California Tax Appeals Unit Living Up to Transparency Goal

Much of the optimism is due to one of the reorganization’s centerpiece moves — transferring the hearing of appeals from the elected Board of Equalization (BOE) to the OTA, an administrative tribunal with 27 judges. The OTA was established with the goal that tax disputes would be decided on the facts by administrative law judges, rather than under the previous system, which allowed for the lobbying of board members.

Under the prior system, it was possible for parties in BOE appeals to have been constituents of the elected board members, and they could meet with those board members to lobby them in advance of hearings. The appearance of potential impropriety was made worse by the fact the BOE was not required to publish written opinions, resulting in a system that led to decades of complaints of favoritism.

The BOE’s appeals practice is gone now, and even the Council on State Taxation, which represents large corporate taxpayers and has been often critical of California’s tax administration, has given the OTA a nod in its most recent tax agency administrative scorecard.

“In addition to concerns about that complexity, practitioners wondered whether the OTA would deliver what was promised,” recalled Carley Roberts, a Tax – State and Local partner at Pillsbury. “They were worried that in the early stages, at least, many of the administrative law judges assigned to the OTA came from the BOE and the Franchise Tax Board (FTB).”

“So many of them were FTB and BOE attorneys,” Roberts said. “The question mark was: Would we get that objective judging that is needed in an independent tribunal?”

“But given the OTA’s work to date, so far, so good,” Roberts said.

“They’ve taken on both the CDTFA and the FTB. They’ve taken them to task, they are not afraid to rule against the agencies,” Roberts concluded.

Practitioners also give the OTA credit for outreach. Roberts is among those representing practitioners on an advisory committee for the OTA, which also includes representatives from the state government, other tax agencies and taxpayer advocate groups.

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