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Document 1837322
State of California
Board of Equalization
Office of Executive Director-MIC: 73
Telephone: (916) 327-4975
Memorandum
To
Honorable
Honorable
Honorable
Honorable
Honorable
Betty T. Yee, Chairwoman
Judy Chu, Ph.D., Vice Chair
Bill Leonard
Michelle Steel
John Chiang
(_.~
From
Subject
Date:
July 10, 2009
,
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'7;JJ;
?'7?1:f(7 r;;{'J
Ramon J. Hirsig
Executive Director' Ittl
I
State Issued Registered Warrants
May the BOE Accept State-Issued Registered Warrants as Payment of Tax and Fee
Liabilities?
The question of whether BOE may accept IOUs in lieu of cash or other legal tender for tax
and fee liabilities incurred from individuals or entities which have been "paid" with State-issued
registered warrants, otherwise known as IOUs, for goods or services provided to the State
has been considered by our Legal Department. The legal opinion on the issue is attached for
your consideration.
If the Board decides that BOE should accept registered warrants as payment of taxes and
fees due, procedures will be established by program and accounting staff to process such
payments.
RJH:fr
Attachment
ITEM P1b
07-22-09
State of California
Board of Equalization
Legal Department, MIC: 83
Office of the Chief Counsel
Telephone (916) 445-4380
Fax (916) 323-3387
Memo r an dum
To:
Honorable Betty T. Yee, Chairwoman
Honorable Judy Chu, Ph.D., Chair
Honorable Bill Leonard
Honorable Michelle Steel
Honorable John Chiang
From:
Kri.stine Cazadd.J;
/}1t~1
Clnef counsel~I'?e/Gfr -..
Subject:
Questions Concerning Registered Warrants for Tax Payments
Date: July 14, 2009
.:1 ".
QUESTION PRESENTED
Board Member Bill Leonard has asked whether the BOE would be allowed to accept registered warrants
issued by the State (known informally as IODs) in payment of tax liabilities from taxpayers who are payees
on registered warrants. Specifically, the questions posed were:
(1) May the BOE accept IODs in lieu of cash from local agencies, private contractors, State
vendors and corporations/businesses, which have been "paid" with State-issued IODs for services or
sales to the State or for tax refunds 1 from the State?
(2) If so, then what form of an IOD would be acceptable for purposes of payment to the BOE?
(3) May the BOE accept IODs in lieu of cash from a third party or accept (non-State issued) IODs
in lieu of cash from any local agencies, private contractors, State vendors and
corporations/businesses, for their sales or use tax liabilities under any circumstances?
BRIEF ANSWER
(1) The BOE is not required to accept registered warrants issued by the State as payment for tax
liabilities, but is not prohibited from doing so. If the BOE chooses to accept the warrants, staff
will need to develop a process for handling them. The BOE would hold the warrants until the
maturity date and then redeem them directly with the State.
(2) If the BOE chose to accept IODs, registered warrants issued by the State would be acceptable.
1 The State Controller's Office infonned BOE Accounting staff that, as of July 10, BOE's tax refund claimants would receive
regular warrants, not registered warrants.
Honorable Board Members
-2-
July 14, 2009
(3) BOE practice has been to refuse to accept IOUs, negotiable instruments or checks from third
parties and would likely refuse to accept non-State issued IOUs by any person or entity other
than the State.
DISCUSSION
The BOE is Not Required to Accept Warrants
There is no law requiring the BOE to accept registered warrants. There is a statute that requires the State to
accept registered warrants as security for payment of personal income taxes or bank and corporation taxes,
meaning that it applies only to the Franchise Tax Board (Govt. Code section 17280.1). Rules of statutory
construction say that if the Legislature had intended to require the BOE or other agencies to accept the
warrants, it could have done so. In fact, there is a bill pending in the Assembly (AB 1506, amended most
recently on July 1, 2009) that would add section 17203.6 to the Government Code, requiring all State
agencies to accept registered warrants for the payment of any obligation owed by the payee. As of July 8,
the bill had been considered by the Assembly Business and Professions Committee, which voted
unanimously in favor of the bill. The law would take effect immediately if passed. The fact that members
of the Legislature thought it necessary to introduce such a bill bolsters the argument that the BOE is not
currently required to accept the warrants.
The BOE May Have Discretion to Accept Warrants
Separate from the question of whether the BOE is required to accept the warrants is whether the BOE may
choose to accept them. There is no specific statutory or constitutional provision authorizing a State agency
or the BOE to accept registered warrants as payment in lieu of cash. The statute applicable to payments to
the BOE, Revenue & Taxation Code § 7101, states: "All fees, taxes, interest, and penalties imposed and all
amounts of tax required to be paid to the state under this part shall, except as provided in Section 6452.1,
be paid to the board in the form of remittances payable to the State Board of Equalization of the State of
California. The board shall transmit the payments to the Treasurer to be deposited in the State Treasury to
the credit of the Retail· Sales Tax Fund." The term "remittances" is not defined by statute. Based on the
foregoing, there is nothing requiring the BOE to accept registered warrants issued by the State as a
"remittance."
Nevertheless, statutes in the Government Code provide that registered warrants issued by the State may be
used as security for public or private debts (Government Code section 17203), and are considered to be
"negotiable instruments" (Government Code section 17205). Section 17203 states: "Such registered
warrants are acceptable and may be used as security for the faithful performance of any public or private
trust or obligation or for the performance of any act, including the use of such registered warrants by banks
and savings and loan associations as security for deposits of fund.s of any county, municipal or public
corporation, district, political subdivision, or state agency." Section 17205 provides: "Notwithstanding
any provision of the Uniform Commercial Code, all registered warrants are negotiable instruments." Under
this body of law, a "negotiable instrument" is a form of payment that may be accepted by the payee in a
particular transaction. A negotiable instrument however, is not the same as "legal tender," which must be
accepted as a form of payment. Based on these statutes and the lack of any legal authority that clearly
prohibits it, State-issued registered warrants could be accepted by the BOE as valid remittances for
Honorable Board Members
-3-
July 14, 2009
purposes of crediting payment of a tax liability for the "payee.". If the Board were to decide to accept Stateissued warrants, the State Controller's advice and direction regarding the use of the particular warrants
should be followed.
Should the BOE choose to allow for payment of tax obligations with State-issued registered warrants, there
would be a financial benefit to the State because the payee would give up the right to collect any interest on
the warrant if and when that person submitted the warrant as payment of taxes. The interest rate has been
set at 3.75%. The taxpayer could submit the warrant as soon as the BOE had procedures in place to accept
it, but the interest would not be pro-rated. All of the interest goes to the holder of the warrant at the
maturity date.
BOE Board Meeting minutes from 1992-the last time the State of California issued registered warrantsreflect that staff recommended and the Board voted at its August 27, 1992 meeting to accept State-issued
registered warrants for payment of taxes. The Board delegated authority to staff to develop the necessary .
procedures. Minutes from the August 10, 1992 Board meeting indicate that the BOE had been accepting
registered warrants up to that point, and the issue arose only after Bank of America stopped accepting the
warrants for deposit on August 5, 1992.
Use of Warrants
In effect, the question was posed as to three different uses of warrants.
(1) Registered warrants issued by the State of California.
(2) Registered warrants issued by the State and delivered to a third party by the payee, then remitted
to the State by the third party as payment for taxes or fees due.
