1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 REPORTER'S TRANSCRIPT 7 APRIL 30, 2019 8 9 10 ITEM K 11 OTHER ADMINISTRATIVE MATTERS; 12 ITEM K2 13 CHIEF COUNSEL'S REPORT 14 15 16 17 18 19 20 21 22 23 24 25 26 27 REPORTED BY: Jillian M. Sumner 28 CSR NO. 13619 1 1 P R E S E N T 2 3 For the Board of Honorable Malia S. Cohen Equalization: Chair 4 Honorable Antonio Vazquez 5 Vice Chair 6 Honorable Ted Gaines First District 7 Honorable Mike Schaefer 8 Fourth District 9 Yvette Stowers Appearing for Betty T. 10 Yee, State Controller (per Government Code 11 Section 7.9) 12 For the Board of 13 Equalization Staff: Henry Nanjo Chief Counsel 14 Board Proceedings 15 Toya Davis Clerk 16 Board Proceedings 17 ---oOo--- 18 19 20 21 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 APRIL 30, 2019 4 ---oOo--- 5 MS. DAVIS: The next item is K2, the Chief 6 Counsel's Report. This item is informational only as 7 well. It does not require a vote. 8 Mr. Nanjo, please come forward. 9 MR. NANJO: I think it's still morning. 10 Good morning, Chair Cohen, Board Members, 11 Deputy Controller Stowers. 12 As you know, I'm Henry Nanjo, Chief Counsel. 13 And this month I will be providing a brief 14 update on the Legal Division's workload status. 15 In addition to the day-to-day work of the 16 Legal Division, one of our key functions is to 17 provide legal advice, answer questions, or provide 18 legal guidance to Property Tax Department staff, 19 assessors' offices and their staff, and taxpayers and 20 taxpayer representatives. 21 In some cases assessors and taxpayers will 22 jointly request a legal opinion from the BOE Legal 23 Department, and frequently agree to be bound by that 24 opinion, thus eliminating the need for litigation 25 between the taxpayer and the assessor. Or they will 26 actually take a hold or a pause in the middle of 27 their litigation to have the BOE legal opinion 28 resolve their case. 3 1 In addition, rather unique to legal 2 departments, the BOE Legal Department also answers 3 taxpayer and taxpayer representative legal questions 4 on property tax matters. 5 So in a very real way, the tax -- the Legal 6 Department is kind of a resource for a wide variety 7 of, not only your constituents, taxpayers, the 8 representatives, but also the assessors' offices, and 9 many other agencies. 10 For example, in the period of 2018 through 11 the first quarter of 2019, the BOE Legal Department 12 received 327, quote, advice-type inquiries on 13 substantive property tax issues. Of those 327, we 14 completed 305. 15 Of these inquiries, we received probably 16 about -- excuse me -- approximately 30 percent from 17 assessors, 30 percent from our internal Property Tax 18 Department, but 40 percent of inquiries are from 19 taxpayers and taxpayer representatives. So we are 20 providing a real service to the members of the 21 public. 22 Of the 327 inquiries, 178 of them were 23 received by e-mail, 35 were from letters, and 22 were 24 requests for memorandum opinions on technical 25 property tax issues primarily directed to our 26 internal Property Tax Department. And then we had an 27 additional 70 that were from phone calls. 28 We also have 22 special projects, which are 4 1 assignments, such as the review of proposed 2 legislation in response to specific questions; i.e., 3 not part of our review for legislation analysis, 4 review of property tax litigation not involving BOE 5 as a party, and discussions with various interested 6 parties for the issuance of possible guidance, and 7 those types of matters. 8 The Legal Department usually sends a 9 representative and attorney to your -- to the 10 Department's interested parties process, where there 11 is a resource, and we work very closely with property 12 tax staff. 13 Through a variety of sources we receive 14 information. There is the BOE Legal Department's Web 15 site. The BOE Legal Department has waived contacting 16 us both by telephone and by e-mail. Again, we have 17 letters. 18 My staff and myself also make it a point to 19 go out to assessor's conferences, to various state 20 bar functions, and various CalTax and various tax 21 organization meetings to make ourselves available and 22 make sure people have contact information for us, and 23 can talk to us about issues as they need. 24 As I mentioned in my prior request -- prior 25 reports to the Board, the BOE Legal Department is 26 understaffed for the workload we get. And we 27 continue to kind of fall behind. 