STATE OF CALIFORNIA FRANCHISE TAX BOARD MEETING WEDNESDAY, JUNE 27, 2007 FRANCHISE TAX BOARD 9646 BUTTERFIELD WAY TOWN CENTER, GERALD GOLDBERG AUDITORIUM SACRAMENTO, CALIFORNIA 1:30 P.M. REPORTED BY: SANDRA VON HAENEL CSR No. 11407 1 APPEARANCES 2 3 FRANCHISE TAX BOARD: 4 Hon. John Chiang, Chair Mr. Mark Hill representing Hon. Michael C. Genest 5 Hon. Betty T. Yee Deputy Controller Marcy Jo Mandel 6 7 FRANCHISE TAX BOARD STAFF: 8 Colleen Berwick Cathy Cleek 9 Lisa Garrison Patrick J. Kusiak 10 Bruce Langston Benjamin A. Miller 11 Brian Putler 12 ---oOo--- 13 14 15 16 17 18 19 20 21 22 23 24 25 2 1 SACRAMENTO, CALIFORNIA 2 WEDNESDAY, JUNE 27, 2007, 1:30 P.M. 3 ---oOo--- 4 CHAIR CHIANG: Good afternoon. This is the scheduled 5 time for the meeting of the Franchise Tax Board. 6 Would the secretary please call roll to determine if a 7 quorum is present. 8 THE SECRETARY: Member Yee? 9 MEMBER YEE: Here. 10 THE SECRETARY: Mark Hill representing Member Genest? 11 MR. HILL: Here. 12 THE SECRETARY: And Chair Chiang? 13 CHAIR CHIANG: Present. 14 At least two members are present, so there is a quorum 15 of the Franchise Tax Board, so that we are now in session. 16 The public has a right to comment on each agenda item. 17 If there are any members of the public wishing to speak on 18 any item, please come forward when that item is called. 19 So please call the first item, the approval of minutes. 20 MEMBER YEE: Mr. Chairman, I would move approval of the 21 April 4th, 2007, Board minutes. 22 CHAIR CHIANG: Okay. There is a motion. 23 Is there a second? 24 MR. HILL: Second. 25 CHAIR CHIANG: Is there any objection? 3 1 Without objection, motion passes. The minutes are 2 approved. 3 Next item. 4 MR. PUTLER: I'm Brian Putler. I'm the Legislative 5 Services Director for the Franchise Tax Board. 6 What I'd like to do, if I may, is start with a quick 7 explanation for the audience of the FTB staff 8 recommendations. 9 The staff will recommend a position if there is an 10 administrative issue with a bill such as the department's 11 computer system isn't able to implement a bill, in which 12 instance, the staff may recommend for an opposed position; 13 however, today there is no administrative issues with any of 14 the bills. 15 So the staff then defers to the Board on matters of tax 16 policy, and denotes that by showing an "N" for neutral. So, 17 accordingly, the recommendation is not that the Board's 18 position be neutral, but that the staff defers to the Board. 19 CHAIR CHIANG: Very good. Thanks, Brian. 20 MR. PUTLER: So, with those things in mind, there are 21 five bills for position today, and I'm happy to introduce 22 each of them or defer to the Board to handle them 23 individually. 24 CHAIR CHIANG: Why don't you go through each so that 25 everybody is fully aware. 4 1 MR. PUTLER: Okay. 2 The first, AB 969 (Eng), would require taxpayers to 3 report and pay the use tax using either a standard Board of 4 Equalization tax return or an income tax, or report it as 5 part of the income tax, and it would change the current law 6 from that being an option to now make that mandatory, to use 7 one of those two methods. 8 SB 38 (Battin) is a disaster bill that would allow 9 taxpayers that were impacted by the Riverside County 10 wildfires of 2006 to be able to file an immediate amended 11 return to take into account their losses due to the fire. 12 SB 114 is a similar bill, but it pertains to the 2007 13 freezing conditions in many parts of the state. 14 SB 920 is a bill that would allow disclosure of certain 15 state tax information to the State Controller's Office to 16 allow the Controller's Office to enhance its return property 17 program. 18 And then, finally, SB 978 (Harmon) is a bill that would 19 require cities that have either a city license or business 20 tax to report certain information on those entities to the 21 Franchise Tax Board. 22 CHAIR CHIANG: Very good. Thank you, Brian. 23 Is there a motion? 24 MEMBER YEE: Mr. Chairman, I would like to move that 25 the Board adopt the recommendation for all the bills. 5 1 CHAIR CHIANG: Thank you very much. 2 There's a motion by Betty Yee to adopt a support 3 position for the five legislative matters that have been 4 raised. 5 I will second that. 6 MR. HILL: It's our position and that of past practice 7 that we will not take a position. 