California Lawmakers Urged to Strip “Self-Dealing” Tax Board of Its Duties

Monday, April 03, 2017
Betty Yee

By Helen Christophi, Courthouse News Service


SACRAMENTO, Calif. (CN) – Following a 2015 finding that California’s tax board mishandled $47.8 million in sales tax revenue, State Controller Betty Yee called on lawmakers Friday to strip the board of its tax administration, audit and compliance duties.


The proposal, which would allow the State Board of Equalization to continue processing taxpayer appeals, comes in response to a Department of Finance audit released Thursday revealing that the board and its officers continue to be mired in mismanagement and self-dealing.


“In order to rebuild taxpayer trust, meaningful reform is essential,” Yee said in a statement Friday. “I urge the Legislature and the governor to strip the board members of all statutory functions and permanently move these duties and assigned staff to a separate new department under the governor.”


The Board of Equalization was established in 1879 to ensure that property tax assessments were uniform throughout the state. Today, the board collects retail sales and use taxes, property taxes and special taxes, and handles taxpayer appeals.


Its more than 30 tax and fee programs generated nearly $61 billion in revenue and accounted for more than 30 percent of all state revenue for fiscal year 2014-2015.


Although the board was dinged in November 2015 when an audit by Yee’s office found that it mistakenly sent $47.8 million in sales tax revenue to the state’s general fund, the Finance Department’s newest audit revealed that the board has done little since then to stanch the bleeding.


The board is still struggling with its accounting, having revised its proposed allocation adjustment 11 times to correct for errors and omissions, according to Thursday’s audit.


And after interviewing more than 70 board employees and managers scattered throughout the state, the Finance Department found that board members routinely redirect staff to projects in their districts, a violation of state law in some cases.


The projects include the informal establishment of a call center in Culver City and the creation of an unofficial office location in El Segundo, both in Southern California.


Though each board member gets an operating budget of $1.5 million, the audit found that some board members pull their staff from jobs collecting tax revenue to do constituent outreach, another violation of state law.


Worse, board staff reported fear of retaliation, including of being fired, if they refused to cooperate with board members.


Due to the redirection of staff, the board’s supplemental annual reports – which the Legislature uses to assess the effectiveness of some of its tax programs – are riddled with errors, according to the audit.


“In performing this evaluation, we noted BOE’s operational culture impacts its ability to report accurate and reliable information to decision makers,” the audit stated.


Moreover, board employees and managers who were interviewed couldn’t answer basic questions about the board’s operations, and were unaware of activities within their own districts for which they were responsible.


A Board of Equalization representative did not return a call seeking comment Friday, which was a state holiday in California.


Yee said she’s hopeful that restricting board’s functions would yield better results.


“This change would address the prevalent misuse of resources and better serve taxpayers,” she said.


To Learn More:

Outdated State Tax Program Costs California Billions (by Nick Cahill, Courthouse News Service)

State Audit Finds “Serious and Pervasive Deficiencies” in SoCal City (by Ken Broder, AllGov California)

Small Window Opens on Secret Audit and Revocation of Blue Shield Not-for-Profit Status (by Ken Broder, AllGov California)

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