1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 9 REPORTER'S TRANSCRIPT 10 MARCH 25, 2015 11 12 CORPORATE FRANCHISE AND PERSONAL INCOME TAX HEARING 13 APPEAL OF 14 JOHNNIE F. LAU and GAY L. LAU 15 NO. 739838 16 AGAINST PROPOSED ASSESSMENT OF 17 ADDITIONAL INCOME TAX 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 For the Board Jerome E. Horton of Equalization: Chairman 3 4 Sen. George Runner (Ret.) Vice Chairman 5 6 Fiona Ma, CPA Member 7 8 Diane L. Harkey Member 9 10 Yvette Stowers Appearing for Betty T. 11 Yee, State Controller (per Government Code 12 Section 7.9) 13 Joann Richmond 14 Chief Board Proceedings 15 Division 16 For Board of Equalization Staff: Lou Ambrose 17 Tax Counsel IV 18 For Franchise Tax Board: Brian Miller 19 Tax Counsel 20 Ron Hofsdal Tax Counsel 21 Natasha Page 22 Tax Counsel 23 24 For the Appellants: Rex Halverson Attorney 25 Johnnie F. Lau 26 Taxpayer 27 Gay L. Lau Taxpayer 28 ---oOo--- 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 MARCH 25, 2015 4 ---oOo--- 5 MR. HORTON: Ms. Richmond, what is our next 6 case? 7 MS. RICHMOND: Our next case is Item B4 8 Johnnie F. Lau and Gay L. Law -- Lau. I'm sorry. 9 Please come forward. 10 And this taxpayer has 15 minutes to present 11 their case. 12 MS. HARKEY: Thank you. I have it. Yes, I 13 do. I believe it's right here. No, I got two more 14 exhibits, okay. Thank you. 15 MR. HORTON: Uh -- 16 MR. AMBROSE: Me. Ready? 17 MR. HORTON: Yeah. 18 MR. AMBROSE: Good afternoon, Mr. Chair, 19 Board Members. 20 This is the appeal of Johnnie F. Lau and 21 Gay L. Lau. And the question is whether Appellants 22 have established error in the Franchise Tax Board's 23 determination that Appellants were residents of 24 California for the entire years of tax year 2007 and 25 2008. 26 MR. HORTON: Whoa. Uh -- 27 MR. HALVERSON: Don't worry. You have it 28 in a smaller version, the paper in front of you. 3 1 Exhibit 14. 2 MR. HORTON: Oh, okay. 3 MS. HARKEY: We don't have to read that. I 4 can read it. 5 MR. HORTON: For the -- 6 MS. HARKEY: Got my contacts in. 7 MR. HORTON: For the benefit of the -- of 8 the recording of it, can we place it in such a way 9 that the cameras can actually pick it up? 10 Thank you, Member Ma. 11 Staff, please. 12 MR. STAGG: Mr. Horton? 13 MR. HORTON: Just turn it around over in 14 that corner. That might -- 15 MS. RICHMOND: It's okay where it is. 16 MR. HORTON: You guys can pick it up? 17 MR. VANZANT: Uh-huh. 18 MR. HORTON: Oh, okay. All right, good. 19 Bring it back. 20 MS. HARKEY: Eye in the sky. 21 MR. HORTON: No, closer. 22 MS. HARKEY: Eye in the sky. 23 MR. HALVERSON: Yes, as close as you can 24 get, please. 25 MR. HORTON: My apologies. Welcome to the 26 Board of Equalization. You will have 10 -- 15 27 minutes to make your presentation. We would ask 28 that you introduce yourself for the record. Please 4 1 be conscious that we will return and allow you five 2 minutes on rebuttal. 3 At your convenience. 4 MR. HALVERSON: Thank you, Mr. Chair. Good 5 afternoon, Chairman Horton and Board Members. 6 Let me begin by introducing Mr. and 7 Mrs. Lau, the Appellants, to my immediate left. 8 I'm Rex Halverson, and my firm is Rex 9 Halverson and Associates. 10 Mr. and Mrs. Lau were born in Hong Kong, 11 moved here in the 60s and lived in California for 12 over 37 years before moving to Nevada eight years 13 ago. Johnnie's 61 and his wife's 57. They have 14 three children and four grandchildren living here, 15 three in San Diego and one in Modesto. They also 16 have 17 relatives living in California. 17 Mr. Lau has multiple business interests in 18 the state of California, Idaho, Nevada and China, 19 but his career started with the meat processing 20 business down in Modesto called Yosemite Meat in 21 1981. He worked hard and built this company into a 22 very successful business that now employs over 160 23 workers. The day-to-day business operations by -- 24 of Yosemite Meat is now handled by a general manager 25 with the assistance of his son, Steven. 26 In early 2007, Appellants decided to move 27 from El Dorado Hills, which is right up here east of 28 Folsom, down to Henderson, Nevada in order to semi 5 1 retire. The move was prompted for several reasons 2 including a desire to slow down, enjoy their 3 grandchildren, avoid the central valley seasonal 4 allergies, the variety and number of golf courses in 5 Vegas, and the entertainment and gaming offered in 6 Las Vegas. 7 Appellants closed escrow on their 8 Henderson, Nevada home on March 8, 2007 and moved 9 into it in April 2007; that's Exhibit 3. 10 California Code of Regulations Section 11 17014, subdivision (c) defines the term "domicile" 12 as the place where an individual has his true, 13 fixed, permanent home and principal establishment 14 and to which he has, whenever he is absent, the 15 intention of returning. Most importantly, an 16 individual can only have one domicile. 17 The FTB's position that Appellants remain 18 domiciled in California after moving to Nevada flies 19 in the face of reality. In fact, if Respondent 20 truly believed their argument, Respondent would have 21 assessed Appellants for tax years subsequent to 22 2008, but Respondent has not done so. And the 2009 23 year is now closed. Action, as we all know, speaks 24 louder than words. 25 Appellants permanently moved from 26 California to Nevada in April 2007. Appellants 27 severed their domicile in California and changed 28 their residency when they bought the new home in 6 1 Henderson, closed escrow on March 8th, 2007, and 2 moved into it in April 2007 with the intention to 3 remain there permanently and indefinitely. As 4 proof, they bought new furniture, moved family 5 heirlooms into the home and have now resided in the 6 Las Vegas area almost eight years and have acquired 7 and moved into no less than two different homes in 8 the Vegas area. 9 Once they moved into the new home with the 10 intention to remain indefinitely, Appellants became 11 domiciled in Nevada as you can only have one 12 domicile. Furthermore, there is not one shred of 13 evidence that Appellants were in Nevada for a 14 temporary or transitory purpose. 15 California Rev. and Tax Code Section 16 17014(a) defines a resident in pertinent part as 17 every individual who's in this state for other than 18 a temporary or transitory purpose, and every 19 individual domiciled in this state who's outside the 20 state for a temporary or transitory purpose. 21 Since moving to Nevada almost eight years 22 ago, Appellants have returned to California for only 23 temporary or transitory purposes. Appellants 24 compiled, in Exhibit 9, a chronological list of 25 every visit to California after moving to Nevada. 26 It's clear that these visits were for purposes of 27 playing golf, visiting relatives and family, 28 weddings, birth of a grandchild, attending 7 1 birthdays, vacations, flying from San Francisco to 2 China and other locales. Each and every one of 3 these visits to California was for a temporary and 4 transitory purpose. 5 There's no bright-line test of residency in 6 California. When a person -- pardon me. The 7 closest thing we have is a rebuttable presumption of 8 California residency when a person's in the state 9 for nine months in a tax year. But over the years 10 the Board of Equalization has developed the closest 11 connections test to address residency. Its roots 12 can be traced to a 2003 Board decision called 13 Stephen D. Bragg. The Board set forth a list of 19 14 items now referred to as the "Bragg Factors" which 15 these list to help a taxpayer -- to help to 16 establish whether a taxpayer has his closest 17 connections in this state. These factors are 18 critical so we'll have to discuss each of them 19 listed in detail. 20 Now, you have a paper version in Exhibit 14 21 in case you can't read my small print. The first 22 one's the location of taxpayer's residence and the 23 approximate sizes and values of each. 24 The new principal residence in Henderson 25 was purchased in March '07 for a little less than a 26 million and was 2595 square feet. 27 Appellants held onto their 6,820 square 28 foot home in El Dorado Hills because the market was 8 1 abysmal in 2007-'08 and they could afford to wait 2 until it recovered. The house was paid for. The 3 house was assessed at approximately 1.5 million, but 4 Appellants could not sell it for anything near that 5 in '07-'08. 6 After living in Henderson for three years, 7 they subsequently purchased a new 7,400 square foot 8 home in Las Vegas in 2010 and moved into it in 9 February 2011. This factor is at worst neutral; 10 but, we'd argue that it actually weighs in favor of 11 Appellants being Nevada residents since they've now 12 lived outside of California for eight straight 13 uninterrupted years and moved into two different 14 homes in the Las Vegas area since departing 15 California. 16 Number 2, the state where the taxpayer's 17 spouse and children reside. Well, spouse and 18 Johnnie both live in Henderson. Their children 19 should not count as they're adults. So this factor 20 weighs in favor of Nevada residency. 21 3. The state where the taxpayer's children 22 attend school. Well, they're out of school so 23 that's not applicable. 24 4. The state where taxpayer claims a 25 homeowner's property tax exemption on a residence. 26 The FTB admits that Appellants claimed their 27 Henderson home as their primary residence on May 3, 28 2007. See Exhibit 5. This factor weighs in favor 9 1 of Nevada residency. 2 6. The telephone's -- the taxpayer's 3 telephone records. Not applicable as they're not 4 available. 5 7. The number of days the taxpayer spends 6 in California versus the number of days the taxpayer 7 spends in other states and the general purpose of 8 such days, vacation/business. 9 Appellants have painstakingly reconstructed 10 a more accurate calendar, Exhibit 8, by taking into 11 account each airline ticket, golf games, dinners at 12 the country club per records of the club, credit 13 card receipts, checks, their normal travel mode when 14 visiting family. Appellants then tallied the number 15 of days in each state based on the calendars. The 16 tally's reflected in Exhibit 7. 