 5 things, I think one of the issues that we are having 6 right now is the revenue generation of the SCOP 7 team, where they are to focus. I mean are they to 8 focus on referring audits? And if not, if that's 9 not their purpose, which I recall, you know, was 10 kind of discussed here when I first got to this 11 Board, that they're not there to do audits. So then 12 they have to -- then they are now focusing more on 13 amending returns. And there seems to be a little 14 bit of pressure to amend returns. And I've seen 15 letters and communication to that effect. 16 And I'm not necessarily saying it's my 17 district, because we are -- we are working with my 18 district, which we are able to do, but we do get 19 these issues. 20 And I would like to say that I think that, 21 for Mr. Runner's edification, that we review the 22 letters that go out from SCOP. We have a 23 compilation of letters, and they seem to indicate 24 that it's a full-on audit. And what I'm hearing is 25 that people show up with their boxes, ready to go, 26 and they are in line waiting with a num- -- I mean, 27 in essence, a room full of people that have boxes 28 that are waiting to go. And then -- you know, to 30 1 have this be reviewed by the SCOP person, and then 2 so they've got their time taken up there. 3 And then they get -- they get a request for 4 an audit from an auditor from the same -- from a 5 district and they're saying, "But we've already been 6 audited." 7 And what we're hearing is, "No. No, you 8 haven't been audited. What did you get?" And we 9 see these letters and they're actually, they're SCOP 10 teams, for compliance. 11 So I do think we're having some confusion. 12 And I don't know if it's district by district, more 13 district -- one district's handling it a little bit 14 different than others. But what I am seeing is I 15 think the form letters really need to -- really need 16 to clarify, in essence, what they're for. And if 17 they -- if we want them to do audits or refer 18 audits, we kind of need to be specific and allow 19 them to have some latitude there. 20 But we also need to be able, for their 21 education, we need to be able to figure out what -- 22 attach a revenue component to that part of the 23 transaction that they're doing. Because if all they 24 can do is show revenue through amended returns or 25 revenue through an audit, actually realizing, then 26 we're not giving them credit for their education 27 abilities. And I think we need to work that into 28 their -- into their -- their -- their revenue stream 31 1 somehow. 2 Because, truly, if they're bringing people 3 into compliance or bringing businesses into 4 compliance, they are generating revenue. And I can 5 think of no more immediate task that we're going to 6 have than with the medical marijuana shops and 7 industry. We are going to need people to go out and 8 be sure that they're permitted and whatnot. And I 9 think that for the SCOP team, it's a great way to 10 also work with what is an underground economy and 11 try to get them into what our regulatory processes 12 will be. 13 And so I think there's -- there's a reason 14 for the SCOP teams. I'm not so sure that they 15 understand what their reason is anymore. They're 16 just trying to do what it is that people are telling 17 them to do or what they think they need to do. And 18 if they need to generate revenue, they're going to 19 do it whatever way they can. If they're not 20 supposed to audit, they're not going to audit, then 21 they might do something different. 22 So I think it's -- it's -- it just needs 23 some guidance. So I would suggest that we look at 24 it, again, in Mr. Runner's committee and review the 25 letters they send out and try to figure out what it 26 is we want the SCOP team to do. And it may be 27 different in different districts, depending on 28 what -- where the need is. But I think that's more 32 1 the issue. 2 MS. MA: Okay. And we have one more public 3 speaker on this issue, Ms. Carmen Kane. You have 4 three minutes. 5 ---oOo--- 6 CARMEN KANE 7 ---oOo--- 8 MS. KANE: Good afternoon, Chairman Ma and 9 honorable Members of the Board. 10 I was not going to step up to this issue 11 because in reality I was here on another issue. 12 We're a small minority-owned business, woman-owned 13 business. I am working with the advocate board at 14 this time. 15 However, when I heard the comments that are 16 being made here by these gentlemen, I have to tell 17 you that your employees, your BOE employees are 18 professional, they're polite. But, obviously, they 19 do give you the run-around. There is definitely, as 20 you said, a coziness between the employees and the 21 petition office. 22 And so I hope to bring a case before you in 23 the near future because I am working with Jessie 24 Sahota of your office. She's excellent. And I have 25 filed for a Petition for Redetermination in 26 reference to my case. 27 There is a certain amount of 28 rubber-stamping, or at least from the perspective of 33 1 a business, small business owner, I do have that 2 feeling. 3 I'm always told you have the right to 4 petition. You have the right to do this. You have 5 the right. Oh, but they're not going to approve it. 6 Oh, really? 