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 FEBRUARY 23, 2017 10 (Prepared from audio recording) 11 12 SALES AND USE TAX APPEAL HEARING 13 APPEAL OF 14 ISAAC PETER GHARIBEH 15 NO. 469663 (AS) 16 AGAINST PROPOSED ASSESSMENT OF 17 SALES AND USE TAX 18 19 20 21 22 23 24 25 26 Prepared by: Kathleen Skidgel 27 CSR No. 9039 28 1 1 P R E S E N T 2 For the Board of Equalization: Fiona Ma, CPA 3 Chairwoman 4 Diane L. Harkey Vice Chair 5 Jerome E. Horton 6 Member 7 Sen. George Runner (Ret.) Member 8 Yvette Stowers 9 Appearing for Betty T. Yee, State Controller 10 (per Government Code Section 7.9) 11 Joann Richmond 12 Chief Board Proceedings 13 Division 14 For Board of Equalization Staff: Ramona Veregge 15 Business Taxes Specialist III 16 Legal Department 17 Jeff Angeja Tax Counsel IV 18 Legal Department 19 For the Department: Scott Lambert 20 Business Taxes Specialist III 21 Business Tax and Fee Department 22 Kevin Hanks 23 Chief Business Tax and Fee 24 Department 25 Stephen Smith Tax Counsel IV 26 Legal Department 27 For Petitioner: George M. Issa Representative 28 ---oOo--- 2 1 5901 GREEN VALLEY CIRCLE 2 CULVER CITY, CALIFORNIA 3 FEBRUARY 23, 2017 4 ---oOo--- 5 MS. MA: Okay. Next item, Ms. Richmond. 6 MS. RICHMOND: Our next item is C11 Isaac 7 Peter Gharibeh. And I think he just walked in, so 8 we're still copying his paperwork. 9 Is that you, sir? 10 MR. ISSA: Issa? 11 MS. RICHMOND: Pardon me? 12 MR. ISSA: Issa? 13 MS. RICHMOND: Yes. You're next. Please 14 come forward. 15 MS. MA: What happened to C8? 16 MS. RICHMOND: It was postponed. 17 MS. MA: Postponed? Okay. 18 MS. HARKEY: All right. 19 MS. RICHMOND: Yesterday. 20 MS. STOWERS: Were you saying you're 21 copying records? 22 MS. RICHMOND: Pardon me? 23 MS. STOWERS: You said you were copying 24 records for them? 25 MS. RICHMOND: Yes, we're copying the 26 contribution forms. 27 MS. STOWERS: Okay. 28 MS. MA: So we'll wait a minute. 3 1 MR. RUNNER: Are they ready? 2 MS. MA: Ms. Richmond, are you -- are we 3 still waiting? 4 MS. RICHMOND: We're ready. 5 MS. MA: Okay, ready. Okay. 6 All right, Ms. Veregge, please introduce 7 the items in the case. 8 MS. VEREGGE: Madam Chair and Board 9 Members, the appeal before you presents one 10 unresolved issue, which is whether additional 11 adjustments are warranted to the unreported taxable 12 sales. 13 MS. MA: Okay. To the petitioner/taxpayer, 14 welcome. You will have ten minutes to present your 15 case. Then the Department will present for ten 16 minutes. You will have five minutes on rebuttal, 17 and then we'll open it up for questions. 18 MR. ISSA: No problem. 19 MS. MA: Okay. 20 MR. ISSA: First, this is the first time 21 here, you know. 22 MS. MA: Okay. Yeah. So please introduce 23 yourself for the record. 24 MR. ISSA: My name is George Issa. I am 25 representing Mr. Gharibeh. He's the owner of the 26 Bar Melody. 27 Thank you very much for granting me the 28 opportunity to submit my case to you. We're seeking 4 1 your assistance and judgment. My client and I 2 waited five years for this moment. 3 The auditor established his audit entirely 4 on the fact sheet, which he applied to the whole 5 audit period. This is dead wrong. Auditor never 6 asked any question about how long this fact sheet 7 been effective. 8 My client used that sheet for a short 9 period of time before he sold his business. 10 Afterward, the auditor started to improve his -- 11 improvise his calculations. The auditor, by 12 depending heavily on this fact sheet, has committed 13 gross negligence and failure to render due 14 professional care, thus rendering this audit 15 obsolete. I objected on this finding. 16 Later, a reaudit was done, supposedly by 17 more experienced auditors. The result was out of 18 the sort they were stating more and more taxes 19 imposed as a reward. I had no alternative but to 20 insist on having a third party to conduct the audit, 21 which I believe that evidence provided by an outside 22 specialist would provide a fairness to verify and 23 assess tax liability, if any, on my client's side. 24 I think that those experienced auditor 25 believed that -- believe in the policy of Kellyanne 26 Conway which states alternative facts. 