Neutered California Tax Board Forces Quick Transition

SACRAMENTO, Calif. — Off and on for nearly a century, California lawmakers pondered breaking up an obscure elected board that now collects a third of the state’s revenue — more than $60 billion a year in sales, alcohol, tobacco and other taxes.

They pulled the trigger last month, with Gov. Jerry Brown and legislators backing a plan to strip nearly all power from the Board of Equalization. The move took effect Saturday, less than three weeks after legislation was introduced, forcing Brown’s administration to scramble to create a new agency to oversee tax collections and audits in a matter of weeks.

In six months, an even bigger change takes effect when another new department, the Office of Tax Appeals, will assume the authority to resolve most disputed tax bills. Panels of administrative law judges stationed around the state will hear and decide appeals in place of the elected Board of Equalization members.

The rapid transition creates a period of uncertainty for the taxpayers that deal with the Board of Equalization, which will retain about 200 of its 4,700 staff positions. The board mostly handled taxes paid by businesses but also adjudicated income tax appeals.

The changes were prompted by a scathing Finance Department evaluation earlier this year that portrayed a rogue agency in which some board members inappropriately used state employees to work on promotional activities and failed to report accurate financial information to the Legislature and the administration.

The evaluation alleged board member Jerome Horton reassigned public employees to work for him, opened a call center in his district without other members’ consent and held outreach events unrelated to the board’s mission. The review also found that 113 board employees helped with parking and registration at an Escondido event sponsored by board member Diane Harkey.

Horton and Harkey have denied wrongdoing.

The Board of Equalization will retain authority to collect and handle appeals for state-assessed property taxes, alcohol taxes and insurance taxes.

The new California Department of Tax and Fee Administration will take over more than 30 other types of taxes and fees. They include sales, tobacco and gas taxes, along with more obscure fees for lead acid batteries, marine invasive species, hazardous waste disposal and underground storage tank maintenance.

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