Confronting the BOE (continued)
The five members of the Board of Equalization (BOE) were seated approximately three feet apart behind a podium on the stage; behind them stood a series of flags and portraits of the various governors past and present of California. Along the walls were photographs of previous board members looking very esteemed. The audience—litigants, lawyers, law students, aides—sat randomly in theatre-style seats, with piles of paper or briefcases on their laps. With the exception of the spotlights shining down on and illuminating the heads of the BOE, the room was not well lit.
As soon as Roberta signaled to the chairman that all of the litigants were in the court, he began speaking. “Let me explain to all of you how we will be proceeding today.” He reminded Roberta of a history teacher she once had. Short sandy hair, slightly graying—a purely Anglo Saxon face set around black-rimmed glasses. “We’ve allotted thirty-five minutes for each hearing. If we can’t make a determination during that time, we’ll either request further information or haul you back in here for the next session. Ho, ho.”
No one laughed although a few people tried, making a sound like feet shuffling along the floor. He continued. “First our esteemed legal analyst, Derrick, will present an overview of your case. You’ve all received a copy of the overview so there should be no surprises.” He paused for dramatic impact. “We all think he’s done an exceptional job of fairly presenting both sides. If you don’t agree, then you should have said something to Roberta before now!” He paused to scan the audience. “Ladies and gentlemen, let me reiterate that this is not the forum to debate the quality of the overview! Just the facts of the case. After the overview, the clock will start. Tick Tock. Tick Tock. Each side, the appellant and the respondent, will have ten minutes—mind you, ten minutes—to present their case. So don’t waste any time playing on our sympathies—this is not a jury trial. All we want to hear are the facts. And please do not make a motion for more time; it will not only be denied, it will prejudice your case!”
He stopped to review his notes. “Let me see, where was I?” The other members shifted uncomfortably in their seats, refusing to make eye contact with the audience.
Maya had read about the state controller. He was a man with five children who ran on the family values platform. Her brief meeting with Roberta had given her hope. She could tell Roberta believed her story. But now all hope was beginning to fade. There was no way a man like him would take pity on her, a divorced woman, a single mom, and so she was doomed, wedged miserably between the lawyer for the state and Duke Franklin Clay, two rows from the spotlight. Doomed.
“Rebuttal,” the chairman read, “Yes, that’s where I was. After the other side presents its case, you will have five minutes for rebuttal. Again, speak to the facts and do not attempt to throw yourself on the mercy of the board. It won’t work. The last ten minutes, we can, if we need to, ask questions of both the appellant and the respondent. Don’t worry. We don’t bite. Ho, ho.”
He took off his glasses, sighed, and again addressed the doomed. “Folks, most cases are open and shut, and you’ll go home today with a good idea of where you stand. But sometimes we can’t give you an on-the-spot decision because we need more time to think it over. Or we might need more information. Heck, we’re only human. If that happens—sorry, but we have to move right on to the next case, otherwise we’ll be here all day and night. Roberta will let you know what our final decision is. But it won’t be today. So don’t bother badgering her, she has enough on her plate. Okay. Without any more ado, let’s get started.”
The litigants for the first case, a short, well-tanned man in blue jeans and a flannel shirt (despite the heat), and the lawyer for the FTB, were called to the front of the board room and ordered to stand at the small podium facing the judges. The appellant seemed confused and agitated. As the analyst began reading the summary, he turned to the lawyer for the state, a young blonde, and began saying something to her in Spanish.
The chairman motioned to the analyst to stop speaking. “What’s wrong Mr. Lopez?” He asked the appellant.
“No Mr. Lopez.” The man responded in a thick accent.
The chairman frowned. “Not Mr. Lopez. Isn’t this Lopez versus FTB?” He asked Roberta, who was seated at the side of the podium.
“It is, your honor,” she confirmed. “But from what I understand, Mr. Lopez had to work and so he sent his cousin.”
“His cousin? Ms. Riley,” The chairman growled, addressing the lawyer for the FTB, “Did you know about this?”
“No, your honor,” Ms. Riley replied, “I didn’t even know this wasn’t Mr. Lopez. Apparently he doesn’t speak English and I don’t speak Spanish.”
“Your honor,” Roberta explained, “Mr. Lopez speaks and writes English very well. He’s a general contractor. He didn’t even request a translator for the hearing.” The chairman exchanged ferocious glances with the other BOE members. What was this? Some sort of kangaroo court? They shut off their mikes and moved closer to each other to exchange words. After a few moments, they took their seats again.