8 CHAIR CHIANG: Very good. 9 All those in favor say aye. 10 BOARD MEMBERS: Aye. 11 CHAIR CHIANG: All those opposed? 12 Without objection the motion passes. 13 Next item, please. 14 MR. PUTLER: Yes, one more item. 15 And, Members, I'm pleased to report that we have made a 16 lot of progress since the last Board meeting on the issue of 17 federal conformity. Since the last meeting, the staff has 18 drafted extensive amendments for purposes of federal 19 conformity for a date change bill to January 1, 2007, and we 20 have worked with Assemblymember Calderon's office, who has 21 the expectation the Board would be the sponsor of that bill. 22 He's actually had the provisions amended into a bill. 23 And what the staff would like today is for the Board to 24 agree to be the sponsor of that bill formally. 25 And I was also asked by Dave Doerr from CalTax before 6 1 the beginning of the meeting to say that CalTax is in support 2 of the bill. 3 CHAIR CHIANG: Very good. 4 Is there a motion? 5 MEMBER YEE: I would move sponsorship of the bill by 6 the Franchise Tax Board. 7 And also I just want to comment and thank the staff for 8 the extensive interested parties process that brought us to 9 this point. It's nice to see the accomplishment. 10 MR. PUTLER: It's worked very well. 11 Thank you. 12 CHAIR CHIANG: Thank you. 13 There's a motion by Ms. Yee. I will second it. 14 I assume the Department of Finance does not take a 15 position and, I take it, is abstaining on this issue. 16 All those in favor say aye. 17 MEMBER YEE: Aye. 18 CHAIR CHIANG: Aye. 19 Without opposition, motion passes. 20 Thank you very much, Brian. 21 Next item, please. 22 MR. MILLER: Good morning. Good afternoon, I should 23 say. Ben Miller with the Legal Division. 24 We just wanted to make a report to the Board. The 25 National Conference of Commissioners on Uniform State Laws is 7 1 undertaking a possible study of the UDITPA laws, the laws we 2 use to assign income of corporations between jurisdictions. 3 The UDITPA was adopted back in 1957. The economies 4 have changed. There are some areas in the nature of 5 assignment of sale of intangible property which don't seem to 6 conform to current economic conditions. A lot of case law 7 has developed under that. 8 The states did become less uniform, and the activities 9 of the Commission will be to try and bring things back, draft 10 new law, pick up the changes which have occurred, and see if 11 they can bring forth a uniform law which would then be 12 considered by the individual states. 13 We have been participating in that initial process. 14 Our understanding or -- it's not our understanding. The 15 initial committee on this has reviewed it. They're making a 16 recommendation to the full body that it be looked at and that 17 all of it be looked as comparative. It's not just the one 18 issue which the Interstate Tax Commission put up. 19 We would anticipate that we will be continuing to at 20 least participate in the process as what's called an 21 observer. Unlikely we'll be drafting the bill. There is 22 obviously a uniform process, a nationwide process, a fairly 23 small drafting committee. So we intend to stay active in it 24 and at least offer our thoughts and suggestions. Whether 25 they're adopted or not, that's beyond our control. 8 1 It's for information only. 2 CHAIR CHIANG: Very good. 3 As has been indicated it is an information item. No 4 action is required. 5 Ben, thank you very much for your report. 6 Next item, please. 7 MR. LANGSTON: Thank you. I'm Bruce Langston from 8 FTB's legal staff, and we are here to request permission to 9 hold an interested parties meeting to talk about our 10 withholding at source regulations. We have some draft 11 discussion, draft regulations in the handout. 12 The withholding at source is a program that's 13 administered by the Franchise Tax Board. It's different from 14 wage withholding. Primarily it's withholding on real estate 15 and payments to nonresidents. 16 The regulations haven't been updated really since 1971, 17 and we have had a lot of law changes in the meantime. There 18 has been modernization of a lot of things, so we want to get 19 the process going with an interested parties meeting. 