• SBOE member says agency lawyers are anti-taxpayer
• Asks governor to bar them from new appellate panels
• Governor must appoint leaders, judges to new Office of Tax Appeals
(BNA) -- Attorneys for California's tax agencies have an anti-taxpayer bias that should bar them from serving as administrative law judges in the new Office of Tax Appeals, State Board of Equalization member Fiona Ma (D) told the governor.
Gov. Jerry Brown (D) hasn't started filling key posts in the new OTA that will take over adjudication of taxpayer appeals from the SBOE in January. In an Aug. 23 letter to Brown's deputy legislative affairs secretary, Ma said he should be sure the ALJs who serve on OTA's three-judge panels are neutral and unbiased.
Attorneys for the SBOE and the Franchise Tax Board have an inherent bias in favor of the state, Ma said. Serving on the SBOE and hearing tax appeals since 2015, Ma said she has heard many taxpayers tell the board they haven't received a fair hearing or fair outcome from lawyers at the tax agencies and came before the board to seek “equity and justice.”
“If we were to allow these same biased attorneys to serve as Administrative Law Judges on this new panel, I believe we would be doing a grave injustice to taxpayers and be setting the reform effort up for failure,” Ma said in her letter to Deputy Legislative Affairs Secretary Michael R.O. Martinez.
SBOE Breakup
Creation of the OTA is one part of a major breakup of the 138-year-old SBOE enacted by lawmakers in June. All tax administration duties that aren't imposed under the California Constitution already shifted out from under the elected board to a new California Department of Tax and Fee Administration July 1.
The next step in the sweeping changes is to shift administrative-level tax appeal adjudication from the five-member board to the OTA on Jan. 1, 2018. Before then, Brown must appoint an executive director, chief deputy director, and chief counsel. The OTA will issue regulations to establish its rules for tax appeals.
Ma told Bloomberg BNA Aug. 24 that her concerns are based on her experience hearing and deciding tax appeals as an SBOE member, and on comments she is hearing from tax practitioners.
She is asking Brown to address her concerns through regulations the OTA will issue as it gets up and running. The points she raise also could be handled through legislation to clarify OTA's structure and operations that is likely to be introduced in the next few weeks.
Tax Experience Needed
The law creating the OTA calls for ALJs who are active members of the State Bar of California with at least five years of experience and with knowledge in state and federal tax and fee laws. It's unclear whether the experience required or potential pay would attract qualified candidates either from inside or outside state service.
The ALJs will be hired through the merit-based civil service process, a spokesman for Brown told Bloomberg BNA Aug. 25. This makes the FTB and SBOE lawyers likely candidates, Ma said.
The governor's spokesman, Brian Ferguson, offered no comment on Ma's request to keep the state lawyers off the panels.
In her letter, Ma also asked that certified public accountants be eligible to serve on the adjudicatory panels. Ma is a CPA and has a master's degree in taxation.
Attorneys defending the state's position in appeals cases “focus solely on case law and not the actual nuts and bolts that go into preparing a tax return,” Ma said. No case law has been exactly on point in the appeals she has heard while on the board, she said.
“Consequently, our Board looks to the facts and circumstances of each case versus case law,” she said. She said the willingness of the board to listen to taxpayer stories regardless of their level of sophistication will be lost with the ALJ panels.
Ma also said appointees to the tax appeal panels should be subject to Senate confirmation, be appointed to four-year terms with a maximum of two terms, and have a one-year cooling off period before they could practice before the panels.