7 Does that mean that you're talking to them, 8 telling them that I'm in the wrong and this is not 9 going to be approved? 10 So I do agree with the comments that are 11 being made here. There seems to be a very 12 complacent attitude. 13 I worked for a government agency. I'm 14 retired. And we all know we don't get fired; and 15 that is the wrong attitude to have. 16 My issue that I was going to present before 17 you is the billing statements. They're extremely 18 difficult to decipher. 19 We settled a case many years ago, and 20 that's what I will be coming for a redetermination 21 here. And the reason I'm in trouble and I have an 22 issue that I'm faced with is because of your billing 23 statements. 24 First of all, you send 'em out annually. 25 They're very difficult to decipher unless you're a 26 rocket scientist or I have a team, like you 27 previously had with the millions that you were 28 discussing, then I wouldn't be in trouble. But for 34 1 small businesses, it is very difficult. 2 Also, when you enter into a payment 3 agreement with the BOE, you basically pay taxes. 4 They don't tell you how much interest is going to be 5 due. For most of us that have been out there in the 6 real world, you buy a car, it's 30,000, interest is 7 5,000, and for four years your payment is so much. 8 I would like to recommend -- I would like 9 to make a request that the Board consider making a 10 change so that businesses, such as mine, small 11 business, are told this is the principal or the tax 12 and this will be your interest due at the end of the 13 agreement and this is the amount. They do not 14 specify that. They do not break it down, and so one 15 or two or 18 months later, oh, $5,000. Well, small 16 businesses have suffered quite a bit with the 17 economy and we're trying to recover. 18 The advocate board is incredible. When I 19 first called him, my first question to Jessie was, 20 "Are you an employee? Are you an employee of the 21 BOE or are you a separate entity?" 22 And she said, "We are employees of the 23 BOE." 24 I thought to myself, "Hmm, what is she 25 really going to do for me? What is this advocate, 26 you know, office?" 27 They're marvelous. They are the only ones 28 that have been able to help me and see me through 35 1 this. 2 Again, the BOE staff, polite, professional 3 in their own way, but not really helpful other than 4 to tell you you have the right to file for 5 everything but that you're going to be turned down. 6 I really appreciate the opportunity to make 7 these comments. And I thank the advocate board for 8 all their assistance. Thank you. 9 MS. MA: Thank you. 10 Okay. Mr. Runner. 11 MR. RUNNER: Yeah. You know, let me -- 12 we've had -- we've heard about petition issues. 13 We've heard about some billing issues in regards to 14 the language in the bill and the clarity. We've 15 heard about SCOP issues. 16 You know, I think, again, we're -- I think 17 it would be appropriate as we work with the Taxpayer 18 Advocate's office, Taxpayer Advocate's office is 19 actually staffing of our Customer Service Committee, 20 and it seems to me that these are all issues that 21 we'd be glad to go ahead and work with the Taxpayer 22 Advocate's office and preparing updates and kind of 23 responding to these issues. I think they're all 24 appropriate within taxpayer -- I think everything 25 we've heard here is about customer service and 26 administrative efficiency. 27 MR. GILMAN: Absolutely. 28 MR. RUNNER: And I think we've already, 36 1 kind of the role that we've established there. 2 MR. GILMAN: Right. 3 MR. RUNNER: So if there's not a concern 4 there, I think we would be glad to kind of make sure 5 that we get closure on these issues and further 6 discussion. 7 MS. MA: Mr. Horton. 8 MR. HORTON: Thank you, Madam Chair. 9 I agree with the taxpayer. If they have a 10 payment plan, we should provide them with a 11 projected interest and principal. That should be 12 standard procedure. 13 So we may also want to -- we may also want 14 to provide the -- just all taxpayers we come in 15 contact with, begin to explain the process where, as 16 Mr. Runner said, where if they have an issue, they 17 can address their issue directly with the district. 18 And then, if not with the district, directly with 19 the office of the Board Member. 20 We certainly appreciate Ms. Kane and her 21 bringing the issue, and look forward to working with 22 her in that regard. 23 But I think it's important that we inform 24 individuals on how to address these issues so that 25 they can solve their problem at the lowest level 26 possible and as soon as possible. And I think that 27 is important, relative to the SCOP program. 28 And my view of it is, is that we should be 37 1 consistent with the BCP. It's the reason the 2 Legislature established the SCOP program, is to 3 empower them to do these investigations, to the 4 extent that they can assist in bridging the gap 5 between noncompliance and compliance. And at the 6 time a 18 -- I believe, $7 billion accounts 7 receivables where the monies just weren't being 8 collected. Because when the taxpayer is trying to 9 do business and the business right next to them is 10 not complying with the law, that's an -- that's an 11 inequity that shouldn't exist. 