New Bill Clarifies California Tax Agency Administration
| Publication year | 2017 |
| Author | By Chris Micheli |
By Chris Micheli1
I previously wrote on the creation of the new California Department of Tax and Fee Administration ("CDTFA") and the Office of Tax Appeals ("OTA") that were done as part of the state budget accord adopted in June and which took effect on July 1, 2017.2 In early September, the Legislature passed and the Governor signed a late budget trailer bill3 that made a number of changes to clarify certain provisions of existing law and to address concerns from the tax practitioner community that had been expressed when the original trailer bill4 was adopted.
As introduced on January 10, 2017, Assembly Bill ("AB") 131 was a budget trailer bill expressing legislative intent.5 Eight months later, on September 6, 2017, AB 131 was amended to contain a number of substantive law changes.6 The bill was signed into law7 on September 16, 2017 by Governor Brown and took effect immediately.8 It makes an initial statement of legislative intent regarding combatting the state's underground economy.9
Thereafter, AB 13110 makes the following findings and declarations:
"In the Taxpayer Transparency and Fairness Act of 2017, the Legislature established the Office of Tax Appeals in order to provide an independent and administrative body for conducting tax appeals hearings before a tax appeals panel.11
"Because the tax appeals panels within the Office of Tax Appeals are an administrative body and are not part of the judicial branch, it is the intent of the Legislature for taxpayers to choose by whom they are represented, consistent with Section 15676 of the Government Code. Further, the Legislature specifically intends, consistent with Section 15676.5 of the Government Code, that taxpayers continue to be able to choose to be represented by certified public accountants and others at every stage of the hearings and proceedings before a tax appeals panel, as was previously the case in matters before the State Board of Equalization prior to the transfer of duties described in Section 15672 of the Government Code.12
"Consistent with these objectives, the Legislature further intends that the regulations to be adopted by the Office of Tax Appeals pursuant to Sections 15676.5 and 15679.5 of the Government Code not limit or impair the ability of certified public accountants and others to represent their clients before a tax appeals panel."13
The first new provision of law under AB 13114 is to provide for appeals conferences by the CDTFA. Appeals conferences continue to be conducted in the same manner as before the duties, powers and responsibilities were transferred to CDTFA.15 16 Moreover, the relevant regulations17 continue in force and apply to appeals conferences with the CDTFA's jurisdiction.18 Nonetheless, the CDTFA may amend, repeal or add regulations as necessary or appropriate to carry out the relevant provisions of law.19 20 Finally, a person requesting relief in an appeals conference may request a hearing before a tax appeals panel in the OTA if the CDTFA denies the request for relief.21
The second new provision of law under AB 13122 is to permit the CDTFA to obtain copies of licensees' photographs directly from the Department of Motor Vehicles for the purposes of enforcing its duties, power and responsibilities.23 24 There is an existing provision of law that limits access to such photographs.25
The third provision under AB 13126 amends existing law dealing with knowledge about the business affairs of companies that report information to the CDTFA.27 These new provisions of law allow CDTFA to disclose to specified persons distinct information solely for use in an action affecting the personnel rights of a current or former employee, but only to the extent that CDTFA determines that the information may be relevant and material to the action or proceeding.28
The information may only be disclosed to the following persons: an employee or former employee of CDTFA who is a party to an administration action or proceeding affecting the personnel rights of that employee or former employee;29 to the employee's or former employee's duly authorized legal representative in writing;30 officers and employees of CDTFA for use in any action proceeding affecting the rights of an employee or former employee;31 and, an administrative law judge, judge, or authorized officer or employee in connecting with an administrative hearing or appeal related to an action or proceeding affecting the personnel rights of an employee or former employee.32
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The new provisions also define what is "an action or proceeding affecting the personnel rights of an employee or former employee of the department."33 Those are basically actions or proceedings under the State Civil Service Act34 or the Ralph C. Dills Act.35 36 Any unauthorized disclosure is subject to criminal penalty and civil liability.37
The fourth provision of law under AB 13138 amends existing law dealing with the transition from the State Board of Equalization ("SBE") to the OTA.39 Specifically, these new sections deal with the conduct of appeals hearings on and after January 1, 2018 pursuant to existing law.40 The SBE will continue to have the legal authority41 to hear, determine, decide, or take any other action regarding an appeal42 regarding matters for which the duties, powers and responsibilities were transferred to the OTA,43 but only if these two conditions are satisfied:
The hearing, determination, decision, or any other action with respect to an appeal is placed on the calendar of a meeting of the SBE to be held before January 1, 201844 and the appeal is heard, determined, decided, or is otherwise final before January 1, 2018.45
Thereafter, on and after January 1, 2018, the SBE has no legal authority regarding matters transferred to the OTA to conduct an appeals hearing, make a determination, issue or publish a decision on an appeal heard at a meeting of the SBE before January 1, 2018.46
The fifth provision of law under AB 13147 is to deal with obtaining copies of photos of licensees.48 It allows the SBE to obtain copies of licensees' photographs directly from the Department of Motor Vehicles for the purposes of enforcing its duties, power and responsibilities.49 There is an existing provision of law that limits access to such photographs.50
The sixth provision of law under AB 13151 amends existing law52 dealing with the Director of the OTA. It specifies that the Director administers and directs the day-to-day operations of the OTA including, but not limited to, ensuring that each hearing office is sufficiently staffed and that appeals hearings are heard and resolved in a timely and efficient manner.53 However, the new law change specifies that the Director shall not direct, oversee, supervise, or otherwise be involved in the decision-making process of the tax appeals panels.54 In addition, judges must conduct themselves according to the canons governing conflicts of interest under the Code of Judicial Ethics.55 56
The seventh provision of law under AB 13157 amends existing law58 that provides definitions of specified terms. In these provisions, the law was amended to specify types of appeals, including: Administrative protests with respect to taxes or fees administered by CDTFA;59 Claims, including refund claims with respect to taxes or fees administered by CDTFA;60 and Appeals61 from an action of the Franchise Tax Board.62
The eighth provision of law under AB 13163 amends existing law64 to specify that the tax appeals panels and the appeals hearings conducted by the tax appeals panels under the OTA are not to be construed to be, or to be conducted by, a tax court.65
The ninth provision of law under AB 13166 amends existing law67 to specify the conduct of the tax appeals panels. First, the tax appeals panels on or after January 1, 2018 will conduct all appeals hearings for those duties, powers and responsibilities transferred to the OTA.68 Second, the law again specifies that the SBE shall not conduct appeals or take any other action with respect to an appeal, with certain exceptions.69
The tenth provision of law under AB 13170 amends existing law71 to include certified public accountants and public accountants to the existing list72 of representatives that may appeal on an appeal on behalf of a taxpayer.73
The eleventh provision of law under AB 13174 is to deal with tax appeals and facilitate the implementation of existing law.75 76 First, the OTA must establish a process under which a person filing an appeal may request a closed hearing.77 Second, the OTA must also establish objective criteria for determining whether to grant a request for a closed hearing.78
The twelfth provision of law under AB 13179 amends existing law80 related to tax appeals decisions. The amended provision specifies that, if a person that sought relief from a tax appeals panel disagrees with the tax appeals panel's decision, the person may bring an action in superior court for a trial de novo.81
The thirteenth provision of law under AB 13182 is to deal with the conduct of all appeals and proceedings.83 The new section requires that all such hearings and proceedings are to be conducted84 pursuant to the California Administrative...
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