20 CHAIR CHIANG: Very good. 21 Is there a motion? 22 MEMBER YEE: I will move to direct staff to initiate 23 the interested parties process. 24 CHAIR CHIANG: Very good. 25 There is a motion by Yee to move the process forward. 9 1 Is there a second? 2 MR. HILL: Second. 3 CHAIR CHIANG: All right. 4 Without objection the motion passes. 5 Thank you very much, Bruce. 6 Next item, please. 7 MS. CLEEK: Good afternoon. I'm Cathy Cleek, and I'm 8 the FTB sponsor of the child support project that FTB and 9 DCSS are working together on. And I'd like to give you an 10 update of where we are on that project. 11 There is kind of three major areas that I'd like to 12 address, and the first one is implementing the system. Last 13 meeting, when we met in April, I came and talked to you about 14 we were on the verge of implementing Version 1 to the pilot 15 counties, so three pilot counties. Today we have all 16 counties on Version 1. 17 May 1st, we had the first three counties transition to 18 Version 2. That implementation went well. We plan to have 19 two quiet months to work on any new issues that came up as 20 you implemented this new system. 21 We've spent the last two months working on such issues 22 as form issues and some data issues, and we have decided to 23 extend the pilot -- the quiet months one month, and start our 24 implementation for the second wave of counties, which is 25 Butte, Napa, San Benito, and Santa Cruz on August 1st. 10 1 The natural question that comes up is what happens to 2 the end date, and we are keeping the same end date. 3 Los Angeles will transition in October of 2008. 4 So, the second thing that is of interest, and 5 especially the Department of Finance is always interested in, 6 federal certification, because what that really means to all 7 of us is that -- we had federal penalties put in abeyance in 8 September 2006, so those penalties are on hold. Once we get 9 a certified system, the federal government will give us 10 $190 million back of those penalties. 11 So we are working with the federal government to get 12 our certification. They've been out in January, March, and 13 in June. We will get the results from their June visit in 14 July, and we anticipate this process to be complete in the 15 April/May time frame so that the money will come back in the 16 the state fiscal year 07/08 as planned. 17 So the last thing I'd like to give you an update on is 18 the transition of CCSAS from FTB to DCSS. We have been 19 working with the Governor's Office and had a meeting last 20 month. And out of that meeting what was decided was that we 21 should start the transition planning, we should let the staff 22 know that this transition is going to occur, and that the 23 transition should begin sometime after 7/1/08. 24 So we have met with the staff, let them know about 25 this. We've set up transition teams that have both the FTB 11 1 and DCSS -- they're co-led and co-managed -- and our first 2 transitions during Committee is next week. 3 So that's my update, and I'd be happy to answer any 4 questions. 5 CHAIR CHIANG: Thank you. 6 Are there any member questions or comments? 7 Thank you very much, Cathy. 8 Next item, please. 9 MS. GARRISON: Good afternoon. I'm Lisa Garrison, the 10 Director of the Financial Management Bureau of the Franchise 11 Tax Board. 12 Under Item 6 today, I have four administrative matters 13 for your consideration. 14 The first item we're requesting Board approval for a 15 contract exceeding $1 million, this is for roll paper needed 16 to do our daily printing. We still print about 3 million 17 notices a month, and this is a three-year contract for 18 $1.2 million. 19 CHAIR CHIANG: Questions? Comments? Motion? 20 MEMBER YEE: I'll move approval of the process. 21 CHAIR CHIANG: We have a motion to approve by Ms. Yee. 22 Is there a second? 23 MR. HILL: Second. 24 CHAIR CHIANG: Second by Mr. Hill. 25 Without objection the motion passes. 12 1 Next item. 2 MS. GARRISON: Item 6b, this is a request for the 3 Board's approval to submit a Space Action Request, otherwise 4 known as Form 9, to the Department of General Services. 5 The first request is to relocate our Los Angeles 6 District Office telecom room. We have run out of space in 7 that telecom room. 8 The second item is to request to renegotiate the lease 9 for the San Francisco District Office. This is our audit 10 office. The soft term of this lease would expire in February 11 of 2009. 