1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 1 CIVIC CENTER PLAZA 3 IRVINE, CALIFORNIA 4 5 REPORTER'S TRANSCRIPT 6 JULY 14, 2016 7 8 9 ITEM H 10 TAX PROGRAM NONAPPEARANCE MATTERS - ADJUDICATORY 11 ITEM H2 12 FRANCHISE AND INCOME TAX MATTERS Ad 13 14 DECISIONS 15 1. MICHAEL C. FLETCHER and JANIS I. FLETCHER, 603936 16 17 SECTION 40 (AB2323) MATTERS 18 2a. BRIAN N. KHOURY, 867810 19 2b. JASON B. KHOURY and LISA B. KHOURY, 867855 20 2c. NOELLE K. LUDWIG and TIMOTHY S. LUDWIG, 867874 21 22 23 24 25 26 27 REPORTED BY: Kathleen Skidgel 28 CSR NO. 9039 1 1 P R E S E N T 2 3 For the Board of Equalization: Fiona Ma, CPA 4 Chairwoman 5 Diane L. Harkey Vice Chair 6 Jerome E. Horton 7 Member 8 Sen. George Runner (Ret.) Member 9 (NOT PRESENT) 10 Yvette Stowers Appearing for Betty T. 11 Yee, State Controller (per Government Code 12 Section 7.9) 13 Joann Richmond Chief 14 Board Proceedings Division 15 For Board of 16 Equalization Staff: Grant Thompson Tax Counsel IV 17 Legal Department 18 ---oOo--- 19 20 21 22 23 24 25 26 27 28 2 1 1 CIVIC CENTER PLAZA 2 IRVINE, CALIFORNIA 3 JULY 14, 2016 4 ---oOo--- 5 MS. MA: All right. Ms. Richmond, next 6 item, please. 7 MS. RICHMOND: Our next item is H2 8 Franchise and Income Tax Matters. These items may 9 be taken in one vote or separately. 10 MR. HORTON: Move adoption of staff 11 recommendation, all items, Madam Chair. 12 MS. MA: Okay. Is there a second? 13 MR. THOMPSON: Excuse me. I'm sorry to 14 interrupt. 15 We have a small typographical error, in 16 Khoury, I wanted to get on the record and correct. 17 MS. MA: Okay. Please introduce yourself 18 for the record. 19 MR. THOMPSON: Grant Thompson for the 20 Appeals Division. 21 MR. HORTON: Section 40. 22 MS. MA: Okay. 23 MS. STOWERS: Excuse me. Can we just 24 separate this? 25 MS. MA: Okay. Well, we're going to 26 separate the issues, H2.1 from H2 section 2a and b. 27 So why don't we take up the first item 28 H2.1, the Fletchers. 3 1 MS. STOWERS: On Fletcher, I move to adopt 2 staff recommendation on H2.1. 3 MS. MA: Okay, Ms. Stowers. 4 Is there a second? 5 MS. HARKEY: Second. 6 MS. MA: Ms. Harkey seconds. 7 Motion carries on -- to adopt staff 8 recommendation on H2.1. 9 MR. HORTON: H2.1. 10 MS. HARKEY: That's Michael Fletcher. 11 MS. MA: Now we're going to take up H2.2. 12 And, Mr. Thompson, would like to clarify -- 13 MR. THOMPSON: Yes. 14 MS. MA: -- a typographical error? 15 MR. THOMPSON: Yes, thank you. 16 On page 8, line 26, we need to change "is 17 not disallowed" to "is only disallowed." So the 18 "not" changes to "only." 19 MS. MA: Can you repeat it again; what 20 page? 21 MR. THOMPSON: It's page 8, line 26. 22 MS. HARKEY: That would be, ". . . subject 23 to exceptions that are not relevant here, 24 installment sale treatment is only disallowed . . ." 25 MR. THOMPSON: Right. So if it's within 26 two years, it's disallowed. But it's only 27 disallowed if it's within two years. But as the 28 context makes clear, if it's outside two years, then 4 1 it would, uh -- it would be allowed. 2 We had a double negative there that tripped 3 us up. 4 MS. HARKEY: Okay. That doesn't change 5 anything in the analysis? 6 MR. THOMPSON: No, it does not. 7 MR. HORTON: Hmm. 8 MS. HARKEY: I'm -- I get nervous when 9 words change. 10 MR. THOMPSON: Well, no, it's -- we had 11 said, ". . . is not disallowed if the second 12 disposition is not more than two years." So the 13 combination of -- it's almost a triple negative. 14 And so what we want to say is, "It's only 15 disallowed if the second disposition is not more 16 than two years." 17 MS. MA: Okay. So delete the "not" in line 18 26, the second "not." 19 MR. THOMPSON: Mm-hmm. 20 MS. HARKEY: Right. 21 MR. THOMPSON: That's right. Thank you. 22 MR. HORTON: Madam Chair, I'm a "no" vote 23 on this. 24 MS. MA: Mr. Horton? 25 MR. HORTON: Only announcing because of -- 26 MS. HARKEY: I move staff recommendation. 27 MS. MA: Is there a second? 28 MS. STOWERS: I'm abstaining on this 5 1 item. 2 MS. MA: Okay. I'm going to second. 3 Ms. Harkey moves, Ms. Ma seconds, Ms. 4 Stowers abstains, and Mr. Horton votes no. 5 MS. HARKEY: I think that's a pass. 6 MR. HORTON: That, it is. 7 MS. MA: Ms. Richmond? 8 MS. RICHMOND: Motion carries. 9 MS. MA: Motion carries, thank you. 10 ---oOo--- 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6 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 July 14, 2016 I recorded verbatim, in 10 shorthand, to the best of my ability, the 11 proceedings in the above-entitled hearing; that I 12 transcribed the shorthand writing into typewriting; 13 and that the preceding pages 1 through 6 constitute 14 a complete and accurate transcription of the 15 shorthand writing. 16 17 Dated: October 21, 2016 18 19 20 ____________________________ 21 KATHLEEN SKIDGEL, CSR #9039 22 Hearing Reporter 23 24 25 26 27 28 7