17 Appellants were in Nevada or outside 18 California 61 percent of the time in '07 and 51 19 percent of the time in 2008. Now keep in mind we 20 had to count half -- half -- you know, each person 21 separately, so it -- it was complicated. 22 Appellants have also signed a Declaration 23 marked as Exhibit 10 as to the veracity of the 24 calendars. The factor weighs in favor of 25 Appellants' Nevada residency. 26 The location where taxpayer files his tax 27 returns, both federal and state, and the state of 28 residence claimed on the returns. Well, taxpayers 10 1 filed California and federal income tax returns for 2 '07 because they were part-year return. And in '08 3 they filed returns also for the U.S. and they listed 4 their home in Henderson, Nevada on both returns -- 5 on all returns. 6 The location of taxpayer's bank and savings 7 accounts. Appellants have numerous banks accounts 8 in both California and California -- in both 9 California and Nevada, but it's critical to note 10 that Appellants opened a Nevada bank account on 11 March 28, 2007, prior to their actually moving into 12 the new home in Henderson. That's Exhibit 12. 13 To the contrary -- well, and the Respondent 14 would say this factor is actually neutral. To the 15 contrary, we'd argue that opening a new bank account 16 would indicate a change of residency, but we could 17 live with calling it neutral. 18 The origination point of taxpayer's 19 checking account transactions and credit card 20 transactions. Respondent erroneously contends that 21 the high number of California transactions as 22 compared to Nevada evidences California residency. 23 That's simply not the case and there's a good 24 explanation. 25 After moving to Nevada, Appellants still 26 owned a residence in El Dorado Hills and wanted to 27 sell it once the real estate market improved. 28 Accordingly, they needed to maintain it. 11 1 Maintenance of the property and others in California 2 required numerous ongoing service such as: lawn 3 maintenance, house cleaning, repairs, landscaping, 4 tree services, exterminators, pool service, alarms, 5 lock and key changes, replacement of worn out 6 appliances, window cleaning, utilities. And all of 7 these services resulted in bills that had to paid 8 monthly. 9 Simply put, Appellants incurred fewer 10 maintenance costs and transactions in Nevada because 11 Appellants owned fewer properties in Nevada and 12 Appellants could do much of the maintenance 13 themselves in the Henderson home because that's 14 where they lived. 15 Appellants also incurred numerous gift 16 expenses, as well as incidental travel expenses 17 during visits to California. In Chinese culture, 18 visitors are expected to bear gifts for each member 19 of the family. Finally, any analysis of the checks 20 written and credit card transactions, which I 21 provided all of you, will reflect many 22 reimbursements of friends for golf-related 23 reservations, hotels, tee times, equipment and 24 lessons that may have been incurred in California or 25 elsewhere when Appellants vacationed. Thus, a pure 26 point of origin analysis of Appellants' transactions 27 cannot alone elucidate Appellants' state of 28 residence. A purpose-driven analysis of these 12 1 transactions is more effective and actually weighs 2 against California residence; but Appellants will go 3 along with calling that neutral. 4 The state where the taxpayer maintains 5 memberships in social, religious and professional 6 organizations. Well, there are no religious and 7 there are no professional organizations, but let's 8 get to social. Respondents would have you believe 9 that Appellants should be considered California 10 residents because they participated in various 11 Chinese golf associations and golf tournaments. 12 Admittedly, Appellants love golf. The 13 Chinese golf associations allow them to play golf 14 with friends. Vastly more important though are 15 country club memberships because you have to pay for 16 these. 17 In 2007 and '08 Appellants were members of 18 only two country clubs: South Shore Country Club in 19 Henderson which cost them $175,000 and involved 20 three golf courses, and Serrano Country Club in 21 El Dorado Hills which cost them 40 to $45,000. 22 Appellants have since added another country 23 club to that list, Southern Highland Country Club in 24 Las Vegas; that cost them $50,000. And they have 25 finally sold the Serrano Country Club membership in 26 2013 for $10,000, which is far below its publicized 27 value. Appellants had been trying to sell Serrano 28 since '07, but they were told there were 45 people 13 1 ahead of them on the list and it took six years to 2 sell it. During the entire six-year period, 3 Appellants were responsible for spending a minimum 4 640 per month for golf and 250 a quarter for food 5 and drink. That is why the California reflects so 6 many golf days and dining days in Serrano during '07 7 and '08. In fact, Appellants did not believe they'd 8 spend the minimum, so they let a good friend 9 actually charge meals on their membership number. 10 See Declaration of Pat Seide marked Exhibit 11. 11 At worst, this factor is neutral or a tie, 12 but considering that the Serrano golf club 13 membership has finally been sold and Appellants have 14 bought no fewer than two additional country club 15 memberships that were more expensive than Serrano, 16 these facts clearly indicate Appellants are -- 17 Appellants are staying put in Nevada and we'd argue 18 that it weighs in favor of Nevada residency, but we 19 can live with calling it neutral. 20 11. The state where the taxpayer 21 registered his automobiles. Taxpayer had two cars 22 that they left in a garage in El Dorado Hills, an 23 empty garage in El Dorado Hills. One is a 24 nonrunning collectible Porsche. The other was a 25 Mercedes Benz 500. 26 Mrs. Lau's car was a 30th wedding 27 anniversary gift to her from Johnnie. So when they 28 moved to -- to Nevada, they took two other vehicles 14 1 that were owned by Yosemite Meat, the company he 2 owns here in California. One of those cars was 3 registered in Nevada, one of those cars was 4 registered in California. Mr. Lau registered his in 5 Nevada. Mrs. Lau didn't register hers in -- left it 6 in California or left it registered in California. 7 So, Respondent would have you believe that, 8 okay, they've got more vehicles registered and 9 parked in California than the single vehicle 10 registered in Nevada, weighing in favor of 11 California residency. We disagree. Appellants have 12 the luxury of owning property all over the U.S. 13 Thus, they can leave one or two automobiles in an 14 empty garage; that's hardly proof that they remained 15 domiciled or residents in that state. 16 A person can only drive one car at a time. 17 Of the two vehicles actually used by them in 18 '07-'08, one was registered in Nevada, one in 19 California. And this factor should be regarded as 20 neutral. Now we gave you proof of the fact that she 21 doesn't use her Mercedes Benz because it only had 22 16,000 miles on it after eight years. 23 The state wherein the taxpayer maintains 24 his driver's license. Appellant-husband 25 relinquished his California license and applied for 26 and received a driver's license in July '07 after 27 moving to Nevada. Appellant-wife did not apply for 28 a Nevada license for the simple reason she'd be -- 15 1 she knew she'd be here visiting family, 2 grandchildren and children while her husband was in 3 China. That factor's neutral. 4 The state wherein taxpayer maintains his 5 voter registration and taxpayer's voting 6 participation history. Mr. Lau registered to vote 7 in Henderson in May 2007 and he's voted there since. 8 Mrs. Lau has never registered in any state. So that 9 one rules -- or should favor Nevada residency. 10 The state where they obtained their 11 professional services such as doctors, dentists, 12 accountants, attorneys and brokers. The 13 professionals, for the most part, are all in 14 California, including myself. But do not forget 15 that Appellants lived here over 37 years. Over that 16 number of years, it should be easy to understand 17 that Appellants were reluctant to change any of 18 their lifelong professionals who thoroughly know 19 their medical and dental history, unique cultural, 20 social, family, trust, tax and business needs. 21 Notwithstanding, we'll concede that that factor 22 weighs in favor of California residency. 23 Now, the state where taxpayer's employed. 24 Appellant-husband is self-employed in Nevada as a 25 consultant following his semi-retirement in '07. 26 His consulting business is known as JGL Consulting 27 and it was founded on March 29, 2007, prior to them 28 moving into their home. It has held a Nevada 16 1 business license since March 29th, 2007, and it's 2 Exhibit 12. That factor weighs in favor of Nevada 3 residency. 4 13. The state -- pardon me. 5 16. The state where the taxpayer maintains 6 their own business interests. Well, Mr. Lau has 7 business interests in Nevada, Idaho, California and 8 China. He's a consultant in Nevada. He raises 9 livestock, pigs, in Idaho and China. He owns a meat 10 processing company in Modesto. And he's a real 11 estate investor; he's got over 10 properties in 12 California. He now has -- he has a couple in 13 Nevada. But during that time almost all of them 14 were in California. 15 But during '07 and '08 he spent most of his 16 time setting up -- starting the phase of a new 17 business venture in China, introducing the Chinese 18 to modern pig farming techniques. That factor makes 19 it neutral. 20 The state wherein taxpayer holds 21 professional licenses. Doesn't apply. 22 18. The state where he owns investor real 23 property. Almost all of it's here in California; 24 we'll concede that. 25 19. The indi- -- the indications in 26 affidavits from various individuals discussing 27 taxpayer residency. We've got four affidavits, 28 they're in Exhibit 13, and we just got these this 17 1 week. These include declarations of: 2 Helen Nguyen, Mrs. Lau's Executive Casino 3 Host at Caesar's who's known Mrs. Lau since the 4 summer of '07 and goes on to verify that she's a 7 5 star rated customer, requiring she visit the casino 6 and gamble several times during any 30-day period to 7 maintain her rating. 