(3) IODs issued by others, e.g. local agencies, private contractors, State vendors and
corporationslbusinesses.
The issue of the use of registered warrants issued by the State of California, and presented by the payee,
was addressed above.
The BOE has no legal obligation or authorization to accept a registered warrant from a third party, that is, a
taxpayer or entity other than the payee named on the warrant. Existing BOE practice and procedures do not
allow a taxpayer to make a payment using a third party check, due to the increased possibility of fraud
inherent in such a transaction. The same concerns would apply to third party registered warrants.
Therefore, acceptance of registered warrants from third parties is not advisable.
There is some statutory authority for local entities (e.g. counties, irrigation districts and water storage
districts) to issue their own registered warrants. However, our research revealed no authority that
specifically permits local entities to use their own warrants to pay tax obligations due to the State. (There is
a procedure for counties to sell registered warrants to the State so that aid to the needy may be paid in cash
rather than by warrants from the County to the aid recipients, but those are obligations owed by the counties
to the needy, not to the State.) We also see no authority requiring or allowing the BOE to accept any
warrants or IODs that individuals or businesses have issued themselves to pay their obligations to the State.
Depending on the type of negotiable instrument presented by the person or entity, it is possible that it might
constitute a valid remittance for certain limited purposes. However, the BOE would have to analyze the
Honorable Board Members
-4-
July 14, 2009
validity of each such instrument, and in coordination with the State Controller and the State Treasurer
determine whether to accept an IOU issued by any person or entity other than the State in a particular set of
circumstances. The Sales and Use Tax staff has indicated that they have had negative experiences in the
past with accepting promissory notes as collateral, and would not be comfortable with the idea of accepting
IODs issued by any person or entity other than the State.
Administrative and Procedural Issues
The law requiring FTB to accept the warrants has been in place since 1983, and FTB had the opportunity to
put its procedures into action when the State issued IOUs in 1992 (see FTB Public Service Bulletins 92-9
and 92-12). FTB has announced already to the media that it will accept warrants ifit becomes necessary
this year. The procedure set forth in Govt. Code section 17280.1 is that a taxpayer who is the payee of a
registered warrant writes a check to FTB and submits it along with a copy of the warrant, but FTB cannot
cash the check until after the date that the warrant becomes redeemable. The taxpayer is not entitled to
receive interest on the warrant (only if the warrant is not yet redeemable). FTB is also willing to accept the
warrant itself, but cannot deposit it, and thus holds it until the maturity date. If the warrant is already
redeemable, and the taxpayer uses it to pay a tax liability, the taxpayer (as payee on the warrant) is entitled
to receive interest (Govt. Code section 17280.2).
Once the warrants become redeemable, there should be no issue, because the payee would be able to collect
the funds from the State at that point and pay any taxes due by using one of the usual payment methods, or
the BOE could accept the warrant and collect the payment from the State itself.
The State Controller has posted a list of questions and answers regarding registered warrants
(http://www.sco.ca.gov/5935.html). but it does not address the issue of using the warrants to make tax
payments.
There are likely to be additional administrative burdens related to handling the warrants, such as where to
hold the warrants, possible difficulties in processing and accounting using the existing IRIS system, and
difficulty estimating how many taxpayers will use warrants to pay their tax bills. As the BOE has no
obligation to accept the warrants and would be doing so voluntarily, the BOE could specify that no refunds
would be given (prior to the maturity date of the warrant) in cases where the amount of the warrant was
greater than the tax obligation. As such, differences between the amount owed and the amount of the
warrant should not pose a problem up front. If the amount owed were more than the amount of the warrant,
the taxpayer would have to pay the difference using one of the regular payment methods. If, on the other
hand, the amount owed were less than the amount of the warrant, then the taxpayer would receive a refund,
but only after the BOE received payment on the transferred warrant from the Controller.
In preparation for the possibility that the Board might decide to accept registered warrants, the BOE staff
has developed draft procedures for handling the warrants. Procedural concerns, among other issues,
include how to determine their validity, the proper method for transferring the warrant to the BOE in
compliance with California Commercial Code requirements, the disposition of accrued interest, the
issuance of refunds where the amount of the warrant is greater than the amount of the tax obligation, and
how to handle refunds after the warrants' maturity dates. The BOE would also have to determine whether
to distribute local tax allocations prior to the maturity date for amounts paid by unredeemable registered
warrants.
Honorable Board Members
-5-
July 14, 2009
If the BOE were to choose not to accept registered warrants, there is the possibility that taxpayers could, on
their own initiative or legal action, raise an equitable "right of set off' alternative, whereby they could argue
that they are entitled to "offset" their own tax liabilities by the amount owed to them by the State.
CONCLUSION
While the BOE is not obligated to accept registered warrants issued by the State as payment for tax
liabilities, it may choose to do so. Staff would adopt the necessary procedures for handling the warrants
that were submitted for payment. The BOE has no legal obligation or authorization to accept registered
warrants from third parties, that is, taxpayers or entities other than the payee named on the warrant, and
existing practices and procedures do not allow a taxpayer to make a payment using a third party check, due
to the increased possibility of fraud inherent in such a transaction. With regard to warrants or IODs issued
by any person or entity other than the State, the BOE is under no legal obligation or authorization to accept
them, and if a decision was made to do so, we would, in coordination with the State Controller and the
State Treasurer, have to analyze the validity of each such instrument to determine whether to accept in a
particular set of circumstances and on a case-by-case basis.
KC/MS
State of California
Board of Equalization
Legal Department-MIC:83
Office of the Chief Counsel
(916) 445-4380 (8) 485-4380
Fax: (916) 323-3387
Memorandum
Date: July 16, 2009
To:
Honorable Betty T. Yee, Chairwoman
Honorable Bill Leonard
Honorable Michelle Steel
Mr. Steve Shea, Acting Board Member
Honorable John Chiang
From:
Kristine Cazadd./ '/'
Chief CounsellXt!!1f4ltlC;
Subject:
July 21, 2009 Board Agenda Item PI b.
BOE Historical Background Information on State Issued Registered Warrants
!
Simultaneous with the distribution of the July 14, 2009 opinion on "Questions Concerning Registered
Warrant for Tax Payments," the Legal Department was asked to look for historical documentation that
shed light on how the issue of registered warrants was handled by the Board of Equalization (BOE) in
1992. Some of the documents were located and are attached; others have not been located but are
described below.
Attached are Board meeting minutes from the August 10, 1992 and August 27, 1992 meetings at
which the issue of registered warrants was considered. Staff has reviewed the microfiche images of
the Board's records from August 1992, but there were no additional documents relating to the August
1992 Board meetings.
Also attached are memoranda from 1992 by BOE and the Department of Finance relating to this issue.
We were not able to locate a copy of a memorandum opinion on this issue that we believe was written
by Asst. Chief Counsel Larry Augusta of the BOE Legal Department on August 21, 1992. In the
attachments, you will see that BOE Chief Counsel E.L. Sorensen informed the Board Members on
August 6, 1992 that staff had been accepting warrants (see two memos dated August 3rd outlining
handling procedures), but that he had instructed them to put that practice on hold while he explored the
legal issues. According to Mr. Sorensen's memo, the Department of Finance (in its memo dated
August 4, 1992) left the issue to the agencies to decide whether to accept the warrants, and only
provided guidance as to how to handle the warrants if the agency were to decide to accept them. The
DOF memo specifically acknowledges that agencies such as EDD, FTB, DMV and BOE were
receiving warrants. The DOF memo instructs the agencies to deposit the warrants with the agency's
bank so long as the banks continued to accept them for deposit (which they were doing at the time);
but if and when the banks stopped accepting warrants for deposit, the agencies were to hold the
warrants until the maturity date and return them to the State Treasury (rather than depositing them with
the bank).