27 What kind of observation the auditor did? 28 Normally before doing any audit, the auditor must do 5 1 an observation on the business operations, fair 2 enough to say such operations should be done five, 3 six times a month. 4 Auditor never did -- ask any -- did do a 5 valid observation. The auditor cannot rely heavily 6 upon a glimpse of his personal observation as a 7 means of appraising, operating, and financial 8 results in order to support this audit. 9 There was an article written in the Family 10 Circle magazine dated November 1st, 2008, which 11 reads as follows: 12 "Alcoholic beverages served at 13 restaurants and bars are over 50 percent larger 14 than a standard serving." 15 This, according to the new research. This 16 means that if a person downed two drinks in an hour, 17 he may actually be consuming the equivalent -- the 18 equivalent of three -- three. Added to that the 19 generosity of the bartender who gives the customer 20 an extra free drink, not considering breakage and 21 spilling. In addition, Bar Melody does not use a 22 measurement to pour in the drinks. The bartender 23 just pours it from the bottle generously. 24 I know that the auditor never ever noticed 25 how the drinks are served. When a bartender mix 26 drinks, I assure you that the liquor poured is more 27 than one or two jiggers. 28 In a conference meeting dated March 10th, 6 1 2010, my client brought to the meeting boxes of 2 documents on cart, representing all his entire 3 income for audit period, sales tapes and payout of 4 orders, operation expenses. 5 Unfortunately, my client and I were shocked 6 when Members of the Board told us bluntly that they 7 do not need to examine these papers. 8 Also in this conference, I asked supervisor 9 Anna Smith -- excuse me -- the question, "Who paid 10 more sales, my client or the seller?" I did give an 11 honest answer; my client. 12 In the audit report, auditor reported 13 discovery of proportion that Bar Melody's taxable 14 sales in 2005 is 977,713. This is excluding the 15 nontaxable of more than $105,000, plus the sales tax 16 of $38,000 in 2006. 17 Auditor reported taxable sales of seven 18 fifty-three, excluding the nontaxable of 183,000 19 plus sales tax of 28,000. 20 Finally, in 2007, auditor reported taxable 21 sales of seven thirty-eight, excluding the taxable 22 of one sixty-two plus the income of $32,000 from the 23 sales tax. 24 According to the auditor report, Bar Melody 25 has the following total sales: Year 2005, 26 1,120,302; in 2006, 965,771; in 2007, gross sales 27 932,628. I don't know where he get these figures. 28 Gross sales reported by Melody Bar was, 7 1 2005 five ninety-six; in the year 2006, five 2 sixty-one; 2007, five eighty-two. That's a big 3 difference between what they reported and what they 4 reported. I don't know from where he got these 5 figures. 6 I'm hoping that Members of the Board will 7 agree with me that the audit report present nothing 8 but the policy of weapon of mass destruction. 9 Thank you again and I leave the decision to 10 be decided by your conscience. Thank you. 11 MS. MA: Thank you, Mr. Issa. 12 Okay. To the Department, you'll have ten 13 minutes for your presentation. Please introduce 14 yourself for the record. 15 MR. LAMBERT: Thank you, Ms. Ma. My name 16 is Scott Lambert; to my right is Kevin Hanks, and to 17 his right is Steve Smith, all representing staff. 18 In this particular case the taxpayer 19 operates a -- a bar with a limited restaurant. The 20 audit was initially selected because it was going 21 through escrow and they needed a clearance for the 22 sale of the business. 