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Public Meeting Minutes


September 3, 1998

The Franchise Tax Board met in open session at 2:00 p.m. at the State Board of Equalization, 450 N Street, Hearing Room 121, Sacramento, California. Present were Hon. Kathleen Connell and Hon. Dean Andal.

Franchise Tax Board
Staff Participating
Gerald Goldberg, Brian Toman, Larry Counts, Johnnie Lou Rosas, Frank Lanza, Titus Toyama, Don Buxton and Megan Hall.
Others Participating Sara Hoover representing ARCO, Sandy Ashford representing Chevron, Phil Plant representing KPMG Peat Marwick, Bob Houston representing U.S. Borax, John Williams representing Deloitte and Touche LLP, Lucinda Stockwell representing H&R Block, Larry Wolfe representing Intuit.

Item 1. - Approval of Board Minutes

The minutes of the August 6, 1998 Board meeting were approved.

Item 2. - Regulation Matters

Regulation 25128-1. (Double Weighted Sales Factor)

Don Buxton, Tax Counsel III, summarized the issues and various positions presented regarding the proposed regulation. Sara Hoover, ARCO, supported most of the staff-recommended version of the regulation, but advised the Board that ARCO preferred the deletion of the words "in a refinery" from the definition of refining. Sandy Ashford, Chevron, contended that the Board has authority to provide alternative methods for determining what businesses are extractive, and requested that the Board adopt Chevron’s proposed alternative methodology.

After discussion, the Board approved going forward with the staff-recommended proposed regulation, including an agreed amendment regarding tracing and an agreed addition to the definition of refining. The Board instructed staff to find an author for a Board-sponsored bill that would specifically allow Chevron and other concerned taxpayers to elect to double weight their sales factor.

Item 3. - Performance Audit

John Williams, partner with Deloitte and Touche LLP, presented the Board with the Early Improvement Opportunities Report. He advised the Board of the four different areas the auditors were focusing on at this time; span of control, technology, organizational structure and timeliness of products and services. The presentation noted 15 findings that served as recommendations being presented to the Board for possible immediate actions.

The Board discussed several of the findings. The Board directed that a BCP be advanced to create budget cuts related to reductions in supervisory/management positions, reduced tax booklet mailings and elimination of the ECR form processing costs. The Board also supported findings which focused on increasing FTB public service by extending district office days and hours for February, March and April and directed FTB to initiate a classification study of support staff and to report back to the Board at the October and December Board meetings.

Item 4. - Administrative Matters

  1. Budget Matters.
  2. After discussion, the Board took the following actions with respect to proposed budget change proposals:

    BCP 4. Limited Liability Corporations. Approved revised BCP, with the provision that the funding requested shall be based upon the hiring of limited-term programmers off of the CMAS schedule.

    BCP 7. Integrated Nonfiler Compliance Project. Approved revised BCP. The revised amount ($6.9 million) is based upon staff’s evaluation of the project and the use of contract programmers.

    BCP 10. Performance Audit Placeholder BCP. In accordance with its approval of certain recommendations in the Performance Audit report, three items were approved to be included in the BCP: deletion of Employee Confirmation Request, reduction in the number of tax booklet mailings, and elimination of specified vacancies.

  3. Contract Matters.
  4. Funding transfer for Security Improvements. Approved

  5. Resolution Regarding Out-of-State Travel.

Approved proposed resolution that limits administrative out-of state travel to $50,000 beginning in the budget year.

Item 5. - On-line and Electronic Filing

Frank Lanza, Director of Processing Services Bureau, presented Lucinda Stockwell with H&R Block and Larry Wolfe with Intuit for an Industry presentation. Ms. Stockwell discussed ways her company has increased Electronic Filing substantially in the last few years. Mr. Wolfe shared his company’s five year goal for on-line filing and implementation.

Item 6. - Tax Gap

Presentation moved to October 8, 1998 Board Meeting Agenda.

Item 7. - Executive Officer’s Time

Mr Goldberg noted that the Franchise Tax Board would be receiving the California Mentor Initiative Exemplary Service Award.

Item 8. - Board Members’ Time

Board approved resolutions relating to retiring employees (Christine Low, Shirley Monroe, Linda Owens, Shirley Patterson, Beverly Peabody, Mary Rogers, Thomas Silvey, Samuel Williams).

Item 9. - Closed Session Announcement

Chair Connell announced there were no agenda items for a Closed Session.

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