28 For example, of the 327 incoming inquiries 5 1 during that period, we were only able to respond to 2 305 of them. But we are trying to keep on top of 3 them. 4 We currently prioritize our responses. Of 5 course it's important to provide legal services to 6 internal property tax staff, so they can do their 7 work. It's also important for us to address 8 assessors. We give a particular priority if an 9 assessor and a taxpayer are trying to resolve a legal 10 issue, to save it from litigation or -- or to stall 11 any litigation. So those are the priorities we 12 assign. 13 In addition, I'm happy to report that we 14 were able to complete our hiring of a tax counsel. 15 So we added one to our staff. And we also got our 16 first support staff position filled. So I'm hopeful 17 that we are going to be able to knock down some of 18 this backlog. 19 Unfortunately, we do still have opinions 20 that are from lower priority from 2017, which we are 21 still trying to work through. 22 And with that, that concludes kind of my 23 workload snapshot. I'm here to answer any 24 questions -- 25 MS. COHEN: Thank you. 26 MR. NANJO: -- that are available. 27 MS. COHEN: What's your current staffing 28 level now? How many do you have on the team? 6 1 MR. NANJO: We have, including myself, seven 2 attorneys and one support staff now. 3 MS. COHEN: Okay. So that's including the 4 two new hires? 5 MR. NANJO: Correct. 6 MS. COHEN: So seven attorneys, one support 7 staff. 8 And what are the number of vacancies you 9 have now? 10 MR. NANJO: We have authorization to hire 11 another AGPA and two Tax Counsel IIIs. So that 12 recruitment is in progress. 13 MS. COHEN: So that's three positions. 14 MR. NANJO: Yes, three more positions. 15 MS. COHEN: And are you moving in the 16 direction to fill all three? 17 MR. NANJO: Yes. 18 MS. COHEN: Okay. And what's the time line? 19 When -- when do you expect those vacancies to be 20 filled? 21 MR. NANJO: I very much am hoping that they 22 will be filled by June. 23 MS. COHEN: Okay. Thank you. 24 I don't have any other questions. 25 Mr. Schaefer. 26 MR. SCHAEFER: Yes. 27 Thank you, Mr. Nanjo. 28 You had 70 phone calls you mentioned, are 7 1 those reduced to some notes, or do you ask the people 2 could they please send you an e-mail or letter? I'd 3 be amazed at how your office responds to a phone call 4 that somebody just wants to chat for your advice. 5 MR. NANJO: We actually encourage phone call 6 inquiries, Member Schaefer. Because a lot of times 7 we can resolve those more quickly. 8 If we have to provide a memo or something in 9 writing, those can be used for other cases or things 10 of that matter. So we -- those tend to take a little 11 bit longer. So we do encourage people to have phone 12 calls. 13 Now, when I say phone calls, they are 14 sometimes very long phone calls. My staff have been 15 known to be on a call with a particular taxpayer or 16 taxpayer representative for over an hour. 17 But the intent is if we can get them taken 18 care of and get the matter behind us right then and 19 there, we are all in favor of doing that. 20 MR. SCHAEFER: Are these calls recorded or 21 just notes made of them as you go along? 22 MR. NANJO: Just notes made of them, yes. 23 MR. SCHAEFER: Are there any specialized 24 courses of BOE tax material among the great law 25 schools of the nation that you know about? Have you 26 ever been invited to appear as a guest lecture? 27 MR. NANJO: Property tax is not something 28 that is that common in law schools. 8 1 But, for example, the Property Tax 2 Department is part of the Western States Association. 3 I'm not getting their acronym correctly. But it's 4 WSATA. And they provide training at those times. 5 In the past, my attorneys have -- I 6 understand have participated in some teaching 7 opportunities. 8 Right now we are so short-staffed, sir, that 9 that's not a priority that I'm assigning them. I 10 really need my attorneys to get the workload knocked 11 down before we can do some of those things. 12 MR. SCHAEFER: And as I've asked you before, 13 if you were to request an article that comes out from 14 one of the law schools in the law journal, property 15 tax issues that you think might be helpful to our 16 education, I would ask you to favor each Member with 17 a copy. 18 MR. NANJO: Absolutely. My pleasure. 