23 Upon a look of the markup, the markup of 24 record for 2005 was 123 percent, 2006 was 100 25 percent, and the 2007 markup was 111 percent; this 26 is extremely low for a restaurant and bar. 27 If you use an example, which is their -- 28 generally their lowest markup item, which would be a 8 1 bottle of beer, and it sold for $3 a bottle, cost 2 approximately $1, the profit is $2. If you divide 3 the $2 into the cost, the profit and the cost, you 4 get a 200 percent markup. That is higher than the 5 book markups that they have reported to us. That's 6 an indication that the total sales that have been 7 reported are understated. 8 The taxpayer did not provide us with the 9 daily sales reports. The restaurant and bar are 10 open daily for 16 hours a day, from 10:00 a.m. to 11 2:00 a.m. Generally when a, uh, cashier rings out, 12 there'll be a ring-out after each shift, there's a 13 report that's prepared. That information was not 14 provided to us. 15 There were bank statements that were 16 provided. The deposits into the bank statements 17 were less than the sales that they reported to the 18 Board, which is an indication that not all deposits 19 at least are being deposited into that bank account. 20 So, a, uh -- a one-month period was used; 21 it was November of 2007, of the purchase invoices. 22 There was a segregation test. That information was 23 then, uh, used to establish a markup. There was a 24 bar fact sheet that was prepared. The information 25 from the bar fact sheet, uh, and the purchase 26 invoices were used to establish a markup. 27 Upon reviewing for this case, I note that 28 there are, uh, possibly some issues with the markup 9 1 of liquor, which is both well and call drinks. It 2 appears that maybe a more extended test would show a 3 lower markup for those items. 4 Uh, there's also minor issues with the 5 draft beer premium, both pitcher and, uh, single 6 glass. Those -- I will point out for the draft beer 7 premium, it's less than one percent of purchases. 8 It's fairly minor. There also appears that there 9 should be an allowance, a 2 percent allowance for 10 pilferage and spoilage for the food. There was a 2 11 percent allowed for self-consumption. This should 12 be an additional allowance. 13 I brought this to the attention of the 14 representative, that we would be willing to make an 15 adjustment, that, uh, I felt that there was enough 16 information for the Department to -- before it goes 17 to a Board hearing, to make an adjustment. The 18 representative decided not to, uh -- or exercised 19 his right to -- to come to a Board hearing. So, uh, 20 the Department's not opposed to making those 21 adjustments. 22 The -- the -- the liquor pour has been 23 allowed at one-and-a-half ounces, which is a decent 24 size pour. I'll point out on the bar fact sheet 25 that the taxpayer has a 5-ounce glass. When you 26 fill a glass with ice and put an ounce-and-a-half 27 alcohol into the glass, there is not much room left 28 for a mixer. So, uh, it's difficult even to get an 10 1 ounce-and-a-half, let alone more into the glass. 2 There were also additional adjustments that 3 are made for -- on the -- the, uh -- the alcohol. 4 There was a pilferage and spoilage of 2 percent. 5 We've allowed adjustments for liquor spilled of 12 6 percent, wine spilled 6 percent -- well, and spill 7 and over-pours. And so the -- the normal allowances 8 have been made in this case. As I point out, 9 there's -- there's no question that the sales that 10 have been reported are understated. 11 In regards to the food, the food for these 12 type of establishments with a restaurant/bar 13 normally is between 200 to 250 percent. In this 14 case a 212 percent markup was used. It was arrived 15 at, uh, through a different means and was kept 16 because it fell within the normal range that we 17 would expect. 18 Um, there is no penalty in this case. 19 There were limited sales records that -- that were 20 provided. 21 So other than the Department's, uh, 22 recommendation that we take a look at some of the 23 issues that I've described, other than that, the 24 Department concurs with Appeals Division Decision 25 and Recommendation. 