BILL ANALYSIS Ó
SENATE COMMITTEE ON
ELECTIONS AND CONSTITUTIONAL AMENDMENTS
Senator Ben Allen, Chair
2015 - 2016 Regular
Bill No: SB 816 Hearing Date: 4/19/16
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|Author: |Hill |
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|Version: |1/4/16 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Frances Tibon Estoista |
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Subject: State Board of Equalization: members: contributions
DIGEST
This bill reduces to zero the current $250 threshold for
campaign contributions that triggers conflict of interest
requirements for Board of Equalization (BOE) members under the
Kopp Act.
ANALYSIS
Existing law:
1) Limits, pursuant to the Kopp Act, the ability of a member of
the BOE to participate in an adjudicatory proceeding that
involves a participant or party who contributed $250 or more
in the preceding 12 months to that member, as follows:
a) Requires a member of the BOE who knows or has
reason to know that he or she received a contribution or
contributions totaling $250 or more in the last 12
months from a party, participant, or agent of a party or
participant, to an adjudicatory proceeding before the
BOE, to disclose the fact on the record prior to
rendering a decision on the proceeding.
b) Requires a party or participant in an adjudicatory
proceeding before the BOE to disclose on the
proceeding's record any contribution or contributions of
$250 or more made in the last 12 months by that party,
SB 816 (Hill) Page 2
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participant, or his or her agent to any member of the
BOE. Provides that when a "close corporation" is the
party or participant, disclosure only applies to the
majority shareholder.
c) Prohibits a member of the BOE from making,
participating in making, or otherwise attempting to use
his or her official position to influence, a decision in
an adjudicatory proceeding if the member knows or has
reason to know that he or she received a contribution or
contributions totaling $250 or more in the last 12
months from a party, participant, or agent of a party or
participant, and if the member knows or has reason to
know that the participant has a financial interest in
the decision, as specified. Permits a member to
participate in a decision under the circumstances
described above if the member returns the contribution
within 30 days from the time that he or she knows or has
reason to know about the contribution and the
adjudicatory proceeding.
1) Provides that a knowing or willful violation of the Kopp Act
is a misdemeanor, and provides that in addition to other
penalties provided by law, a violation is punishable by a
fine of $10,000, or three times the amount the person failed
to disclose or report properly, whichever is greater.
Requires prosecution for a violation to be commenced within
four years after the date of the violation.
2) Creates the Fair Political Practices Commission (FPPC), and
makes it responsible for the impartial, effective
administration and implementation of the Political Reform Act
(PRA).
3) Prohibits a person, other than a small contributor committee
or political party committee, from making any contribution
totaling more than $7,000 to any candidate for BOE, and
prohibits candidates from accepting a contribution that
exceeds that amount. Requires the FPPC to adjust this limit
in January of every odd-numbered year to reflect any increase
or decrease in the Consumer Price Index, and requires those
adjustments to be rounded to the nearest $100.
This bill:
SB 816 (Hill) Page 3
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1) Lowers the campaign contribution threshold that triggers the
conflict of interest requirements under the Kopp Act from
$250 to $0. Thereby providing that a contribution of any
amount acts as a trigger.
2) Makes other conforming changes.
BACKGROUND
Board of Equalization : Established in 1879 by a constitutional
amendment, the BOE is composed of four members elected by
districts and the State Controller, and was initially charged
with responsibility for ensuring that county property tax
assessment practices were equal and uniform throughout the
state. Currently, the BOE also administers the sales and use
tax, locally-imposed transactions and use taxes, several excise
taxes, and more than 30 other fee programs, and considers all
appeals under these laws and programs. Additionally, the BOE
hears appeals from Franchise Tax Board actions. The BOE is the
only elected tax board in the country.
The Kopp Act : Under the PRA, campaign contributions generally
cannot be the basis for a disqualifying conflict of interest.
There is one exception - the Levine Act - which was enacted in
1982 as a response to reports that members of a state agency
sought to raise money from individuals and entities that had
permit requests pending before the agency. The Levine Act is
narrowly drafted to apply only to decisions made by agencies
with membership that is not directly elected by voters, and only
to proceedings involving licenses, permits, or other
entitlements for use. Proceedings of a more general nature and
with broader applicability are not covered by the Levine Act.
The Levine Act expressly provides that it does not apply to the
Legislature, the BOE, or constitutional officers.