Honorable Board Members
July 16, 2009
-2-
There is a follow-up memo dated August 6,1992 from the Department of Finance clarifying that its
first memo (August 4) applies only to those departments that already have the authority to accept
registered warrants and does not provide any new authority for the acceptance of registered warrants.
Since BOE was specifically named in the first memo as one of the agencies that was receiving
warrants, it is unclear into which group BOE falls.
Please feel free to contact Tax Counsel Miruni Soosaipillai at (916) 212-5756 or Supervising Tax
Counsel Deborah Cooke at (916) 216-9409 if you have any further questions.
. ,I
.UJeIJ£-£.
Approved:'
Ramon J. Hi: 1
Executive Direttor
jbr/
KC:es
Attachments
cc:
Mr.
Ms.
Ms.
Ms.
Ramon 1. Hirsig
Jean Ogrod
Deborah Cooke
Miruni Soosaipillai
I~
state of california
BUDGET LETTER 92-13
MEMORANDUM
~
To
f~:
~j~:
August 6, 1992
Agency Secretari es
Department Directors
Departmental BUdget Officers
Departmental Accounting Officers
Department of Finance Budget Staff
DEPARTMENT OF FINANCE
Off1eeof the Director
Registered Warrants Remitted to the St t
Budget Letter 92-12, issued August 4, 992. provided instructions on how to
handle the depositing of registered war nts. It should be clarified, however,
that the instructions apply only to tho e agencies and departments which alread~
have the authority to accept registere arrants. The Budget letter does D21
provide any new authority for the acce t nee of registered warrants.
If further clarification is needed, ple s call Robert Straight, Program Budgpr
Manager, at 445-5332.
~~
STANCELL
LaFENUS
Chief Deputy Director
bl:warrants.jl
•
3JNtlN I.:J .:10 Id3G: cr I I,..JS0: TT nHl C:6, -90-8ntl
1992 MINUTES OF THE STATE BOARD OF EQUALIZATION
-379-
THURSDAY, AUGUST 27
The Board met at its offices at 1020 N Street, Sacramento at 10:20 a.m. with
Chairman Sherman, Vice Chairman Dronenburg and Mr. Fong present and Ms. Scott present
on behalf of Mr. Davis in accordance with Government Code Section 7.9.
BUSINESS TAXES MATTER HEARD AUGUST 26
The Board deferred consideration of the matter in the appeal of Wilshire
Westwood Associates, HA HQ 36-018571.
FINAL ACTION ON PETITION HEARD AUGUST 26
Upon motion of Mr. Fong, seconded by Mr. Dronenburg and unanimously
carried, Mr. Sherman, Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes, Mr. Bennett
absent, the Board ordered that the petition of Wilshire Westwood Associates,
HA HQ 36-018571 be denied.
PROPERTY TAXES MATTERS
Upon motion of Mr. Fong, seconded by Mr. Dronenburg and unanimously
carried, Mr. Sherman, Mr. Dronenburg and Mr. Fong voting yes, Ms. Scott abstaining in
accordance with Government Code Section 7.9, Mr. Bennett absent, the Board ordered that a
$132,108,005 unitary escape assessment of State-Assessed Property for the appeal of Pacific
Gas and Electric Company (135), in San Luis Obispo County be added to the 1992 Board roll
in conformance with the Settlement Agreement and no penalties or interest are applicable.
Upon motion of Mr. Fong, seconded by Mr. Dronenburg and unanimously
carried, Mr. Sherman, Mr. Dronenburg and Mr. Fong voting yes, Ms. Scott abstaining in
accordance with Government Code Section 7.9, Mr. Bennett absent, for the appeal of Southern
Pacific Transportation Company (872), Nonunitary Escape Assessments, the Board ordered
that the following escape assessments be added to the 1992 Board Roll plus applicable penalty
and interest:
SBE Map 872-39-44AC, Par 41
1988
1989
$2,960.00
$2,960.00
-380-
1992 MINUTES OF THE STATE BOARD OF EQUALIZATION
THURSDAY, AUGUST 27 (continued)
1990
$2,960.00
1991 -- $2,960.00
SBE Map 872-39-44AC, Par 42
1988
$3,750.00
1989 -- $3,750.00
1990
$3,750.00
1991
$3,750.00
Upon motion of Mr. Fong, seconded by Mr. Dronenburg and unanimously
carried, Mr. Sherman, Mr. Dronenburg and Mr. Fong voting yes, Ms. Scott abstaining in
accordance with Government Code Section 7.9, Mr. Bennett absent, the Board ordered that for
the appeal of PacTel Cellular-San Diego (2512), Nonunitary Escape Assessments, the
following escape assessments be added to the 1992 Board Roll plus applicable penalty and
interest:
SBE Map 2512-37-65, Par 1 Possessory Interest
1990 -- $28,570.00
1991
$29,090.00
SBE Map 2512-37-67, Par 1 Possessory Interest
1989 -- $34,470.00
1990
$34,310.00
1991
$55,810.00
Upon motion of Mr. Fong, seconded by Mr. Dronenburg and unanimously
carried, Mr. Sherman, Mr. Dronenburg and Mr. Fong voting yes, Ms. Scott abstaining in
accordance with Government Code Section 7.9, Mr. Bennett absent, the Board ordered that the
changes to the 1992, 1991 and 1990 State-Assessed Rolls, be granted.
Upon motion of Mr. Fong, seconded by Mr. Dronenburg and unanimously
carried, Mr. Sherman, Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes, the Board
ordered that the Timber Yield Tax Redetermination Schedule RD-2, which canceled a
$57,100.79 liability against Baldy and Baldy, Inc., as a result of the Hoopa Valley Tribe,
et al. v. Richard Nevins, et al. be granted.
RULEMAKING MATTERS
1992 MINUTES OF THE STATE BOARD OF EQUALIZATION
-381-
THURSDAY, AUGUST 27 (continued)
As recommended by Mr. E. L. Sorensen, Jr., Chief Counsel, upon motion of
Mr. Sherman, seconded by Mr. Fong and unanimously carried, Mr. Sherman,
Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes, Mr. Bennett absent, the Board
authorized publication of Sales and Use Tax Regulation 1574, Vending Machine Operators.
As recommended by Mr. Sorensen, upon motion of Mr. Dronenburg, seconded
by Mr. Fong and unanimously carried, Mr. Sherman, Mr. Dronenburg, Mr. Fong and
Ms. Scott voting yes, Mr. Bennett absent, the Board authorized publication of Sales and Use
Tax Regulation 1594, Watercraft.
As recommended by Mr. Sorensen, upon motion of Mr. Dronenburg, seconded
by Mr. Fong and unanimously carried, Mr. Sherman, Mr. Dronenburg, Mr. Fong and
Ms. Scott voting yes, Mr. Bennett absent, the Board authorized publication of Sales and Use
Tax Regulations 5104 & 5108, Settlement of Disputed Tax Liabilities (and adoption of the
published versions of the remainder of Regulations 5100-5110).