26 MS. MA: Okay. Mr. Issa, you may -- 27 MR. ISSA: Yes. 28 MS. MA: -- rebut, five minutes. 11 1 MR. ISSA: Yes, uh -- uh, regarding the 2 bank deposits for the whole year, we -- I -- we 3 declared total sales five ninety-six in 2005, and 4 bank deposits were four ninety-three. 5 In 2006, we declared total sales of five 6 sixty-one nine sixty-five, bank deposits five oh 7 nine oh twenty-four. 8 In 2007, we declared five eighty-two nine 9 ninety-four sales, total sales, with bank deposits 10 five hundred and thirty one ninety-four. 11 Total -- 12 I can't see it. 13 I have total taxable sales for 2005 14 453,757, which according to the tax sales of 15 thirty-seven seven thirty-five. 16 The auditor came up with taxable sales of 17 977,713. I mean, from where he invented these 18 figures? 19 Same thing with the 2006, we have taxable 20 sales three forty-nine four ninety-six. He doubled 21 it, seven fifty-three three oh two. 22 In 2007 I have taxable sales of three 23 eighty-eight four eighty. He said no, seven hundred 24 thirty-eight one fourteen. 25 I mean -- excuse me. 26 This is, uh, obviously, I don't know for 27 where he got -- I don't know, I couldn't figure out 28 where he got these figures, period. 12 1 I have all the -- we brought all the 2 documents, sales slips, everything, to the meeting. 3 They don't want to look at them. Why? 4 MS. MA: Okay. All right. 5 Questions? Mr. Runner. 6 MR. RUNNER: Yeah. I, um -- yeah, I 7 understand the dispute in regards to some of the 8 numbers. But -- but my understanding is the 9 Department did offer to try to make some 10 adjustments. And the -- I guess your client or you 11 were not willing to make those adjustments. 12 MR. ISSA: I declined to do any adjustment. 13 MR. RUNNER: What's that? 14 MR. ISSA: I declined to -- to do any 15 adjustment. 16 MR. RUNNER: Okay. 17 MR. ISSA: Mr. Lambert offered me an 18 adjustment. I said -- 19 MR. RUNNER: Right. 20 MR. ISSA: -- I'm sorry, I don't accept it. 21 I want to submit my case to you and then the 22 decision be made. 23 MR. RUNNER: Okay. Um, because I think the 24 number's going to be somewhere in between. I mean I 25 think -- I think -- I think the issue's going to be 26 trying to find the right number. Um, and, um, I 27 think that's our challenge, um, you know. 28 And so it seems to me -- again, this is 13 1 going to be redundant of our last discussion -- but 2 it seems to me that if the Department is willing to 3 make some adjustments, particularly on pour size and 4 some of these other issues, which is going to be a 5 reduction in some of these liabilities, um, you and 6 your client would want to at least be able to -- 7 to -- to see those and to move and to see if those 8 get you closer. 9 Um, the alternative for us is to go and 10 have you go back to a 30/30/30, talk through these 11 numbers, uh, see if you can come to an adjustment 12 that is reasonable. Um, because it's going to take 13 more than just you disputing the numbers. Um, and, 14 um, then again, if you can't come to a conclusion, 15 you'll be back in front of us again. 16 But at this point, um, it seems to me we 17 are a little bit lost in terms of a decision to be 18 made because we've already heard from the Department 19 that they're willing to make some adjustments, but 20 I'm not sure we're willing to exactly lay those out 21 right now because we're talking about some other 22 kinds of things that need to be -- need to be talked 23 through. 24 Um, and so I'm -- I -- I would suggest and 25 actually make a motion for a 30/30/30, for you all 26 to get together and continue the hearing. But I 27 would listen carefully to the adjustments that 28 they -- that they are wanting to make, too, along 14 1 with you providing the additional information. 2 MS. MA: Okay. I do have a couple 3 questions. 4 Mr. Issa, I have a couple questions 5 first. 6 MR. ISSA: Okay, go ahead. 7 MS. MA: Okay. Uh, now, when you say -- 8 you know, you just gave us the sales and the bank 9 deposits for 2005, 2006, 2007. 