California Controller Wants to Strip Tax Board of Duties

LOS ANGELES — California's state controller wants to strip the state's elected tax board of its most important functions.

The Board of Equalization administers more than 30 tax and fee programs that collected $60.5 billion in revenue during fiscal year 2014-15, according to an evaluation by the state Department of Finance, released Thursday.

The five-person board consists of four members elected from different districts, and the state controller.

The controller, Betty Yee, wants the board relieved of tax administration, audit and compliance functions, to better focus on its appellate duties.

Yee asked lawmakers and Gov. Jerry Brown to strip the board members of all statutory functions and permanently move these duties and assigned staff to a separate new department under the governor.

The BOE would continue to hear appeals in sales and use tax, franchise and income tax cases under Yee's proposal, which hasn't been fleshed out.

A review by the controller's office in November 2015 showed the agency had misallocated $47.8 million in sales tax revenue and had other widespread accounting and administrative control deficiencies.

"What got me focused on this approach to reform is that we found in our audit the misuse of agency resources by board members," Yee said. "They have been using positions devoted to revenue generation to help with outreach events that don't generate revenue."

Auditors and compliance workers have been used to staff educational and information events, instead of focusing on audits and other work that would increase revenues, she said.

Thursday's separate Department of Finance evaluation raised additional concerns about the challenges staff face in carrying out the mission of the BOE, Yee said.

"Despite having dedicated staff and operating budgets of $1.5 million, some board members routinely supplement their staff by redirecting revenue generating staff to perform non-revenue generating activities, including outreach," according to the DOF's report.

The allocations of sales and use tax to the general fund and local governments should be correct so the state and local governments can rely on the income, Yee said.

In its response to the DOF evaluation, the BOE wrote that it is strengthening and developing a number of policies and controls related to the use of staff for outreach events.

It disputed the DOF's claim that it had difficulty providing complete and accurate documentation in response to evaluation inquiries. DOF also found that in some instances various levels of management were "not aware of and could not speak to certain district activities for which they held oversight responsibilities."