“Roberta, can you please find someone to explain to Mr. Lopez’s cousin that, given the no-show of the appellant on a case of grave importance, the board has no alternative but to rule in favor of the Franchise Tax Board?”
“I can try, your honor.”
“¿Qué pasa?” Mr. Lopez?s cousin asked.
“You lost,” the lawyer for the FTB whispered back glumly. She’d just won her first BOE case.
The next case was Singh versus FTB. Mr. Singh had deducted what he’d spent on child support and alimony from his income, claiming that he shouldn’t have to pay income taxes on money that had gone to his ex.
“Mr. Singh,” The chairman began, after the summary had been read, “Certainly an intelligent man like yourself has read the law. You cannot claim child support as a deduction. The law is so unequivocal that I don’t understand why this case is even on the roster.”
“But your honors, I will take my ten minutes that I am allotted to prove that my ex is spending this money on dope.”
“Mr. Singh—who’s the person standing next to you?”
“This person is my attorney, your honors.”
“Then shouldn’t you allow your attorney to speak for you?” Mr. Singh motioned for the young man standing next to him to speak.
“Your honors,” he began confidently “I am not an attorney. I am a law student at Columbia Law School. But I can attest to what my uncle, the appellant, has said. His ex has indeed been buying dope.”
“That is not a relevant fact in a court of tax law!” The chairman roared. “Tell your client/uncle to take his case to family court. The tax law says that child support payments are taxable.”
“But I do not get my ten minutes to protest?” Mr. Singh pleaded his hand over his heart.
“You were invited here to appeal a ruling from the state Franchise Tax Board, my friend, not to protest the fact that your ex-wife buys illegal drugs.” He sighed, making a note in his binder. “I’m afraid we are forced to stand with the FTB with this one as well. Are the other members in agreement?”
In just thirty minutes two cases had been thrown under the bus. The chairman had made it very clear on whose side he stood, and it wasn’t with the taxpayers. He wasn’t even giving appellants the chance to speak.
Slattery, who’d been nodding in agreement with virtually everything the chairman said, even chuckling at poor Mr. Singh, leaned over Maya with wintergreen breath and said to Duke, “It’s not too late.”
“Only if I can tell them my story.” Maya was tired of the two lawyers talking over her as if she didn’t exist.
“You’ve seen what’s happening, Maya,” Duke pleaded, “They’re not letting anyone speak. No one’s getting a break.”
She wondered what it would be like to turn to Slattery and say I give up. To even thank him for compromising with her: Thank you for allowing me to pay the piddling sum of ten thousand dollars which to the state is nothing but to me and my children represents years of sacrifice. In return for my supplication to your power, can you pry your henchmen—Interest and Penalties—from my back? She could tell from his face that he was ready to walk into the spotlight and claim that victory was his—that the taxpayer, having witnessed the intolerance that the board had for tax evaders, had surrendered. Justice had been done. And then she saw Roberta seated to the side of the chairman and remembered the warmth of her handshake, the encouragement in her eyes. Someone believed her story, someone who felt that an injustice had been done. What would she think if Maya just gave up? “No.”
“No? There’s only one case left.” Duke reminded her. “And then it’s our turn.”
The next case was called. O’Brien versus FTB. The analyst read the summary. In 1992, the appellant, Thomas O’Brien, purchased a yacht for $185,000 dollars from a private citizen, Mr. Paul Collins, in Los Angeles, California. His intent was to moor the boat at his home in the San Juan Islands; however, owing to business difficulties, he was not able to take possession of the yacht. His appeal to the BOE was over California use taxes which he claimed he should not have to pay because he was not in possession of the yacht. Before the opening arguments began, Roberta informed the chairman that the man standing at the podium was not Mr. O’Brien but his business partner, Mr. Biddings, who would be representing him. The chairman scowled. There was no excuse for an appellant not to appear in person, no matter how important they thought they were. The BOE could level the playing field faster than Wyatt Earp had dispensed with Tommy Clancy.
“Where’s the lawyer for the FTP?” Maya whispered.
“This is the direct appeal of a BOE decision,” Duke replied, “It’s up to the BOE to defend their position, or to take under consideration facts that could change their minds.”
“Mr. Biddings,” The chairman began, “Why is your business partner, Mr. O’Brien, not in court making the appeal himself?” “
Mr. O’Brien’s wife is ill, your honor.”
