California Tax Board Improperly Helps Constituents: Complaints

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Laura Mahoney

Employees of the State Board of Equalization have been contacting Gov. Jerry Brown’s (D) administration in recent weeks to say the elected board members pressure the tax agency’s staff to break rules to help their constituents.

Department of Finance Principal Program Budget Analyst Chris Hill told a Senate subcommittee with authority over the agency’s budget about messages the office is receiving, in the most pointed public comments since the DOF’s auditing arm released a scathing report March 30.

The concerns from employees go beyond the central findings of the audit about board members misusing staff and resources to promote themselves to involve direct interference in tax administration.

“Subsequent to releasing its review of the board, the Office of State Audits and Evaluations received numerous complaints from Board of Equalization employees alleging a host of improprieties including being pressured by board members and by board member staff to perform their audit, investigation and collections activities in a manner inconsistent with standard operating procedures with the assumed goal of benefiting the board members’ constituents,” Hill said at the May 18 hearing.

First Step

Hill made the remarks as the Senate Subcommittee on State Administration and General Government, and its counterpart in the Assembly, took the first steps to change the rules for the SBOE in the wake of the audit. The subcommittees both approved a request from Brown the week of May 14 to separate funding for each of the four elected board members from the overall tax agency budget to more clearly show how much money each member receives to hire staff and run their offices.

Hill said the budget proposal is the first step in enacting changes to the SBOE. The proposal applies to the four members who represent geographic districts and will likely be part of the overall state budget package that lawmakers and Brown are planning to enact by July 1.

Still unclear is a potentially larger set of statutory changes to the SBOE that Brown has requested from lawmakers. Negotiations between the governor’s office and lawmakers are ongoing, Hill said.

“The administration’s goal is to work with the Legislature to enhance the fairness, consistency and transparency of the tax administration process and to ensure the board’s hard-working civil service employees are able to perform their jobs free of undue influence from board members,” he said.

More Investigations

In the audit, the OSAE found that board members intervene in daily operations of the tax agency, illegally use staff to promote personal events with few ties to the agency’s tax mission, and threaten senior staff members if they don’t go along.

In addition to calling on lawmakers to enact changes to the SBOE, Brown April 14 asked California Attorney General Xavier Becerra (D) to investigate whether board members used state resources illegally. Becerra told the Sacramento Press Club May 18 he can’t comment on the scope of his investigation so far.

Brown also froze the board’s ability to hire staff or enter into contracts and ordered the Department of Human Resources to conduct its own investigation into the board’s practices.

Board members are scrambling to show their intent to police themselves in response to the audit, with four proposals on their May 23 meeting agenda covering topics from tracking staff vacancies to disciplining fellow board members for misconduct.

The board’s four members representing geographic districts are Chair Diane Harkey (R), Jerome Horton (D), Fiona Ma (D), and George Runner (R). State Controller Betty T. Yee (D) serves as the board’s fifth member.

The board administers the state sales and use tax and more than 30 other special taxes and fees. They also equalize the valuation of taxable property among the state’s 58 counties, set the value for public utilities such as railroads and power companies, adjudicate disputes between taxpayers and the state, and issue regulations.

To contact the reporter on this story: Laura Mahoney in Sacramento, Calif. at LMahoney@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

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