1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 5901 GREEN VALLEY CIRCLE 3 CULVER CITY, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 JUNE 23, 2015 10 11 12 13 14 15 ITEM F 16 PUBLIC HEARINGS 17 ITEM F1 18 BUSINESS TAXPAYERS' BILL OF RIGHTS HEARINGS 19 20 21 22 23 24 25 26 27 REPORTED BY: Kathleen Skidgel 28 CSR NO. 9039 1 1 P R E S E N T 2 3 For the Board Jerome E. Horton of Equalization: Chairman 4 5 Sen. George Runner (Ret.) Vice Chair 6 7 Fiona Ma, CPA Member 8 9 Diane L. Harkey Member 10 11 Yvette Stowers Appearing for Betty T. 12 Yee, State Controller (per Government Code 13 Section 7.9) 14 Joann Richmond 15 Chief Board Proceedings 16 Division 17 18 For Staff: Todd Gilman Taxpayers' Rights 19 Advocate 20 David Gau Chief Deputy Director 21 22 ---oOo--- 23 24 25 26 27 28 2 1 INDEX OF SPEAKERS 2 SPEAKER PAGE 3 William Connell 5 4 Marc Brandeis 13 5 6 ---oOo--- 7 8 9 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 JUNE 23, 2015 4 ---oOo--- 5 MR. HORTON: Good morning, Members and 6 guests. Let us reconvene the meeting of the Board 7 of Equalization. 8 Ms. Richmond, what is our next matter? 9 MS. RICHMOND: Our next matter is Item F, 10 Public Hearings; Item F1, Business Taxpayers' Bill 11 of Rights Hearings. 12 MR. HORTON: Welcome, Mr. Gilman. Please 13 introduce yourself for the record. 14 MR. GILMAN: Todd Gilman, Taxpayers' Rights 15 Advocate with the Board of Equalization. 16 A pleasure to see you, Mr. Chairman. We 17 missed you at the last Taxpayer Bill of Rights 18 Hearings, so glad to see you back. 19 MR. HORTON: Thank you, sir. 20 MR. GILMAN: Good afternoon, Chairman 21 Horton and distinguished Members of the Board. Todd 22 Gilman, Taxpayers' Rights Advocate with the State 23 Board of Equalization. 24 This is the Business Taxes Taxpayer Bill of 25 Rights Hearing for Culver City, June 23rd, 2015, 26 where individuals have the opportunity to present 27 their ideas, concerns and recommendation regarding 28 legislation, the quality of agency services and 4 1 other issues related to the Board's administration 2 of its tax programs, including sales and use tax, 3 environmental fees, fuel taxes, excise taxes and any 4 issues identified in the Taxpayers' Rights Advocate 5 2013-'14 Annual Report. 6 Our first speaker is Mr. Bill Connell. 7 Mr. Connell. 8 MR. HORTON: Mr. Gilman, with your 9 permission, I'd like to have Mr. Brandeis come 10 forward as well who is a representative for Brandeis 11 and Associates. 12 MR. GILMAN: Okay. Yes, sir. 13 ---oOo--- 14 WILLIAM CONNELL 15 ---oOo--- 16 MR. CONNELL: Hey there. 17 Is he with me? 18 MR. HORTON: No. 19 MR. CONNELL: No. 20 MR. GILMAN: He's testifying after you. 21 MR. CONNELL: Oh. I thought I was getting 22 help. 23 MR. HORTON: All the veterans in the room, 24 please stand. There's a lot of 'em back there. 25 MR. CONNELL: First of all, good afternoon, 26 Mr. Chair and most honorable Board. 27 Twenty-two years I've been at it. I'm 28 getting very close. We've circled the wagons. We 5 1 have some issues to address that can be done so, I 2 believe, comfortably. 3 The continuing efforts to locate and repay 4 those veteran vendors, I have been informed, despite 5 efforts to notice all, that there's still some of 6 them dropping through the cracks. And in speaking 7 with Harry Hagen, our County Controller, and 8 different City Controllers, they thought it would be 9 a great idea to put on the application for a 10 business license six words: "Are you a vet -- 11 honorably discharged veteran?" 12 Right then and there you will know what the 13 veteran community now will start to consist of as I 14 don't believe you have that number, and that was one 15 of the numbers Betty Yee wanted to try to maintain. 16 So if that suggestion can be worked out 17 within Santa Barbara County, Mr. Hagen, who gave me 18 a phone call right before I came here, more than 19 willing to help in that regard. 