1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 5901 GREEN VALLEY CIRCLE 3 CULVER CITY, CALIFORNIA 4 5 6 7 REPORTER'S TRANSCRIPT 8 NOVEMBER 17, 2015 9 F PUBLIC HEARING 10 F1 PROPOSED AMENDMENTS TO 11 SALES AND USE TAX REGULATION 1525.4 12 MANUFACTURING AND RESEARCH AND 13 DEVELOPMENT EQUIPMENT 14 15 16 17 18 19 20 21 22 23 24 Reported by: Juli Price Jackson 25 No. CSR 5214 26 27 28 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 Division 15 16 For Staff: Robert Tucker Tax Counsel IV 17 Legal Department 18 19 ---oOo--- 20 Speaker: Therese Twomey Fiscal Policy Director 21 California Taxpayers Association 22 23 ---o0o--- 24 25 26 27 28 2 1 5901 GREEN VALLEY CIRCLE 2 CULVER CITY, CALIFORNIA 3 NOVEMBER 17, 2015 4 ---oOo--- 5 MR. HORTON: Welcome back, Members. 6 MR. RUNNER: This is like your house, isn't 7 it? 8 MR. HORTON: No -- maybe the guest house. 9 Members, let us reconvene the meeting of 10 the Board of Equalization. 11 Ms. Richmond, what is our next matter? 12 MS. RICHMOND: Our next matter on today's 13 agenda is item F, Public Hearing, F1, Proposed 14 Amendments to Sales and Use Tax Regulation 1525.4, 15 Manufacturing and Research and Development 16 Equipment. 17 And we do have someone who wishes to make a 18 public comment. 19 MR. HORTON: Thank you. 20 Members, we have Ms. Therese Twomey with -- 21 the Fiscal Policy Director for the California 22 Taxpayers Association. 23 We'd ask that she come forward after 24 Mr. Tucker makes his opening remarks. 25 MR. TUCKER: Yes, I'm Bob Tucker with the 26 Board's Legal Department. Here -- we're here for 27 the public hearing for proposed amendments to Sales 28 and Use Tax Regulation 1525.4, Manufacturing and 3 1 Research and Development Equipment. 2 This is the public hearing regarding the 3 proposed amendments clarifying that taxpayers may 4 substantiate the useful life of property using a 5 warranty, service contract or industry practice. 6 This is the opportunity for the Board to 7 adopt these amendments. However, there's been a 8 recent development. 9 A letter was received from Department of 10 Finance and Finance -- Department of Finance has 11 some objections to these amendments. 12 Ms. Kirsten Shelton, the program budget 13 manager for Department of Finance, issued in her 14 letter -- expressed some concern over these 15 amendments. 16 One, objecting to -- her statement -- that 17 she believes the Board has overstepped its delegated 18 authority, and the second objection relates to the 19 economic impact statements that were provided for 20 these amendments. 21 As in regards to the first statement about 22 overstepping authority, the staff recognized that 23 Revenue and Taxation Code Section 6377.1 may be 24 interpreted by some as ambiguous and potentially 25 inconsistent with its drafting. 26 It was understood that the perceived 27 ambiguities -- that with these ambiguities 28 reasonable minds could differ. Staff indicated that 4 1 if the Board agreed, in the light of the entire 2 statutory scheme, that the legislature intended to 3 make the partial exemption available for these items 4 with a useful life of one year or more, subject to 5 approvable -- approval by the Office of 6 Administrative Law, the proposed amendments would 7 address the issues raised by Cal-Tax, and effectuate 8 such legislative intent. 9 However, DOF believes that -- DOF meaning 10 Department of Finance -- means that the -- has said 11 that the Board is required to prepare a standard 12 form 399, which the Board did prepare. However, we 13 prepared it as having no fiscal impact because we 14 believe that the fiscal impact is covered by the 15 enacting statute. 16 They have stated that they think that -- in 17 their opinion, that there is a significant fiscal 18 impact. And we would be required to amend such 19 standard 399 and required to obtain their 20 concurrence in the assessment of some impact -- or 21 the impact before the publishing of the notice. 22 They have also said that based on their 23 interpretation, they believe there is a -- this 24 would result in a major regulation, which means it 25 would have an impact exceeding $50 million in a 26 12-month period. 