12 The third item is a request to relocate our Van Nuys 13 District Office. This is an audit-only office which is 14 currently in a private building. The soft term of this lease 15 expires in November of 2008. 16 And, finally, the fourth request is to request 17 additional space for Investigations in our West Covina 18 office. The Tax Gap BCP has granted us nine new 19 investigative positions in that area. 20 CHAIR CHIANG: Very good. 21 Are there member questions, comments, or motions? 22 MEMBER YEE: I understand that there aren't any 23 employee concerns with respect to the present lease. 24 Is that correct? 25 MS. GARRISON: That's correct, there are no employee 13 1 concerns. 2 MEMBER YEE: With that, I will move approval. 3 CHAIR CHIANG: Motion is by Yee to move approval. 4 Is there a second? 5 MR. HILL: I'd ask a question first. 6 Do you anticipate any need for a budget augmentation 7 regarding any of those moves at this point? 8 MS. GARRISON: No. We have provided for any relocation 9 expenses and the expenses also on the telecom room. 10 MR. HILL: Thank you. 11 I'll second. 12 CHAIR CHIANG: There is a motion and a second. 13 Without objection, motion passes. 14 Next item, please. 15 MS. GARRISON: Items 6c is an informational item. This 16 is an overview of the Budget Act Highlights for 2007/08. The 17 FTB's operating budget is proposed to be about $660 million, 18 for 5,200 positions approximately. 19 Some changes to items that you have previously seen -- 20 this is a Tax Gap BCP that you approved. There was some 21 shifting of positions based on LAO approval, and $250,000 was 22 granted to the Department ostensibly for shared efforts 23 between FTB, EDD, and BOE. 24 The BCP Number 6, to partially restore customer service 25 levels was denied. 14 1 And then finally we did add a finance charge for our 2 Vehicle Registration Collection program. This was not 3 presented to the Board in our May finance letter, and so it 4 was submitted pending Board approval. 5 It has also been approved to augment that program by 23 6 positions. This is out of the Vehicle Fund, not the General 7 Fund. 8 CHAIR CHIANG: Very good. 9 Member questions? Comments? 10 MS. GARRISON: And finally Item 6d is an informational 11 item. This is a summary of the proposed BCP that the 12 Department is preparing at this time. They will be submitted 13 at the end of August to the Department of Finance, and 14 because of the scheduling, they will be submitted pending 15 Board approval. The completed BCPs will be brought back to 16 you for action in the fall meeting. 17 I think that's all of them. I can go through each one 18 There's 14 of them. Or if you have any questions. 19 CHAIR CHIANG: Would the members like further details? 20 Thank you very much, Lisa. 21 Next item, please. 22 MS. STANISLAUS: Okay. Moving on to Item Number 7, 23 that's the Tax Systems Modernization. 24 If the Board would so indulge us by moving to the side 25 table to better see the presentation, that would be helpful 15 1 for us. 2 Thank you. 3 MS. CLEEK: Good afternoon, again. And I'm going to 4 talk to you about an FTB tax systems modernization effort, 5 and I have a presentation, and I will be happy to answer 6 questions along the way or at the end. 7 I think all of you are aware is this January we updated 8 our Strategic Plan, and this truly provides the direction for 9 FTB for the next four years, so 2007 to 2009. As part of 10 this effort, we set those six goals that are really important 11 to us, and we want to move forward in this direction. 12 We want to improve the customer service we provide, 13 work more actively with taxpayers and tax representatives, 14 give people input, not just decide what's good for them. So 15 that's one of the things that's really important to us. 16 The the next thing is to increase fairness in 17 compliance with tax law. I can place this in our Tax Gap 18 efforts, what are we doing to decrease the tax gap 19 allocation. 