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State Board of Equalization:
Guidelines Adopted for Administrating New Written Opinion Requirement

A law (AB 2323, Perea) requiring the State Board of Equalization to issue written opinions, beginning in January, was approved this year. After lengthy discussions at its December 19 meeting in Sacramento, the BOE adopted a number of policy guidelines to attempt to comply with the law.

One big issue is the definition of "amounts in controversy." The legislation requiring the written opinions states that the requirement applies to cases where the "amount in controversy" is $500,000 or more, but the legislation does not define the term.

The board unanimously decided:

At the time the BOE votes on an appeal, the board will decide if the opinion is to be a formal or summary opinion. The date of the board's final decision will be controlling for the purposes of AB 2323.

Deputy State Controller Marcy Jo Mandel, representing Controller John Chiang, pointed out that for appeals of FTB-imposed taxes, the published opinion will be issued after the 30 days that a taxpayer has for a rehearing.

Covered decisions will be narrowly drafted, and will include only the findings necessary to support the board's decision, the board decided.

Board members also expressed concern about release of confidential tax information.

The board directed staff to begin a rulemaking process, with interested parties meetings, on AB 2323 implementation issues.

In other BOE news:

Fire Tax Developments. As of December 11, the BOE completed sending more than 752,000 fire tax bills to taxpayers. Approximately $88 million has been billed.

At previous board meetings, board staff presented monthly updates of fire tax developments. Stories based on these updates highlighted significant problems in implementation, excessive administrative costs and significant non-compliance.

On December 19, this procedure was changed. A written report was sent to the board – but was not linked to the online agenda item – and it was assumed that board members had read the report, so staff was available to answer questions but did not make a presentation. A representative of the California Department of Forestry and Fire Protection also was present to answer questions.

During the discussion that ensued, Board Member Betty Yee said she appreciated the memo, and said this is the biggest issue for her constituents this year. She added, "We know some of the problems; we don't know all of the problems."

In response to board members' questions, David Gau, head of the Property and Special Taxes Division, said the board ceased sending "demand" letters on November 28. He also said the Franchise Tax Board sent 24 employees to the BOE to help with administration.

Board Member George Runner said he has heard from people who are grumpy that vacant lots that receive fire-protection services from the state are not covered by the tax (which is labeled by the state as a "fee," and is imposed on owners of property with habitable structures in areas where the state is responsible for providing fire services). Mr. Runner also said people who appeal the tax and are denied will be forced to pay a higher penalty than those who simply do not pay the tax.

CalTax subsequently acquired the report prepared for the board members. The report states that as of December 14, the BOE has mailed 752,543 bills, and has received $55.8 million in revenue. The board has received 55,416 appeals cases, and has mailed refunds totaling $167,804. A total of 64,730 bills have been returned by the postal service, and 149,431 final bills have not been paid (384,371 have been paid, and 24,241 have been partially paid).

Finance Department Nixes BOE Request for Funds to Implement Proposition 30. BOE staff said it is costing $535,000 to implement the sales tax increase provision of Proposition 30, and requested a budget augmentation for 2012-13. The Department of Finance said "no," and told the board to absorb the cost. As a result, board staffers said they are redirecting funds from other programs, and this will delay some projects.

Timber Yield Tax Adopted for 2013. For 2013, the timber yield tax will remain constant, as the board adopted a 2.9 rate, the same as in 2012. There was no disagreement on the adoption of the staff recommendation.

The board also adopted harvest values for the tax for the first half of 2013. The values vary by timber species and location .The values were developed by board staff, in consultation with the Timber Advisory Committee. The highest value timber ($540 for specified logs) comes from redwood trees in the northern coastal counties.

December 21, 2012
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