20 Second item is those veteran vendors prior 21 to the enactment of 919. I was given a state form 22 against claims. It was -- this was -- and I believe 23 this is before the 2002 because my case goes back to 24 the 90s as well as my other Vietnam veteran. So I'm 25 assuming they're getting the government claim form 26 in order to try to get their monies returned to 27 them. If I'm inaccurate, could you tell me? 28 Well, anyway, I filled out the entire form. 6 1 I paid another $25 to do it. And then I'm going to 2 submit it. I have no idea how much money to ask for 3 in compensation. Don't have a clue. It's only been 4 six different Legislative initiatives I've had to 5 put forth. It's cost me a lot of money. 6 Years ago I said, "Why aren't you honoring 7 the veterans' exemption?" Right now you're honoring 8 the veterans' exemption. 9 Once the first veterans' exemption was 10 signed by our Governor in 1893, everything else is 11 irrelevant. The veteran held a tax and fee 12 exemption. So I don't know how that's going to work 13 out. 14 Lastly and most upsetting to me is I've 15 always played aboveboard with everybody. Senate 16 Governance and Finance Committee hearing of 6/11/14, 17 when it went to background and for the bill, it was 18 one page. One page. There were three different 19 pages all written about me and all in a negative 20 light. However, what wasn't put in here and what 21 must go in here so that the legislators aren't lied 22 to would be the January '99 legislation 3-4 from the 23 SBOE; the February 20th, 2003 by Assemblymember 24 Mountjoy that I defeated; the January 18, 2006 by 25 Assemblymember Walters, also defeated. 26 Now, you're going to have to help these 27 veterans. There were 20,000 of them homeless on the 28 streets of LA last night. There's a 24 percent 7 1 unemployment rate of these veterans. 2 I've gotten in law an extremely narrow 3 exemption at this point. It could be looked at. It 4 could be given a little -- little space to breathe 5 where the veteran could have a helper or have his 6 son help him. Or it might be such that the veteran 7 can only do so much. 8 So, I've got some issues here, specifically 9 the Senate Governance and Finance Committee Report. 10 I want to know how to go best about accurately 11 changing this nonsense because, if it happened to 12 you, if they wrote what they wrote against me to any 13 one of you, you'd be fuming. 14 I've held my temper. It's been gorgeous. 15 They were at a point of trying to shoot the 16 messenger and I'm awfully tough to hit because I'm a 17 moving target. 18 You guys have done everything I've asked 19 you. Your integrity is beyond reproach. 20 They made a mistake in 1992 not honoring 21 the Veterans' Tax Exemption Statute. You got all 22 these attorneys jumping on, one after the other, 23 after the other, after the other. Plain meaning 24 exemption statute; everything else is irrelevant. 25 Thanks a lot. 26 MS. RICHMOND: Time's expired. 27 MR. CONNELL: See, I got "thanks a lot" in 28 before "time's expired." 8 1 MR. HORTON: Perfect timing. Perfect 2 timing. 3 MR. CONNELL: I got this time down. 4 MR. HORTON: Yes. 5 Member Ma. 6 MR. CONNELL: This is Mr. -- 7 MS. MA: I do have a question. Thank you, 8 Mr. Connell, for coming. It's always great to see 9 you. 10 I'm surprised in the Senate analysis that 11 you're specifically named and disparaged in the 12 comments. Six years I spent there and I don't 13 recall people specifically -- 14 MR. CONNELL: I want -- 15 MS. MA: -- you know, named in an analysis. 16 MR. CONNELL: My name was right over that. 17 And I want to know what sales and use tax attorney 18 was whispering in this poor 22-year-old's ear. It 19 didn't come -- it didn't come from her because she 20 doesn't know me. 21 MS. MA: Right. So I'd like to see, you 22 know, what was written. And I'm not sure what we 23 can do, but -- 24 MR. CONNELL: You all have copies of it. 25 MS. MA: I don't think I have a copy of 26 that, so -- 27 MR. CONNELL: You -- you got a copy. 28 MS. MA: Okay. I'll ask Ms. Richmond. 9 1 MR. CONNELL: You've got a copy of that. 2 MS. MA: And then -- 3 MR. CONNELL: And I don't come up here and 4 say something that's a falsehood. 