20 The next thing is increased transparency. And under 21 Selvi's leadership, she's really pushed us to do things like 22 interested parties meetings and be very open. We have put a 23 great deal more information on the Web, and we see this as 24 really important in the work we do. 25 The next thing is to have a great place for people to 16 1 work, contribute, and learn, the people part of the job. You 2 can have great strategic plans, but it's the people who make 3 it happen. So we want to invest in those people to make good 4 things happen here at Franchise. 5 Demonstrate operational excellence. What we see about 6 this is we've been a leader in tax administration. We want 7 to continue that leadership role. We want to do this 8 effectively at reduced cost but with high quality. 9 And last but by no means least, we will move very 10 strongly in the protection of taxpayers' information and 11 their privacy. That's the very high level of things we'll be 12 moving forward on. 13 So once you have a Strategic Plan, what we believe is 14 the next step is to develop a Technology Strategic Plan. We 15 believe that technology helps us take that next leap forward 16 anytime, if you do it right. So this plan will answer 17 questions of what technology do we need to make this vision 18 that we've laid out in the Strategic Plan for you. 19 So this Technology Strategic plan effort that we are 20 undergoing is something that really supports the Strategic 21 Plan and is really an extension of that Strategic Plan. 22 So just to give you some history. We did a similar 23 effort in the '90s, and this IT Strategic Plan, we had four 24 major projects come out of that plan. The projects cost the 25 State about a hundred million dollars and generated a billion 17 1 dollars in project benefits. So we see this effort kind 2 of -- we expect the same kind of results this time. 3 So how do we do this? And it's really, to me, a 4 five-step process. First thing we do is we document our 5 current way of doing business and the problems that restrain 6 us from improving how we are doing things. 7 The next step is documenting the future way of doing 8 business based on our Business Strategic Plan. So it's 9 really our guiding force. 10 The next thing we do is we evaluate the latest 11 technologies that are out there to determine the smartest 12 possible way to solve some of our business problems. 13 And the fourth step is to validate what we have 14 currently in our IT infrastructure and what we need to enable 15 the business and help meet the Business Strategic Plan. 16 And the fifth step is identifying and prioritizing the 17 technology projects that need to be implemented. And let me 18 just give you a really quick example. 19 The way we model and select cases for audit, there has 20 been -- this is something we developed twenty plus years ago, 21 and there has been a lot of really good advancement in how 22 you can select cases for audit. So this is something we are 23 very interested in, looking at some of this technology, and 24 we believe that more sophisticated ways of choosing cases for 25 audit will generate more revenue for the State and also it 18 1 will allow us not to have so many no-change audits, which are 2 burdensome, interfering to taxpayers, and just not a wise use 3 of resources. That's one of the very high-level ideas that 4 we will be doing some more work on. 5 Part of this process is really defining, for all the 6 ideas we come up with, what's the business benefit, what's 7 the revenue associated. And also technology is a risky 8 proposition, so what are the risks and what time line makes 9 sense. 10 So with this plan, what we plan to do is we kick off 11 this effort July of 2007. We will complete the business 12 opportunity analysis, where are our biggest problems, by this 13 November. We will have an Implementation Plan in February of 14 2008, and our completed IT Strategic Plan in March 2008. 15 This is really a team effort. We are involving the 16 highest level of FTB management in both business and 17 technology. 18 I just want to emphasize, even though I'm the CIO 19 talking about this, I do not feel like this is my plan. I 20 feel like this is really our Business Plan to help us move 21 forward. 22 We are bringing in subject-matter experts, our sister 23 tax agencies, our taxpayer advisory board. We want to be 24 very open and collaborative about what make sense for us to 25 move forward. We also have a consultant who works with us, 19 1 Performance Technology Partners. 