BILL ANALYSIS                                                                                                                                                                                                    




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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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