8 Khanh Chau Kaiser, Mrs. Lau's manicurist 9 at J Nails who sees her regularly. 10 John Herndon, Director of Operations for 11 South Shore Golf Club in Henderson, verifying that 12 Appellants were Platinum or golf members of the 13 club. 14 And (4), Steve Rains, a construction 15 contractor in Henderson who did some repair on the 16 Henderson home in June of '07 and has remained in 17 contact over the years. 18 This factor weighs in favor of Nevada 19 residency. 20 In sum, the final tally of the 19 Bragg 21 Factors shows 7 weighing in favor of Nevada, 2 22 weighing in favor of California, and I've been 23 conservative of my weighing of each. We may 24 disagree on the exact tally, and I agree, but it'd 25 be extremely unfair to ignore the total tally as to 26 closest ties. 27 Thank you. 28 MR. HORTON: Members, let us go to the 18 1 Department. The Department has 10 minutes to make 2 their -- 15 minutes to make their presentation. We 3 would ask that you commence with your introduction 4 for the record. 5 MR. MILLER: Okay. Chair, Members, my name 6 is Brian Miller, representing the Franchise Tax 7 Board. This is Ron Hofsdal and Natasha Page. 8 This case is about whether Mr. and Mrs. Lau 9 severed their longstanding ties to California in the 10 spring of 2007 and suddenly became domiciles and 11 residents of Nevada, mere months before they issued 12 themselves dividends from Yosemite Meat. 13 Appellants received dividends of $5,383,000 14 in 2007 and $3,360,000 in 2008. If they're 15 California residents, these dividends are taxable by 16 California. If they are not California residents, 17 then these dividends are not taxable. 18 All residency analysis begins with 19 domicile, which is where a person has his true, 20 fixed, permanent home, principal establishment. A 21 person has only one domicile. 22 It is not in dispute that Appellants were 23 domiciles of California prior to April 2007. The 24 key inquiry is what ties, if any, did Appellants 25 sever from California? 26 Here, the facts show that they did not 27 sever their ties to California. First, they kept 28 their California business. They kept their 19 1 California rental properties. They kept their 2 California home furnished and maintained. They 3 had -- they kept two cars in El Dorado Hills. They 4 kept their California address and received credit 5 card statements in El Dorado Hills. They kept their 6 California tax preparers, their California doctors, 7 their California dentists. They continued to fly 8 out of San Francisco International Airport. 9 Further, when Mr. Lau traveled for 10 business, usually to China, Mrs. Lau often chose to 11 be in California where she had significant ties 12 rather than staying in Nevada where Appellants claim 13 to have made their new home. 14 Still further, Mr. Lau represented to the 15 California Secretary of State that he resided in 16 California by designating himself as the Agent for 17 Service of Process for his Modesto company; this is 18 significant. Any business, including a meat 19 processing business, has potential perils that could 20 lead to lawsuits. An injured Californian would seek 21 to serve notice of a lawsuit on Yosemite Meat, and 22 without being able to locate this designated agent, 23 clearly there would be problems. 24 Reporting the proper contact for the 25 business should not be taken lightly, and Mr. Lau 26 registered himself as that agent. 27 While Mr. and Mrs. Lau kept their 28 significant ties to California, they established few 20 1 new ties in Nevada. The only ties that Appellants 2 made with Nevada during the relevant time period is 3 the purchase of a house, which is less than half the 4 size of their El Dorado Hills home. Only Mr. Lau 5 obtained a Nevada driver's license and registered to 6 vote in Nevada. 7 They registered the -- a Yosemite company 8 SUV in Nevada and they purchased golf memberships. 9 But Appellants did not sever their ties to 10 California and did not demonstrate with actual 11 substantive actions that they intended to make 12 Nevada their permanent home in 2007. Appellants, 13 long-time California domiciles and residents, 14 maintained their close ties to the state and 15 remained California domiciles. 16 Therefore, the inquiry under the residency, 17 the question is, when Mr. and Mrs. Lau were outside 18 California, were they absent from this state for a 19 temporary or transitory purpose? Respondent's 20 position is that their continued ties with 21 California, coupled with minimal new ties to Nevada, 22 indicates that when they were absent from this 23 state, they were temporarily absent. 24 Again, Appellants can establish some 25 connections with Nevada by acquiring a house and one 26 new driver's license and registered one voter. They 27 registered a Yosemite -- a company SUV and bought 28 new golf memberships. But Mr. and Mrs. Lau retained 21 1 more substantive connections with California through 2 2007 and '08. 3 Again, Appellants kept their Yosemite Meat 4 businesses. They kept their rental properties. 5 They kept their El Dorado Hills home and 6 furnished -- furnished it and regularly maintained 7 it for their use. 8 Appellants kept two cars in El Dorado 9 Hills: one, a working luxury Mercedes sedan, the 10 other a classic car which the Appellants did not 11 transport to what they claim is their new home in 12 Nevada. 13 Appellants kept their California addresses 14 and received credit card statements in El Dorado 15 Hills. They kept their California tax preparers, 16 their California doctors, California dentists. 17 Cali- -- Mrs. Lau kept her California driver's 18 license. Mr. Lau kept his Agent for Service 19 registration for his Modesto companies, claiming for 20 that purpose that he resided in California. 21 Appellants were also present in California 22 more than twice as many substantiated days as they 23 were in Nevada. Appellants provided calendars to 24 our auditor substantiating that from May 1st, 2007 25 they were both in California 58 days and both in 26 Nevada only 27 days. 27 In 2008, these calendars that are 28 substantiated were accepted by our auditor, they 22 1 were in California -- both in California 88 days and 2 both in Nevada only 38 days. 3 After the audit and after the protest, 4 Appellants provided new calendars that they claim 5 are more accurate than the first calendars. These 6 calendars are largely identical to the calendars 7 they gave our auditor, but Appellants count as 8 Nevada days, days that were previously unknown. 9 Respondent does not join Appellants in 10 leaping into the presumption that unknown days are 11 now Nevada days. We maintain that unknown days are 12 still unknown days. 13 Appellants claim in their briefs that much 14 of their time in California was because they drove 15 from Las Vegas to San Francisco Airport where Mr. 16 Lau went to China on business. Mrs. Lau generally 17 stayed in the state when Mr. Lau was overseas. 18 The drive from Las Vegas to San Francisco 19 via Modesto is about nine and a half hours. 20 Appellants told our protest hearing officer that 21 they also drove from Las Vegas to San Diego to drop 22 Mrs. Lau off with family in that town. It's not 23 clear if Mr. Lau then flew from LAX, San Diego, 24 San Francisco. San Diego would only be a couple 25 hours. But if he flew out of SFO, that's some 500 26 miles and eight hours away. 27 So it's no exaggeration to say that flying 28 out of Las Vegas, then transiting through LAX or SFO 23 1 to China is a much more realistic proposition for 2 someone living in Henderson, Nevada rather than 3 making a long drive from Henderson to a California 4 coastal airport. It would be realistic for the 5 couple to start in Las Vegas while Mr. -- Mrs. Lau 6 flew to San Diego to family and Mr. Lau flew -- 7 transited over to China. 8 Basically, it just makes no sense that they 9 drove all these hours just to fly out of SFO or LAX. 10 But, if they were living in northern California, it 11 makes sense to drive from El Dorado Hills to SFO; 12 it's only about two hours, 120 miles. 13 Appellants -- Appellants, with the, uh -- 14 their chart and their exhibit, would like to frame 15 the Bragg Factors -- which is from a case decided by 16 your Board back in 2003. They want to frame it as a 17 score card. But actually what it is, is a tool used 18 by your Board, by taxpayers, and by FTB. It, first 19 of all, is a way to help determine the -- the 20 closeness, the proximity of their ties, the strength 21 of particular ties that are used to tell how close 22 are they to California. And what we're trying to do 23 is find out, are they closer to California than any 24 other state? 25 So rather than a score card, what one -- 26 typically, the way it works is to examine factors 27 that are present and then examine the strength of 28 those factors rather than tallying them up into a 24 1 score card. 2 Let's see, Appellants said they kept their 3 El Dorado Hills home because of the real estate 4 market, which did go down late in the 2000 -- 2009 5 or so. On Zillow there's a chart -- I just looked 6 at it yesterday; I did not print it out -- showing 7 that the value of the house in 2000 and 2008 did not 8 dip below one and a half -- 1.5 million. So at 9 least in that neighborhood, in those years, the real 10 estate market had not tanked. It may have been 11 pressing but it certainly wasn't tanking. 12 Let's see. In their California visits -- 13 this morning when Appellants gave me their -- a 14 chart showing -- well, not a chart, but their list. 15 This would be Number 9. And when I was looking at 16 it this morning and marked it up, a lot -- most of 17 the activity in California involves Serrano, 18 northern California. It appears that they would 19 have stayed, logically, in their El Dorado Hills 20 home which is right along the Serrano golf course. 21 So this is an indicator actually of a lot of time 22 spent, continuing to spend in their El Dorado Hills 23 home. 24 In conclusion -- in conclusion, in Nevada 25 all Appellants did was buy a house. Mr. Lau 26 obtained a Nevada driver's license and registered to 27 vote; two simple administrative tasks that take 28 little effort. They also registered a company SUV. 25 1 By contrast, Appellants kept their long -- 2 long-established California connections: California 3 home, California businesses, rental properties, tax 4 preparer, their doctors, dentist, California 5 vehicles. 