As recommended by Mr. Sorensen, upon motion of Mr. Dronenburg, seconded
by Mr. Fong and unanimously carried, Mr. Sherman, Mr. Dronenburg, Mr. Fong and
Ms. Scott voting yes, Mr. Bennett absent, the Board authorized publication of Sales and Use
Tax Regulation 1802, Place of Sale for Purposes of Bradley-Burns Uniform Local Sales and
Use Taxes.
WELFARE EXEMPTION CLAIM MATTER
Mr. Fong moved that the request for review be granted; the motion was
seconded by Mr. Dronenburg; Mr. Fong withdrew his motion. Upon motion of
Mr. Dronenburg, seconded by Mr. Fong and unanimously carried, Mr. Sherman,
Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes, Mr. Bennett absent, the Board deferred
consideration on this matter for the appeal of China Connection, Los Angeles County, WEC92004.
Ms. Scott left the Board room.
Mr. Davies entered the Board room.
ALTERNATIVE TAX PAYMENT METHODS FOR TAXPAYERS
OWED MONEY BY THE STATE
-382-
1992 MINUTES OF THE STATE BOARD OF EQUALIZATION
THURSDAY, AUGUST 27 (continued)
Upon motion of Mr. Davies, seconded by Mr. Dronenburg and unanimously
carried, Mr. Sherman, Mr. Dronenburg, Mr. Fong and Mr. Davies voting yes, Mr. Bennett
absent, the Board adopted the Oliver resolution to accept registered warrants.
Upon motion of Mr. Davies, seconded by Mr. Dronenburg and unanimously
carried, Mr. Sherman, Mr. Dronenburg, Mr. Fong and Mr. Davies voting yes, Mr. Bennett
absent, the Board adopted the Sherman proposal subject to approval of Department of Finance.
By the same motion, the Board granted the staff the authority to make necessary changes to
procedures and forms.
Mr. Oliver reported on the status of the budget.
The Board recessed from 11:30 a.m. to 11:40 a.m. and reconvened with
Mr. Dronenburg, Mr. Fong and Ms. Scott present.
RETIREMENT RESOLUTION
Upon motion of Mr. Fong, seconded by Ms. Scott and unanimously carried,
Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes, Mr. Sherman and Mr. Bennett absent,
the Board adopted a resolution extending to Carol Reed, Van Nuys District Office, its best
wishes on her retirement and its appreciation for her service to the Board and the State of
California. A copy of the resolution is incorporated in these minutes by reference
(Exhibit 8.4).
ASSESSORS' HANDBOOK 215, STANDARDS FOR ASSESSORS' MAPS,
PARCEL NUMBERING AND TAX-RATE AREA SYSTEMS
Upon motion of Mr. Fong, seconded by Ms. Scott and unanimously carried,
Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes, Mr. Sherman and Mr. Bennett absent,
the Board approved the Assessors Handbook 215.
1992 MINUTES OF THE STATE BOARD OF EQUALIZATION
-383-
THURSDAY, AUGUST 27 (continued)
OUT-OF-STATE TRAVEL
As recommended by Mr. Oliver, upon motion of Mr. Fong, seconded by
Ms. Scott and unanimously carried, Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes,
Mr. Sherman and Mr. Bennett absent, the Board approved the out-of-state travel schedule
dated August 27, 1992. A copy of the schedule is incorporated in these minutes by reference
(Exhibit 8.5).
LEGISLATIVE COMMITTEE REPORT
Margaret Shedd, Legislative Counsel, presented the Legislative Committee
Report dated August 26, 1992. A copy of the report is incorporated in these minutes by
reference (Exhibit 8.6).
Upon motion of Mr. Fong, seconded by Ms. Scott and unanimously carried,
Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes, Mr. Sherman and Mr. Bennett absent,
the Board approved the committee report.
PRECOLLECTION OF SALES TAX ON FUELS
The Board concurred.
FRANCHISE AND INCOME TAXES HEARINGS
Joseph F. and Mary E. Purcell, 91R-0729
1985, $19,419.02
For Appellant:
Mark Roseman, Accountant
Joseph M. Purcell, Witness
For Franchise Tax Board:
Edward Kline, Counsel
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were
disclosed.
Issue:
Whether appellants have established their entitlement to a bad debt deduction for
the payment of certain loan guarantees by appellants.
-384-
1992 MINUTES OF THE STATE BOARD OF EQUALIZATION
THURSDAY, AUGUST 27 (continued)
Action:
Upon motion of Mr. Fong, seconded by Ms. Scott and unanimously carried,
Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes, Mr. Sherman and Mr. Bennett absent,
the Board ordered that the appeal be submitted for decision.
Patrick B. and Marjorie S. Dancer, 90A-1505
1981, $11,815.00
1982, $ 9,440.00
1983, $ 2,879.00
For Appellant:
Lewis R. Wiener, Attorney
Marjorie Dancer
Patrick B. Dancer
For Franchise Tax Board:
Edward Kline, Counsel
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were
disclosed.
Issue:
Whether respondent properly characterized as a constructive dividend the
aggregate corporate funds used to construct a single-family residence on property owned by
appellants.
Whether respondent properly treated the gain from the sale of the residence as
incurred by appellants rather than their corporation.
Whether respondent properly treated corporate payments to appellants for the
use of their vehicles as constructive dividends rather than rental payments.
Action:
Upon motion of Mr. Fong, seconded by Ms. Scott and unanimously carried,
Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes, Mr. Sherman and Mr. Bennett absent,
the Board ordered that the appeal be submitted for decision.
The Board recessed at 1:00 p.m. and reconvened at 1:05 p.m. with
Mr. Dronenburg, Mr. Fong and Ms. Scott present.
John Lee and Renee Alicia Carrico, 91R-0242
1986, $7,870.00
1987, $6,137.00
For Appellant:
John Lee Carrico
For Franchise Tax Board:
Anna Jovanovich, Counsel
1992 MINUTES OF THE STATE BOARD OF EQUALIZATION
-385-
THURSDAY, AUGUST 27 (continued)
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were
disclosed.
Issue:
1989.
Whether appellants were residents of California during 1986, 1987, 1988 and
Action:
Upon motion of Ms. Scott, seconded by Mr. Fong and unanimously carried,
Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes, Mr. Sherman and Mr. Bennett absent,
the Board ordered that the appeal be submitted for decision.
Harbor Properties, 91A-0452
9-30-84, $336.198.00
For Appellant:
Gary Conner, Attorney
Roy Vallarino, Witness
For Franchise Tax Board:
H. Kent Holman, Counsel
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were
disclosed.
Issue:
Whether appellant successfully effected a like-kind exchange so as to come
within the requirements for nonrecognition of gain set forth in Revenue and Taxation Code
section 24941.
Mr. Sherman entered the Board room.
Mr. Fong left the Board room.
Action:
Upon motion of Ms. Scott, seconded by Mr. Sherman and unanimously carried,
Mr. Sherman, Mr. Dronenburg and Ms. Scott voting yes, Mr. Fong and Mr. Bennett absent,
the Board ordered that the appeal be submitted for decision.
FRANCHISE AND INCOME TAXES MATTERS
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were
disclosed.
The Board deferred consideration of the opinion in the appeal of The Nutrasweet
-386-
1992 MINUTES OF THE STATE BOARD OF EQUALIZATION
THURSDAY, AUGUST 27 (continued)
Company, 87N-1645.