2 So I'd like to try and simplify things, even though 3 sometimes technology doesn't seem simple. But I really think 4 of this as FTB's biggest problems -- and get in there and 5 solve them. But we want to make sure our future IT 6 investments are smart -- because they're expensive -- that 7 they make a difference, that they provide the greatest 8 business yield and revenue for the State, and that the risks 9 are manageable for the investments that we propose. 10 That's the process that we're working on. We are very 11 excited about that. And I would be really happy to answer 12 any questions. 13 CHAIR CHIANG: Are there any Member questions or 14 comments? 15 MR. HILL: As you have noted earlier in the meeting, 16 there was $250,000 added to the budget for a study of data 17 communication between the BOE and FTB that was kind of laid 18 out. Assuming that stage of the project goes like that, it 19 would be integrated in with this, have you thought about 20 moving -- it looks like it may have been a separate thing 21 that occurred in the process of this. 22 MS. CLEEK: Mark, I totally agree with you, and the 23 timing is good that we can incorporate this result, the 24 result of that. And I would see, you know, sharing data 25 among sister tax agencies is something we believe is very 20 1 important as we move forward. The technology is there to do 2 it much easier than it was ten years ago, and I think we need 3 to take advantage of that. 4 So "absolutely" is the answer to your question. 5 MEMBER YEE: Just a couple of comments on behalf of the 6 Board of Equalization. We are very interested in that, and 7 we see that as a necessary thing to be integrated in the 8 plan. 9 Thank you. 10 CHAIR CHIANG: Thank you. 11 Next item, please. 12 MS. STANISLAUS: Our next item is Item Number 8, 13 Executive Officer's time. I want to talk about two items 14 today. 15 At FTB, staff is doing an outstanding job in finding 16 ways to make our processes better, faster, cheaper, and more 17 efficient. We call it our Business Process Reengineering 18 goals where we focus on ways to eliminate tasks, bottlenecks, 19 and backlogs whenever possible. 20 The first process I would like to briefly describe is 21 our hiring process team and the work they did at FTB. What 22 this team did was they took a look at how long it takes to 23 hire a permanent employee to FTB. Our current time frame is 24 about 146 working days. The team has reduced this now to 54 25 days, saving 92 days of time. 21 1 When I came on board, a lot of employees and would-be 2 employees complained that it takes a long time to get hired 3 by FTB, and our team worked very hard to reduce the time 4 frame. 5 The next success I would like to showcase is something 6 on which John worked very hard, and that is our legal 7 reengineering of the docketed protest process. 8 I did come to the Board last year and spoke about this 9 process in July of last year, but I would like to give you an 10 update. So as of right now, we have a triple-track system, 11 and cases can go on a 12-month track, 18-month track, or a 12 24-month track. 13 Currently we have 130 cases in the triple-track system. 14 10 percent of these cases are in the 12-month track. The 15 rest of the cases are divided equally among the other tracks. 16 The change in process was well received by the taxpayer 17 groups, and I have to say Legal has done an outstanding job 18 in keeping up with the new time frame, and also John. 19 Thank you. 20 CHAIR CHIANG: Very good. 21 Item 9 is Board Members' time, and so let me take this 22 moment, and I will read a resolution. 23 The moment, I know, probably is pure joy for John. For 24 those of us who are great admirers of John, this is a moment 25 of sadness and, I know, happiness for you, John. 22 1 I've known John since 1989 when I worked in then State 2 Controller Gray Davis's office. John was a senior attorney, 3 and those of us who had the opportunity to partake in public 4 service and had the extraordinary fortune of working for 5 John Davies, all benefitted immensely from not only his great 6 professional integrity and stewardship and knowledge and 7 leadership, but we know him to be a stand-up and stand-out, 8 first rate individual with the highest values and personal 9 integrity. So you have made a significant contribution in 10 many of your colleagues' professional and personal lives. 