6 They kept two cars, including a 7 collectible, in El Dorado Hills. They spent twice 8 as much time in California as they did in Nevada. 9 Appellants' continued ties to California 10 show that their short absences from California were 11 temporary or transitory. 12 The purpose of residency is to ensure that 13 all persons who are in California for other than a 14 temporary or transitory purpose, as Appellants were, 15 enjoying the benefits and the protections of the 16 state, as well as Appellants were, should in return 17 contribute to its support. 18 Appellants have contributed greatly to 19 California with their businesses. Appellants have 20 been rewarded financially for their hard work. But, 21 California has also contributed to their success by 22 providing benefits, protection, such as 23 infrastructure, police and fire service, a court 24 system. As Appellants have enjoyed the benefits and 25 protection of this state, Appellants, as residents, 26 should return -- in return contribute their support. 27 Thank you. 28 MR. HORTON: On rebuttal, please. 26 1 MR. HALVERSON: Well, let's talk at the 2 beginning. Yes, the house in Nevada, the original 3 house in Nevada was smaller. But you got to 4 remember, they down-sized. They no longer have 5 three children. So there's just the two of them. 6 You don't need a 6,000 square foot house. 7 Now, they did buy a bigger house later. 8 Why? A good investment. 9 Now, the 2,594, whatever it was, square 10 foot house that they bought in Henderson was no 11 dump. It was later leased to Rollie Fingers, the 12 Oakland A's pitcher, relief pitcher and he bought 13 the house -- he bought that from them. So this is 14 no dump and you can't call it a dump. This is not a 15 600 square foot condo in, uh -- in Tahoe. All 16 right. Did I say the wrong (inaudible). 17 Number two, service of process issue. 18 Johnnie Lau has got business interests everywhere, 19 and he gets a form that says Statement of 20 Information for the Secretary of State. He probably 21 has a secretary or a manager send the forms back to 22 the Secretary of State showing any new information. 23 I'm not sure they know his actual address. He uses 24 p.o. box in all of his mail. And his p.o. box in -- 25 in, uh, El Dorado Hills is forwarded to the -- to 26 the -- forwarded to his p.o. box in Las Vegas. Why? 27 Because his mail's been broken into and they know 28 better. But it's really a nonissue. 27 1 Secretary of State and who they can serve, 2 they can serve Steve, his son; they can serve the 3 firm, the firm's not gone anywhere since 1981. 4 Anything that you send or try to serve on Johnnie 5 will get to Johnnie, period. So that's really a 6 nonissue. 7 Three, Johnnie's not going to sell 8 apartments, commercial buildings and his company 9 that employs 160 people just to beat the tax system. 10 That's not him. This is a man who pays, still to 11 this day, over 300 grand a year to the State of 12 California. 13 This man gives a home to San Luis Obispo 14 University for a million dollars. This is not one 15 of those people that's running to hide and save 16 everything he can in Nevada, all right. Yes, he 17 wanted to live there for all the reasons we said: 18 allergy, his wife likes to gamble, etcetera. This 19 is not what's going on here. 20 Now, we went through the calendar and this 21 was the original calendar. This is '08 from the 22 Franchise Tax Board. This is pathetic. The time 23 spent on this couldn't have been more than an hour. 24 We have spent hundreds of hours reconstructing ours. 25 And yes, we did assume all unknown were Nevada. 26 Why? Because, when you go on vacation, where do you 27 go back? You go back to your home. How many years 28 have they been there? Eight years. Where else are 28 1 they going to go back to? 2 Yes, they may stop in Modesto to see their 3 son, Steve, and that child. They may stop in San 4 Diego and see their child- -- their grandchildren 5 and their children there, but they come back to 6 Las Vegas. Why? That's where they live and have 7 lived now for eight years. 8 Now, why do they like to drive? I can't 9 tell you. Johnnie and Gay Lau, they've got great 10 cars for driving, but they love to drive. 11 Now Johnnie tells me when he goes to China, 12 he has to take heavy tools. So you're not going to 13 take a commuter flight when you've got a heavy, 14 heavy suitcase that's got tools for his pig farm in 15 China, over 45,000 pigs there. Okay. 16 Give him credit. If it's cheaper to throw 17 it in the car and drive, he'll do that. Why would 18 he do that? He can drop his wife off wherever she 19 wants, San Diego to visit that child, Modesto if she 20 wants to visit the other children, or El Dorado 21 Hills to play golf. Remember, he's got to spend a 22 certain number -- a certain amount per month at the 23 golf course, and he's unable to do that because he 24 lives in Las Vegas. 25 Yeah, and now we don't want to make a big 26 thing of the fact that the professionals are all in 27 California, but Yosemite Meat insures all of the 28 people at Yosemite Meat, and they have a Kaiser 29 1 plan. There's no Kaiser in Nevada. It forces them 2 to come back here. But he comes back here so 3 often -- I mean, look at the calendar. I said he's 4 51 percent in Nevada 2008. 5 He comes back here a lot. But why? Every 6 one's for a temporary or transitory purpose. If you 7 go through the list, we've provided it to you, it 8 ties into the calendar and it shows it. 9 Now, we also went through the calendar and 10 looked at how many food -- how many times they 11 actually go to Costco in Folsom, which is the place 12 you'd shop for food, right? It's only like one 13 exit. 14 He went there four times in a period of 15 nine months. The only -- the only credit card 16 charge we can find involving food is four times 17 in -- you're not filling a refrigerator up if you're 18 only going there that many times. Now, was he 19 paying cash? Yes, probably a lot of times. I'll 20 give you that, too. 21 Now, I looked at Nevada. How many times 22 there? Very few there, too. Why? Because Mrs. Lau 23 qualifies for -- they go in and gamble, they get 24 free dinner and they get free tickets to the show. 25 That's what a 7 star rate will do for you. I doubt 26 she cooks much anymore at all, period. Now I know 27 Johnnie can testify to that and you can ask Gay. 28 But would you, if you had -- if you had this life? 30 1 No. 2 We're glad to answer questions. 3 MR. HORTON: Discussion, Members? 4 MS. STOWERS: Okay, I'll start. 5 MR. HORTON: Member Stowers. 6 MR. HALVERSON: If you have the dividend 7 question, I'll be glad to answer that. 8 MS. STOWERS: Okay. Let's go with the 9 dividend question first. 10 MR. HALVERSON: Okay. 11 MS. STOWERS: What is this dividend? I'm 12 going to ask both parties. 13 Let's go to FTB first, okay? You want to 14 go first? Is this California -- 15 MR. HALVERSON: Well, I don't think they 16 know. 17 MS. STOWERS: Is this California -- 18 MR. HALVERSON: They need -- they need me 19 to provide the facts. 20 MS. STOWERS: Okay. Is this California 21 source income? 22 MR. HALVERSON: Pardon me? 23 MS. STOWERS: Is the dividend California 24 source income? 25 MR. HALVERSON: It's not. It never gets a 26 business situs in California. 27 MS. STOWERS: Please explain. 28 MR. HALVERSON: All right. The -- the -- 31 1 the question that you posed in this sheet that we 2 received earlier, we -- we, um -- we said early on, 3 as soon as we got the question, that it can be 4 answered. 5 So I've got Johnnie Lau here who can 6 testify under penalty of perjury that he's never 7 used the stock or the dividends, which it was paid, 8 as collateral for a loan since he started his 9 business in '81. 10 So that's the only exception that allows 11 him to make it a California dividend. Okay. Now, 12 it's all in one statute, 17592, and it's one 13 sentence. Let me read it to you. 14 "For purposes of computing taxable 15 income of a nonresident or part-year 16 resident, income of nonresidents from 17 stocks, bonds, notes or other intangible 18 personal property is not income from 19 sources within this state unless the 20 property has acquired a business situs in 21 the state." 22 The reg. says now, on that point: 23 "Intangible personal property has a 24 business situs in the state if it's 25 employed as capital or the possession and 26 control of the property has been localized 27 in connection with a business, trade or 28 profession in this state so that its 32 1 substantial use and value attach to and 2 become an asset of the business, trade or 3 profession in the state. For example" -- 4 And this was the only example offered by 5 the Franchise Tax Board, to this day. 6 "For example, if a nonresident pledges 7 stocks, bonds or other intangible personal 8 property in California as security for the 9 payment of indebtedness, taxes, etcetera, 10 incurred in connection with a business in 11 the state, the property has a business 12 situs here." 13 That's the only exception, okay. 14 Now, Johnnie Lau will testify today under 15 penalty of perjury that he's never used -- he's 16 never used the stock of the corporation Yosemite 17 Meat in that manner, for a loan. I also have a 18 statement from their CPA that says the same thing, 19 and it's signed under penalty of perjury and you 20 have disclosure. 21 So, in my opinion, the only person that 22 really knows and the only way they could do this, if 23 they -- if you actually force them to do a -- to do 24 a brief on the subject, was to have those facts in 25 evidence, because they didn't ask this in the 26 six-year audit. All right. Six years have been 27 going along, they've never asked Johnnie Lau this 28 question and they've never briefed it. In other 33 1 words, it's never been in the audit. It's never 2 been an issue. Why? Well, it really shouldn't have 3 been because -- because, like Johnnie Lau will 4 testify today, and this affidavit by his CPA will 5 say, it's never been used as collateral. 