27 We did not -- we did not believe it was a 28 major regulation and, accordingly, we submitted the 5 1 standard 399. 2 As a result, OAL may not approve -- and 3 this is the possible consequence -- OAL may not 4 approve the agency's proposed regulatory action if 5 it determines that the agency failed to 6 substantially comply with the requirement to 7 determine the fiscal impact of the proposed 8 regulatory action or prepare an economic impact 9 statement for the proposed non major regulation or 10 the SRIA, which is the major regulation. 11 In general -- and I don't mean anything to 12 demean OAL -- but OAL doesn't have the experience 13 that Department of Finance has, so, we would expect 14 that OAL would, in all likelihood, take and look at 15 DOF's expertise in assessing the economic and fiscal 16 impact, and weigh that heavily when they make their 17 decision. 18 If the Board chooses to adopt the proposed 19 amendments during this hearing, then it is -- it 20 appears that OAL may not approve such amendments. 21 And, as a result -- this is based on their reliance 22 on the Department of Finance. 23 At this stage in the rulemaking process, if 24 the Board has concerns about the Department of 25 Finance letter, the Board can decide not to proceed 26 with the proposed amendments and publish a notice to 27 that effect in the California Notice Register. And 28 that would end the current proposal to amend 6 1 Regulation 1525.4, but without affecting the Board's 2 authority to amend the regulation in the future. 3 The Board cannot withdraw the regulation at 4 this time from OAL's consideration, which was 5 discussed in the Department of Finance letter, 6 simply because it hasn't been submitted to OAL yet. 7 Unless the Board actually adopts the 8 proposed amendments and submits the completed 9 package to OAL, at that time if they were to change 10 their mind, then they could withdraw. But it's 11 simply not feasible to withdraw at this time. 12 Accordingly, if the Board chooses to adopt 13 the proposed amendments and submit the rulemaking 14 file to OAL, there are a couple options that would 15 exist. 16 If it's submitted to OAL and OAL disproves 17 the proposed amendments based on any grounds, 18 then -- and most likely we would anticipate it would 19 be based on the DOF letter -- OAL must provide the 20 Board a written opinion regarding the disproval. 21 The Board would have ten days to file a 22 written request for review of OAL's opinion with the 23 Governor's Legal Affairs Secretary, and have OAL's 24 opinion reviewed by the Governor. And OAL's 25 decision would be become final if not appealed 26 within that ten-day period. 27 However, in this case, if they do actually 28 disprove the proposed amendments, it's our opinion 7 1 that, in all likelihood, we do not think that an 2 appeal would be fruitful or that it would result in 3 the Governor's office overturning OAL at this point. 4 That's simply our interpretation. 5 However, ultimately, it's for the Board to 6 decide how they want to proceed at this point. 7 And at this point I will hand off to 8 Ms. Twomey. 9 MR. HORTON: Thank you very much. 10 THERESE TWOMEY 11 MS. TWOMEY: Good afternoon, Members. 12 Good afternoon, Members. Thank you for the 13 privilege to provide testimony on this issue. 14 And thank you again for your ongoing, 15 continued leadership on this issue, as well as the 16 dedication and hard work on your staff since the 17 legislation was passed in 2013. 18 There are a couple of important points I'd 19 like to address. The first has to do with the 20 Board's authority. The Board is fully within its 21 vested authority to make regulatory changes to 22 provide taxpayer guidance on this issue. And that's 23 simply what the proposed amendments that your Board 24 has looked at, has drafted with our cooperation. 25 This is a matter in which taxpayers are 26 asking for an interpretation on an ambiguity that is 27 apparent in the statute itself. 28 If you interpret the statute the way that 8 1 it's currently being interpreted, then it provides 2 an inherent conflict of two provisions in the 3 statute itself. The way that the amendments specify 4 the interpretation would be to allow taxpayers and 5 the Board of Equalization to administer the statute 6 the way it was intended by the legislature. 