The State Board of Equalization confirmed July 21 that it will accept state-issued registered warrants, aka IOUs, as payment of taxes.
The board did not vote on the issue, but members agreed with their legal staff that a 1992 vote to authorize acceptance of state IOUs remains in effect. Members directed staff to issue a press release announcing the policy, thus clarifying the matter for the public and for the BOE's own staff. As reported in last week's Cal-Taxletter, staff had been instructed not to accept IOUs in person – and IOUs received in the mail were to be kept in a safe and not processed or acknowledged with an official receipt – until the board members had a chance to issue guidance.
Board Chair Betty Yee urged the board's legislative affairs staff to pursue legislation that will codify the acceptance of IOUs in state law. This prompted a discussion of whether the BOE should simply endorse AB 1506 (Anderson), which would add a section to the Government Code declaring that, "A state agency shall accept from any person or entity a registered warrant or other similar evidence of indebtedness issued by the Controller that is endorsed by that payee, at full face value, for the payment of any obligations owed by that payee to that state agency."
Deputy State Controller Marcy Jo Mandel, representing Controller John Chiang, noted that Mr. Chiang supports AB 1506. BOE Member Bill Leonard indicated a preference for supporting the bill, which already has passed its first committee, in order to settle the matter quickly. Mr. Leonard said the state's acceptance of its own IOUs is critical to ensuring that the credit agencies do not downgrade California's credit rating any further.
Ms. Yee said she would like to see legislation that more specifically authorizes the BOE to accept IOUs, to make it crystal clear in case the issue arises in the future. "I don't think we've seen the end of registered warrants, unfortunately," she said.
The legislative staff indicated that they will work on the issue and return to the board with a plan.
Cal-Tax Vice President and General Counsel Michele Pielsticker testified in support of the board's decision to accept IOUs, saying, "It's good policy and it could save the state some money in interest, so it's a win-win for everyone."
Cal-TaxReports, July 27, 2009
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