6 MS. STOWERS: FTB? 7 MR. MILLER: We accepted the corporation's 8 returned as -- returns as filed with Mr. and Mrs. 9 Lau. We audited them for residency. We did not 10 audit for the exception -- for the business situs 11 exception. 12 So, we do not have any information that 13 would indicate that this is California source 14 income; one reason is because that is just not an 15 issue that we, um -- we audit. 16 MS. STOWERS: You did not look at it, 17 okay. 18 MR. MILLER: And we've not audited the 19 corporation -- 20 MS. STOWERS: Okay. 21 MR. MILLER: -- when it was a C, nor when 22 it was an S. 23 MR. HALVERSON: And if I could add one 24 thing. If we -- if we briefed it, you'd have the 25 same discussion, that code section, the part of the 26 reg. I read you. And you'd mention the mobilia 27 sequuntur personam rule and you'd talk about two 28 cases: Christman v. FTB and McColgan. That's it. 34 1 MS. STOWERS: Okay. 2 MR. HALVERSON: And so the brief would be 3 really short. 4 MS. STOWERS: Okay. 5 MR. HALVERSON: Probably take us a half 6 hour, hour. 7 MS. STOWERS: FTB, you're not accepting 8 their revised calendar? 9 MR. MILLER: We're not accepting it 10 essentially because we find that the new declared 11 dates in California -- or I mean the new declared 12 dates in Nevada are not substantiated. Essentially 13 what it is is the old calendar and where it was 14 blank before, and the reason it would be blank is 15 because we did not have information saying where the 16 parties were rather than leave the -- oh, they were 17 in a particular place, we left them blank. Hence, 18 that is why the calendar that Mr. Halverson showed 19 you had a lot of white spots on it, because it's not 20 substantiated. It's still not substantiated, so -- 21 MS. STOWERS: So the -- the calendar that 22 you did accept where they said they were in Nevada 23 or California, did they give you source documents to 24 establish that or that you -- 25 MR. MILLER: Yes. Yes, we did. We, uh -- 26 the Laus provided us documentation. Our auditor 27 went through stacks of things. She looked at things 28 like checks, credit cards, eliminating things like 35 1 utilities or other payments like online purchases, 2 eliminating things like that. Only doing things 3 like a Costco in Folsom would show that they were in 4 California on that day -- 5 MS. STOWERS: So -- 6 MR. MILLER: -- for example. 7 MS. STOWERS: -- Appellant, on your revised 8 calendar, did you look at any more source documents 9 or any personal calendars? 10 MR. HALVERSON: Oh. 11 MS. STOWERS: Yes, I'm back to you now. 12 MR. HALVERSON: Oh, you can bet your sweet 13 bippy. We -- 14 MS. STOWERS: Would you explain your -- is 15 that -- 16 MR. HALVERSON: Well, the calendar from FTB 17 was so bad that we tried to do it the same way. 18 Now, the problem is when we got people going in 19 different directions; Johnnie's traveling to China, 20 she stays and plays golf or she visits family. So 21 you had to split the days and we were using yellow 22 for one, red for the other and orange if they were 23 in opposite places. Or yellow -- actually yellow 24 and red together would be orange. We used that for 25 California; we knew both were in the same state. 26 And then we gave them this thing on a 27 one-year calendar, the same as you saw. It was 28 pathetic. You couldn't tell diddly from it. 36 1 So, we stopped. We went back. We then 2 went, brought all the documents together and did 3 them on a month-by-month basis, and you see that. 4 If you flip through the year-and-nine-month calendar 5 we gave you, it's purple and pink if they're in 6 Nevada or elsewhere. 7 Now, they would -- FTB would prefer we not 8 count elsewhere. But guess what? This man works in 9 China, so we've got to count elsewhere. And that's 10 a lot of days in China. All right. So, it shows 11 you -- and if you visually go through it, you can 12 see most of it's purple and pink, all right. 13 Now, we also documented who's buying stuff, 14 if it's -- and what checking account's being used, 15 the California checking account or the Nevada 16 checking account. It also shows, by color, or top 17 to bottom, whether it's Mrs. Lau on the bottom, Mr. 18 Lau on the top. So you know where they are at, and 19 it's based on all the information we have. 20 Is it perfect? No, because they had to do 21 this years later. But is it as good as you're going 22 to get? Yeah. And is it better than what the FTB 23 offered you? A -- a whole lot better. 24 We spent over a hundred hours on it; I know 25 we did. And then we analyzed it and sat down again 26 when Johnnie and Gay came up to see me. We'd say, 27 okay, we've gone through every bill and we've listed 28 'em on here. If they get all the checking -- all 37 1 the checks -- and I've given you and the FTB this 2 list -- you can look at the check number, I can find 3 the check and you can see what's going on. 4 So, if you see something like Johnnie Lau 5 buying something at wherever he may be, some golf 6 shop, we know then Johnnie Lau might have been in 7 there. Now some -- with golf equipment he could 8 have ordered it by phone or something else and 9 mailed them a check. But for the most part, we 10 could reconstruct, restaurants and so forth, and 11 then get an idea, okay, if he's eating in El Dorado 12 Hills, he's probably staying in El Dorado Hills. 13 Not necessarily. Could have been there for a while 14 and then gone down to Modesto. Could have been just 15 playing golf in the morning with friends and done 16 that. Because it's only 90 -- about two hours from 17 El Dorado Hills. Half hour here, then an hour and a 18 half down south. 19 But agonizing hours spent on it. 20 MR. HOFSDAL: One of the issues with their 21 presentation -- 22 MS. STOWERS: Sir. 23 MR. HORTON: Excuse me. 24 MR. HOFSDAL: I'm sorry. 25 MR. HORTON: Ms. Stowers. 26 MS. STOWERS: Wait a second. I'm trying to 27 take it all in. 28 With respect to your clients' presence in 38 1 Nevada, can someone please talk to me about your 2 activities? I think you addressed eating out. 3 Because I didn't see anything showing groceries, or 4 at least, as you say, maybe four days of -- four 5 purchases of groceries. And I would imagine that 6 there's food being purchased someplace. Or -- or 7 was your lifestyle that you did really eat out a 8 lot? 9 MR. HALVERSON: Gay's the perfect one to 10 answer that question. 11 MRS. LAU: Hi, Ms. Stowers. 12 A lot of time I buy groceries, it's only a 13 min- -- less. Just for both of us. A lot of time 14 we go out because I get those from the casinos. So 15 it's more we go -- I don't eat much dinner -- lunch 16 and breakfast. Most is my coffees. He eats more. 17 But I -- mostly cash. But we do go out a lot to eat 18 because we -- I do get a lot of comps through my 19 casinos hosts. 20 MS. STOWERS: I know in this package now we 21 have some affidavits speaking to their presence in 22 Nevada. And -- 23 And this is coming to you, FTB. 24 The way I read the statute is when you're 25 changing your domicile, affidavits are sufficient 26 to -- to speak to -- what could be sufficient to 27 speak to whether or not they changed their domicile. 28 And then I thought that we look to the 39 1 Braggs factors for residency only, but now it seems 2 like you're talking about the Bragg factors to prove 3 whether or not they changed their domicile. 4 MR. MILLER: Um, I understand your 5 question. 6 Um, in the second half of my presentation I 7 did use the same facts on the residency, applying 8 the Bragg factors, as in domicile. In domicile you 9 are looking at their, uh, permanent home, the place 10 they always come back to. Residency, again, is if 11 they're absent from there, uh, returning. If 12 they're temporarily absent. 13 The facts in these sorts of cases, more 14 often than not, overlap. So that is why it looks 15 like we're mixing and matching, but that's not the 16 case. I am framing it, the residency, the factors 17 indicate that they -- when they were absent from 18 California, they intended to return. They were 19 temporarily absent. 20 MS. STOWERS: And you're saying that, like 21 for one of the factors you're looking at is their -- 22 their business interests in California? 23 MR. MILLER: Yes. 24 MS. STOWERS: And so -- 25 MR. MILLER: And their rental properties. 26 MS. STOWERS: And their rental property in 27 California. 28 MR. MILLER: And doctors, their dentist -- 40 1 MS. STOWERS: Okay. 2 MR. MILLER: -- their professionals, their 3 tax -- 4 MS. STOWERS: It's my understanding 5 their -- their medical is through Kaiser which their 6 company is paying for. It seems to be unreasonable 7 to ask them to now pay separately. 8 Their business interests, Appellants, am I 9 correct that you had a manager that was running the 10 day-to-day operations? 11 MR. HALVERSON: Of Yosemite Meat? 12 MS. STOWERS: Of Yosemite? 13 MR. HALVERSON: Yes. 14 MS. STOWERS: And what about the California 15 real estate? 16 MR. HALVERSON: Uh, yes. They have 17 managers of all those. 18 MS. STOWERS: So they're not really -- 19 MR. HALVERSON: Well, it's not a manager. 20 What do they call it? Property company. Pardon me. 21 Now, and they've got a -- they have a manager at the 22 pig farm in Idaho, and he has a manager of the pig 23 farm in China. 24 MS. STOWERS: Okay. So they have an 25 interest in California, but yet their presence is 26 not really needed to -- to continue to own it. 27 I'm pretty sure I had another question, but 28 I think I've taken up enough time. 41 1 MR. HALVERSON: If I may answer your -- 2 MS. STOWERS: Do I -- go right ahead, 3 sir. 4 MR. HALVERSON: Yeah. The question you 5 posed to FTB -- 6 MS. STOWERS: About the Bragg factors? 7 MR. HALVERSON: The factors -- yeah. 8 They're only relevant for residency, not domicile. 9 MR. HORTON: Member Harkey. 10 MS. HARKEY: I was going to wait, but I'll 11 just ask a question. 12 This declaration that you just served us 13 from Chris Kelly, CPA -- I'll hold it up here so 14 everybody sees that. It says in here that it was a 15 C corporation until 1/1/07 when elected S corp 16 status. And it was at that time that the dividends 17 were paid from accumulated earnings. 18 Why did you change from the C corp to the S 19 corp? 20 MR. HALVERSON: May I correct one thing? 21 The dividends were actually paid August of 2007 and 22 January of 2008. 