BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 2323 (Perea) - Board of Equalization: publication of
decisions.
Amended: May 25, 2012 Policy Vote: G&F 5-4
Urgency: No Mandate: No
Hearing Date: July 2, 2012 Consultant: Mark McKenzie
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 2323 would require the Board of Equalization
(BOE) to publish decisions on its website when the amount in
controversy is $500,000 or more.
Fiscal Impact: The BOE estimates it would incur increased staff
costs of $479,000 to $572,000 in the first year, and ongoing
costs of approximately $383,000 to $476,000 annually (General
Fund) for 1.5 to 2 additional attorney personnel years (PYs) and
an additional 1/2 PY of court reporter costs (see staff
comments). These costs reflect the assumption that BOE would
publish an additional 30 to 35 decisions each year.
Background: Among other duties and functions, the BOE acts as a
quasi-judicial appellate body to hear and decide taxpayer
disputes arising from both the tax and fee programs administered
by the BOE and Franchise Tax Board (FTB) determinations of
income and corporate tax matters. Taxpayers that file and
appeal to the BOE (for FTB-related cases) or request an oral
hearing before the members of the board (for BOE-administered
taxes and fees) surrender the right to confidentiality with
regard to information provided to the BOE or included in the
"hearing summary" prepared to assist the BOE in its
consideration of the appeal. The BOE publishes the minutes and
provides video streams and archives of all of its public
hearings on its website. In addition, all hearing summaries are
attached to public meeting agendas and posted on the website 10
days in advance of the hearing.
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.
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Letter decisions may not be cited as precedent in any appeal or
proceeding before the BOE.
The BOE adopted updated Rules for Tax Appeals in 2008, which are
based on the California Rules of Court and provide guidance for
publishing decisions. Specifically, the Rules provide BOE with
the discretion to adopt a "formal opinion" for franchise and
personal income tax appeals that contain the findings of fact
and conclusions of law that form the basis for BOE's decision on
an appeal. "Memorandum opinions" serve the same function as
formal opinions, but are adopted in connection with
BOE-administered tax and fee programs. 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. "Summary decisions" may
apply to appeals of either BOE or FTB decisions, but may not be
cited as precedent. When deciding whether to issue a
precedential decision in the form of either a formal opinion or
memorandum opinion, the BOE considers whether it would:
Establish a new rule of law, apply an existing rule to a
set of facts significantly different from those stated in
published opinions, or modify or repeal an existing rule.
Resolve or create an apparent conflict in the law.
Involve a legal issue of continuing public interest.
Make a significant contribution to the law by reviewing
either the development of a common law rule or the
legislative or judicial history of a provision of a
constitution, statute, or other written law.
Proposed Law: AB 2323 would require the BOE to publish and make
available on its website a written formal opinion, a written
memorandum opinion, or a written summary decision within 120
days of a BOE decision in which the amount in controversy is
$500,000 or more, not including any consent calendar actions.
Each of the published decisions must include findings of fact,
legal issues presented, applicable law, analysis, disposition,
and names of adopting board members. The bill would authorize
board members to submit a concurring or dissenting opinion, as
specified. A formal opinion or memorandum opinion published by
the BOE may be cited as precedent in any matter or proceeding
before the board unless it has been depublished, overruled, or
superseded. A summary decision may not be cited as precedent.
Related Legislation: The July 7, 2005 version of AB 1655
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(Horton), as it was heard in this Committee, would have
prohibited BOE board members from participating in the hiring,
dismissal, or promotion of BOE staff, and required BOE to make
written staff decisions and recommendations pertaining to board
decisions available on its website. The bill was amended as it
was voted off of the Suspense File to require BOE to make
available a public statement indicating whether a board decision
modified, upheld, or overruled a staff recommendation and noting
the vote of each member voting on the matter. AB 1655 was
subsequently amended on the Senate Floor to address a different
subject.
Staff Comments: AB 2323 is intended to promote transparency and
taxpayer confidence by requiring the BOE to publish written
opinions and decisions. These documents would provide a more
detailed formal record of the legal analysis applied to resolve
significant cases. While it is unclear whether the total number
of appeals before the BOE has changed dramatically over the
years, the author notes that the number of formal opinions
published by the board have decreased from an average of just
over 160 per year in the 1980s to just over 3 per year during
the period from 2000 to 2010. In addition, only 7 memorandum
opinions have been published since 2000.
This bill would require BOE to publish either a precedential
opinion, or a summary decision which may not be cited as
precedent, but would require the same level of detailed analysis
and preparation for all published decisions. BOE's estimated
costs are based on the application of the bill's requirements to
approximately 30 to 35 decisions. Based on projected caseload,
BOE assumes 23 of the published decisions would be related to
oral hearings for which the bill would require the preparation
of a more comprehensive legal opinion rather than the brief
letter decisions or notices of board action that are currently
prepared to reflect the board's determination. AB 2323 would
require the brief notices and letter decisions to be replaced
with the preparation of a full opinion that contains detailed
factual findings and legal analysis that would need to be
brought back before the board for review, discussion, and
adoption. Since these cases often involve the most complex
factual and legal issues, substantial evidence, and extended
oral hearings, the preparation of written decisions for these
cases would comprise the majority of the estimated costs of the
bill. BOE estimates each of these cases would require
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approximately 140 hours of legal staff time.
The remaining caseload would be related to a total of 9
decisions that are decided on the basis of the written record,
rather than oral hearings. Currently, these "nonappearance
adjudicatory decisions" are prepared by legal attorneys in the
Appeals Division or audit staff. Those decisions currently
prepared by legal staff would only require a relatively minimal
amount of additional workload to comply with the provisions of
this bill, but those decisions currently prepared by audit staff
would require substantial revision to provide factual findings
and legal analysis consistent with the bill's requirements. BOE
estimates that each case for which legal staff currently
provides a written decision would only require an additional 10
hours of legal staff time, while those appeals for which audit
staff currently prepare written materials, each case would
require an additional 50 hours of legal staff time.
In total, BOE estimates the bill would require 1.5 to 2 PY of
legal staff time to comply with the bill's provisions (1 Staff
Counsel III PY, and 1/2 to 1 Staff Counsel IV PY) at a first
year cost of $395,000 to $488,000, and ongoing costs of $312,000
to $405,000 annually. In addition, BOE estimates the need for
an additional 1/2 PY of court reporter staff time at an
estimated first year cost of $84,000, and ongoing costs of
$71,000 annually. These staff costs represent fully-loaded PY
costs that include salaries, benefits, and operating expenses
and equipment.
Staff notes that BOE estimates assume that the term "amount in
controversy" applies to decisions in which the total amount of
tax, penalties, and interest exceeds $500,000, not just the
amount of tax in question. BOE's analysis also assumes that the
bill would apply to local tax reallocation appeals when disputed
amounts pertain to the allocations of property taxes among local
agencies. The estimated costs attributable to the bill would
decrease if these cases were excluded from BOE estimates.