11 Let me read a resolution on behalf of my colleagues and 12 myself presented to you by the Franchise Tax Board. It's 13 short. The meaning behind it is significantly more, John. 14 WHEREAS, John Davies has served the public interest as 15 Chief of the Executive Programs -- 16 Oh, I've got a different one. 17 WHEREAS, John Davies has brought his considerable 18 experience and expertise to the Franchise Tax Board where he 19 has served in the Legal Department for 14 years, most 20 recently as its Chief Counsel; and, 21 WHEREAS, John Davies has provided the Franchise Tax 22 Board with keen analysis on matters of legislation, 23 economics, and statistical research; and, 24 WHEREAS, John Davies has served the public interest as 25 chief of the Executive Programs Division, overseeing the 23 1 Franchise Tax Board's Taxpayer Advocate Bureau, Political 2 Reform Act Audit Section, Internal Audit Bureau, 3 Investigations Bureau, Legislative Service Bureau, and 4 Economic and Statistical Research Bureau -- and that's 5 because John can't hold a job. 6 WHEREAS, John has earned the respect and admiration of 7 his colleagues with whom he worked at the Franchise Tax 8 Board, the Office of the State Controller, and the 9 Legislative Counsel Bureau; 10 WHEREAS, John Davies has received a Juris Doctor degree 11 from Stanford University in 1972, preceded by a B.A. in 12 economics from the University of Minnesota; and, 13 WHEREAS, few commercial electronic products and gadgets 14 make it to the market without arousing the interest and 15 curiosity of John Davies; and, 16 WHEREAS, major college and professional sports, 17 including ice hockey and football, are among John Davies' 18 interests; and, 19 WHEREAS, John Davies has benefitted by the love and 20 support of his wife Lois, daughter Lauren, and son Chris. 21 NOW, THEREFORE BE IT RESOLVED that the Franchise Tax 22 Board, its executive officer and staff, congratulate 23 John W. Davies on his 30 years of dedicated State service, 24 and wish him health and happiness on the occasion of his 25 retirement. 24 1 On a final note. Those of you who have worked with 2 John know his extraordinary passion for this institution and 3 the people he worked with. I think you've been indeed very, 4 very blessed by the deep commitment and compassion he has for 5 all those he has worked with. 6 So, John, the Franchise Tax Board has so very 7 benefitted from you and, you know, a piece of you will always 8 be here. 9 Thank you. 10 MR. DAVIES: Thank you. 11 CHAIR CHIANG: I know we have an additional resolution. 12 I'd like to recognize my colleague Betty Yee. 13 MEMBER YEE: Thank you, Mr. Chairman. 14 John, you also had a resolution that I will be 15 presenting on behalf of Secretary of State Debra Bowen, and I 16 think, Mr. Chairman, has many of the sentiments that she 17 wished to have me express to you publicly. 18 But let me just say that I would agree with her that 19 over the course of your 30-year career, and a stella and 20 successful one is has been, that you have earned the trust 21 and respect and friendship of all those with whom you have 22 worked, even though some may have been your adversaries on 23 any given day. And I think it's been a model of how we can 24 actually come together and work together and initiate 25 something which has really taken us far. 25 1 So I want to present this on behalf of the Secretary of 2 State Debra Bowen to you as well. 3 MR. DAVIES: Thank you, Member Yee. 4 CHAIR CHIANG: Member Hill. 5 MR. HILL: On behalf of the Governor, I'd like to read 6 to you a short letter that he's writing to you on behalf of 7 all Californians. 8 "I am pleased to convey my sincere congratulations and 9 appreciation as you retire following 30 years of State 10 service. As you depart from the Franchise Tax Board, you 11 leave behind a legacy of professionalism and dedication to 12 your work. 13 "Public service is a noble calling, and you can take 14 great pride in your work on behalf of the people of 15 California. Your contributions have been instrumental in 16 helping to ensure that state government is effective and 17 responsive. 