In 1990, the Legislature approved and Governor Deukmejian signed
SB 1738 (Roberti, Ch. 84, of 1990), a comprehensive ethics
reform package that enacted new legislative conflict of interest
rules, banned honoraria and limited gifts to public officials,
and imposed new post-government employment restrictions on
former public officials, among other provisions. One provision
of SB 1738 established the Kopp Act - so named because those
provisions originally were contained in legislation authored by
SB 816 (Hill) Page 4
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then-Senator Quentin Kopp. The Kopp Act - which was modeled
after the Levine Act - prohibits a member of the BOE from
participating in an adjudicatory proceeding if the member knows
or has reason to know that he or she received contributions
totaling $250 or more in the 12 months prior to the proceeding
from a party, participant, or agent of a party or participant,
as specified. Members are permitted to participate in the
decision, however, if they return the contribution within a
specified time period. When the Kopp Act was being considered,
the author argued that the BOE should be subject to rules
similar to those that applied to appointed boards and
commissions under the Levine Act because of the BOE's
quasi-judicial role as the appellate body for state tax appeals.
Unlike the Levine Act, the Kopp Act is not part of the PRA, and
is neither administered nor enforced by the FPPC.
COMMENTS
1) According to the author : Current law contains a loophole
that allows individuals with business before the Board of
Equalization to contribute to BOE members at levels below
$250 without triggering disclosure and recusal rules.
California's five-member BOE is the only elected tax
commission in the nation. It collects sales, property and
use taxes, acts as the state's tax court in settling
disputes, and assesses public utility and railroad
properties. Four board members are elected by districts;
the state controller is the fifth member. SB 816 ensures
that BOE members comply with disclosure and recusal
procedures for all contributions received in the previous 12
months instead of just those over $250. The measure
prevents BOE members from voting on cases if they've
received a contribution from that entity within the previous
12 months.
2) Political Committees . SB 816 will ensure that a party,
agent, or participant who contributes significant amounts,
but breaks them up into several smaller contributions to
avoid the $250 threshold, triggers the Kopp Act's conflict
of interest provisions. The measure responds to recent news
reports where 45 employees of tax consulting firm Ryan, LLC,
donated $249 each to one BOE member, and 25 employees
donated the same amount to another BOE member. As a result,
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the measure will likely add transparency to BOE proceedings
in the form of increased disclosures from BOE members and
contributors. However, the bill's change only applies to
direct contributions, because of current law's ambiguous
application to donations from Political Committees, commonly
known as PACs.
Soon after the Kopp Act was enacted, BOE's chief counsel
opined that a contribution exceeding the $249 limit to the
State Controller by a PAC controlled by a corporation with a
valuation issue before the board did not disqualify the
recipient board member from voting on the question, stating
that "a political action committee does not come within any
of these definitions ["party," "participant," or "agent"].
Laura Mahoney with Bureau of National Affairs, now held by
Bloomberg News, found evidence of the political influence of
PACs in BOE cases in her August, 2010 work, "Campaign
Contributions and the BOE: A Special Report." The report
selected a sample of BOE cases and found in those disputes
with $250 or less in contributions tied to them, the
taxpayers won 30 percent of the time. In cases with between
$250 and $16,000, the winning percentage rose to 53 percent.
At the level of $16,000 to $50,000, the success rate was 75
percent. For cases where contributions were between $50,000
and $137,000 - the top level - the success rate was 88
percent.
3) Strategic Disqualification Under the Kopp Act : Under the
BOE's Regulation 5550, any three members of the BOE
constitute a quorum, except in specified circumstances, and
a majority of the quorum is required to approve or
disapprove taxpayer appeals and other matters. As a result,
if two members of the BOE are disqualified under the Kopp
Act from participating in a proceeding, it would take only
two of the remaining three members to reach a decision in
the proceeding. The fact that disqualifications due to the
Kopp Act can reduce the number of votes necessary for the
BOE to reach a decision has led to concern that parties and
participants can strategically disqualify members of the BOE
from certain proceedings by making campaign contributions of
$250 or more to those members. To the extent that the Kopp
Act is actually being used to strategically disqualify
members in proceedings, this bill could exacerbate that
problem. However, a BOE member could respond by returning
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the contribution within 30 days from the time that he or she
knows or has reason to know about the contribution and the
adjudicatory proceeding.
RELATED/PRIOR LEGISLATION
AB 1828 (Dodd) makes similar changes to the Kopp Act, but also
applies its provisions to behested payments in aggregate of
$5,000 or more. AB 1828 recently passed out of the Assembly
Elections and Redistricting Committee and has been referred to
the Assembly Appropriations Committee.
PRIOR ACTION
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|Senate Governance and Finance | 5-0 |
|Committee: | |
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POSITIONS
Sponsor: Author
Support: Fiona Ma, Board of Equalization Chair, and Member
Second District
George Runner, Board of Equalization Member First
District
California Public Interest Research Group
California Common Cause
Oppose: Jerome Horton, Board of Equalization Member Third
District
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