23 MS. HARKEY: Right. 24 MR. HALVERSON: So not April 1. 25 MS. HARKEY: It says that -- 26 MR. HALVERSON: But yeah, you're right. 27 The S corporation -- 28 MS. HARKEY: -- they were from accumulated 42 1 earnings and profits of the C corporation prior to 2 its S corp election. 3 So my question is what -- what generated 4 the change in -- from S -- from C corp to S corp? 5 MR. HALVERSON: Johnnie's tax advisors and 6 his estate planning folks said he needed to move the 7 earnings out of the corporation. And -- and Johnnie 8 did that. 9 MS. HARKEY: So there was no real change in 10 ownership, it was the -- 11 MR. HALVERSON: No, it's just a matter -- 12 look, if he had gotten it -- 13 MS. HARKEY: I was trying to help you here. 14 I was seriously trying. 15 MR. HALVERSON: No, but either way -- under 16 the rules we just talked about earlier on this 17 dividend issue -- 18 MS. HARKEY: Uh-huh. 19 MR. HALVERSON: -- the dividend issue 20 follows residency. So if he's a resident of Nevada, 21 those dividends are not taxable by California, under 22 the rules we talked about. Okay. It doesn't matter 23 that they're accumulated earnings and profits. 24 MS. HARKEY: Yeah, I know. I'm not going 25 there. 26 I was just trying to find out if there was 27 something else to learn about the change that 28 happened in 2007, from a C corp to an S corp. And 43 1 apparently there's not. So it was just an inquiry. 2 It wasn't meant to generate the discussion further 3 on the other things. I get that. 4 The credit card statements that the 5 Department says they have as evidence that -- you 6 know, you get a monthly credit card statement, you 7 would expect that that would go to your house where 8 you're domiciled, not to a place where you're not 9 domiciled. 10 What do -- what do you have in the form of 11 evidence of that or how -- how did you verify it and 12 how many and what time period? 13 MR. MILLER: So during 2007 and 2008 there 14 are credit card statements. I believe some is -- 15 some are American Express to their El Dorado Hills 16 home. I do not have them with me and I do not have 17 the number of statements that were sent to the 18 El Dorado Hills home, but I would be glad to get to 19 that for you. 20 MS. HARKEY: Thank you. So my -- my -- 21 because my -- my inquiry's directed that you would 22 not want to pay those late in any time. So can you 23 explain why you had -- or how many or do you have 24 any idea about the credit card statements? 25 MR. HALVERSON: There were -- there are 26 probably many of them with the address of the p.o. 27 box in El Dorado Hills. 28 Credit cards are issued for, what, a 44 1 three-year period typically. So you're not likely 2 to change the address, so long as your system is set 3 up so that when it arrives at this -- at this post 4 office box, it gets immediately forwarded to the 5 next post office box. 6 And I don't think if -- let me give you an 7 idea how organized Ms. Lau is. She is incredibly 8 organized. And when she provided -- and I'm telling 9 you, the documents of checks and so forth, they're 10 this thick. And the rest of the checking accounts, 11 it's another four or five inches. Every one of them 12 is in order. Every one of them's circled. Every 13 one's reviewed and you see her initials. It's -- 14 it -- she's just that organized. 15 So, there's nothing that falls through the 16 cracks with her, period. 17 MS. HARKEY: Well, I'm just -- I'm just 18 wondering why you wouldn't change the -- why you 19 wouldn't change the address on a credit card. Maybe 20 Mrs. Lau can respond. She looks like she wants to. 21 MRS. LAU: Yes, Miss Harkey. 22 I do go online and check the balance. So 23 it gives me a balance, what the due dates are. So I 24 can pay any time I want to pay actually. 25 MS. HARKEY: And you probably do, right? 26 MRS. LAU: Yeah, I do. I never have 27 service charge, not one single one. 28 MS. HARKEY: Okay. Well, I'm just 45 1 wondering. That was -- that was something that was 2 out there in my mind. 3 The next question for the Laus or for 4 their -- the flights out of San Francisco, what 5 explanation do we have for those? Because I -- I've 6 just Googled and there's a lot of flights from Las 7 Vegas to China, direct. 8 MR. LAU: Yes. Miss -- Miss Harkey, I am a 9 member of Marco Polo Club, which is Cathay Pacific, 10 and I get free upgrade in San Francisco airport. 11 So -- 12 MS. HARKEY: That would make sense -- 13 MR. LAU: -- most of time I fly out of San 14 Francisco airport. 15 MS. HARKEY: -- if you're flying halfway 16 across the world. 17 MR. LAU: Yes. 18 MS. HARKEY: Okay. Thank you. 19 MS. MA: I have a question. 20 MR. HORTON: Member Runner, then -- 21 MR. RUNNER: Yeah, just -- the issue of 22 domicile, let me ask a couple questions in regards 23 to that. 24 The assumption then that FTB is -- is -- is 25 making is the domicile was indeed in El Dorado 26 Hills. 27 MR. MILLER: California. Yes, El Dorado 28 Hills. 46 1 MR. RUNNER: But -- but the house that they 2 lived in was in El Dorado Hills. 3 MR. MILLER: Yes. 4 MR. RUNNER: Right? 5 MR. MILLER: Their primary residence. 6 MR. RUNNER: Their primary residence. 7 Okay. You know, because I guess that's kind of the 8 core of the discussion. Because -- again, because 9 then we throw in if we -- if we believe that, then 10 we end up throwing in all the other time that was 11 spent in California as evidence that California 12 remained their residency, right? 13 MR. MILLER: Correct. 14 MR. RUNNER: Okay. So if you assume -- 15 and, again, I guess the assumption then on the other 16 side is the assumption that they believe that takes 17 place is that domicile is in Las Vegas. And, 18 therefore, all the time that was spent in California 19 was in transit or -- or -- or visiting. And, 20 therefore, those days should add up as visiting 21 shouldn't then count as days in residence in 22 California. 23 MR. HALVERSON: Not quite. 24 MR. RUNNER: Okay. 25 MR. HALVERSON: We would say that you're 26 here temporary or transitory -- 27 MR. RUNNER: Right. 28 MR. HALVERSON: -- usually when you're 47 1 vacationing, playing golf, visiting family, going to 2 weddings, and that's what the list is full of. 3 There's no work. There's no going down to -- down 4 to Modesto and slaughtering pigs; that's not what 5 Johnnie does anymore. 6 So, if you -- if you can find anything on 7 there that indicates -- 8 MR. RUNNER: Well, let me -- okay. Let me 9 just ask that. Would that -- would that -- again, I 10 don't know if that's what you're telling me it's the 11 case. But would that in itself invalidate domicile 12 in Las Vegas -- 13 MR. HALVERSON: No. 14 MR. RUNNER: -- if indeed you had a 15 business -- 16 MR. HALVERSON: No, no, no. 17 MR. RUNNER: -- that you had to go visit 18 once every three months? 19 MR. HALVERSON: No, no. 20 MR. RUNNER: Okay. 21 MR. HALVERSON: But temporary and 22 transitory's just that; you always leave here and go 23 back -- 24 MR. RUNNER: Right. 25 MR. HALVERSON: -- to their home. Which is 26 what they do. 27 MR. RUNNER: Okay. So how many days -- if 28 that's the case then, how many days did -- did the 48 1 FTB identify that they spent in El Dorado Hills in 2 order to establish that as their primary residence 3 or their primary domicile? 4 MR. MILLER: Just a moment. I have it 5 written down. 6 So what we have is -- well, we don't have 7 specifically El Dorado Hills. What we have is 8 California. 9 MR. RUNNER: Well see, that's my point. My 10 point is you start with the assumption that -- that 11 you have all of California because you believe the 12 primary domicile is in El Dorado Hills. 13 So my question is, how many days do you 14 have identified that they were in El Dorado Hills in 15 order then to get to the point to where residency 16 was in California? 17 MR. MILLER: Because -- let's see, at the 18 tip of my fingers I do not have how many they spent 19 directly in El Dorado Hills. What we do have is in 20 California 58 days. That would be in their home in 21 El Dorado Hills. It would be with family. It would 22 be in San Diego. Be in Modesto. Then they would -- 23 MR. RUNNER: But, again, under their 24 scenario, they would say, hey look, our primary 25 residence was in -- our domicile was in -- was in, 26 uh -- was in -- was in Las Vegas. And we were in 27 San Diego because I was out visiting the grandkids, 28 I think, right? 49 1 MR. HALVERSON: Right. 2 MR. RUNNER: So I mean, that -- that's -- 3 you know, we're kind of passing each other in our -- 4 in our rationales here. 5 MR. MILLER: May I? In their -- one of the 6 exhibits that we received this morning, Number 9 -- 7 MR. RUNNER: Uh-huh. 8 MR. MILLER: -- there's a list of 9 temporary/transitory visits to California. And I 10 ticked off how many at Serrano, which would be in 11 El Dorado Hills. 12 MR. RUNNER: Mm-hmm. 13 MR. MILLER: It's the golf course right 14 next to their El Dorado Hills house. And at least 15 10, 11 in 2007 -- 16 I mean, just looking at my underlines I'm 17 up to 25. 18 MR. RUNNER: So you've got -- okay. 19 MR. MILLER: And that's not days, that's 20 times, so -- 21 MR. HOFSDAL: Could be multiple days. 22 MR. MILLER: Yeah. Yeah. Some of it is 23 7-11 to 18, that's a week in Serrano, in El Dorado 24 Hills. 25 August 8 to 14, that's about a week, golf 26 equipment in Folsom. Husband played at Serrano. 27 Another example December 8 to 14, Folsom 28 Linens and Things. 50 1 MR. RUNNER: Yeah. I guess I'm -- I guess 2 I'm kind of baffled by the fact that we are trying 3 to make the point that the primary domicile -- the 4 domicile was in El Dorado Hills and you can't tell 5 me how many days, nights they spent there. 6 MR. MILLER: Right. I can't tell you off 7 the top of my head. 8 MR. RUNNER: Well, isn't that fundamental 9 to your -- to your point? 10 MR. MILLER: More fundamental to my point 11 is not directly El Dorado Hills. El Dorado Hills is 12 their primary residence, we believe. However, it's 13 their time in California. 14 MR. RUNNER: See, that's circular logic to 15 me. Because, again, what -- you're -- you're saying 16 you don't have to count the days in El Dorado Hills 17 because you believe that that -- you assume that 18 that's their house, therefore, you count all the 19 rest of the days in California. 