19 MS. COHEN: Mr. Gaines. 20 MR. GAINES: Yeah. Thank you. 21 Just -- perhaps you can help clarify Richard 22 Moon's position. 23 MR. NANJO: So Richard Moon is my Tax 24 Counsel IV. So as I mentioned I'm trying to hire two 25 Tax Counsel IIIs. So that would be the senior most- 26 experienced position in my staff from Property Tax. 27 MR. GAINES: Wonderful. And it's my 28 understanding he was -- is he's based out of Southern 9 1 California, or is he up here now? 2 MR. NANJO: No, he's in -- I have two 3 attorneys down in the Irvine office. 4 MR. GAINES: Okay. 5 MR. NANJO: Yeah. 6 MR. GAINES: And is -- so is he operating 7 out of that office? 8 MR. NANJO: Yes. 9 MR. GAINES: Okay. All right. Well, we're 10 very fortunate to have him. Because he's got the 11 depth and experience under both BOE entities. And I 12 just want to highlight him. And I wish you the best 13 in your recruitment efforts. 14 MR. NANJO: I appreciate that. Thank you. 15 MR. GAINES: And I'd like to see if we can 16 get people with property tax experience. 17 MR. NANJO: Yeah. 18 MR. GAINES: Which sounds like a narrow area 19 of law, based on what you're describing to us. So I 20 wish you the best. 21 MR. NANJO: Thank you. 22 MR. GAINES: Thank you. 23 MR. NANJO: I appreciate that. 24 MS. COHEN: Mr. Vazquez. 25 MR. VAZQUEZ: Yes. 26 Thank you for the update. 27 MR. NANJO: Absolutely. 28 MR. VAZQUEZ: And when you're talking about 10 1 possibly filling these vacancies by June, what 2 capacity is that going to give you? 3 Because I know we've had some conversation 4 about, as we move forward, especially in the area of 5 property tax, that you feel like you can obviously 6 use more attorneys. So given that once you get to 7 June, I guess that's you're really at your capacity, 8 you're still going to be short, in your opinion, how 9 many attorneys? 10 MR. NANJO: So I think, ideally -- I've had 11 some discussions with our Executive Director on what 12 would be ideal staffing for the Legal Department. If 13 I calculate the work that was being done under 14 BOE 1.O for just property tax, the back of the 15 cocktail napkin calculation I come up with is about 16 20 staff; 15 attorneys, plus or minus, and 5 support 17 staff. So with the 3, that will take me up to 10 18 staff. So we're kind of halfway there. So we're 19 still short. 20 I'm making up for that in a couple of ways. 21 One, for a lot of our litigation and some of our 22 other things that we don't need to have BOE staff 23 particularly involved in, I'm utilizing the services 24 of the AG's office. 25 The challenge with the AG's office, though, 26 in all candor, is they're very expensive. So it 27 costs us more. And I don't have those resources in 28 house. So we're fighting for those resources with 11 1 everyone else who makes a request for AG's office's 2 services. 3 But operationally, my, again, rough 4 estimation would be 20 staff would put us back at 5 full staff and allow us to be able to handle the 6 workload we have, and maybe do some of the things I'd 7 like for us to be able to participate. 8 Right now, on a very, very cautious basis, I 9 do have some of my attorneys do some education. 10 Especially when we get a request from, like, the 11 State Bar's tax law section, they want a presentation 12 on property tax, I'll try to free up an attorney to 13 go to that, or make a couple presentations here and 14 there. We really should be doing that more. That 15 goes towards our mission of educating the public and 16 the community on property tax matters. 17 So at this point, depending on, you know, 18 whether or not things change or the workload changes 19 drastically or not, I would say 20 attorneys -- or 20 20 legal staff, 15 attorneys, and 5 support staff would 21 be an adequate number to be able to do all of the 22 spectrum of things that I think your Legal Department 23 should -- or our Legal Department should be doing. 24 MR. VAZQUEZ: So when you're saying when you 25 borrow, or when you request assistance from the AG 26 office, they're very expensive? I thought those were 27 pro bono. They don't do pro bono? 28 MR. NANJO: What's that? I'm sorry. 12 1 MR. VAZQUEZ: The AG's office doesn't do pro 2 bono? 3 MR. NANJO: No, they're far from it. It's 4 kind of like being in a taxi; every minute charges. 5 MR. VAZQUEZ: All right. 