18 "Congratulations once again. And please accept my best 19 wishes for a retirement that is both enjoyable and 20 fulfilling. 21 "Sincerely, Arnold Schwarzenegger." 22 MR. DAVIES: Thank you very much. 23 CHAIR CHIANG: Is there any public comment or roast? 24 MR. DAVIES: You know, I guess it shows that I've been 25 around the track a few times over the years. If I might take 26 1 a minute just to make a few comments. 2 It's been 30 years. I started with the State in 1973, 3 and with the exception of a few years in the private sector, 4 it's all been with the State of California. I've served six 5 different governors, starting with Governor Ronald Reagan. 6 That's in my overall career. 7 In the last five years as chief counsel, I have gone 8 through three controllers, two executive officers, and one 9 interim executive officer, and I don't know how long Selvi is 10 going to be here. The pace seems to be accelerating. 11 I've had a long-time history with the FTB, starting 12 back in 1975 when I worked at the time in the then called 13 Agricultural Services Agency, and the executive officer was 14 Martin Huff. 15 When we were first at the agency, it was Martin who 16 offered to bring in a team of management people from the FTB 17 to help them get organized and work efficiently in the new 18 administration, and we very much appreciated that. At that 19 time, of course, I never had any expectation that I would be 20 at the FTB for a period of 14 years, working as an attorney 21 and working as chief counsel. 22 Over the years, of course, I owe many people, and I 23 want to thank them. And I particularly want to mention the 24 executive officers at the FTB. I want to thank Selvi for 25 retaining me. I want to thank Gerry Goldberg for not vetoing 27 1 Glenn Rigby's offering me to the FTB. And I want to thank 2 Martin Huff who diplomatically, 30 years ago, reminded me 3 that I had a small credit balance on my account that might go 4 statute of limitations unless I did something. 5 We are all immigrants here in California, the vast 6 majority of us. One of the things that I look to in 7 retirement -- and I look more on as graduation, not 8 necessarily going out to pasture -- and family history is one 9 of the things that interests me. And just as a historical 10 note, the first generation of Davies to come to this country 11 included Samuel Watts Davies who landed in New York and then 12 became at one point the mayor of Cincinnati, Ohio, for five 13 consecutive terms. Later on he was described as practically 14 the political dictator of the town. 15 So I'd like to say this to the people who maybe 16 disagree with my decision-making process, to taxpayers who 17 disagree with my litigating positions on abuse of tax 18 shelters, or my decisions with respect to penalty relief, and 19 to members of the FTB management team who frequently say, 20 "Where did he come up with that?" the answer is "It's in the 21 genes." 22 So thank you very much. I truly appreciate what you 23 have done for me here today, and I appreciate the rewarding 24 experience that I've had over these 30 years serving the 25 people of California in this great state. 28 1 Thank you. 2 CHAIR CHIANG: Thank you, John. 3 We next have closed session. 4 (Closed session.) 5 MS. MANDEL: The Board met in closed session and 6 discussed pending litigation and personnel matters. 7 We are adjourned. 8 Thank you. 9 (At 2:36 p.m. the meeting was adjourned.) 10 ---oOo--- 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 29 1 REPORTER'S CERTIFICATE 2 3 4 STATE OF CALIFORNIA ) ) ss. 5 COUNTY OF SACRAMENTO ) 6 7 8 I, SANDRA VON HAENEL, certify that I was the 9 official Court Reporter for the proceedings named herein, and 10 that as such reporter, I reported in verbatim shorthand 11 writing the named proceedings; 12 That I thereafter caused my shorthand writing to 13 be reduced to typewriting, and the pages numbered 1 through 14 29, inclusive, constitute a complete, true, and correct 15 record of said proceedings: 16 17 IN WITNESS WHEREOF, I have subscribed this 18 certificate at Sacramento, California, on the 9th day of 19 July, 2007. 20 21 ___________________________ SANDRA VON HAENEL 22 CSR No. 11407 23 24 25 30