7 So, within those parameters -- to provide 8 guidance to taxpayers, to provide guidance in the 9 administration both to the Board of Equalization 10 staff and to taxpayers -- that is fully within the 11 power and the authority and the responsibility of 12 the Board of Equalization. 13 The second point that I'd like to address 14 is the economic impact. When this legislation was 15 moving forward in the legislature, this was part of 16 a three-part plan. The Governor's plan was to 17 eliminate the enterprise zones. And with 18 elimination of the enterprise zones, to replace it 19 with three incentives. 20 The biggest incentive is this 21 manufacturer's exemption -- excuse me. The other 22 two incentives have to do with hiring credit, as 23 well as the California GO-Biz Competes. 24 The intent was to have these three new 25 incentives be revenue neutral to the elimination of 26 the enterprise zones. 27 Finance's own estimate of all three to 28 become revenue neutral was a minus of $750 million 9 1 for the enterprise zones and a plus of $750 million 2 for all three components. 3 By Finance's own estimate, as indicated in 4 the floor analysis when this bill went through the 5 legislature for final vote, Finance's estimate was 6 that taxpayers would be allowed to use $486 million 7 of this exemption. To date, the utilization based 8 on the interpretation of that statute, is 25 9 percent. 10 Our petition is to ask for simple, 11 clarifying, interpretative language to provide 12 taxpayers with the guidance necessary in order to 13 give them comfort to use this exemption. 14 That is what the Board did in August when 15 we heard this issue. We ask currently, now, that 16 the Board transmit the regulations to the Office of 17 Administrative Law. That is because we disagree 18 with the Department of Finance's assessment that the 19 economic impact is a cost increase, when Finance's 20 own numbers were $486 million, we're now using -- 21 taxpayers are being able to utilize a little bit 22 over 25 percent of that. It's unclear how that can 23 be, quote, unquote, "a cost increase." 24 Therefore, we're asking for additional time 25 to work with the administration towards resolution. 26 And by doing so, we request respectfully that the 27 Board transmit the regulations and the proposed 28 amendments to the Office of Administrative Law to 10 1 allow us that time. 2 We've also requested a meeting with the 3 Governor's office to work with him on how to ensure 4 that this revenue -- this proposal is revenue 5 neutral, consistent with his economic plan for 6 trying to improve the manufacturer's exemption in 7 California and make California more competitive. 8 With that, I thank you for your 9 consideration and for your time. 10 MR. HORTON: Thank you very much. 11 Discussion, Members? Member Runner. 12 MR. RUNNER: Yeah, just a quick question 13 on -- when do we -- how -- what would be the 14 timetable that we'd assume -- I'm -- it's probably 15 in statute -- that OAL has to review this? 16 MR. TUCKER: Off the top of my head -- I 17 have to check back. 18 MR. RUNNER: Okay. 19 MR. TUCKER: I apologize. 20 MR. RUNNER: Okay. I'm just -- I mean, I 21 just wondered again -- 22 MR. TUCKER: Perhaps thirty days. 23 MR. RUNNER: Okay. Okay, I mean, I guess 24 my view here is that, you know, I think we clearly 25 have some interesting discussions going on in 26 regards to our authority, in regards to definition 27 of economic impact. 28 You know, I do believe -- and again if 11 1 people recall back when this was a debated issue in 2 the legislature, this whole idea, that number was a 3 very hotly contested issue because they were trading 4 one -- one economic stimulus for another one. And 5 it needed to be -- and the num -- and the total 6 dollars were a part of that package. 7 And, so, it seems to me that I don't think 8 there is anything wrong with us looking at that as 9 the number in regards to the economic impact in 10 regards to the fact that this is below that and this 11 is not a new, additional $50 million and all of a 12 sudden we're having an impact. 