5 MR. HORTON: Mr. Connell -- 6 MS. MA: We go it. 7 Okay. And then secondly, to the BOE, what 8 kind of information do we collect? Do we know 9 whether some of our resellers are veterans? Is it 10 possible to, you know, ask or send a survey or put 11 on the form when they're signing up for a resale 12 license if they're honorably discharged? I'm just 13 wondering the process and procedures for information 14 and self-reporting. 15 MR. GILMAN: Ms. Ma, I'm not familiar or 16 whether there's anything in the law that allows us 17 to ask as to whether or not somebody's an honorably 18 discharged veteran or not. But there's been a lot 19 of work and a lot of effort that's gone into this, 20 especially by Mr. Gau and some of his staff in 21 bringing more attention to this issue. 22 I mean, if you want some more information, 23 I'd be happy to ask Mr. Gau to come up and provide 24 you with some detail or history in terms of what 25 we've doing, what we've been up to. 26 MS. MA: Okay. 27 MR. CONNELL: Can I say one thing before 28 Mr. Gau speaks? Just one. 10 1 MS. MA: Yeah. 2 MR. CONNELL: I apologized to him, as I had 3 gone to a newspaper two weeks before meeting with 4 him up in Sacramento. I was frustrated at the time. 5 I didn't think the word was getting out. I gave an 6 interview. 7 As a letter arrived when I got home, 8 Mr. Gau had been indeed working diligently. And I 9 apologized to him today prior to this meeting. 10 MS. MA: Yes. And we've been working in 11 our office, through Francine Castanon, to get the 12 word out as well. So we understand the timeline and 13 the importance. So thank you for bringing it to us 14 though. 15 MR. GAU: David Gau. And apology was 16 accepted, by the way, too. 17 So, anyway, we have been working with Mr. 18 Connell as he helps us try to identify different 19 kinds of associations and veterans' groups to reach 20 out to. So -- and -- and on our own as well. So 21 this is something that we are earnestly working to 22 continue to strive to do a better job of reaching as 23 many people that might be being able to avail 24 themselves of this as possible. 25 I think we also are starting to do, like, 26 website veterans. You know, it goes beyond sales 27 tax. There's property tax considerations as well. 28 So we're trying to look into this as a comprehensive 11 1 veterans issue as we work with Mr. Connell and 2 others. 3 MS. MA: How about self-reporting or 4 gathering information from people. 5 MR. GAU: Yeah. Specifically to that, I 6 would have to echo Todd's comment. I don't know 7 that we currently do anything to identify. In 8 property tax they have to. They do that to avail 9 themselves to the exemption. But in the sales tax 10 area, we don't -- that I'm aware -- have current 11 self-identification that way. But it's something we 12 can look at, that's for sure. 13 MR. HORTON: Further discussion, Members? 14 The intent language at this point, probably 15 the best that we might be able to get is a letter to 16 the file from the Chair or someone else to sort of 17 clarify that possibly it wasn't the intent to be 18 despairing in any way. So that now have a trail of 19 evidence to contradict what might be perceived to be 20 the interpretation of the language and the intent. 21 MR. CONNELL: Something. Something, 22 anything, in the Legislative digest that makes the 23 correction necessary. However you guys do it. 24 MR. HORTON: Okay. 25 MR. CONNELL: You guys are mystical up 26 there. You do a lot. 27 MR. HORTON: The Chair of our Legislative 28 Committee has committed to working on that, so I 12 1 think we're in good shape. 2 MR. CONNELL: I think we are. Once again, 3 thank you very much. I want everybody to have a 4 happy summer solstice day belated, and enjoy -- 5 enjoy yourselves. 6 MR. RUNNER: Thank you. 7 MR. CONNELL: That's for you. 8 MR. GILMAN: Is that for me? Okay. 9 MR. CONNELL: You all have a little package 10 when you get back. You can look at it. It has the 11 information you'd like. 12 MR. HORTON: These days, be sure to run 13 that package through security. Just kidding. 14 I believe Mr. Brandeis is here as well to 15 speak on F1. At your convenience, sir. You'll have 16 three minutes. 