6 But actually this is good. Because now I'm 7 thinking, as we move forward, especially on our 8 strategic plan, I'm hoping we can tackle some of this 9 as we get together among ourselves to try to figure 10 out, or at least come up with, maybe a game plan to 11 assist you in that staffing level. 12 Because I know you kind of touched on one 13 item that I know many of us are really interested in, 14 is that is to get some of our legal folks out in the 15 public to talk about some of these issues. 16 MR. NANJO: Correct. 17 MR. VAZQUEZ: So people, especially small 18 businesses, don't get in trouble and are caught up in 19 these back taxes, right? 20 MR. NANJO: Correct. 21 MR. VAZQUEZ: And then they end up closing 22 their business because of it. 23 MR. NANJO: Right. 24 MR. VAZQUEZ: Okay. Thank you. 25 MS. COHEN: Ms. Stowers. 26 MS. STOWERS: Thank you, Madam Chair. 27 A couple of questions. I believe you said 28 40 percent of all inquiries were from taxpayers or 13 1 representatives? 2 MR. NANJO: Correct. 3 MS. STOWERS: I'd be curious -- and I don't 4 want to give you new work. But what's the breakdown 5 between taxpayer representatives, and is there any 6 concern that your Legal Department is doing research 7 and are providing legal opinions for attorneys that 8 are taking that work product and marketing it to 9 their clients, for lack of a better term? 10 MR. NANJO: So, candidly, that is a concern 11 sometimes. I can't say that that's a major part of 12 the concern. I mean, most of the inquiries we get 13 are very legitimate. And we know there's real-life 14 stories behind it. 15 I think you've been involved with BOE 1.0, 16 that we do have a couple of individuals, and I won't 17 use their names, that seem like they're attorneys, 18 and they give us a set of hypotheticals, if you will, 19 and say, "Oh, in this case, if you have X and Y," we, 20 you know, we try to -- we try to accommodate those 21 people as well. But, candidly, their priority is not 22 going to be as high. 23 MS. STOWERS: Okay. 24 MR. NANJO: And that's how we handle it. 25 MS. STOWERS: And kind of the same thing, 26 when they're giving these hypotheticals, would you, 27 for the record, kind of explain the difference 28 between oral advice and written advice, and how a 14 1 taxpayer can rely on written advice, and what they 2 must disclose in order for us to provide written 3 advice? 4 MR. NANJO: Sure. 5 So generally speaking, oral advice is giving 6 them guidance. And we are called upon to do that a 7 lot. This is information that, you know, they're not 8 sure how they're supposed to do a particular 9 exemption, they're trying to set up a trust, or 10 something like that. And they just want to know -- 11 have some advice on the property tax implications of 12 that. That's one level. 13 The next level is sometimes we have 14 taxpayer, taxpayer reps, or other people who are 15 having issues with their assessor's office, and may 16 not necessarily be comfortable with what the 17 assessors are telling them. 18 And what we try to do is we don't want to 19 get directly in opposition with assessors, but we try 20 to explain them the law, and kind of give them some 21 guidance. And, again, try to point them back to the 22 assessor's officer and maybe help them frame the 23 questions that they can ask the assessors. 24 Because sometimes what we come across is 25 it's just a miscommunication. The assessor's office 26 is very technical. Obviously, a taxpayer may not be. 27 And they're just not -- they're kind of talking past 28 each other. So we try do give some guidance along 15 1 those lines. 2 When it gets to written opinions or written 3 advice, whether they be a memo or a letter, those can 4 be used by taxpayer/taxpayer reps in their 5 interactions with the assessor's office, and 6 particularly with Assessment Appeals Boards. So 7 we're a lot more careful with the advice we give in 8 those type of situations. 9 If it's -- depending on the situation, we'll 10 check with property tax staff to make sure this isn't 11 something that's already an issue that's being 12 handled by property tax staff. And we don't want to 13 be in a situation where Legal Department is giving 14 advice contrary to property tax staff. 15 If property tax staff is making an error in 16 our opinion, which doesn't happen very often, we want 17 to make sure we can talk to them and get them 18 straightened out. So we'll engage at that level. 