13 The other side is as I -- again I -- I 14 would be concerned that we fully -- and unless the 15 Board would decide that we are actually not moving 16 in our authority, I would assume that it would best 17 for us to truly move out and continue in this 18 direction and let OAL and Finance make their 19 statements. 20 And at the end of the day we do our due 21 diligence and we thought we were okay. And they 22 choose to somehow, you know, determine that we 23 were -- that these are needed, well, then, that's 24 fine. 25 But I -- I'm concerned about us kind of 26 stopping our process when it is that we have an 27 opinion letter that's been kind of -- not an 28 official opinion letter, but a letter with an 12 1 opinion in it -- from Finance telling us to go ahead 2 and withdraw our hold on that issue. 3 I also think it's important, it seems to 4 me, that as this is a debated issue that by moving 5 forward with it we do give Cal-Tax a chance to go 6 ahead and have conversations with the Governor's 7 office, which is not necessarily equivalent to 8 Finance, and help them go ahead and determine if 9 there's a path that they can then find as this 10 regulation moves forward. 11 So, I'm supportive of us moving forward 12 with it. And I think it's within our authority. 13 And then let's just see what the next part of the 14 process holds. 15 MR. HORTON: Ms. Stowers. 16 MS. STOWERS: No, sir -- well, I do have a 17 comment. 18 Just for the record, I still object as 19 moving forward. 20 MR. HORTON: Member Harkey. 21 MS. HARKEY: I just -- this is a question 22 for Therese, if we get the same response back and 23 you need to run this statutorily, are you going to 24 be finding a steeper uphill battle by carrying this 25 forward now? 26 MS. TWOMEY: I don't believe so. I think 27 that having the proposal move forward signals from 28 the BOE that on a policy basis, not on procedural 13 1 or, you know, what Finance thinks, that on a policy 2 basis the Board of Equalization supports being able 3 to implement this piece of law the way the 4 legislature intended it to. 5 And I think that would add to and help our 6 legislative process as opposed to being a 7 detriment. 8 MS. HARKEY: Okay. So, you feel it's 9 additive and that -- you know, we thought it was 10 within our purview, so -- 11 MS. TWOMEY: And we agreed. 12 MS. HARKEY: -- thank you. 13 MR. HORTON: Members, at no point do we 14 want to minimize our authority, which would -- is 15 pretty much what the Department of Finance would be 16 asking relative to their inquiry about our 17 authority, from my perspective. 18 The Board of Equalization has the authority 19 to make a recommendation. We don't -- we recommend 20 legislation. And the legislation goes to the Office 21 of Administrative Law. And if they sign off on it 22 or say we're not doing anything we shouldn't be 23 doing, then it goes into -- into play. 24 The -- the challenge that I have here is 25 that the -- the Department of Finance has raised a 26 technicality. And I'm just interested -- interested 27 in either one of you responding to that technicality 28 that this may be a major regulation, that there may 14 1 be -- Ms. Twomey has already shared her thoughts 2 with the Department -- there may be a cost factor, 3 economic cost factor. 4 Were you able to at least inquire of our 5 economists to see -- I think the concern, if I just 6 may sort of put my two cents in, is not that it 7 increases the projected costs relative -- because 8 only 25 percent has been consumed, we are, to some 9 degree, expanding the -- those -- expanding the 10 definition to some degree do allow more people to 11 actually utilize this, which is a wise thing, I 12 think, on our part. But in doing so, it may -- it 13 may actually increase the usage, hopefully. And 14 increasing the usage may result in this additional 15 cost factor that Department of Finance has put 16 forth. 17 So, there's a question there and a 18 statement. 19 MR. TUCKER: I'll -- 20 MR. HORTON: Mr. Tucker. 21 MR. TUCKER: -- I'll do the best I can to 22 answer. 23 Initially we determined that this was not a 24 major regulation, simply because we looked to the 25 enabling and enacting -- pardon me -- statute. And, 26 so, we looked at the cost being associated with the 27 statute, not with the regulation. So, that's why we 28 determined that there was, at the point, zero 15 1 impact. 