BILL ANALYSIS Ó AB 2323 Page 1 Date of Hearing: May 25, 2012 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 2323 (Perea) - As Amended: May 15, 2012 Policy Committee: Revenue and Taxation Vote: 8-0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill requires the State Board of Equalization (BOE) to publish and make available on its Internet Web site a written formal opinion, a written memorandum opinion, or a written summary decision for each case in which the amount in controversy is five hundred thousand dollars ($500,000) or more. Specifically, this bill: 1)Requires each published opinion to include specified sections, including disposition and the concurring board members. 2)Authorizes any BOE member to write a dissenting opinion should he/she disagree with the majority opinion. 3)Provides that the BOE shall determine the precedential value of each formal legal opinion and each memorandum opinion at its discretion. FISCAL EFFECT Administrative costs annually for BOE in the hundreds of thousands of dollars. COMMENTS 1)Purpose. The author explains that BOE members hear appeals arising from the various tax and fee programs the BOE administers and also serves as the administrative appellate body for final actions of the Franchise Tax Board. The author states given BOE's quasi-judicial role in hearing and deciding taxpayer disputes, taxpayers must have full confidence in the AB 2323 Page 2 process by which the BOE renders its decisions. The author argues AB 2323 would promote taxpayer confidence by requiring the BOE to publish written opinions for each case in which the amount in controversy is $500,000 or more. The author notes the number of published decisions has decreased dramatically in recent years. For example, during the 1980s, the BOE published a total of 1,615 formal opinions, for an average of 161.5 decisions a year. During the period from 2000 to 2010, however, the BOE only published 32 formal opinions, an average of 3.2 decisions each year. The author contends publishing these opinions would provide a formal record, for both the taxpayers involved and other interested parties, of the legal analysis applied to resolve significant cases. 2)Support. The California Tax Reform Association supports AB 2323 because even though BOE is a quasi-judicial body it issues very few formal opinions even though the decisions may be a precedent that would be useful to the public. They argue since the bill only requires written opinions for decisions greater than $500,000, there is a substantial amount of revenue at issue in these appeals and the public has a right to know the basis and reasoning of BOE decisions. They conclude that requiring written opinions with the information about the case will provide public information about these proceedings. 3)Opposition . Opponents, including Price Waterhouse Coopers (PwC) and BOE member George Runner, oppose the bill arguing it is burdensome and unnecessary and will be costly and delay the appeals process. PwC, in particular, notes the bill, without defining a problem needing to be solved, proposes to spend hundreds of thousands of dollars annually to require the BOE to arbitrarily publish decisions, irrespective of their significance. The California Taxpayers Association opposes the bill, unless it is amended, seeking amendments that eliminate the $500,000 threshold requirement and requiring publishing of precedential decisions regardless of the dollar amount. They argue that the BOE decisions may be helpful or even set precedent for future taxpayers, even if they are below the threshold and, in those cases, the public may be precluded from important information that would help them determine whether to file an appeal for a tax dispute. AB 2323 Page 3 4)Background . If a taxpayer's dispute cannot be resolved through discussions with BOE staff, the taxpayer's case may be referred to the Appeals Division for conference by an Appeals Division attorney or auditor with no prior involvement with the case. The Appeals Division will thereafter issue a decision and recommendation in the appeal based on all relevant arguments and evidence. If the taxpayer disagrees with the D&R, the taxpayer may request a public hearing before the members of the BOE. The decisions of BOE are reflected in the meeting minutes, often with a simple notation of the action taken. In many cases, the BOE's Appeals Division will also prepare a "Letter Decision," which contains a short explanation of the reasons for the BOE's decision, and provide one copy to each party to the case. Letter Decisions may not be cited as precedent in any appeal or proceeding before the BOE. The BOE does, however, have the discretion to adopt a several types of opinions as defined "Formal Opinion," "Memorandum Opinion," or a "Summary Decision." Any Formal Opinion or Memorandum Opinion may be cited as precedent in any matter or other proceeding before the BOE, unless the opinion has been depublished, overruled or superseded. 5)Prior legislation. Before being amended to a different subject, AB 1655 (Horton), of 2005 required the BOE to make public and readily available on the Internet all BOE decisions and determinations. The BOE's staff analysis of AB 1655 noted the bill's publication provisions seemed premature, given that the BOE was then engaged in a comprehensive review of its Rules of Practice. Specifically, the BOE analysis noted the review includes, developing criteria for publishing decisions and that BOE legal staff is researching the California Rules of Court for requirements the Courts of Appeal use in publishing decisions. The BOE staff analysis concludes that the review will also involve an interested party meeting process, in which all stakeholders can have their concerns addressed. Only 10 formal opinions were published between 2006 and 2010. Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081 AB 2323 Page 4