17 ---oOo--- 18 MARC BRANDEIS 19 ---oOo--- 20 MR. BRANDEIS: Thank you, Members of the 21 Board. My name is Marc Brandeis, former BOE auditor 22 and now a representative, representing taxpayers in 23 their sales and use tax audits. 24 The first thing I wanted to discuss 25 regarding the Taxpayer Bill of Rights does -- it 26 concerns the right for a taxpayer to receive 27 information and assistance. 28 Approximately six months ago I wrote a 13 1 letter to the Board requesting guidance on the use 2 of electronic signatures. And I received a 3 response -- I would call that response timely, but 4 the response really didn't provide an answer, yes or 5 no. It sort of said, I see the case for, see the 6 case against. And then it just left it at that. 7 Which I don't really consider that guidance. 8 So I wrote a response back saying, you 9 know, I got your response, but it didn't -- it 10 doesn't help. It doesn't say one way or -- I'd, you 11 know, like to know what -- whether the Board does 12 accept electronic and/or digital signatures or not. 13 So anyway, here we are six months later and still 14 don't have a response. 15 In the meantime, I've had a couple clients 16 that have suffered negative consequences as we 17 signed documents electronically and the Board has 18 refused to accept those electronic signatures. And 19 so I'm hoping that the issue of timeliness in 20 response can -- can be looked at in -- in this 21 matter. 22 MR. HORTON: Members, let's go -- 23 There's others? 24 MR. BRANDEIS: There's others. 25 MR. HORTON: Okay. 26 MR. BRANDEIS: Do you want to talk -- did 27 you want to respond to that, or do you want me to -- 28 MR. HORTON: Well, I don't want to absorb 14 1 your time. But please hold the time because I do -- 2 would like to have each individual item sort of 3 addressed. 4 Mr. Gilman? 5 MR. GILMAN: Well, I certainly understand 6 his concern. I mean as an advocate, if a taxpayer 7 requests information and -- they should expect to 8 receive it. 9 When they provide documentation with 10 respect to something that requires a signature, if 11 an electronic signature is acceptable, then it would 12 seem as if the Board would receive it. 13 But it sounds like what maybe Mr. Brandeis 14 is talking about is maybe he needs some 15 clarification or a follow-up response from the Board 16 in terms of what exactly it is that -- the advice is 17 that he's trying to receive. 18 I don't know if there's anybody here from 19 the Tax Policy section in the audience that worked 20 with Mr. Brandeis or who authored the letter that he 21 received the opinion on. 22 MR. BRANDEIS: The initial letter was from 23 Mr. Bob Tucker, which didn't really give a 24 conclusive answer. And then a follow-up was sent to 25 Mr. Scott Claremon in Legal. 26 MR. HORTON: Well, I'll tell you what, I 27 really don't want to -- I would prefer to allow 28 sufficient amount of time to have this issue -- 15 1 MR. GILMAN: Right. 2 MR. HORTON: -- addressed, as opposed to 3 doing it here. 4 MR. GILMAN: Right. 5 MR. HORTON: I would say that the Board of 6 Equalization is bound by State law as it relates to 7 that, and so the response should be relatively easy. 8 And what may need to happen is the request may need 9 to be germane to a specific item. 10 On some items electronic signatures are 11 okay and others they're -- they may not be. And so 12 let's see if we can get a response. 13 Mr. Tucker is here. I'm going to ask that 14 he meet with you right after you've provided us with 15 your testimony and see if we can get some 16 resolution. And then Mr. Gilman will communicate to 17 the Board the resolution to that particular item. 18 Mr. Runner. 19 MR. RUNNER: Yeah, I'd actually like to get 20 something a little more broader than that. I mean 21 I'd like to know what is our policy on -- 22 MR. GILMAN: Right. 23 MR. RUNNER: -- electronic signatures. 24 MR. GILMAN: Right. 25 MR. RUNNER: And, you know, what documents 26 they -- we do accept them on and which ones we 27 don't. 28 MR. GILMAN: Don't, right. 16 1 MR. RUNNER: So that we can take a review. 