10 MR. ISSA: Yes. 11 MS. MA: Where do those numbers come from? 12 MR. ISSA: From the bank statement. 13 MS. MA: From the bank statement. 14 And are they also reported on the tax 15 returns the same way, the same numbers? 16 MR. ISSA: Every item on the bank statement 17 was -- was transferred exactly to the income 18 statement. 19 MS. MA: Okay. 20 So, to the Department, um, what is the 21 discrepancy? Did the taxpayers not charge tax on 22 certain items that you audited? I couldn't really 23 understand -- 24 MR. LAMBERT: Right. Okay. 25 MS. MA: -- why the numbers are double. 26 MR. LAMBERT: Oh, why we doubled. Well, 27 and it basically comes down to the fact that we 28 impeached their records, which means we didn't 15 1 accept what their records were. And the reason for 2 that is, when you take a look at the markup of 3 record, and it's -- in one case it's at a hundred 4 percent, that's -- that's not what you would find in 5 this type of business. There are no, uh -- well, I 6 shouldn't say no. 7 The facts from the bar sheet didn't support 8 a hundred percent markup; it supported a much higher 9 markup. So there can be an adjustment in how you 10 arrive at that. But the bottom line is, is that 11 they had so many purchases of -- and we broke it 12 down between liquor, food, beer, wine. 13 MS. MA: And you had those -- you had those 14 numbers. 15 MR. LAMBERT: We did. 16 MS. MA: Okay. 17 MR. LAMBERT: We did have those numbers. 18 MS. MA: Okay. 19 MR. LAMBERT: And when you take a look at 20 those and then you start figuring out, okay, these 21 are my purchases, this is how much we should 22 receive -- 23 MS. MA: Okay. 24 MR. LAMBERT: -- from the sale of those and 25 you compare it to the cost of those -- 26 MS. MA: Right. 27 MR. LAMBERT: -- it's not a hundred 28 percent. 16 1 MS. MA: Right. 2 MR. LAMBERT: It's over 300 percent. And 3 that's -- that's where the problem comes down to, is 4 the taxpayer's argument is this is what I reported 5 and that was all of my sales and so that's what we 6 say we owe. 7 We say, you know what, the fact that you 8 deposited into the bank and it matches the sales 9 that you reported, uh, on your income tax returns, 10 it appears that not all receipts were deposited into 11 the bank account. 12 Uh, you cannot have a hundred percent 13 markup based on the business that was described in 14 the bar fact sheet. 15 MS. MA: So did you have, um, bank 16 statements? Did you use bank statements, credit 17 card statements? 18 MR. LAMBERT: We did not use the credit 19 card statements, but we wouldn't be opposed to 20 taking a look at that. 21 If the taxpayer wants to provide us with, 22 uh -- give us, again, the bank statements and for us 23 to take a look at what the credit card receipts were 24 and look at it from that standpoint, we're willing 25 to take a look at that. 26 The method that we use is an established 27 method that the Board of Equalization uses to, um -- 28 to arrive at taxable sales when we impeach a 17 1 taxpayer's record. But we're willing to look at 2 additional information. 3 And as I pointed out in this particular 4 case, I believe there is room for adjustment based 5 on what we've done. And I'm willing to -- or the 6 Department's willing to recommend us to take another 7 look. 8 MS. MA: And what type of source documents 9 did you have to, you know, use as the baseline? 10 MR. LAMBERT: For -- 11 MS. MA: For -- for this case. Did you 12 have, what, distribution invoices? What -- what did 13 you use exactly? 14 MR. LAMBERT: Right. They provided us with 15 their purchase invoices for the month of November of 16 2007. So we took all of their purchases and then we 17 broke 'em down between the different categories. 18 And there's a lot of different categories for these 19 types of businesses because you could end up with -- 20 uh, they'll have behind the bar -- and I don't know 21 how familiar you are with the -- with the bar 22 industry -- but you'll have generally what's called 23 a well drink and that's, like -- that's -- if you 24 don't say what kind of liquor you want, you're going 25 to get what they normally serve. And so that's a 26 well drink. 