BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 816|
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THIRD READING
Bill No: SB 816
Author: Hill (D)
Amended: 4/26/16
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 5-0, 3/30/16
AYES: Hertzberg, Nguyen, Beall, Lara, Pavley
NO VOTE RECORDED: Hernandez, Moorlach
SENATE ELECTIONS & C.A. COMMITTEE: 3-1, 4/19/16
AYES: Allen, Hancock, Hertzberg
NOES: Anderson
NO VOTE RECORDED: Liu
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SUBJECT: State Board of Equalization: members:
contributions
SOURCE: Author
DIGEST: This bill lowers the thresholds in the Kopp Act, the
conflict of interest statute that applies to the Board of
Equalization (BOE), from $250 to $100.
ANALYSIS:
Existing law:
1)Enacts the Quentin L. Kopp Conflict of Interest Act of 1991,
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also known as the Kopp Act, which applies several conflict of
interest measures to BOE members, including:
a) Requiring members who know or who have reason to know
that they received a contribution or contributions totaling
more than $250 in the last 12 months from a party, the
party's agent, any participant, or the participant's agent,
to a proceeding before BOE, to disclose the fact on the
record prior to rendering a decision on the proceeding.
b) Requiring parties or participants in adjudicatory
proceedings before BOE to disclose on the proceeding's
record any contribution or contributions exceeding $250
made by a party, the party's agent, any participant, or the
participant's agent to any member of the Board within the
last 12 months. However, when a "close corporation" is the
party or participant, disclosure only applies to the
majority shareholder.
c) Prohibits members from making, participating in making,
or otherwise attempting to use his or her official position
to influence, the decision in any adjudicatory proceeding
where the member received a contribution or contributions
from a party, the party's agent, any participant, or the
participant's agent, to a proceeding before BOE within the
previous 12 months, so long as the member knows that the
participant has a financial interest in the decision.
However, a member can participate in a decision under the
circumstances described above so long as the member returns
the contribution.
1)Provides that violations of the Kopp Act are punishable as a
misdemeanor, but requires prosecutions to be initiated within
four years of the date of the violation. Any person convicted
is subject to a fine up to the greater of $10,000 or three
times the contribution, and cannot serve as an elected
official or lobbyist for four years following the time for
filing a notice of appeal has expired, or all possibility of
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direct attack in the courts of this state has been finally
exhausted, unless the court at the time of sentencing
specifically determines that this provision shall not be
applicable.
This bill:
1)Lowers all of the Kopp Act's threshold amounts from $250 to
$100, thereby requiring BOE members to disclose contributions
above $100 from contributors with proceedings before BOE, and
prohibiting them from participating in those proceedings for a
12 month period following the contribution. Contributors
with a proceeding before BOE would additionally have to
disclose on the record of the proceeding any contributions to
BOE members of more than $100.
2)Makes grammatical and conforming changes.
3)Provides that no state mandated local program reimbursement is
necessary.
Background
In 1850, the Legislature first directed county assessors to tax
property; however, assessors in different counties often applied
different tax rates and methods of assessment. The California
Constitution of 1879 created the five-member BOE, composed of
four members elected by district and the State Controller, to
equalize rates and assessment practices among counties. In
1910, voters amended the Constitution to direct BOE to value
property owned by railways, companies selling gas and
electricity, or telephone companies. The Constitution
additionally allows the Legislature to authorize BOE assessment
of property owned or used as "public utilities." BOE also
administers the Sales and Use Tax, locally-imposed transactions
and use taxes, several excise taxes, and more than 30 other fee
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programs, and considers all appeals under these laws and
programs.
When the Legislature created the Bank and Corporation Franchise
Tax in 1929, instead of directing BOE to collect the tax, it
instead established the Franchise Tax Commissioner to do so. A
three-member Committee consisting of the State Controller,
Director of Finance, and the Chair of BOE appointed the
Commissioner. The Legislature granted to BOE appellate review
functions over the Commissioner's actions, and chose to retain
this same structure when it enacted the Personal Income Tax in
1935. In 1948, the Legislature replaced Commissioner with the
Franchise Tax Board, consisting of the same three officials
charged with appointing the Commissioner. BOE considers more
than 1,000 appeals per year for all of its programs, and
appellants and their representatives make contributions to BOE
candidates.
Existing law also creates the Fair Political Practices
Commission (FPPC), and makes it responsible for the impartial,
effective administration and implementation of the Political
Reform Act (PRA). Prior to 1991, the Political Reform Act's
conflict of interest provisions didn't apply to BOE members. In
that year, the Legislature enacted SB 1738 (Roberti), an omnibus
political reform bill which included the Kopp Act.
SB 816 ensures 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. This bill 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. However, this
bill's change only applies to direct contributions, because of
current law's ambiguous application to donations from Political
Action Committees. 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 political action committee
controlled by a corporation with a valuation issue before the
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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").
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
SUPPORT: (Verified5/10/16)
BOE Chair Fiona Ma
BOE Member George Runner
California Common Cause
California Public Interest Research Group
OPPOSITION: (Verified5/10/16)
BOE Member Jerome Horton
ARGUMENTS IN SUPPORT: According to the author, "California's
five-member Board of Equalization 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 Board of Equalization (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. Current law contains a loophole
that allows individuals with business before the BOE to
contribute to BOE members at levels below $250 without
triggering disclosure and recusal rules. As an example, a BOE
member's reelection campaign committee last year received 45
contributions of $249 each from executives, attorneys and other
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employees of a tax consulting firm totaling more than $11,000.
Another BOE member received 25 contributions of $249 each from
employees of the same tax consulting firm."
ARGUMENTS IN OPPOSITION: According to BOE Member Horton,
"According to the author this measure has no legal, factual, or
evidentiary basis and no real problem it seeks to resolve.
Rather, it is based on a false perception created by a few news
articles. The measure effectively discriminates against
citizens, residents, unions, and other who seek to exercise
their constitutionally protected rights to support candidates
and measures in the election process without jeopardizing their
right to an administrative hearing before BOE because their
contribution creates a conflict. It will severely restrict the
freedom of speech rights of citizen or resident who contribute
to BOE members and the State Controller by disqualifying that
member from hearing their appeal, while leaving unrestricted the
rights of citizens or residents contributing to judges,
commissioners, legislators, and other elected constitutional
officers, which is tantamount to a violation of due process and
'equal protection under the law.'"
Prepared by:Colin Grinnell / GOV. & F. / (916) 651-4119
5/11/16 15:12:46
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