2 We did not look at it from the perspective, 3 as the DOF letter points out, that it would be a 4 major regulation because we didn't attribute any 5 cost to anything other than the underlying statute. 6 However, it -- if we were to do such a 7 review, it would -- it's something -- it would be 8 new for us. We have not done so historically. We 9 have simply looked to whatever the enacting statute 10 was and attributed the costs there. 11 MR. HORTON: Yeah, the -- Members, it sort 12 of seems to me that the Department of Finance has 13 put a poison pill in there with that major 14 regulation language. 15 And, so, the Department -- the Office of 16 Administrative Law, relying on the Department of 17 Finance, believing that it is there, with that 18 poison pill in there, is just going to deny it. 19 And, so, even if we go forward, we're going 20 forth knowing that the odds are pretty good that 21 Office of Administrative Law is going to follow 22 Department of Finance and not assess whether or not 23 we are right that this is not a major regulation 24 because we have not put forth any economic numbers 25 saying that we believe it is not. 26 So, at a minimum, we ought to say 27 that based on something that we believe, that this 28 is not a major -- that the cost estimate by the 16 1 Department of Finance is high or doesn't exist or is 2 not existing or something do that effect, so that -- 3 and that, I think, positions us to at least call 4 into question this technicality. 5 We don't call it into question, it stands 6 as the Office of Administrative Law's reality, and 7 it gets denied. And basically we're poking the bear 8 in the face for -- and I don't -- I can't find a 9 reason to do that at this point. 10 MS. TWOMEY: We would also be working with 11 the Department of Finance and the Governor's office 12 primarily to address that issue as well. 13 MR. HORTON: Is -- from the timelines, is 14 there a way that we could put this over to give them 15 time to talk to the Governor's office or -- 16 MS. TWOMEY: We put in a request as soon as 17 we -- the issue has been that we were not informed 18 of Finance's objection until very late last week. 19 So, as soon as we found out, we put in a 20 request to meet with the Governor's office. The 21 Governor was out of state yesterday and has just 22 returned to the state today. 23 And it's a matter of getting folks who are 24 out of town to come into town as well. So, we are 25 awaiting the scheduling of that. 26 MR. HORTON: Now are -- 27 MS. TWOMEY: We think moving forward would 28 be to have the OAL, because they do have -- to 17 1 transmit it to OAL because they do have thirty days. 2 And we think that within that 30 days we can work 3 towards a resolution. 4 MR. HORTON: And you would be having this 5 conversation with the Governor's Chief of Staff, 6 Ms. McFadden? 7 MS. TWOMEY: Yes. 8 MR. HORTON: She's in town. I think I 9 spoke to her maybe last week. So, she's in town. 10 And you never had this conversation with 11 the Governor before on these particulars? 12 MS. TWOMEY: No, because we -- frankly, 13 this was a surprise to us that Finance would come 14 in, No. 1, a budget agency, to question the legal 15 rulemaking process, which is primarily the 16 jurisdiction of the Office of Administrative Law. 17 It's our understanding this hasn't happened 18 very often. I don't know if it's ever happened in 19 the past. And, so, it's a surprise to us. We 20 weren't informed about it until recently. 21 And, so, as soon as we found out we put a 22 call in and made a request for a meeting with 23 Ms. McFadden. 24 MR. HORTON: Now based on your experience, 25 do think it's a surprise to the Governor's office? 26 MS. TWOMEY: I don't know that the Governor 27 has knowledge of this or even the front office of 28 the Department of Finance. 18 1 Based on my reading the letter, it's pretty 2 technical. It's signed by a PBM, which is somebody 3 who's not in the Capitol office -- in the Capitol 4 itself. It's Finance's budget staff, although a 5 manager level. So, I don't know that it's risen to 6 that level. 