27 MS. MA: The cheapest. 28 MR. LAMBERT: Uh, yeah, it's the cheapest 18 1 drink to the customer, yeah. And it's the cheapest 2 bottle that they buy. 3 MS. MA: Right. 4 MR. LAMBERT: But it's not what they get 5 their high -- well, I'll take that back. It is what 6 they get their highest markup on, is the well drink. 7 It's not the call drink, which is more expensive. 8 MS. MA: Right. 9 MR. LAMBERT: Because the call liquor costs 10 more. So -- and then you can also have what's 11 called a premium drink and, you know, that's -- 12 MS. MA: Even more expensive. 13 MR. LAMBERT: -- a more expensive -- 14 MS. MA: Okay. 15 MR. LAMBERT: -- drink. But then you 16 have -- 17 MS. MA: But the markup is less. 18 MR. LAMBERT: Uh, yeah, it's generally 19 less. Yeah, as you -- because you usually make your 20 markup on some of those bottles of liquor, you know, 21 it might be less than $10 for a bottle and you're 22 able to sell, you know, enough -- say you can sell 23 25 drinks out of there at $4 a shot, so you're 24 making a hundred dollars on a $10 bottle. 25 Um, but, you know, there's -- there's the 26 draft beer, there's wine, there's draft premium, 27 there's singles, there's pitchers. 28 MS. MA: Okay. 19 1 MR. LAMBERT: We have to go through all of 2 those things. 3 MS. MA: Got it. 4 So Mr. Issa, so you kind of heard how they 5 derived their numbers based on the purchase. 6 MR. ISSA: Yes. You know, but you cannot 7 apply, you know, this policy on -- on -- on Bar 8 Melody. Bar Melody is a bar that was run down. It 9 wasn't fancy bar, you know. It was, you know -- the 10 money was -- was not made from the -- from the 11 liquor. 12 MS. MA: What was it made from? 13 MR. ISSA: It was from entry fees when he 14 started to introduce the bands to the -- I mean to 15 the bar and he was offering happy hour with food. 16 MS. MA: Okay. 17 MR. ISSA: He has -- 18 MS. MA: So -- so -- 19 MR. ISSA: -- machines, and that was a 20 good, uh, source for him. 21 MS. MA: Okay. So I think this is what the 22 adjustments could be made if you all get together. 23 I think probably the sentiment is a 30/30/30, 24 meaning 30 days, um, for -- 25 What is it, Mr. Angeja? 26 MR. ANGEJA: 30/30/30. 27 MS. MA: I don't want to say it wrong. 28 Thirty days for -- 20 1 MR. ANGEJA: 30/30/30 and continue the 2 hearing. 3 MS. MA: I know. But explain to him what 4 30/30/30 means. 5 MR. ANGEJA: Well, in this case the 6 Department already has some of the information that 7 it needs to make those adjustments. But they would 8 allow the taxpayer 30 days to provide any additional 9 information, 30 days for the Department to consider 10 that and essentially perform a quick reaudit, and 11 then Appeals has 30 days to consider that. And if 12 there remains a dispute, it would come back before 13 the Board. 14 MR. ISSA: We still have the, uh -- the 15 documents, you know. 16 MS. MA: You still have the documents? 17 MR. ISSA: I brought them to the 18 conference. 19 MS. MA: Okay. 20 MR. ISSA: They said they don't want 21 them. 22 MS. MA: So, you probably weren't here for 23 the last case. But we basically explained that you 24 will now be working with, uh, the Department. 25 They're just going to focus on your case. You're 26 not going to get the same auditor that came out 27 originally. So we are really trying to resolve the 28 case and you will be able to provide that type of 21 1 information: You know, when they had bands; how 2 many people came; you know, any sort of, you know, 3 write-offs; anything that you feel was not taken 4 into account just based on that one month, right, 5 that they used. 6 So this is an opportunity for them to go 7 back again and look at your records. You to give 8 them the records and a fuller picture of what 9 happened. Um, and then they will look at it again 10 for 30 days and then come back. And if it's still 11 not satisfactory, it's not resolved, then you will 12 come back before us. But at least we will have a 13 better picture of what's going on. Because right 14 now we cannot -- we don't know the attendance 15 record, we don't know exactly, you know, how many 16 nights they did what, what they did, how many, you 17 know, meals they served, when they stopped serving, 18 how many drinks. I mean we just don't know right 19 now at this -- at this level today, so that's why 20 we're giving you an opportunity to go back again. 