Major Changes to California Board of Equalization Underscores Need for Careful Tax Guidance for Appeals and other Proceedings

At least some taxpayers are aware of the changes underway at the California Board of Equalization. Talks of reform efforts have swirled for years, but the agency seemed to avoid major changes for years. However, due to recent scandals and other allegations which have rocked the agency in recent years, the agency was no longer able to resist political calls for change.

Recently, California Assembly Bill 102 passed as part of a state budget package. This aspect of the budget package would make major changes to the BOE and the services it offers. The tax lawyers and tax professionals at the Tax Law Offices of David W. Klasing have studied and assessed the reform bill. We can help taxpayers navigate the “new BOE” to improve the likelihood that their tax matter or concern is resolved favorably.

How Does the Taxpayer Transparency and Fairness Act of 2017 Remake the California BOE?

Under California AB 102 — Taxpayer Transparency and Fairness Act of 2017 – The Board of Equalization’s responsibilities is limited, and the organization will be divided into several new dedicated agencies. It is believed this approach will lead to a more responsive and manageable tax agency. Furthermore, it is believed that this approach is more likely to create and preserve a tax adjudicating body that is truly independent and objective. The reform bill accomplishes this goal through the establishment of an Office of Tax Appeals which will be staffed by a panel of administrative law judges (ALJs).

The new structure of the California Board of Equalization will now include:

  • The “New” BOE
  • The California Department of Tax and Fee Administration
  • The Office of Tax Appeals

In the following paragraphs, our tax lawyers will briefly summarize the general duties and responsibilities of each new tax agency.

What are the Responsibilities of the “New” California Board of Equalization

The “new” BOE will assume some of the responsibilities of the old agency. However, the responsibilities of this agency will be greatly curtailed compared to its predecessor agency. In a nutshell, the new BOE will be charged with carrying out the Constitutionally charged tax duties previously assigned to the old BOE. These duties will include reviewing and adjusting property tax assessments, setting the rate for gas taxes, and handling the assessment of taxes on pipelines, insurance companies and alcoholic beverage sellers.

Like with the old BOE, the new BOE will be overseen by elected BOE members and the State Controller.

What Responsibilities will the California Department of Tax and Fee Administration Have?

Many of the tax collection duties of the old BOE will be assumed by the California Department of Tax and Fee Administration (CDTFA). This means that the CDTFA will assume responsibility for administering and collecting sales and use tax in California.

The CDTFA came into existence on July 1, 2017. The organization is organized under and reports to the state governor’s office.

The Duties of the California Office of Tax Appeals

The Office of Tax Appeals is one of the forums where taxpayers can bring their challenges and appeals to tax determinations and decisions. The Office of Tax Appeals will hear challenges to assessments of income tax, sales tax or special taxes and fees. Like the CDTFA, the new office would be over seen by the governor.

Under the new appeals process which has been described as relatively “unique” by observers, each appeal would be heard by a panel of three administrative law judges (ALJs). Under the approach, a broad array of representatives including accountants, CPAs, and tax lawyers will be able to represent taxpayers. However, taxpayers should still be wary regarding utilizing their original preparer due to potential conflicts of interest that can burn a taxpayer. Furthermore, if criminal conduct is at issue, taxpayers should only work with a lawyer to avoid a potential subpoena of one’s CPA or accountant.  If an unfavorable determination is reached, taxpayers will still retain the right to appeal to a higher court.

The Office of Tax Appeals is slated to commence operations on January 1, 2018.Taxpayers who file a petition to appeal before this date should follow current rules regarding appeals through the old BOE.

Work with Experienced California Tax Practitioners

The changes and reform efforts at the California Board of Equalization present both pitfalls and opportunities for taxpayers. The changes which include alterations to the process and system of appeals which may favor certain taxpayers while other taxpayers may find unexpected and unwanted additional scrutiny under the new system. Working with an experienced tax practitioner can help a taxpayer assess and make decisions of this type. To schedule a confidential and reduced rate assessment, please call 800-681-1295 or schedule online today!