2 Which one's under statute maybe and which ones 3 aren't. I'd like to see if we can get that whole 4 report back in order for us to understand for 5 taxpayers then. Because, clearly, he asked for 6 guidance. 7 MR. GILMAN: Yeah. 8 MR. RUNNER: He was given -- but -- but -- 9 but I guess in one sense we actually are giving 10 guidance because we're not accepting them. 11 MR. BRANDEIS: Well, you can sign -- you 12 can eFile a return and there's no physical signature 13 that shows up on that. Or you can apply for a 14 seller's permit. So I would say the Board does 15 accept them. 16 MR. RUNNER: But I thought you said you had 17 some file -- I thought you said you had some clients 18 that filed and they weren't accepted. 19 MR. BRANDEIS: We -- we filed -- we signed 20 a waiver, BOE 122 extension of statute of 21 limitations -- 22 MR. RUNNER: Uh-huh. 23 MR. BRANDEIS: -- for an audit, and it 24 wasn't accepted. 25 MR. RUNNER: Okay. So, again, it goes back 26 to the original, when are they accepted and when 27 aren't they accepted? 28 MR. GILMAN: And when are they not. 17 1 MR. RUNNER: Okay. Thank you. 2 MR. BRANDEIS: And -- 3 MR. HORTON: This may be -- 4 Mr. Runner? 5 MR. BRANDEIS: One more. The form that we 6 signed, the BOE 122 was emailed by the auditor, came 7 in a PDF. And the PDF allowed us to put an 8 electronic signature on there, which I did, and then 9 I sent back. Other BOE forms block that function, 10 and some BOE forms -- 11 MR. RUNNER: Okay. Clearly we do not have 12 a clear direction or policy. 13 MR. HORTON: This may be a good topic for 14 the Customer Service Committee? 15 MR. RUNNER: I think we'd be glad to take 16 a -- we'll work with the Taxpayer Advocate -- 17 MR. GILMAN: Yeah. 18 MR. RUNNER: -- as to this particular 19 issue. 20 MR. HORTON: Okay. Next item. 21 MR. BRANDEIS: The next item concerns the 22 application of the 40 percent penalty when a 23 taxpayer collects sales tax reimbursement, does not 24 remit all the tax to the Board. 25 I have a case that's coming up to hearing 26 where that has become an issue. In this case the 27 taxpayer has, in response to an audit notice, met 28 with the auditor and volunteered that they had done 18 1 this and didn't play games with them, didn't say, 2 "Catch me if you can" or "We're going to deny, deny, 3 deny." And the reward for being forthcoming and 4 what the -- what the auditor's saying, "Hey, we want 5 to make this right," was the application of a 40 6 percent penalty. 7 And I think what that does is it sends the 8 message to the public that you shouldn't come 9 forward. You shouldn't volunteer this information. 10 You should deny, deny, deny. Because if you come 11 forward and you say, "Hey, I did this," the -- the 12 consequence is going to be a 40 percent penalty and 13 most businesses can't survive that, a penalty which 14 is also not deductible. 15 So I think there should be some extenuating 16 circumstances when a taxpayer -- maybe when they -- 17 when they don't -- in an audit situation where they 18 voluntarily come forward and say, "Look, I did this. 19 There was extenuating circumstances. I agree it 20 wasn't right, but we don't want to play games with 21 you. We don't want to play, you know, 22 catch-me-if-you-can." That there should be some -- 23 some -- some wiggle room for the Audit Department to 24 say, "Okay, well, we think there could be an 25 application, but we're going to -- we're going to -- 26 there's an exception if you don't play games with 27 us." You know, put it in more technical language, 28 but some sort of deference. 19 1 MR. HORTON: Mr. Gilman. 2 MR. GILMAN: I think it'd be appropriate 3 for us to go back and look at our audit policy and 4 find out what exactly is being told to a staff. I 5 don't have that in front of me, obviously, in terms 6 of how staff are being guided on this issue. But 7 it's definitely something I think we can look into 8 and find out exactly how staff are being trained or 9 provided with guidance on this issue. 10 MR. HORTON: Mr. Runner. 