Upon motion of Mr. Dronenburg, seconded by Ms. Scott and unanimously
carried, Mr. Sherman Mr. Dronenburg voting yes, Ms. Scott voting yes on all except
abstaining on Subitems 1 and 13, Mr. Fong and Mr. BeIll1ett absent, the Board approved the
remainder of the staff recommendations with respect to Franchise and Income Tax Decisions
Schedule dated August 27, 1992. A copy of the Schedule is incorporated in these minutes by
reference (Exhibit 8.7).
Because of unsatisfactory contribution disclosures, the Board took no action in
the appeals of Charles (Deceased) and Josephine Ish, 89A-1365; Richard and Ellen Posell,
90R-0974; and William G. Wilt, 90A-1496.
Mr. Brenner withdrew subitem 4, the appeal of Robert F. and Marcia A. Smith,
89A-1318.
The Board deferred consideration of the matters in the appeals of Micro D, Inc.,
0934878, Taxpayer, Ingram Computer, Inc., 1130770, Assumer and/or Transferee, 91A-0205;
Paul B. and Haviland C. Thompson, 90R-0822; and Trico Bancshares, 87A-0224 and 90A0061.
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were
disclosed.
Upon motion of Mr. Dronenburg, seconded by Ms. Scott and unanimously
carried, Mr. Sherman, Mr. Dronenburg and Ms. Scott voting yes, Mr. Fong and Mr. BeIll1ett
absent, the Board ordered that the appeals of Chuck Venezio, 90R-1098; The William Lyon
Company, 89A-0707; and The Walton Associated Companies, 89A-0933 , be sustained.
FRANCHISE AND INCOME TAXES HEARINGS
Richard N. and Janice L. Lawrence, 90A-0405
1983, $1,941.93
For Appellant:
Richard Lawrence
For Franchise Tax Board:
Mark McEvilly, Counsel
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were
disclosed. Ms. Scott stated that she would not participate in this hearing.
1992 MINUTES OF THE STATE BOARD OF EQUALIZATION
-387-
THURSDAY, AUGUST 27 (continued)
Issue:
Whether the Franchise Tax Board properly included in appellants California
taxable income a lump-sum pension distribution attributable to services performed in another
state but paid to appellants after they became residents of California.
Whether the Franchise Tax Board has correctly computed its adjustments to
appellants' income, including adjustments based on a federal audit report and on an amended
federal return.
I
Action:
Upon motion of Mr. Dronenburg, seconded by Ms. Scott and unanimously
carried, Mr. Sherman, Mr. Dronenburg and Ms. Scott voting yes, Mr. Fong and Mr. Bennett
absent, the Board ordered that the appeal be submitted for decision.
John Mueller, 90R-0178
1981, $3,160.00
1982, $3,336.00
1983, $3,440.00
1984, $3,064.00
For Appellant:
Appearance Waived
For Franchise Tax Board:
H. Kent Holman, Counsel
Contribution Disclosures pursuant to Government Code Section 15626: No contribution
disclosures were filed for this hearing.
Action:
The Board took no action.
The Board adjourned at 3:20 p.m.
Attest:
Executive Director
1992 MINUTES OF THE STATE BOARD OF EQUALIZATION
-329-
MONDAY, AUGUST 10
The Board met at its offices at 690 West Knox Street, Torrance at 10: 10 a.m.
with Chairman Sherman, Vice Chairman Dronenburg and Mr. Fong present and Ms. Scott
present on behalf of Mr. Davis in accordance with Government Code Section 7.9.
BUSINESS TAXES MATTERS
Lars Tragardh, Naveed Iqbal, Sauveur Chemouni, Michael Tolson, and David Kawecki, a
partnership, SN BH 01-949317
1-1-84 to 5-2-86, $26,807.36
Considered by the Board on:
April 1, 1992
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were
disclosed.
Action:
The Board concluded that the petitioner's furnishing of animation on magnetic
computer tape was a taxable sale of tangilbe personal property and not a furnishing of
nontaxable services; that the petitioner was not a producer of motion picture productions under
Regulation 1529; and that the petitioner had no written evidence as required by
Section 6596 to prove misinformation. Therefore, the petitioner is liable for the tax on its
sales of computerized animation to its customers.
The Board also concluded that all partners in the partnership are jointly and
severally liable for the partnership's sales and use tax liability.
Accordingly, upon motion of Mr. Fong, seconded by Dronenburg, and
unanimously carried, Mr. Sherman, Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes,
Mr. Bennett absent, the Board ordered that the tax be redetermined without adjustment.
However, the Board ordered that the 10% penalty for failure to file returns be cancelled.
Dilligham Heavy Construction, Inc., SZ JHF 27-705082
1-1-85 to 12-31-87, $796,457.69
Considered by the Board on:
April 2, 1992
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were
disclosed.
Action:
The Board concluded that the rock and aggregate transfers to the joint venture
were retail sales and not nontaxable contributions of capital; that there was no misinformation
-330-
1992 MINUTES OF THE STATE BOARD OF EQUALIZATION
MONDAY, AUGUST 10 (continued)
given to the taxpayer by the Department; that the requirements for exemption for any of the
rock and aggregate sales and fixed asset sales have not been met, and that the negligence
penalty be deleted.
Accordingly, Mr. Dronenburg moved that the petition be granted with respect to
transactions outside the 3-mile limit; the motion failed for a lack of a second.
Mr. Sherman moved that the petition be granted with respect to the $4.6 million in addition to
30 % of the remainder of the determined amount; Mr. Fong seconded the motion but it failed
to carry, Mr. Sherman and Mr. Fong voting yes, Mr. Dronenburg and Ms. Scott voting no,
Mr. Bennett absent, the Board deferred cosideration of this petition to its August 11, 1992
meeting.
Edi R. and Fred H. Vickers, SR GH 26-757564
4-1-86 to 3-31-89, $62,966.67
Considered by the Board on:
May 5, 1992
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were
disclosed.
Action:
The Board concluded that the artwork in question was purchased for resale in
the regular course of business.
Accordingly, upon motion of Mr. Fong, seconded by Mr. Dronenburg,
unanimously carried, Mr. Sherman, Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes,
Mr. Bennett absent, the Board ordered that the purchases of artwork be deleted from the
amount subject to tax and that the matter be otherwise redetermined in accordance with the
reaudit report dated December 10, 1990.
Musleh Lutf Ali, SR DHA 22-748549
7-1-84 to 6-30-87, $33,372.25
Considered by the Board on:
May 20, 1992
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were
disclosed.
Action:
The Board concluded that the taxpayer intentionally underrecorded taxable
purchases for the purpose of underreporting taxable sales.
Accordingly, upon motion of Mr. Dronenburg, seconded by Ms. Scott and
1992 MINUTES OF THE STATE BOARD OF EQUALIZATION
-331-
MONDAY, AUGUST 10 (continued)
unanimously carried, Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes, Mr. Sherman
abstaining, Mr. Bennett absent, the Board ordered that the tax and penalty be redetermined
without adjustment.
Meymarian Bros., Inc., SR AC 13-692687
10-1-85 to 9-30-88, $21,371.31
Considered by the Board on:
March 4, 1992
Action:
The Board concluded that the taxpayer failed to keep adequate records and was
negligent in reporting taxable sales.