20 And so I'm -- I'm just asking you what got 21 you to the point to where you could assume all those 22 days in California? 23 MR. MILLER: Would be, again, from the 24 receipts. When we worked -- the auditor worked on 25 the calendar, it was based on receipts, based on 26 checks written. And these would be for goods and 27 services in California. Many of them would have 28 been, you know, in Folsom, near El Dorado Hills. 51 1 Others might be purchases from around Modesto where 2 they have businesses, they have family. 3 MR. RUNNER: And grandchildren. 4 MR. MILLER: And rental housing. 5 MR. RUNNER: Yeah. 6 MR. MILLER: Rental, um -- San Diego where 7 they do have family, but they would have spent time 8 there. 9 MR. RUNNER: Okay. Okay, thank you. 10 MR. HORTON: Member Ma. 11 MS. MA: Yeah. To the taxpayers, when did 12 you sell your El Dorado house? 13 MR. LAU: It's -- yes, Miss Ma. It's about 14 2010. 15 MS. MA: 2010? 16 MR. LAU: Yeah. 17 MS. MA: And then, are you still active 18 with Modesto Meats or not? 19 MR. LAU: Yes, I am. 20 MS. MA: Okay. Because you're still listed 21 as President, and your wife is listed as Treasurer 22 and CEO. So how often do you go to the office? 23 MR. LAU: Once a month. 24 MS. MA: Once a month? And you're still 25 the President and CEO? 26 MR. LAU: Yes, I am. Not about to turn the 27 key over to my son yet. 28 MS. MA: Okay. 52 1 MR. HORTON: Question of Appeals. Just 2 for -- can you tell us the difference between 3 domicile and residency? 4 MR. AMBROSE: Certainly. Domicile -- you 5 can have one domicile and -- 6 MR. HORTON: So you can have more than one 7 residence? 8 MR. AMBROSE: You can have more -- you can 9 be resident of more than one state, right. But the 10 domicile is established -- okay, they were domiciled 11 in California, in their case, okay, they say until 12 April of 2007, okay. 13 So you're presumed to be domi- -- they're 14 presumed to be domiciled in California until they 15 can establish that they became domiciled somewhere 16 else, okay. And then once they do that, then, you 17 know, they would have Nevada as their domicile once 18 they've established that. So that's where the 19 analysis starts. 20 As far as how much time they're spending in 21 each state, that could then -- so if they're 22 domiciled in California and they were in Nevada for 23 a temporary or transitory purpose, they would still 24 be -- since they're domiciled in California, they 25 would still be considered resident in California. 26 If they were in Nevada for other than a 27 temporary or transitory purpose, they would be 28 residents of Nevada for that period and vice versa. 53 1 If they established domicile in Nevada and then they 2 come back to California and it's for other than a 3 temporary or transitory purpose, then they would be 4 considered, you know, part-year or residents of 5 California for that period. 6 MR. HORTON: Question of the Respondent. 7 The, uh -- oh, boy -- the closest connection -- 8 closest connection test established by the Board of 9 Equalization seems to be the basis for some of the 10 discussion of the time. Irrespective of the court's 11 decision -- I mean, courts -- I can't remember the 12 case right now which deals with the nine-month 13 period of time. Or maybe this is a culmination of 14 all of these taken under consideration. 15 Why not examine the documentation 16 provide -- subsequently provided by the Appellant to 17 support the -- the -- the days that were previously 18 unsupported? 19 MR. MILLER: So if I understand your 20 question right, it's -- 21 MR. HORTON: Yeah, let me simplify it. 22 Why didn't you take their information under 23 consideration in determining the whole Braggs test, 24 closest connection evaluation? 25 MR. MILLER: Mm-hmm. First, the new 26 calendars were sent as new calendars. 27 MR. HORTON: Meaning? 28 MR. MILLER: Meaning there was no 54 1 additional substantiation. 2 MR. HORTON: Okay. 3 MR. MILLER: Our auditor had, you know, 4 stacks of the checks and credit card statements 5 and -- and she worked out purchases in California. 6 That's how -- 7 MR. HORTON: So if we -- not to interrupt 8 you, but if we were to allow you time to consider 9 that and it was correct, would that change your 10 position? 11 MR. MILLER: It depends. And that is 12 because their time in state, the number of days, is 13 just one of several factors we look at. It's an 14 important factor, but it's not the only (inaudible). 15 MR. HORTON: What's your position relative 16 to Kemp versus the Franchise Tax Board where the 17 courts concluded that the time in state is not the 18 real issue, that the issue is the purpose. And so 19 accordingly, if the taxpayer was to fly from Nevada 20 to work in California and then fly back and sleep in 21 Nevada as then -- would that time count pursuant to 22 Kemp versus the Franchise Tax Board? And did you 23 give that some consideration? 24 MR. MILLER: Yes, we gave that 25 consideration. And it is not just counting days, as 26 you point out. It's what they were doing in 27 California, so -- 28 MR. HORTON: And -- and when the courts 55 1 look at what they're doing, do they look at it 2 relative to residency or do they look at it relative 3 to domicile? For example, do they look at the fact 4 that he is in California to visit his children, his 5 grandkids, or to fly out of the state, or to visit 6 his business? 7 Or do they look at it in relationship to 8 pure domicile as to what the intended purpose is? 9 Is the court trying to establish is it the intended 10 purpose of the Appellant to have to return to a 11 particular place? Are they going to return to 12 El Dorado Hills or are they going to return to 13 Nevada? 14 MR. MILLER: Right. Domicile is about 15 intent, and what we look at are objective facts, 16 objective actions, in order to trial to discern what 17 the intent was. So we -- that's how we were looking 18 at acts. What were they doing in California? They 19 were flying out of California. They were, uh -- 20 they had cars here. They, you know, had a, uh -- 21 their businesses here. They have their, uh, house 22 here. 23 MR. HORTON: So the conclusion was, during 24 the time that they were -- that activity was 25 occurring, they would go home in California 26 somewhere? 27 MR. MILLER: Yes. Yes. 28 MR. HOFSDAL: I don't know if he's exactly 56 1 answering the question you posed, and I'll -- I'll 2 give it a shot. 3 Like Lou was saying earlier, it all starts 4 with domicile. Once you decide where the domicile 5 is, then you focus where and what people are doing 6 inside of the respective state. 7 For example, if somebody's domiciled in 8 California, right, we don't really look at or care 9 that much as to what they're doing in California; 10 we're looking to what are they doing in Nevada. Are 11 they outside of California for other than a 12 temporary or transitory purpose? 13 MR. HORTON: So your argument is, pursuant 14 to the time in question, because they had 15 established domicile in California, then the burden 16 of proof is on the Appellant that they've 17 established domicile somewhere else; is that -- 18 MR. HOFSDAL: Yes. It's -- it's -- it's 19 our position that the taxpayers maintained their 20 domicile in California. They didn't sever any of 21 their ties with California. Therefore, the burden 22 is on -- on them to prove a change, yes, as far as 23 the burden shifting goes. 24 MR. HORTON: I would think that Chambers 25 versus Hathaway disagrees. That says that it's 26 the -- it's the -- it's the -- the court weighs not 27 only the facts as well as the acts that have 28 occurred and that they look at the preponderance of 57 1 those, too. 2 MR. HOFSDAL: I'm talking about burden. 3 I'm not familiar with the case you cited, but it's 4 my understanding that it's the party who is trying 5 to establish a change that has the burden. 6 MR. HORTON: Has the burden of proof. 7 MR. HOFSDAL: Yes, that has the burden of 8 proof. 9 MR. HORTON: And given that they have the 10 burden of proof and they've -- they've dedicated 11 these hours to try to prove it, then wouldn't the 12 burden -- some burden be on the Department to at 13 least examine those documents? And determine 14 whether or not they -- they have reached the -- they 15 have satisfied the burden. 16 MR. HOFSDAL: We've examined all of the 17 documents that they provided to us. We've -- we go 18 out early on in the process and do a lot of 19 discovery on ourselves. That's how we get the 20 American Express bills and stuff like that. We send 21 out notices to get -- 22 MR. HORTON: Not to interrupt you, but -- 23 not to interrupt you, but I understand the 24 testimony -- 25 MR. HOFSDAL: Yeah. 26 MR. HORTON: -- of the Department was that 27 they had not looked at the recent calendar provided, 28 as well as the supporting documents. 58 1 MR. MILLER: So we have not had the 2 opportunity to see the supporting documents. I 3 mean, another way to put it is we don't have them. 4 MR. HOFSDAL: Yes. They provided a 5 calendar, but they didn't provide anything to 6 support the calendars. And one thing on the 7 calendars is -- is -- is the calendars are very 8 broad. They're comparing California to all of the 9 places outside of California, whether it's Nevada, 10 Hong Kong, Idaho, etcetera, etcetera, and somehow 11 giving a presence in Hong Kong meaning beyond them 12 being physically present in Nevada. 13 MR. HORTON: Yeah. I mean I don't think 14 it's fair to this body to ask us to evaluate 15 documents we have not seen, the Department has not 16 analyzed. And -- and -- and still, I don't think 17 it's fair for you to -- the Department, as well as 18 the Appellant -- for me to cite these cases, which 19 seems to be on point in my mind. 20 I mean, I think -- you know, Kemp is right 21 on point to establish that the -- the -- the courts 22 look at the intent of the party, the intent of the 23 visit. Why are you there? 24 I mean you could come up with a comparative 25 analysis, closest connection, and the courts would 26 say, well, the fact that they were there to visit 27 their kids means absolutely nothing; take that out 28 because that's not relevant relative to domicile or 59 1 residency. Unless the Department is concluding -- 2 and I haven't heard this -- that the fact that they 3 were there to visit the kids for an extensive period 4 of time, that they in fact had to sleep somewhere or 5 had to return somewhere and their intent was to 6 maintain their original domicile established. 