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March 14 — The five elected members of the State Board of Equalization are split 3-2 over a bill to tighten their rules for monetary contributions involving taxpayers who come before them, with one member mounting a behind-the-scenes campaign asking outside interest groups to oppose the bill.
Bloomberg BNA has obtained copies of a sample opposition letter drafted by the staff of member Jerome Horton (D), and which Horton sent to at least three different groups with a request to send it to lawmakers as their own.
The bill ( A.B. 1828), by Assemblyman Bill Dodd (D), is sponsored by SBOE Chair Fiona Ma (D) and supported by State Controller and board member Betty Yee (D).
Member George Runner (R) submitted a letter to lawmakers March 15 backing the measure. The three members say the bill would prevent even the appearance of a conflict when they make decisions in taxpayer appeal cases.
“As a quasi judicial body, it is important that we are seen as impartial, non partisan and issuing our decisions solely on the merits of each case,” Ma told Bloomberg BNA in a March 11 e-mail.
Along with Horton, member Diane Harkey (R) has said publicly she opposes the bill. Harkey told Bloomberg BNA March 14 that she wouldn't comment on her concerns until the SBOE staff completes its analysis of the bill, which may be during the week of March 21.
Horton didn't respond to a March 15 request for comment from Bloomberg BNA.
Horton would feel the effects of A.B. 1828 the most. According to disclosures filed with state authorities and examined by Bloomberg BNA, since Horton took office in 2009, he has received 88 percent of all payments made to the five SBOE members that would fall under the bill. As for the other members, Harkey accounts for 4.2 percent of payments, Runner has received 1.6 percent, Yee received 1.2 percent and Ma accounts for 0.6 percent.
The bill would ban contributions to—or those made at the request of—board members from individuals or companies with an interest in a tax appeal before the board. It targets both direct campaign contributions and so-called behested payments that California elected officials can ask others to make to nonprofit organizations for governmental, legislative or charitable purposes. Elected officials are required to disclose payments of $5,000 or more within 30 days.
Bloomberg BNA reported in December that Horton has disclosed $731,835 in behested payments since 2009, with most of the contributions going to or through nonprofit organizations with ties to his wife, Yvonne, who is the elected clerk of the City of Inglewood (236 DTR J-1, 12/9/15).
Hundreds of thousands of those dollars came from companies with business before the board, including Space Exploration Technologies Corp., AT&T Inc., Time Warner Inc. and Intuit Inc. The Hortons mainly use the contributions to host events loosely tied to the SBOE's tax mission through the nonprofit organizations with ties to Yvonne Horton.
To muster opposition to the bill, Horton sent the sample letter from his SBOE e-mail account in recent weeks to at least three groups. Two copies of the sample letter obtained by Bloomberg BNA show it was written by a member of Horton's staff, Kristine Cazadd, who is a former executive director of the SBOE.
The Asian Business Association of Los Angeles (ABALA) submitted the letter verbatim on its letterhead to the Assembly Governmental Organization Committee March 4, one week after receiving it from Horton. The ABALA Executive Director Dennis J. Huang told Bloomberg BNA March 11 the group is retracting it after closer examination.
The four-page letter from ABALA, like Horton's sample letter, challenges the December 2015 story in Bloomberg BNA “regarding behested payments to a nonprofit where my wife and other minority women were the founders—though my wife did not serve on the Board during the time in question.”
Huang said although he signed the letter, Horton provided the text. He said the letter wasn't referring to his wife and he wasn't familiar with the nonprofit organization mentioned.
“I've had no doubts about him in the past,” Huang said of Horton. “I need to be more careful.”
The California State Conference of the NAACP sent an edited version of the letter to the Assembly Governmental Organization Committee March 3. It doesn't include the paragraph citing the Bloomberg BNA story, “my wife,” or several other sections of Horton's original letter, but the NAACP version is either taken directly from his version or slightly edited.
California NAACP President Alice A. Huffman told Bloomberg BNA March 16 the group opposes the bill because it could be a “nose under the tent” that could lead to broad measures harming nonprofit organizations like theirs. It is more appropriate for the Fair Political Practices Commission (FPPC) to be the organization that can address concerns raised in the bill, she said.
“I would hate to see it erode our ability to work together,” Huffman said.
The California Association of Nonprofits also received the sample letter from Horton, but has decided not to take a position on A.B. 1828 for now, Nancy Berlin, the association's policy director, told Bloomberg BNA March 16. It seems like it could have an impact on a small, select group of nonprofits, but the association is still assessing whether the bill affects its members, she said.