Accordingly, upon motion of Mr. Dronenburg, seconded by Mr. Sherman and
unanimously carried, Mr. Sherman, Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes,
Mr. Bennett absent, the Board ordered that the request for rehearing be denied.
Upon motion of Mr. Dronenburg, seconded by Ms. Scott and unanimously
carried, Mr. Sherman, Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes, Mr. Bennett
absent, the Board approved the staff recommendations with respect to requests for refunds. A
copy of the schedule dated August 10, 1992, is incorporated in these minutes by reference
(Exhibit 8.1).
ADMINISTRATIVE MATTERS
Burton W. Oliver, Executive Director, reported that there is still no 1992-93
State budget. The Board's biggest resulting operating problem is travel funds for auditors. If
the Board continues to operate without funds, audit revenues will fall.
Mr. Dronenburg noted that the Board had considered two draft versions of
amendments to Sales Tax Regulation 1802, Place of Sale for Purposes of Bradley Burns
Uniform Local Sales and Use Taxes. He stated that he would send his draft to the Members
and asked that it be scheduled for authorization to publish at the next Sacramento meeting. He
suggested that the issue of confidentiality of tax payment data be referred to the Legislative
Committee.
BUSINESS TAXES HEARINGS
Reliance Development Figueroa, Ltd. Ptn., SR AA 11-722227
1-1-87 to 11-1-89, $64,728.01
1992 MINUTES OF THE STATE BOARD OF EQUALIZATION
-333-
MONDAY, AUGUST 10 (continued)
For Department of Business Taxes:
Robert Nunes, Deputy Director
Dennis Fox, Hearing Representative
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were
disclosed.
Issue:
the facts.
Whether the understatement of retail sales was established in accordance with
Action:
Upon motion of Mr. Fong, seconded by Ms. Scott and unanimously carried,
Mr. Fong, Mr. Dronenburg and Ms. Scott voting yes, Mr. Sherman and Mr. Bennett absent,
the Board ordered that the petition be submitted for decision.
Nazih Sami Khoury, SR ADA 14-699201
2-1-85 to 6-30-86, $195,144.64
For Petitioner:
Nazih Khoury, Owner
John W. Tulac, Attorney
Yocoub Khoury, Witness
For Department of Business Taxes:
Robert Nunes, Deputy Director
Dennis Fox, Hearing Representative
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were
disclosed.
Whether a basis exists for the Board to increase the amount of tax determined.
Whether the resale certificate and "XYZ" letter obtained from the petitioner's
brother were accepted in good faith.
Whether the Board is required to and has provided evidence to show that the
resale certificate was not taken in good faith.
Whether relief from the penalty for fraud or intent to evade the tax is warranted.
Issue:
Action:
Upon motion of Ms. Scott, seconded by Mr. Fong and unanimously carried,
Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes, Mr. Sherman and Mr. Bennett absent,
the Board ordered that the petition be submitted for decision, granting the petitioner 30 days to
submit additional documents.
The Board recessed at 12: 15 p.m. and reconvened at 1:40 p.m. with
Mr. Sherman, Mr. Dronenburg, Mr. Fong and Ms. Scott present.
-332-
1992 MINUTES OF THE STATE BOARD OF EQUALIZATION
MONDAY, AUGUST 10 (continued)
For Petitioner:
Warner McLean, Vice-President, Tax
Robert R. Richmond, Director
For Department of Business Taxes:
Robert Nunes, Deputy Director
Gary J. Jugum, Counsel
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were
disclosed.
Issue:
Whether the negotiation of the amount of the gratuity to be included in the
banquet contract makes the gratuity optional rather than mandatory.
Mr. Davis entered the Board room; Ms. Scott left the Board room.
Action:
Upon motion of Mr. Dronenburg, seconded by Mr. Fong and unanimously
carried, Mr. Sherman, Mr. Dronenburg, Mr. Fong and Mr. Davis voting yes, Mr. Bennett
absent, the Board ordered that the petition be granted.
Ms. Scott entered the Board room, and Mr. Davis left.
DISCUSSION OF REGISTERED WARRANTS
Mr. Oliver and E. L. Sorensen, Chief Counsel, reported that before August 5,
1992, endorsed registered warrants were received in payment of amounts due the Board. On
August 5, Bank of American stopped accepting these warrants for deposit. Because the
warrants are negotiable instruments, the staff proposes to continue to accept them, hold them
until they are redeemable, then deposit them with the State Treasurer. In the best interest of
the State, the staff will continue to accept them.
The Board recessed at 11 :20 a.m. and reconvened at 11 :40 a.m. with
Mr. Dronenburg, Mr. Fong and Ms. Scott present.
BUSINESS TAXES HEARINGS
Dennis H. & Bonita K. Kline, SR AC 13-715712
1-1-86 to 12-31-88, $5,880.00
For Petitioner:
Dennis H. Kline, Owner
-334-
1992 MINUTES OF THE STATE BOARD OF EQUALIZATION
MONDAY, AUGUST 10 (continued)
BUSINESS TAXES HEARINGS
Philip and Dorothy Von Ladau, SN BHA 01-949385
1-1-81 to 12-31-86, $306,351.00
For Petitioner:
John Neely McCord, CPA
Stephen C. Johnson, Attorney
For Department of Business Taxes:
Robert Nunes, Deputy Director
David H. Levine, Counsel
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were
disclosed.
Issue:
Whether the evidence shows that the tax was paid to the Board by the lessee
either measured by the rental payments or measured by the purchase price, or was paid as part
of a deficiency established by audit.
Whether the petitioner acted as an agent of the corporation which made the
purchase from the manufacturer.
Whether rental receipts can be excluded from the tax.
Whether only the lessee can be liable for the use tax measured by rental
receipts.
Whether the statute of limitations prevents the Board from collecting this tax.
Whether the substance of the arrangement was merely a nontaxable financing
transaction.
Action:
Upon motion of Mr. Dronenburg, seconded by Ms. Scott and unanimously
carried, Mr. Sherman, Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes, Mr. Bennett
absent, the Board ordered that the petition be submitted for decision.
Gary R. & Joan Davidson, SN BHA 01-949386
1-1-81 to 12-31-86, $3,847.41
For Petitioner:
Gary R. Davidson, Executive Vice President
John Neely McCord, CPA
Stephen C. Johnson, Attorney
For Department of Business Taxes:
Robert Nunes, Deputy Director
David H. Levine, Counsel
1992 MINUTES OF THE STATE BOARD OF EQUALIZATION
-335-
MONDAY, AUGUST 10 (continued)
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were
disclosed.
Issue:
Whether the evidence show that the tax was paid to the Board by the lessee
either measured by the rental payments or measured by the purchase price, or was paid a part
of a deficiency established by audit.
Whether the petitioner acted as an agent of the corporation which made the
purchase from the manufacturer.
Whether rental receipts can be excluded from the tax.
Whether only the lessee can be liable for the use tax measured by rental
receipts.
Whether the statute of limitations prevents the Board from collecting this tax.
Whether the substance of the arrangement was merely a nontaxable financing
transaction.
Action:
Upon motion of Mr. Dronenburg, seconded by Ms. Scott and unanimously
carried, Mr. Sherman, Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes, Mr. Bennett
absent, the Board ordered that the petition be submitted for decision.
Mr. Sherman left the Board room.