11 MR. RUNNER: I was going to say, in light 12 of the fact that we actually are going to have this 13 issue on an appeal, it will give us the ability for 14 us at that time to kind of see what the 15 circumstances were there, and also then come back 16 and maybe even at that point get educated and -- and 17 ask some questions in regards to the broader policy, 18 too. So I think it's certainly valid for us to take 19 a look at. 20 MR. GILMAN: Right. 21 MR. HORTON: Okay. 22 MR. BRANDEIS: How am I on time? 23 MR. HORTON: Sure. 24 MS. RICHMOND: 30 seconds. 25 MR. BRANDEIS: Oh, okay. I shouldn't have 26 saved the biggest for last. 27 The next one deals with the Audit Manual. 28 The Audit Manual is badly outdated, badly needs 20 1 updating. 2 I have probably 85, 90 percent of my 3 clients are restaurant clients. Chapter 8 in the 4 Audit Manual, which deals with restaurants, is -- 5 still refers to cash registers, doesn't refer to POS 6 systems. 7 As a result, a lot of auditors essentially 8 are making up their own procedures. They're not 9 following guidelines in the Audit Manual. They're 10 not -- they're just make -- do whatever they want to 11 do. And, you know, it creates confusion. It 12 creates a lot of problems with how the audits are 13 conducted. 14 One thing that we -- we have issues with 15 are undercover purchase tests that are done before 16 the audit notices are sent out. When we get -- when 17 we find out later on after we've turned over records 18 that undercover purchases have been made, the 19 auditors refuse to give us copies of the receipts. 20 Just flat out refuse. 21 I've got a case that we're waiting -- we've 22 already gone to the supervisor, getting ready to go 23 to a 79-A hearing, I still don't have copies of the 24 receipts. I don't know if they made 10 purchases, 25 20 purchases. But it's being used, also, as a means 26 of calculating a percentage of error and projecting 27 against the population. 28 How do I know that they didn't make 20 21 1 purchases, but yet they only put 10 in -- in their 2 sample? I mean this is a non statistical method. 3 It's an extremely small sample size, and the 4 methodology that the auditor wants to use in this 5 case allows for division by zero, which, you know, 6 results in imaginary numbers. 7 MR. HORTON: Member Runner. 8 MR. RUNNER: Yeah, real quick. I have been 9 concerned over undercover purchases. And in fact I 10 think in -- and I'm not sure how universally they're 11 actually done right now in the State of 12 California. 13 MR. BRANDEIS: Heavily done in West Covina. 14 MR. RUNNER: I would -- I would -- I think 15 it's an issue to which I think we need to try to 16 address in regards to undercover purchases. I -- I 17 do have an issue with the fact that -- that a 18 taxpayer is -- somebody's coming from the BOE 19 government, doing something in their establishment 20 and they don't know that, without any real reason 21 for us to suspect that they're doing something 22 that's wrong. 23 So I think at this point, now that it's 24 been brought up, I think maybe we need to have a 25 review of what's happening with our undercover 26 purchases and the problems with that. So I think 27 it's -- it's a valid issue to which I think the 28 Taxpayer Advocate needs to kind of take a look at 22 1 and review. 2 MR. HORTON: Member Harkey. 3 MS. HARKEY: I would like to second that. 4 I'm not fond of clandestine operations for people 5 that are just trying to earn a living. And I do 6 think, though, if we're going to do this, the data 7 ought to be revealed as to what they're looking at 8 so you at least have a chance out the gate. 9 We are looking at audit procedures in my 10 office. And I think, as we run across updating and 11 there's a variety of industries that need updates, 12 and we'll put this one on our list and get working 13 on that. 14 We're -- we're doing -- and, you know, 15 we'll be running them through the Business Tax 16 Committee. But we are looking at a variety of audit 17 procedures. 18 MR. HORTON: Excellent. 