7 The other issue of concern, I do have 8 concern about the source issues. And, um -- and 9 would like to have someone have a position on it. I 10 understand the Appellant does. But anyway, it makes 11 it difficult -- and it's a little unfair, I think, 12 to the Appellant as well. 13 But that being the case -- 14 MR. HALVERSON: Mr. Horton, may I correct 15 the record though? You know, they've had these 16 calendars since my reply brief, and that hasn't 17 changed. 18 And these -- these are the source documents 19 of every check that tie into that calendar. Okay. 20 So again, if you look at the calendar, you'll find a 21 number and tell you they were at the manicurist or 22 they bought food or they -- or they paid the 23 gardener. Every one of these source documents 24 they've had since day one. 25 Now when they asked us for checking account 26 records, all their bank accounts, all the banks had 27 to start printing. And this is just the personal 28 bank accounts for Nevada and California. They had 60 1 two accounts; one for each state. 2 Now, credit cards, the same thing. It 3 wasn't the FTB that went to American Express to get 4 that. Mrs. Lau did. And she then Xeroxed them, and 5 it had attached every receipt that -- that went to 6 each line item. 7 So those were given to them. They have 8 been denied nothing. And then they produced this 9 (indicating) which we just said, you know, this is 10 not going to do. And that's what -- that's what led 11 us to doing the purple calendar, purple and pink as 12 you can see. And you know exactly all of that was 13 provided back with the reply brief. Nothing's 14 changed on those items. 15 MR. HORTON: Um -- 16 MR. MILLER: Sir -- 17 MR. HORTON: Yes. 18 MR. MILLER: Clarification. We do have 19 those documents. 20 What it is, is when they provide the 21 calendars, new Nevada days are suddenly on and it's 22 like, well, where did this come from? 23 MR. HORTON: Well, that's the process of 24 gathering evidence. That's how it works. 25 MR. MILLER: And I'm concerned. That's 26 what I was saying. 27 MR. HORTON: You ask a question, you get an 28 answer. You present an issue, you get a response. 61 1 You have to address that response. 2 I mean, you're leaving us at a 3 disadvantage. And it sounds to me like Mrs. Lau is 4 pretty thorough. 5 MRS. LAU: I am. 6 MR. HORTON: So maybe you ought to give her 7 the benefit of the doubt and take a look at the work 8 she's done. 9 Anyway, further discussion, Members? 10 Let me ask. Do you want to look at it? 11 MR. MILLER: If they have additional 12 documents, absolutely, we would look at them. 13 MR. HALVERSON: They have been given every 14 document. 15 MR. MILLER: So again, our issue was that 16 previously unsubstantiated days are suddenly Nevada 17 days. It's not -- and we don't know where that came 18 from. If it came from extrapolation, if it came 19 from rethinking -- years later rethinking that, oh 20 yeah, well, on this week we were in Nevada. 21 So it's not necessarily a matter of 22 evidence being brought. 23 MS. PAGE: I -- I think it's important that 24 perhaps the parties speak and divide out the days 25 that are in "other places" and "Nevada." Because it 26 looks like at this point the Appellants have 27 combined "Nevada" with "all other places," and I 28 think this case requires California, Nevada, and all 62 1 other places so that we can have a clear view of the 2 calendars. Because really, when you have the 3 domicile -- first, we have the first question for 4 your Board is, Where are they domiciled? And then 5 the next question is, Where are they temporary and 6 transitorily present? 7 So there's two layers of questions. And I 8 think that's where we're getting a little 9 tongue-tied on those second set of calendars is that 10 the purple dates represent days that they are in 11 Nevada or some other place. 12 MR. HORTON: Member Harkey. 13 MS. HARKEY: I think one of the problems is 14 is that the Department's assumed the resident's in 15 California and they're trying to prove a negative 16 which makes it very difficult. 17 I think -- I think all of those 18 documents -- all of the checks and the calendar that 19 I have is pretty clear, the pink and other. And -- 20 and, quite honestly, if you're visiting in 21 San Diego, you're not anywhere near El Dorado Hills 22 to stop by for the night. I mean, that's like a -- 23 that's a real stretch. That's not something you 24 would do. If you're in Modesto, you're actually not 25 very close to El Dorado Hills either. 26 So, you know, I think the fact that they've 27 got all these checks and they've got all these 28 items, I'm -- is disconcerting that they weren't -- 63 1 that those weren't examined with the calendar 2 because I think that was the intent. The calendar 3 and the checks and the items and the receipts that 4 were given that they believed proves evidence and 5 that, from what I'm hearing, we have not looked at. 6 So I've -- and I don't hear that they were 7 supplied late. I think they were supplied on time 8 or with the appeal or with the response, I guess it 9 is. Pardon me. 10 MR. HOFSDAL: Reply. 11 MS. HARKEY: Yeah, I'm probably not 12 using -- 13 So that's -- that's where I'm having a hard 14 time supporting the Department on this. 15 You may, yes, please. 16 ---oOo--- 17 18 19 20 21 22 23 24 25 26 27 28 64 1 ---oOo--- 2 MR. MILLER: So, it's not that we failed to 3 examine anything that they gave to us. It's that 4 when the new calendars arrived with their reply 5 brief, it was suddenly new -- suddenly newly 6 remembered days or Nevada days or other days, 7 somewhere other than California and Nevada. 8 MS. HARKEY: I think -- I think they -- 9 they established, though -- they tried to establish 10 their Nevada days. And they tried to establish days 11 that they were traveling. 12 And they tried to provide a lot of new 13 information because they were -- they were -- they 14 were digging for information because they -- they 15 had to -- they tried to give information to disprove 16 what your assumption was. 17 So, I think they've got a lot of 18 information. The fact that they couldn't account 19 for every hour of every day, but they've got a lot 20 of information in these calendars. I mean, 21 there's -- there's a lot in here. 22 It's still -- it still looks like they 23 travel around quite a bit. But the fact that 24 they're still in Nevada, that they've bought a 7,000 25 square foot house, that their El Dorado home was 26 sold in 2010 -- which is probably right given where 27 the recession was. I mean, nobody would move to 28 property unless they had to. 65 1 So, I mean, I'm just kind of guessing, if 2 you're not broke, you're not selling a house. 3 You're just going to hang on and hope it comes back, 4 especially in that area, which is very nice. 5 So -- you know, I'm just -- and they've 6 explained to me the flights and the credit card 7 statements. That was very right on. I do the same 8 thing. 9 So, I'm just -- my problem is the evidence 10 that we had that maybe we should have utilized. 11 MR. HORTON: Now, Ms. Harkey, just by 12 virtue of an example -- 13 MR. HOFSDAL: Okay. 14 MR. HORTON: -- the State legislature -- 15 legisature -- it's getting late -- they have 16 domicile in their district. They are predominantly 17 outside of their district and their refrigerator 18 might not be as full, but they're buying and doing 19 all that stuff in Sacramento or Washington, D. C. 20 But when the courts consider the issue of 21 domicile, they look at the intent to establish a 22 home and the intent to return to this established 23 home. 24 And the activities that a resident would 25 take carries a little more weight -- registering to 26 vote, registering your car, buying food, going to 27 the restaurant, buying gas -- all of those different 28 things and -- which is reflected in the Kemp case, 66 1 you know. 2 And maybe the Department might want to go 3 back and examine these records, take a look at that 4 case and maybe you can resolve this. 5 I don't -- Mr. Runner. 6 MR. RUNNER: I was just going to say my -- 7 I think my concern with more time is I -- I think -- 8 I think the -- I think the set of facts are the 9 same. I think it's the filter through which we look 10 at them. 11 And, so, I think that that is -- I don't 12 think more time does that. It gets -- it's the 13 filter that says domicile's in Vegas, domicile's in 14 El Dorado Hills. And, so, therefore, that begins 15 the process for counting. 16 And, so, I'm satisfied with it. I don't 17 think more time would solve that problem. 18 MR. HORTON: Further discussion, Members? 19 Hearing none, is there a motion? 20 MS. STOWERS: Take it under submission -- 21 take it under submission. 22 MR. HORTON: Member Stowers moves to take 23 it under submission. 24 Second by Member Harkey. 25 Without objection, Members, such will be 26 the order. 27 Thank you very much for appearing before us 28 today. 67 1 MR. HALVERSON: Thank you. 2 MS. HARKEY: Thank you. 3 MR. HORTON: The Board will take your 4 matter under consideration later on this evening and 5 send you a written report of our decision. 6 ---o0o--- 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 68 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 March 25, 2015 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 64 constitute 14 a complete and accurate transcription of the 15 shorthand writing. 16 17 Dated: April 23, 2015 18 19 20 ____________________________ 21 KATHLEEN SKIDGEL, CSR #9039 22 Hearing Reporter 23 24 25 26 27 28 69 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, JULI PRICE JACKSON, Hearing Reporter for 8 the California State Board of Equalization certify 9 that on March 25, 2015 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 65 through 68 14 constitute a complete and accurate transcription of 15 the shorthand writing. 16 17 Dated: APRIL 20, 2015 18 19 20 ____________________________ 21 JULI PRICE JACKSON 22 Hearing Reporter 23 24 25 26 27 28 70