“Sorry to hear that. So he entrusted you, his business partner, to represent his best personal interests?”
“Yes, your honor.”
“Well, that must be some relationship you two have. No offense, Mr. Biddings, but if I were facing the same stiff fines and penalties that Mr. O’Brien is, I’d have you take care of my sick wife and defend myself! I mean, he’s been evading this thing for years and when he finally—oh never mind. Let’s proceed. You have ten minutes, although, if it’s okay with you, we might not wait until the end of your comments to ask questions. Is that all right with you?”
“Yes, your honor. Well, to begin with, Mr. O’Brien never even got on the yacht in question! In fact, I don’t think he knows where it is.”
“Was it stolen? the chairman asked.
“I don’t think so. Would it make a difference?”
“As a general rule, the use tax is due either within one year of the purchase date of an item or by the end of the month following the date the buyer is contacted by BOE about having a tax liability, whichever comes first. So if the yacht was recently stolen, no. It wouldn’t make a difference. Please proceed, or is that your total argument?”
“Mr. O’Brien thought if you intended to moor a yacht out of state you didn’t have to pay use taxes.”
“What you’re referring to is the ninety-day rule. However, Mr. O’Brien has stated that he never took possession of the boat and therefore did not moor it out of state. Mr. Billings, is it?”
“Biddings, your honor.”
“Mr. Biddings, the issue is not possession of the yacht. Unless Mr. O’Brien can prove that the yacht was stolen shortly after purchase or that it was moved out of state, he really has no case. We will take the matter aside; however, I think you should advise your business partner to pay the use taxes owed for the past, what is it, six years.”
“But, your honor, the other fact to keep in mind is that the yacht is forty-five feet long, which means it’s registered with the feds and not the state, and therefore Mr. O’Brien does not have to pay California use taxes.”
“You are right on one of your points. If a vessel is in excess of twenty-six feet and is primarily a seagoing vessel, then it must be registered with the US Coast Guard. However, the owner is still required to submit use tax revenues. If they don’t, then we track them down. They might be harder to find, but let me assure you, we find them. Just like we found your Mr. O’Brien, now home with his sick wife!”
“Does that mean, your honors, that you reject his appeal?”
“Tick Tock. Tick Tock, Mr. Biddings. The longer he waits to pay, the more he will owe!”
“But because his wife was ill, doesn’t he get another appeal?”
The chairman looked over at Roberta. “This was the second extension of this case requested by the appellant,” she reported. “He’s had his second appeal. Next case, please.”
The chairman watched Maya as she rose and walked towards the podium, flanked by the two lawyers. She wanted to smile and somehow warm his cold heart, but she couldn’t give birth to something that was not inside her. The other members looked down at her as the name of the case was called:
“Maya Bethany versus the FTB.”
The analyst rose and began speaking. “Your honor, the respondent contends that the appellant has failed to meet the requirements for innocent spouse relief.”
“Thank you, Derrick. I think we’ve all read your summary which was, I must say, very astutely written,” the chairman interrupted.
“However, the appellant has provided evidence in the form of statements from her neighbors and correspondence from the attorney handling her divorce that does support her contention that her ex-husband did not readily provide financial information and that the tax return in question was signed under duress.” The chairman turned away from the legal analyst and addressed Maya with a warm smile.
“Yes, yes. Hello, Ms. Bethany. I think I can say on behalf of the members of the BOE that you have provided evidence of a most compelling case, heartrending, even. I’m interested to hear the state’s position.”
“The respondent argues that the adjustment on the return in question does not involve a re-characterization of losses from ordinary losses to capital losses,” the analyst continued, his voice rising two octaves. “And therefore, the adjustment does not constitute an omission of income or an erroneous deduction within the terms of section 18533 subdivision (a) (1). The BOE should question the state as to why the improper characterization of those losses fails to meet the terms of section 18553, subdivision (a) (1). And also, how this re-characterization affects the applicability of Revenue and Taxation Code section 19006, subdivision (c)!”
“Thank you, Derrick,” the chairman continued. “Now, this is a tax case! Not some family court issue, mystery of the missing boat, or send your cousin to court folderol! Mr. Slattery, would you care to address how the appellant has failed to satisfy section 19006, subdivision (c)?”
At first Slattery opened his mouth but nothing came out.
“Mr. Slattery?” the chairman continued, “We don’t have all day.”