“It seems more related to campaign finance than to nonprofits,” Berlin said.
Although Horton addressed the sample letter to the Governmental Organization Committee, and the ABALA and NAACP sent their letters there, the bill was referred March 14 to the Assembly Elections and Redistricting Committee.
In his support letter to the elections committee, SBOE member Runner said the bill would remove the perception of conflict.
“While I don't believe board members have been unduly influenced or taken inappropriate actions under current law, these are reasonable restrictions that will strengthen public confidence that the board decides cases based on the facts and the law, independent of inappropriate influence,” Runner said.
The California Clean Money Campaign also submitted a March 15 letter in support of the bill to the elections committee. The group said A.B. 1828 is a reasonable response to “loopholes” in current contribution rules for SBOE members.
The bill also would ban contributions from employees of a company or other party with an adjudicatory proceeding before the board in the 12 months before and after a tax appeal is heard. This provision would address instances in which companies and their employees have aggregated small contributions from multiple people to get around an existing contribution limit of $249 in the 12 months before the board considers a tax appeal case.
Although many of the behested payments disclosed by Horton came from companies with various business before the board such as tax appeals, property tax assessments or interest in pending regulations, the proposed bill applies only to taxpayers that are taking an appeal before the board in an oral hearing.
According to the bill, a member would be disqualified from voting on a tax appeal case if the member knows, or has reason to know, that he or she received a contribution or asked for a behested payment that was made to a nonprofit from a party to a case.
In the letter, Horton said A.B. 1828 would prohibit SBOE members from having a role in any events with nonprofit organizations. Members couldn't serve on nonprofit boards or be listed on communications that imply collaboration, support or fundraising assistance, he said.
He also argued the bill could disrupt the adjudication of cases before the board because employees of companies that are party to an appeal could make members ineligible to vote by making even small contributions to a nonprofit without the member's knowledge.
“This bill is an unfortunate reaction to the unsubstantiated paranoia of a very small, but vocal, minority, holding that behested payments to nonprofits by elected officials, including the Governor, Judges, Commissioners, Legislators and, in this case, Board Members, are inherently bad and that the public welfare of the greater majority who benefit from the public service of elected officials through their partnership with nonprofits should be set aside,” Horton said in the letter.
Dodd, the bill's author, told Bloomberg BNA March 15 he hasn't heard directly from Horton but is willing to consider amending the bill if necessary. He said he realizes the bill could create some complications but the point is to increase transparency.
“I'm going to listen to what everyone has to say,” Dodd said. “I don't think a lot of the arguments behind the opposition make a lot of sense.”
According to past advice from the FPPC in response to a request from the Public Utilities Commission (PUC), a member's duty to report a behested payment to the FPPC is triggered if the member “solicited, requested or suggested” the payment or otherwise coordinated it.
“Accordingly, a donation to a charitable organization is not a reportable behested payment merely because a member of the PUC serves on the board of directors, an advisory council, or a fundraising committee of an organization,” the FPPC said in the 2009 letter to a PUC attorney.
The governor and other elected officials, including the attorney general and legislators, regularly disclose to the FPPC behested payments to nonprofit organizations. Although some state judges who are elected would be subject to behested payment disclosure rules, the FPPC hasn't received any such disclosures in the past, an FPPC spokesman told Bloomberg BNA March 14.
Under a 2010 law that applies to California Superior Court, judges are disqualified from a case if they receive more than $1,500 from a party or lawyer in a proceeding before them within the past six years.
Judges must disclose smaller amounts they receive, even if the contributions aren't enough to disqualify them. They can also be disqualified if the judge believes a contribution could compromise his or her impartiality, or if a person aware of the contribution might “reasonably entertain a doubt that the judge could be impartial.”
The Assembly elections committee hasn't set a date to hear A.B. 1828, but must do so by April 22.
To contact the reporter on this story: Laura Mahoney in Sacramento, Calif., at firstname.lastname@example.org
To contact the editor responsible for this story: Ryan Tuck at email@example.com
The sample letter is at http://src.bna.com/dmO.
Text of A.B. 1828 is at http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201520160AB1828.
Runner's letter of support is at http://src.bna.com/dmR.
The ABALA's letter is at http://src.bna.com/dmV.
The NAACP's letter is at http://src.bna.com/dmW.
The California Clean Money Campaign's letter is at http://src.bna.com/dmX.
The FPPC's letter is at http://src.bna.com/dm5.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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