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Public Meeting Minutes


September 16, 1999

The Franchise Tax Board met in open session at 10:00 a.m. at the State Board of Equalization, 450 N Street, Hearing Room 121, Sacramento, California. Present were Hon. Kathleen Connell, Jean Alexander representing Hon. Johan Klehs, Hon. B. Timothy Gage.

Franchise Tax Board
Staff Participating:
Gerald Goldberg, Brian Toman, Ralph Shoemaker, John Vranna, Frank Lanza, Lynette Iwafuchi, Titus Toyama, Benjamin Miller, Joan Keegan, Janet Ballou, and Katie Horn.
Others Participating:Theresa Casazza representing American Electronics Association, David Doerr representing Cal-Tax, Lenny Goldberg representing Children Now, Bill Harris representing Intuit, Richard E. V. Harris representing himself, Peggy Jensen representing Family Support Council, Jason Mahler representing Computer and Communications Industry Association, Christina Polley representing Department of General Services, Lucinda Stockwell representing H & R Block, Curt Soderlund representing Board of Control, and Stanley Trom representing Ventura County.

Item 1. - Approval of Board Minutes

  1. The Minutes of the July 6, 1999, Franchise Tax Board meeting were unanimously approved.

  2. The Minutes of the August 12, 1999, Franchise Tax Board meeting were unanimously approved.

Item 2. – Child Support

  1. Plan for Expanded Role in Child Support Collections.
    John Vranna briefed the Board on the department's expanding child support collection activities.

  2. Plan for Child Support Automation.
    Mr. Goldberg introduced Lynette Iwafuchi, Assistant Executive Officer for the Audit Branch, who will be the executive sponsor and have responsibility for the automation project.

    Ralph Shoemaker, Assistant Executive Officer for the Technology and Resources Branch, briefed the Board on the department's role in regard to technology.

    Upon motion of Chair Connell, seconded by Member Gage, and unanimously carried, the Board delegated all necessary authority to Gerald H. Goldberg to ensure the expeditious and effective completion of the new child support automation project.

Item 3. Electronic Filing - Internet

Status report and Board discussion.

The Board voted (2-0, Chair Connell abstaining) to proceed with the Internet Filing Pilot Project as proposed by staff. In addition, the Board voted unanimously to include on FTB's website only those commercial online services that offer free online filing to single taxpayers with taxable incomes of $50,000 or less and joint return filers with taxable incomes of $100,000 or less.

Item 4. – Regulation Matters

  1. Staff Reports and Requests for Authorization to Commence Formal Regulatory Proceedings:
    • Proposed Regulation 25106.5-1 (Combined Reporting – Intercompany Transactions). The Board unanimously authorized staff to proceed with formal noticing as a proposed regulation.

    • Proposed Regulation 25137(b) (Property Factor – Nonjurisdictional Property).
      The Board voted unanimously to postpone further action on the regulation.

    • Proposed Regulation 25137(c) (Sales Factor – Occasional Sale of Intangible Assets).
      The Board unanimously authorized staff to proceed with formal noticing as a proposed regulation.

  2. Proposed Regulations 19041 and 19044 (Protests). The Board directed staff to schedule a symposium.

  3. Proposed Regulations 25106.5 (Mechanics of Combined Reporting) and 25106.5-2 (Capital Gains in a Combined Report). The Board received the staff's status report.

  4. Proposed Regulation 17951-4 (Income Sourcing). The Board received the staff's status report and acknowledged a symposium scheduled for September 29, 1999.

  5. Proposed Regulations 17252.5-1, 17265-1, 17266-1, 17267.2-1, 24356.2-1, 24356.3-1, 24356.4-1, 24356.7-1 (Recapture of Deduction for Qualified Property Previously Used). The Board received the staff's status report.

  6. Proposed Regulation 23334 (Tax Clearance Certificate). The Board received the staff's status report.

  7. Proposed Regulation 18567 (Extensions of Time for Filing Income Tax Returns). The Board received the staff's status report.

Item 5. - Water's-Edge Matters

Staff reported on a newly identified set of problems and informed the Board that it intends to come forward with a legislative proposal at the December meeting. The Board encouraged staff to continue to find a way to solve these problems.

Item 6. – Applications for Voluntary Disclosure

The Board unanimously approved the anonymous Applications for Voluntary Disclosure pursuant to Revenue and Taxation Code Section 19191.

Item 7. – Administrative Matters

  1. FY 2000/01 BCPs.
  2. The Board unanimously approved the following budget change proposals for FY 2000/01:

BCP #1:  Integrated Nonfiler Compliance Project
BCP #2: Legal Support Program Maintenance
BCP #3: Network Backbone Upgrade
BCP #4: Enterprise Duplex Printing System
BCP #6:UPS Replacement – Data Center
BCP #7:Business Tax Reporting
BCP #8:  Court Ordered Debt Program
BCP #9:         CA Peace Officer Memorial Fund
BCP #10:       Limited Liability Company
BCP #11:       PASS Project
BCP #12:       Accounts Receivable Collection System
BCP #13:E-File Performance Audit Savings
BCP #14:       Investigation Bureau Augmentation
BCP #15:Board of Control Collections for Victims Restitution Fund.
Note: After discussion, the Board approved the funding request for
$1,610,000 but requested that the 21 authorized positions be filled by a redirection of  21 positions from vacancies elsewhere in the department.
BCP#CO1:Minor Capital Outlay
  1. The Board unanimously approved the following Facilities Action Requests (Form 9): Hard wall construction and relocation of fingerprint process and orientation sessions from Building 1 to Building 2; conversion of training room 1811 (hard wall construction) to office space for Operations Services Bureau Director; and demolition of a wall in Security Command Center to provide space for additional security equipment.

  2. Contract – United International Investigation Contract.

    The Board unanimously approved this contract.

  3. Franchise Tax Board Resolution 98-19-"Out of State" Travel Expenditures.

    The Board approved the staff request for administrative out-of-state travel above the Resolution limit of $50,000. The specific purposes of the travel include:
    1. Year 2000 Compliance Effort.
    2. Integrated Non-filer Compliance Project.
    3. Child Support Collection System Reform and Requirements.
    4. Statewide Child Support Automation Project.

    These activities and the required travel are described in a memorandum to Board Members from Mr. Goldberg, dated August 31, 1999.

Item 8. – Executive Officer's Time

    Mr. Goldberg had no items for discussion.

Item 9. – Board Member's Time

  1. The Board unanimously approved all Employee Recognition Resolutions.
    (Herman Adkins, Robert David, Patsy Elliott, Elaine Fales, Duncan Fong, Arlene Hess, Carolyn Manning, Shirley Martinez, Ron Schlenker, Molly Stacy, Ron Stocker.)

  2. The Board unanimously approved Resolutions appointing a new Board Secretary (Katie Horn) and commending the prior Board Secretary (Megan Hall).

    The Board discussed the veteran's check-off for the upcoming filing season.
    Mr. Goldberg informed the Board that the problem appears to be a legal one, and the
    department is working with all appropriate parties in order to retain the check-off.

Item 10. – Closed Session Announcement

Chair Connell announced the agenda for the Closed Session, pursuant to Government Code section 11126.3.

The meeting was adjourned at 2:57 p.m.

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