12 And so in -- in the district I represent, 13 the SCOP team is empowered to do all the functions 14 as articulated by the Legislature in the BCP process 15 when it's related to folks that are not filing their 16 tax returns, paying taxes, or are not permitted and 17 are required to be permitted. At the same time they 18 play a public relations role, too, for those who are 19 complying and a conduit, in my mind, to the 20 Taxpayers' Advocate and others to assist them in 21 being connected to -- to the problem-solvers. 22 They can't make you file an amended return 23 unless you filed -- your initial return was wrong. 24 They can't make you register unless you weren't 25 registered. 26 So, my apologies. Because of my voice, 27 this may sound a little harsher than I intended, but 28 it's not. I am very sympathetic to individuals who 38 1 make -- who are human beings. We all -- we make 2 human errors. We ought to be given a second chance 3 when you make a human error. But those who 4 intentionally manipulate the system for their own 5 personal gain, I don't have a lot of sympathy for. 6 MS. MA: Thank you. 7 MR. HORTON: Thank you, Madam Chair. 8 MS. MA: Mr. Gilman. 9 MR. GILMAN: If I may. Thank you, Members. 10 I'd like to backboard some of the comments that you 11 made. I'll start with the SCOP team. 12 First off, I want to say, we have some 13 extremely talented, professional, smart people that 14 work at the BOE. They're very good at what they do. 15 And they do a good job every day. Sometimes they 16 may just get caught up in the moment, okay, in terms 17 of whatever it is, whatever the role is that they're 18 filling at that particular time. And I think that's 19 where we need to make sure we connect the dots in 20 terms of, you know, maybe the training or the, you 21 know, reemphasizing this in the policy that we have 22 with the BOE. 23 But I think, again, like I said, we -- I've 24 worked with thousands and thousands of taxpayers 25 over the years, including my staff. You know, we 26 report in my annual report close to a thousand 27 taxpayer contacts a year. Less than two percent of 28 those are taxpayer rights violations. It's a very, 39 1 very small percentage of cases in which taxpayers 2 come to our office. 3 So my message is, we have some really good 4 folks that do a great job. Every now and then we 5 have some that maybe have an issue or two in terms 6 of policy or procedure and maybe it didn't get to 7 them in time. But I think through these efforts and 8 being on the Customer Service Committee we can make 9 some positive changes. 10 With respect to Ms. Kane's issue, I think 11 that there is a lot of room for improvement with our 12 billing statements. A majority of the time the 13 taxpayers don't even know whether or not -- there's 14 nothing in our statements that show what the payment 15 is. It doesn't show whether it's a cash payment, 16 it's an autopay, an ePay, whether it was from a 17 levy, wage garnishment, or whether it was -- there 18 was a with- -- a sundry withhold on the returns. 19 If we did a better job and explained to the 20 taxpayer what it is that they owe, I think you'd 21 have much more compliance when it comes to sending 22 out billings and statements and notices to the 23 taxpayers to follow. They're not experts in this. 24 I've talked to some of our staff today that 25 have been around more than 15 years; they struggle 26 in examining and understanding our billing 27 statements because the way they're set up and the 28 way they're structured. 40 1 Anyway, to close, I have talked to our 2 Deputy Director of our Technology Services 3 Department, and she's assured me that she also is 4 going to include this as part of the functionality 5 for CROS as well. 6 MS. MA: Okay. 7 MR. HORTON: That'd be cool. 8 MS. MA: Okay. Ms. Kane? 9 MS. KANE: I'd like to add a comment to 10 what Mr. Gilmore said. He absolutely is right; you 11 do have a tremendous amount of talent in your 12 staffing. The issue here is the message that I get 13 as a business owner. Whether they're talented or 14 not -- 15 MR. HORTON: That's important. 16 MS. HARKEY: They can be too talented. 17 MS. KANE: -- I don't get the message of -- 18 I get the message that they're in cahoots with each 19 other. That's the message I get. And it's not 20 nice. And I won't accept it, and that's why I'm 21 here. 22 MS. MA: Thank you. 23 MS. KANE: So I appreciate you listening to 24 my thoughts. Thank you. 25 MR. GILMAN: Okay. We have one more 26 hearing for property tax. 27 MS. MA: Okay. Yes. 28 MR. GILMAN: So let's move right along here 41 1 real quick. 2 ---oOo--- 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 42 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, KATHLEEN SKIDGEL, Hearing Reporter for 8 the California State Board of Equalization certify 9 that on April 26, 2016 I recorded verbatim, in 10 shorthand, to the best of my ability, the 11 proceedings in the above-entitled hearing; that I 12 transcribed the shorthand writing into typewriting; 13 and that the preceding pages 1 through 42 constitute 14 a complete and accurate transcription of the 15 shorthand writing. 16 17 Dated: May 2, 2016 18 19 20 ____________________________ 21 KATHLEEN SKIDGEL, CSR #9039 22 Hearing Reporter 23 24 25 26 27 28 43