21 MR. ISSA: No problem. I can bring the 22 records. 23 MS. MA: Okay. 24 MR. ISSA: You can have over here, you 25 know. 26 MS. MA: Okay, Ms. Harkey. 27 MR. ISSA: I brought some samples of them, 28 you know. 22 1 MS. HARKEY: Thank you. We're not going to 2 look at those here. 3 MR. ISSA: I know. 4 MS. HARKEY: But we do appreciate you 5 bringing them with you. We will, like, uh, 6 Chairwoman said, we're going to be recommending 7 this, but I do want to make a suggestion. 8 The shelf test for alcohol should be 9 expanded. I think there's only two that were used, 10 uh, you know, as opposed to, I guess, the nine that 11 could have been. 12 So that would be -- and also maybe abate 13 the interest for the period of 10/1/04 to 6/30/16. 14 There were some unreasonable delays and errors in 15 the audit process. 16 I know that the Department removed interest 17 for the five years that the file was lost. But I 18 think there were like three different audits, 19 different amounts, and maybe some delays there. 20 So that would be my recommendation, too, if 21 we can get this resolved somehow. 22 Other than that, I agree with the 30/30/30. 23 MS. MA: Okay. Mr. Horton. 24 MR. HORTON: Thank you, Madam Chair. 25 Members, I -- I -- I haven't seen any -- 26 enough evidence to -- to direct staff to make a -- 27 an adjustment of interest. I would be supportive of 28 them taking that under consideration, but -- 23 1 MS. HARKEY: Right. 2 MR. HORTON: -- certainly wouldn't want to 3 direct them to do so. 4 The -- the other concern is there may -- we 5 may have to take some additional time to have the 6 initial discussion with the taxpayer so that they 7 fully understand what transpired here today and what 8 their option -- what his options are. 9 Um, there appears to be a reluctance to -- 10 to cooperate, but yet still the willingness to 11 cooperate, which is a -- a weird mixture here. Um, 12 and so I just think we need to spend the extra time 13 to kind of go through the calculations and maybe 14 some hypotheticals, "If this was the case, here's 15 what the adjustment might be," you know, so that 16 there's a better understanding of what you're 17 attempting to do. 18 Lastly, I just wanted to commend the 19 agency -- I mean the Department, uh, for being 20 forthcoming with this information, thoughtful in 21 trying to get to the right number, and be as 22 cooperative as they can with the taxpayer. We 23 appreciate that. 24 Thank you, Madam Chair. 25 MS. MA: Okay. There was a motion -- is 26 there a second -- for a 30/30/30? 27 MS. HARKEY: Yeah, I think there was a 28 motion and a second. 24 1 MR. RUNNER: Is there -- 2 MS. HARKEY: I'll second. 3 MS. MA: Okay. 4 MS. HARKEY: Yeah. 5 MS. MA: Mr. Runner moves, Ms. Harkey 6 seconds, for a 30/30/30 and to continue this case. 7 MR. ISSA: I'm glad to bring all the 8 documents we have. 9 MS. MA: Okay, good. You'll have the 10 opportunity now, Mr. Issa. 11 MR. ISSA: I wish they ask for it -- 12 MS. MA: Thank you. 13 MR. ISSA: -- but they never did. 14 MS. MA: Thank you. Well, thank you for 15 coming today. 16 MR. ISSA: Thank you. 17 MS. MA: We appreciate it. 18 MR. ISSA: Thank you very much. 19 ---oOo--- 20 21 22 23 24 25 26 27 28 25 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 February 23, 2017 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 25 14 constitute a complete and accurate transcription of 15 the shorthand writing. 16 17 Dated: March 21, 2017 18 19 20 ____________________________ 21 KATHLEEN SKIDGEL, CSR #9039 22 Hearing Reporter 23 24 25 26 27 28 26