PHOENIX - California State Controller Betty Yee will introduce a draft governance policy for the state Board of Equalization later this month in the wake of a review that showed the agency had misallocated $47.8 million in sales tax revenue.

Yee said in a release that she will introduce the draft policy, which has now been made public, at the May 23 BOE meeting in Sacramento. Yee has said she wants to strip the elected board of its tax administration, audit and compliance functions and focus on handling appeals in sales and use tax, franchise and income tax cases.

Betty Yee, California's state controller, wants changes at the tax-collecting Board of Equalization. State Controller's Office

Those changes would require legislative action. Currently, the five-member board collects the retail sales and use tax, property taxes, and special taxes, as well as handling appeals of Franchise Tax Board cases.

The 14-page draft policy spells out a number of ethical guidelines for BOE members designed to curb the widespread problems alleged in two reviews of the agency released in 2015 and in March of this year.

“Clearly, a governance policy is urgently needed to create board member oversight, accountability, and efficiency,” said Yee, who as controller is an ex-officio member of BOE. “While I continue to work with the legislature and the governor to craft comprehensive BOE reforms, a new governance policy will help guide the board towards more ethical decision-making.”

“Board members will never act where there may be a conflict of interest or appearance of a conflict of interest,” the proposed policy states. “A conflict of interest is understood to be a situation where a relationship exists that could reasonably be expected to diminish independence of judgment in performance of official responsibilities as a Board member. Specifically, Board members may not participate in decisions which might result in significant personal economic advantage. “
The policy places disciplinary powers with the board.

“Discipline will be at the discretion of the Board, after considering the nature and number of violations, and may include, but need not be limited to, admonishment, censure, and/or the requirement of additional training,” the policy states. “Any public discipline will be imposed in open session at a duly-noticed meeting of the Board, and only upon adoption of a motion by the Board.”

Last month Gov. Jerry Brown notified BOE that its delegated authority for personnel, contracting, and technology is indefinitely suspended, and called on legislative leaders to identify and enact changes by June 2017 to address the problems at BOE.

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Kyle Glazier

Kyle Glazier

Kyle Glazier is a reporter covering market trends, infrastructure, and the Far West region for The Bond Buyer.