Noble Adrian Howze, SR DHA 22-705920
7-1-83 to 9-30-86, $15,477.12
For Petitioner:
Noble Howze
Christopher A. Strong, CPA
For Department of Business Taxes:
Robert Nunes, Deputy Director
David H. Levine, Counsel
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were
disclosed.
Issue:
Whether certain items of equipment withdrawn from resale inventory and
charged to a capital aacount for depreciation purposes were in fact resold without any
intervening use.
Whether sufficient evidence has been provided to prove that certain sales qualify
as exempt sales for resale to Mexican merchants or exempt sales in foreign commerce.
Action:
Upon motion of Ms. Scott, seconded by Mr. Fong and unanimously carried,
-336-
1992 MINUTES OF THE STATE BOARD OF EQUALIZAnON
MONDAY, AUGUST 10 (continued)
Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes, Mr. Sherman and Mr. Bennett absent,
the Board ordered that the petition be submitted for decision, directing the Assistant Chief
Counsel, Appeals Review Section, to discuss documentation with the petitioner.
Mr. Sherman entered the Board room.
Karman Ltd. Architectural Products, SS AC 13-765500
4-1-86 to 3-31-89, $54,823.14
For Petitioner:
Andrew Cooper, President
Charles Nagel, Attorney
For Department of Business Taxes:
Robert Nunes, Deputy Director
David L. Levine, Counsel
Contribution Disclosures pursuant to Government Code Section 15626: No contributions were
disclosed.
Issue:
Whether the signs furnished and installed by the petitioner are materials rather
than fixtures.
Whether the petitioner received and relied upon misinformation qualifYing for
relief within the meaning of Revenue and Taxation Code Section 6596.
Action:
Upon motion of Mr. Sherman, seconded by Mr. Dronenburg and unanimously
carried, Mr. Sherman, Mr. Dronenburg, Mr. Fong and Ms. Scott voting yes, Mr. Bennett
absent, the Board ordered that the petition be granted with respect to the structures and
console, that the staff reaudit the labor accounts, and that the petition otherwise be
redetermined.
The Board recessed at 3:40 and reconvened at 3:45 with Mr. Dronenburg, Mr.
Fong and Mr. Scott present.
ADMINISTRATIVE MATTERS
Mr. Oliver reported that the Auditor General released a report with reference to
a Board of Equalization auditor who accepted a bribe. The auditor was placed on
.
administrative leave and then was dismissed effective the date of the bribery.
1992 MINUTES OF THE STATE BOARD OF EQUALIZATION
-337-
MONDAY, AUGUST 10 (continued)
Mr. Oliver reported that the Department of Finance denied the Board's proposal
to participate in the Administration's early retirement program.
Mr. Sherman announced that the Board will meet October 5, 1992, in San
Francisco and that meetings for the remainder of the week are canceled. October 30 and
November 20 meeting dates will be held in reserve, as will the week of December 7. The
work for the week of November 20 and December 7 will be combined.
FINAL ACTION ON MATTERS HEARD AUGUST 10, 1992
Upon motion of Mr. Dronenburg, seconded by Mr. Fong and duly carried, Mr.
Dronenburg and Mr. Fong voting yes, Ms. Scott voting no, Mr. Sherman abstain,
Mr. Bennett absent, the Board ordered that the petition of Dennis H. & Bonita K. Kline,
SR AC 13-715712 be redetermined, reducing the measure by 50%.
BUSINESS TAXES HEARINGS
Mundorf Corp., SR AB 12-697185
7-1-84 to 6-30-87, $5,702.40
For Petitioner:
No Appearance
For Department of Business Taxes:
Robert Nunes, Deputy Director
Dennis Fox, Hearing Representative
Contribution Disclosures pursuant to Government Code Section 15626: No contribution
disclosures were filed.
Action:
The Board took no action.
Stan's Wines & Spirits, Inc., SR AB 13-818465
10-1-87 to 10-19-89, $55,481.88
For Petitioner:
No Appearance
For Department of Business Taxes:
Robert Nunes, Deputy Director
Dennis Fox, Hearing Representative
Contribution Disclosures pursuant to Government Code Section 15626: No contributions
-338-
1992 MINUTES OF THE STATE BOARD OF EQUALIZATION
MONDAY, AUGUST 10 (continued)
were disclosed.
Action:
The Board took no action.
Franklin P. Peters, Advina Margorie Kadir, & Shanti 1. Peters, SR AC 13-798865
11-1-85 to 6-30-90, $178,998.00
For Petitioner:
No Appearance
For Department of Business Taxes:
Robert Nunes, Deputy Director
Dennis Fox, Hearing Representative
Contribution Disclosures pursuant to Government Code Section 15626: No contribution
disclosures were filed.
Action:
The Board took no action.
The Board recessed at 4: 15 and reconvened immediately in closed session with
Mr. Sherman, Mr. Fong and Ms. Scott present.
CLOSED SESSION
The Board met to discuss personnel matters and litigation.
The Board adjourned at 4:50.
Attest:
Executive Director
Aug
.STATE BOARD OF EQUALIZATION
5.92 13:49 No.OO? P~~.
--
Je:.-.
.
~
Boerd of Equolization
Memorandum
•
To
I
from
:
August 3, 1992
1'.J 1 District AdlllinistratOl:fl
CiSt.her ine Jo1etz, Chler
Ad~lnistrative
ServIces Division
In the event tn. BUdgel Act is not adopted before August 5, 1992,
banks wi 11 no lOT\9cr acc~pt the State Registered Warrants
(RW) , However, the Board will continue accepting RW's as payment
for tax liabilit.y. If RW's are used by the taxpayer, the following
procedures should be tollowed.
.~
1tI~ny
PJ..STR!~-2.V'.Ict PRQQ.tmuRe
TS\xpl\~pr.__Paying~
wi t.tL.F.~91.~e..r.~q wan:ant
(R~),
If a t~XPi:Jyct" presents an RW a~; payment tor a tax liability after
August 4, 1992, the RW should be accepted as payment but not be
deposited.
The ~w and the pay docum~nt sho\Jld be sent to the
Headquarters Cashier Unit (HQCU) for processing.
~Y,p~¥~~~~~st$ ReQei~~
Il'hls shculd be
pn:~paretl
only upon request.
receipt, with copies to distribute as follows:
•
•
*
'l'he
Prepare a GA-602
aopy is 9ivcn to taxpayer
Second copy to HQCU
Third copy (yellow) retaine~ by 4istr1ct office
O~i9inal
rec~1pt,
RW
And
pay document. 9hould .be sent to HQCU tor
processing.
lt~.lsLQll~c..~ Cash
t.r... nsrnl ttc.l.1
Rep9rt..lYA-§Q~1
List the account number and amount of the RW.
"sent to HQCtJ for proce$sing".
•
Make a notation
alth-.B§.9~£ter B~~t..1Ti2PQ)
'l'h is should not PC used, but it on~ 1s prepared inadvertently,
t.hon, minus the amount of the receipt from the total on the
tr'anslnittal (GA-GOJ). Write o'n the tt~nsrnitte;tl that the receipt,
RWand pay document were sent to HQCU for processing.
Aug
STATE BOARD OF EQUALIZATION
. \ .
.. •. ' ... All Distt'lct
.Adl'nini$tr~tors
August 3, h"
'-"
•
~uhJt~..s.iA.tyr.~~UT~9)
Cont~
Forward a photooopy ot th~ portion r,.)f tape p~rtaini))q to the RW, to
HQcU. Ple(\se include the pay dOCUlnellt a.nd the RW.