19 One of the things that we do make sure 20 before we give written advice is the matter is not in 21 litigation. If the matter is in litigation, then we 22 will not take a position or give them advice. 23 Because we don't want to be drawn into a lawsuit. 24 Because, obviously, we don't have time for that, and 25 that expends a lot of resources. 26 So what we'll do is we will only provide 27 advice in litigation cases when both parties, as the 28 assessor and the taxpayer and the appellant comes to 16 1 us and says, "You know what, we're both going to be 2 okay with whatever you say." You know, that kind of 3 eliminates the possibility we'll be brought into a 4 lawsuit. And more importantly, it helps resolve 5 matters and unclog the court. So we believe that 6 we're providing a service to the legal community as 7 well. 8 MS. STOWERS: That's interesting. Thank 9 you. 10 Thank you, Madam Chair. 11 MS. COHEN: Mr. Vazquez. 12 MR. VAZQUEZ: Yeah. I have one last 13 question I forgot to ask. 14 When he was talking about the brain drain 15 basically from staff that have retired -- 16 MR. NANJO: Yes. 17 MR. VAZQUEZ: -- how did that -- I'm 18 assuming there were some attorneys in there. 19 MR. NANJO: On the attorney staff, actually 20 my two most senior attorneys -- which I'm not sure if 21 the Board's met Sonya Yim, but she's also down in the 22 Irvine office. Both Richard Moon and Sonya Yim are 23 two of my most technically expert attorneys. 24 And at this point, I'm not aware of either 25 one of them having any immediate plans to retire. So 26 consequently, we really weren't hit with the brain 27 drain as much as we were hit with -- when we went 28 from BOE 1.0 to 2.0, we weren't left with any 17 1 attorneys. 2 MR. VAZQUEZ: They just moved over, is that 3 what happened? 4 MR. NANJO: Yes. We have two attorneys that 5 were relatively new that are doing an excellent job. 6 But that's -- we had to make some legislative changes 7 in 2017 that brought Richard Moon and Sonya Yim, and 8 a couple other of my more experienced property tax 9 attorneys back to the BOE. 10 MR. VAZQUEZ: Thank you. 11 MS. COHEN: All right. 12 Mr. Schaefer. 13 MR. SCHAEFER: Madam Chair, if we're about 14 to adjourn for lunch, if there's anybody here on 15 Item N that wanted to briefly comment before we go to 16 lunch, I would be willing to have them appear now so 17 they can be relieved. 18 MR. NANJO: Item N, for the Board Members' 19 reference, is the public comment on matters not on 20 the agenda. As far as I know, we only have one 21 written submission. This is Mr. Mooney, again, who, 22 because of an ADA accommodation, will be reading his 23 comment. So -- 24 MR. SCHAEFER: Oh. 25 MR. NANJO: Yeah. 26 MR. SCHAEFER: So we have nobody out there 27 who is going to have to come back. 28 MS. COHEN: That's what it sounds like. 18 1 So as we wrap up your presentation, I'm 2 probably going to speak on behalf of the body. 3 Because we trust that, you know, that you fully -- we 4 want you to know we fully appreciate the magnitude of 5 the work that's being completed by your Department, 6 our Department, our Legal Department, our legal team. 7 And what I'd like to see starting next month 8 would be for you to begin to provide this Board at 9 least a quarterly report -- 10 MR. NANJO: Okay. 11 MS. COHEN: -- on the substance of your 12 work, as well as the workload. I think last month I 13 also -- we didn't have a written report in our 14 binder. And I would like to get back into the 15 practice of having something that we can thumb 16 through, review, and then ask follow-up questions 17 prior to today's -- prior to the Board Meeting. 18 And, again, it's just because we value the 19 work and look forward to our collective partnerships. 20 Are you -- do you have any other question 21 for Mr. Nanjo? 22 All right, Mr. Nanjo. 23 Okay. Well, folks, it's 11:59. We're going 24 to take a 45-minute recess. We will reconvene at 25 12:45. Thank you. This body is in recess. 26 MR. NANJO: Thank you very much. 27 ---oOo--- 28 19 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, Jillian Sumner, Hearing Reporter for 8 the California State Board of Equalization, certify 9 that on April 30, 2019 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 19 14 constitute a complete and accurate transcription of 15 the shorthand writing. 16 17 Dated: July 24th, 2019 18 19 20 ____________________________ 21 JILLIAN SUMNER, CSR #13619 22 Hearing Reporter 23 24 25 26 27 28 20