19 Member Ma. 20 MS. MA: Yeah, similarly, we are also 21 concerned about the audit procedures and making sure 22 that auditors are doing what's outlined in their 23 guides, if we need to update that. 24 One of my major concerns is sticking a 25 thumb drive into taxpayer's computers. As a CPA 26 handling audits before the different agencies, I've 27 never heard of that. Usually the agencies just ask 28 you for the information; you know, tax returns, bank 23 1 statements, whatever corroborating information, 2 documents, paper documents, but not going into a 3 taxpayer's operations and trying to download 4 whatever information they want and then going back 5 and figuring out what it is they need. 6 So that is something that really concerns 7 me in my office. And, you know -- 8 MR. GILMAN: Absolutely. 9 MS. MA: -- I'd really like to work with 10 you and your staff to establish guidelines on 11 privacy. 12 MR. GILMAN: Mm-hmm. 13 MS. MA: You know, what's in your computer 14 could have private, confidential information which 15 is what we're always concerned about here at the 16 BOE. Yet when I hear that that's happening out 17 there, that really does concern me. 18 MR. GILMAN: I want to -- 19 MR. HORTON: Mr. -- 20 MR. GILMAN: I'm sorry. 21 MR. HORTON: -- Gilman. 22 MR. GILMAN: I -- I want to thank you for 23 your comments. This is something that I've been 24 concerned with for the last couple of months. In 25 fact, I've reached out to some of our policy folks 26 with some of the concerns that Mr. Brandeis has 27 brought to your attention; specifically pointing 28 out, going back to your comment, Ms. Ma, about, you 24 1 know, how do we gain access to this information? Do 2 we have a right to, you know, stick a thumb drive 3 into a computer or stand over someone's shoulder to 4 be able to ensure that we get the right information? 5 So this is something that we've been 6 working on behind the scenes for at least a month, 7 month and a half, in terms of these issues. So it's 8 very timely. 9 MR. RUNNER: If the -- if the -- if the 10 Board would allow, you know, I think these are 11 pretty hard -- pretty core customer service 12 relationship issues in regards to both undercover 13 buys, in regards to going into people's private 14 issues, in regards to getting -- we'll be glad to 15 agendize that and work with the Taxpayer Advocate on 16 those issues. 17 MR. HORTON: Yeah, there's -- there's 18 probably -- wow. It sounds as if though this 19 actually comes up in all three of the committees. 20 And so maybe there is a way that there can be some 21 joint effort by virtue of the Legislative Committee. 22 We may need to have some legislative guidance as it 23 relates to, you know, the existing law. And then 24 the Business Tax Committee certainly as it relates 25 to changing the Audit Manual and modifying -- 26 MR. RUNNER: Mm-hmm. 27 MR. HORTON: -- that. Customer service as 28 it relates to the overall how customers are 25 1 perceived and how they are treated in that process. 2 Let me -- let me also say that this is 3 certainly not an indictment on the organization. 4 These are case-by-case situations, and so we will be 5 considering all of the factors that are involved in 6 this. 7 There are situations that -- and the lack 8 of information, the lack of cooperation that does 9 lead to alternative methods of testing. But some of 10 these clearly, even in that situation, should not 11 be, you know, a flash drive, downloading all the 12 information. 13 MR. GILMAN: Right. 14 MR. HORTON: There seems to be some 15 violation -- potential violations of privacy 16 matters. And so -- and particularly given that, you 17 know, we're -- our universe that we examine is 18 relatively small. 19 Mr. Runner. 20 MR. RUNNER: So we're not -- I was going to 21 say, so we're not duplicating, we would be fine to 22 go ahead and start that process. And then as we 23 identify those things that need to be referred to 24 the other committees, we would just go ahead and -- 25 and do that once we -- once we identify those. 26 MR. HORTON: Okay. 27 MR. RUNNER: Does that work? 28 MS. HARKEY: That's fine with us. 26 1 MR. RUNNER: Okay. 2 MR. HORTON: Okay. 3 MS. HARKEY: We just keep moving through 4 and (inaudible). 5 MR. HORTON: All right. 6 MR. GILMAN: Perfect. 