"r.~DOUARTtRD,
CASHIER UNIt
J:);.ep6.dJlg..~
~E6~ONSIBILITIES
tt.li- [email protected]
KQCU will pr~pare a transrnitt~l (GA-603) tor all RW's received that
Previously prepared receipts (GA-602) will be listed on the
transmit~al prepared by th~ HQCU.
day.
'I'hose
dOCluments received without a rt>ceipt (GA-602) will have one
prepared by tl'e HQCU and will be listed on tho tl;"ansmittal
(GA-603).
''''
Tho pay doc\tmcnt w,511 be processed as a paid document.
•
~gJ. s!=-.u~t:r.{m.t_i
RW's will be held for deposit in the kQCU until they are directed
to depo5 it then,.
QueGtioh~ regarding these pl'ocedures 6hould be directed to Betti.
walker at 323-2325, C~lnet 473-2325 or Je~nne Marshall ~t 323-2144,
Calnot 473-2144 of the HQCU.
I
I,
I
CM;qlt\
co:
I
I
Mr. Burt Oliv~r
Ms. Judy Aqan
I
Robert Nunes
Mr. Char~es Cordell
Ml~.
II
..Ms_Jlan.~.u~
Ms. Jeanne Marshall
Pr1ncipal Complianc~
.'
Supervi~ors
I
,
,
.
.
•' Stote of Collfornia
Board of Equalization
Memorandum
District Administrators
R. A. Slater
F~m
Subject
August 3, 1992
Dote
I
Acceptance of Registered Warrants
Registered.warrants are to be accepted as payment for all taxes
administered by the Board.
Even though the warrants are not redeemable until a future date not
yet to be determined, procedures outlined in CPPM Sections 510.150
through 510.220 relating to effective dates of payment are
applicable. Pen?lty and interest will apply only when the
effective date of payment is subsequent to the due date.
Should you have any questions, please contact me.
RAS: jk
cc:
Robert Nunes
Allan K. Stuckey
Glenn A. Bystrom
Joan Albu
E. V. Anderson
Dennis D. Smith
Ron Taussig
Jan Tankersley
eanne ars a
Supervisor, Cashier Section
Supervisor, Return Review Section
)
)
)
)
)
)
)
)
Please ensure that, should
our depositing banks
return these warrants
unpaid they are not
treated as dishonored
checks for purposes of
taxpayer notification
and billing.
)
)
)
RECEIVED
f t i .-~
,·1
o G 1992
(yl I'
.i "('f~i0"
AUG 0 4 1992
Board of Equalization
Admin. Processing Section
'.
State of California
ao.d of Equalization
Memorandum
Honorable
Honorable
Honorable
Honorable
Honorable
Brad Sherman
Ernest J. Dronenburg, Jr.
William M. Bennett
Matthew K. Fong
Gray Davis
From
E. L. Sorensen, Jr.
Subject;
state Registered Warrants
Date:
August 6, 1992
This is to give you an update on the question of whether the
Board should accept State Registered Warrants submitted by
taxpayers as payment for their business taxes liabilities.
Initially, the districts were notified that the warrants were
acceptable as payments for tax liabilities (See August 3, 1992
memoranda from Slater and Metz, attached). We have since put
that advice "on hold" in order to further consider the legal
ramifications of this course of action.
(See August 6, 1992
memoranda from Metz, attached). We will report our findings to
you and try to get a sense of the Board on this issue next week
during the Monday morning administrative agenda in Torrance.
For your information, attached are memoranda from the
Department of Finance (DOF) dated August 4 and 6 which pertain
to the general processing of warrants when accepted by state
agencies.' As you can see, DOF has left the determination as to
the propriety of accepting these warrants to the a encies.
ELS:sb
cc:
•
Mr.
Ms.
Mr.
Mr.
Mr.
Mr.
Ms.
Mr.
Mr.
Burton W. Oliver
Judy Agan
Robert Nunes
Ron Taussig
Richard Slater
Allan Stuckey
Catherine Metz
Gary Jugum
Larry Augusta
Board of EquaUzation
State of California
Memorandum
:All District Administrators
From
:
Date
August 6, 1992
Catherine Metz, Chief
Administrative Services Division
SubJect:
state Reqistered Warrants
An issue has been raised regarding the legality of the Board of
Equalization's continued acceptance of state Registered Warrants as
payment· for taxes administered by the Board.
This is currently
being reviewed by the Board of Equalization's legal staff and will
be discussed with the Board Members at next week's meeting.
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until further notice, taxpayer's attempting to pay by means of
Registered Warrants should be informed that until a decision is
made by the Board on this issue, warrants will not be accepted as
paymenl: for their tax Hahi! i ties.
According ly , appr:r i~~~jI.!
interest and penalty could apply.
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CM:gm
cc: Mr. Burt Oliver
Ms. Judy A. Agan
Mr. Bob Nunes
Mr. Ron Taussig
Ms. Jan Tankersley
Ms. Jeanne Marshall
Principal Compliance Supervisors
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ME
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of C:alitonia
BlTOGE':~
LETTER 92-12
M 0 RAN 1:. U M
hte
r
August 4, 19512
To
;
Agency Secretar1 es
Department Directors
Departmental Budget Officers
Dellirtmental Accounting Officers
Department of Finance Budget Staff
'1'11I :
DEPARTMENT Of FINANCE
Office of the Director
Registered Wt.rrints Remitted to the S a e
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Effective July 1, 1992, the State Cont ler's Office began issuing registered
warrants to ml!et the state's non-Const1 iona1 General Fund obl igations. These
payments include disbursements to vend
for food, medicine and supplies, and
refunds to taxpayers.
Pursuant to
vernment Code Section 17205, thue
registered warrants are negotiable i s rume.n~·s. As a result, departments,
primarily the Franchise Tax Board, th oard ~f Equalization, the Employment
Development Department and the Departm n of Motor Vehicles have been receiving
.registered WClrrantS as payments for i bl11t1es owed to the State (e.g., a
citizen will submit a registered fers n 1 income tax refund to the Department
of Motor Vehicles tQ pay vehicle ice
fees, etc.)
As long as financial institutions coni ue to accept the registered warrants,
registered warrants reteiv~d as p~ to the State should be deposited with
the' financial institutions. The fin n 1a1 institutions will then earn any
interest accriled on the registered war
from the date of issuance to the date
the warrant is first advertised as re
able.
banks no longer accept reg s tred warrants for deposit, however,
should h~ld the warrants un i they are called for r-edemption by the
State Treasurer's Office. At that ttIH
, warrants should be submttted to the
treasure,.'s OfficII for redelllPtfon .. NI • than depodted wtth th, drpar1:sHnt-s
financial fnstttutton. This action wi 1 allow the 'General Fund to be credited
.for interest 4!arnings on registered WI nts which were held by the State unti 1
When the
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,.
/,
dep~rtments
redeemable.
For informaUon on redemption date
Office has establish
1-800-992-4647.
registered warrants, the State
toll-free telephone Hne at
If you have arty quest'1ons· about this me
Bud<;et' Manage;,., at 445-5332.
please call Robert Straight. Program
Controller's
~~~te
laFENUS
STAHCI~Ll
Chief Deputy IHrector
bl:revprod.lZ:t
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