7 MR. HORTON: Okay, thank you. 8 Member Runner. 9 MR. RUNNER: I was just going to ask, 10 typically -- this can't be the first time that we've 11 created -- had to move forward with a regulation 12 that had an amount of money that was budgeted or a 13 piece of legislation that had an amount of money 14 attached to it over $50 million. 15 In the past when we'd have similar 16 situation -- similar dollars like that, a piece of 17 legislation that had dollars attached to it, did we 18 ever -- did we ever have to do this -- the -- the 19 economic impact in the past? 20 MR. TUCKER: For example -- 21 MR. RUNNER: Yes. 22 MR. RUNNER: -- when we implemented the -- 23 that regulation itself, 1525.4 -- 24 MR. RUNNER: Right. 25 MR. TUCKER: -- we put it forth as zero -- 26 MR. RUNNER: Okay. 27 MR. TUCKER: -- impact. 28 MR. RUNNER: Okay. So, that, to me is the 19 1 point. To me that's a key point because -- 2 MR. TUCKER: What we did -- 3 MR. RUNNER: -- again, we moved forward 4 with that without having -- having triggered any 5 economic impact. The dollar amount in that 6 legislation was 400 and -- 7 MS. TWOMEY: Was $486 million. 8 MR. RUNNER: So -- so, again, it seems to 9 me that this is a different kind of a call -- that 10 we're being asked make here, inconsistent with what 11 we've have done in the past? 12 MR. HORTON: Well -- 13 MR. RUNNER: Go ahead. Let me ask -- 14 MR. TUCKER: I would agree, I would agree. 15 It's -- as I said, when the initial 16 regulation went through, it was with zero economic 17 impact. 18 MR. RUNNER: And then we weren't -- we 19 weren't required at that point. 20 MR. TUCKER: Well -- 21 MR. RUNNER: Obviously, we weren't 22 required. 23 MR. TUCKER: -- it may not have been 24 required at that point, but it's consistent with our 25 view that the economic impact falls back on the 26 statute. 27 MR. RUNNER: In our regulation that we're 28 doing now is basically still -- 20 1 MR. TUCKER: It's an amendment that -- 2 MR. RUNNER: -- creating an amendment to 3 that -- that particular item. 4 MR. TUCKER: -- correct. 5 MR. RUNNER: I guess the thing that would 6 make sense to me is if, indeed, our amendment -- or 7 that our amendment to the regulation was going to go 8 over the $450 million, then it would -- then it 9 would seem to me that's -- that's an interesting 10 discussion. 11 But right now we're still -- believe that 12 we're within the amount of dollars within the 13 statute. 14 Okay. 15 MR. TUCKER: It's consistent with how we've 16 done it in the past. 17 MR. RUNNER: Okay, thank you. 18 MR. HORTON: Just to -- my view, from a 19 historical perspective, is -- is that historically 20 none of our regulations have an economic impact 21 greater than what was conceived in the original 22 legislation. So, it's always been zero. 23 And it would only be more than that if, in 24 fact, our actions is causing a greater liability on 25 the state. 26 And that's -- and whenever that occurs, 27 50,000 or not, the legislature's going to say, 28 "You're acting outside your authority," because 21 1 that's a budgetary thing. 2 And that's what the Department of Finance 3 is saying is that you've got in ex -- we don't know 4 how much, but you've -- we believe you have an 5 excess 50 million in which the -- which the Governor 6 and the legislature have allocated by virtue of this 7 regulation. 8 And, so -- 9 MR. RUNNER: I don't think they're saying 10 that. I don't think they're saying that they 11 believe that -- that this $50 million over the 12 $400 million. 13 MR. HORTON: -- what does the expert say? 14 MS. TWOMEY: I don't know what Finance is 15 actually saying, except that they believe there is a 16 cost impact to it. 17 MR. RUNNER: Right. 18 MR. HORTON: But they can't -- I mean, not 19 to create a colloquy, my apologies. 20 If Department of Finance is saying that 21 50 million is within the 490, this is -- they can't 22 object. 23 They -- you know, it's not a major 24 regulation. It's just -- just an amendment to an 25 existing regulation. 26 MR. RUNNER: I think the Chair has hit the 27 core of the discussion. 