7 MR. HORTON: Sounds good. 8 MR. BRANDEIS: Can I just add one? When 9 you talk about auditors accessing taxpayer's POS 10 systems or computer systems, my experience has been 11 that auditors frequently use threats and 12 intimidation when the taxpayer tells them that 13 they're not going to allow them to access their 14 computers or their POS systems. 15 I have letters from districts threatening 16 us with a subpoena even though we have turned over 17 that data. In other words, we've remotely 18 downloaded it or we've gone to the business and 19 downloaded it ourselves and then furnished that 20 information to the Board. Districts have said we 21 refuse to accept that and we want to go down there 22 and either extract it ourselves or we want to watch 23 you extract it in front of us. 24 I tell them that's overreach on their part 25 and that, even if you were to get a subpoena duces 26 tecum, that that subpoena would be an order to turn 27 over records. It doesn't give you the authority -- 28 MR. GILMAN: Right. 27 1 MR. BRANDEIS: -- to, you know -- 2 MR. GILMAN: Compel. 3 MR. BRANDEIS: -- compel us, to compel the 4 Board to come in and directly access records. So, 5 we've had this battle, many occasions. 6 MR. HORTON: Again, you know -- 7 MR. RUNNER: We'll follow up. 8 MR. HORTON: Yeah. Let me reiterate 9 that -- I mean, I've been with this organization for 10 30-some years, so I've seen just about everything. 11 And -- but what I've also noticed is that it's -- 12 it's an individual item. It's sort of reflective of 13 a personality, individual personality. Not 14 necessarily the personality of the agency or the 15 majority of those who serve with the agency. 16 The reputation of the Board of Equalization 17 is extremely high and noted as a customer service, 18 customer friendly organization. Some -- that it's 19 very, very responsive. 20 So, I don't want this to be perceived as 21 something that is reflective of auditors. It's 22 reflective of a personality which in fact may be 23 more of a managerial issue where management maybe 24 just needs to engage. 25 MR. RUNNER: Back to the Audit Manual. 26 MR. HORTON: And, as well, directional 27 issue as it relates to -- as Mr. Runner indicated, 28 as it relates to the Audit Manual. 28 1 And so we're very much appreciative of you 2 bringing this forward. 3 In the -- in light of all the -- the 4 increase in fraudulent activities that -- that -- 5 that we've experienced over the last few years and 6 so forth, there's so many extenuating circumstances 7 that may cause them to -- to -- to -- to use 8 alternative method. But none of those circumstances 9 causes -- should -- should support rude behavior 10 even if there is fraud or something like that. 11 So, thank you again for providing us with 12 that information. 13 MR. BRANDEIS: Thank you. 14 MR. HORTON: Seems as if though you're 15 going to have a lot of people looking at it. 16 MR. BRANDEIS: Thank you. 17 MR. GILMAN: Thank you. 18 Okay. This is that time of the hearing 19 where you ask anybody that wants to come forward and 20 speak, with your permission, they're entitled to or 21 welcome to. 22 MR. HORTON: Ooh. 23 MR. GILMAN: Are they all rushing? 24 MR. HORTON: I don't think they heard you. 25 MR. GILMAN: If anybody would like to come 26 forward and speak at the Business Taxes Taxpayers' 27 Bill of Rights, with your permission, Mr. Chairman, 28 I would invite them to come forward. 29 1 MR. HORTON: Okay. 2 Any comments from the Members? 3 Hearing none, the Board will receive and 4 file your presentation. Thank you so very much. 5 MR. GILMAN: We have no written submissions 6 for the Business Taxes for the record, too. 7 MR. HORTON: Okay. 8 ---oOo--- 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 30 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 June 23, 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 30 constitute 14 a complete and accurate transcription of the 15 shorthand writing. 16 17 Dated: July 22, 2015 18 19 20 ____________________________ 21 KATHLEEN SKIDGEL, CSR #9039 22 Hearing Reporter 23 24 25 26 27 28 31