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Public Meeting Minutes


October 8, 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, Karen Beeding, Richard Draffin, Jim Shook, Titus Toyama, Cathy Cleek, Jim Yates, Douglas Bramhall, Larry Counts and Megan Hall.
Others ParticipatingJon Williams representing Deloitte and Touche LLP, Tracy M. Potts representing State Bar of California, Roy E. Crawford representing Brobeck, Phleger & Harrison, Gina Rodriquez representing Spidell Publishing, Inc. and James Clark representing California Bankers’ Association.

Item 1. - Approval of Board Minutes

The minutes of the September 3, 1998 Board meeting were approved.

Item 2. – Applications for Voluntary Disclosure

The Board approved 2-0 the five Applications for Voluntary Disclosure, which were put forth for consideration.

Item 3. - Performance Audit

Jon Williams, Deloitte & Touche LLP, made a presentation to the Board on the status of the performance audit. He indicated that based on comments received on the draft report, some changes to the basic action plan and recommendations were made, and he would summarize them orally. Rather than recommending a cut of 239 vacant staff positions, Deloitte & Touche substituted a recommendation to cut 250 staff positions. After discussion, the Board voted 2-0 (Robin J. Dezember, who represents Hon. Craig L. Brown, was absent) to approve a staff cut of 250 positions, effective for the budget year and to reduce the budget year personnel costs based on a per position cost of $43,870. Further, the Board directed Mr. Goldberg to develop an implementation plan for achieving the staff reduction without requiring employee terminations or layoffs.

Further discussion of the Draft Report by the Board members indicated the members did not believe the contract for the Performance Audit had been fulfilled. Those discussions led to adoption of a motion to 1) withhold payment for the Performance Audit until finally approved by the Board, pursuant to contract terms; and 2) direct Mr. Goldberg to work with Deloitte & Touche staff to supplement the Draft Report with an FTB mission statement and implementation plan (including specified components).

Item 4. - Administrative Matters

  1. Board consideration and action regarding budget matters.
  2. After discussion, the Board took the following actions regarding budget change proposals:

    BCP 10. Performance Audit (Reductions). The Board approved of an additional reduction of 250 positions to be included in the BCP. The Board further directed that an average salary of $43,870 be used for purposes of calculating the savings in personnel costs.

    BCP 11. Performance Audit (Augmentations). This was a placeholder BCP to incorporate augmentations to the FTB budget as a result of the Performance Audit. Since there are no recommendations approved by the Board requiring additional funding, the BCP was withdrawn by the Board at this time.

    BCP 12. Augmentation for Homeowners and Renters Assistance Program. After discussion, the Board approved the BCP in the revised amount of $600,000 and 16.6 PY’s for the current and budget years.

  3. Board consideration and action regarding contracts.
  4. The Board approved staff’s recommendation to initiate contracts for the CPU upgrade.

  5. Leases.
  6. San Francisco Audit Office. After discussion, the Board denied the staff request to proceed with acquiring an office at the proposed location in the San Francisco Financial District. The Board directed staff to work with the Department of General Services to find less costly space.

    Fresno Taxpayer Service Center. The Board approved Mr. Andal's recommendation to acquire private leased space for a Taxpayer Service Center in the North area of Fresno, in conjunction with the Board of Equalization and possibly the Employment Development Department.

Item 5. – Tax Gap

Mr. Goldberg introduced Cathy Cleek, Director of Filing Compliance Bureau, and Jim Yates, Director of Investigations Bureau, for a staff presentation.

Cathy Cleek gave the Board an overview of how the department has been working to reduce the tax gap through service, enforcement and education. Ms. Cleek addressed Collections ability to increase the number of taxpayers who are eligible for installment payments and how taxpayers are encouraged to pay through EFT.

Jim Yates gave a presentation on how the Investigations Bureau assists in closing the tax gap. He used, as an example of its efforts, a case involving a contractor using cash pay to avoid paying withholding.

The Board requested that a staff member attend the December Board meeting and present the Board with further details on how FTB is getting information out to the public in regards to EFT and installment payment arrangements.

Item 6. – Trust Symposium

Tracy Potts with the Executive Committee of the Estate Planning Trust and Probate Law Section in the State Bar of California, Roy Crawford with Brobeck, Phleger and Harrison, Gina Rodriquez with Spidell Publishing, Inc. and James Clark with California Banker’s Association gave brief comments on the issues as well as expressed gratitude for the cooperation of FTB.

Item 7. - Executive Officer’s Time

Mr. Goldberg noted that the Internet Tax Freedom Act had been passed in the Senate this afternoon.

Item 8. - Board Members’ Time

Board approved resolutions relating to retiring employees (Joseph Ciaramitaro, Rose E. Hamburg, Yvonne H. Lucsky, Margaret L. McCarty, Louvenia McLaughlin, Shirley C. Monroe, Cheryl C. Pickering, Shirley Robinson).

The Board asked to have a staff report at the December Board meeting regarding the status of the controversies concerning inclusion of net gains in the sales factor issue. The report should consist of the number of cases as of August 1998, how many of those cases are resolved to date, and the number of distortion analyses completed by staff to date, as well as the average age of the dispositions.

Item 9. - Closed Session Announcement

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

The meeting was adjourned at 4:16 p.m.

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