28 MS. TWOMEY: Yes. And that's why we would 22 1 like the opportunity to discuss further with, you 2 know, the Governor's office on what it is, because 3 the first year, based on Finance's own number in the 4 bill analysis for the floor statement, they estimate 5 486. 6 But in the second year, which we are now 7 in, they estimate $521 million of utilization. And 8 the utilization will increase in Year 2 and 3. 9 But we won't reach those targeted numbers 10 that Finance put together unless there are some 11 clarifying of the ambiguities. 12 And when we're a quarter below or, excuse 13 me, 75 percent below that target, it's unclear how 14 that is a cost increase. 15 MR. RUNNER: Let me ask -- can I just 16 follow up on that? 17 MR. HORTON: Yeah, sure. 18 MR. RUNNER: Again in the opinion of 19 Cal-Tax, do you believe that -- that moving forward 20 with this amended regulation is going to put us over 21 the amount that was in the original legislation? 22 MS. TWOMEY: Absolutely not. 23 This is one small fix. There are other 24 barriers. I believe that when the legislature 25 looked at the numbers it was based on numbers that 26 we had to get on the data that was available. 27 And the data that was available was based 28 on the MIC, when California had aerospace industry. 23 1 We had a much larger tech industry. 2 We're not sure that the factors that were 3 discounted in order to derive these estimates took 4 into account that many of those aerospace industries 5 are no longer in California because, you know, the 6 federal government has cut back on its defense 7 budget. Many of those tech companies have relocated 8 and expanded outside the state. 9 So, we think those numbers are 10 overestimated. 11 MR. RUNNER: Thank you. 12 MR. HORTON: Okay. Further discussion, 13 Members? 14 Is there a motion? Member -- 15 MS. MA: I was just going to say, I agree. 16 I mean -- 17 MR. HORTON: -- Member Ma. 18 MS. MA: -- when we pass legislation in the 19 legislature, sometimes it is not clear. And this is 20 under our purview. 21 And I think to assist taxpayers in trying 22 to figure out if they qualify or not, I think that 23 is within our purview. 24 I also agree with my colleagues that this 25 does not increase costs. This is just clarifying 26 who can and can't file within the guidelines of 27 taking this credit. 28 So, I'm also a little bit confused on why 24 1 this would increase costs when, you know, 25 percent 2 of the fund is being used right now because there is 3 so much confusion out there. 4 MR. HORTON: Yeah, I -- I agree with you 5 guys. 6 The challenge I'm having is that they have 7 created this technicality and if we don't -- maybe 8 Mr. Tucker, is there a way that we could -- we 9 could, at least, challenge that by indicating that 10 we believe that -- we believe, based on -- maybe 11 during this time period we could have our economists 12 take a look at it and have some authoritative body 13 within the Board of Equalization, so we can expedite 14 it -- that we believe that this clarification will 15 only allow -- is consistent with what the 16 legislature prescribed relative to the overall cost. 17 MR. TUCKER: My understanding is that a 18 challenge would come after it's been disproved by 19 the OAL. And that's when we'd have the ten-day 20 period. 21 I'm not aware of any means to do so during 22 this process. 23 MR. RUNNER: I would move adoption of the 24 proposed amendments. 25 MR. HORTON: It's been moved by Member 26 Runner, second by Member Ma. 27 Objection noted. 28 Ms. Richmond, call the roll. 25 1 MS. RICHMOND: Mr. Horton. 2 MR. HORTON: No. 3 MS. RICHMOND: Ms. Harkey. 4 MS. HARKEY: Aye. 5 MS. RICHMOND: Mr. Runner. 6 MR. RUNNER: Aye. 7 MS. RICHMOND: Ms. Ma. 8 MS. MA: Aye. 9 MS. RICHMOND: Ms. Stowers. 10 MS. STOWERS: No. 11 MS. RICHMOND: Motion carries. 12 MR. HORTON: Motion carries. 13 Thank you very much. Appreciate you, 14 Mrs. Twomey, Mr. Tucker, thank you. 15 ---o0o--- 16 17 18 19 20 21 22 23 24 25 26 27 28 26 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 NOVEMBER 17, 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 27 constitute 14 a complete and accurate transcription of the 15 shorthand writing. 16 17 Dated: DECEMBER 2, 2015 18 19 20 ____________________________ 21 JULI PRICE JACKSON 22 Hearing Reporter 23 24 25 26 27 28 27