The New California Office of Tax Appeals (OTA) on November 6, 2017, held an interested parties meeting in Sacramento to discuss the contents of a draft of emergency regulations to guide both income tax appeals from the California Franchise Tax Board and sales and use tax appeals from the California Department of Tax and Fee Appeals (CDTFA). The meeting was chaired by Kristen Kane, the newly appointed Chief Counsel and Acting Director of the OTA, and by Zack Morazzini, the Director and Chief Administrative Law Judge (ALJ) in the Office of Administrative Hearings.  Ms. Kane and Mr. Morazzini provided helpful insight on how the new OTA will operate, including the following:

  • The OTA is in the process of hiring 18 new ALJs.
  • Hearings will be held in Sacramento, Los Angeles and Fresno.
  • Hearings are expected to commence in late January, after a crash training program for the new ALJs.
  • Both Ms. Kane and Mr. Morazzini stressed the intention that the hearings be as informal and conversational as possible, bearing in mind that many, if not most, taxpayers will either appear pro per or be represented by non-attorneys.
  • Taxpayers will open the process by making a written submission, and the agencies will file a written brief in response. The procedures may be similar to the current practice before the State Board of Equalization, where the taxpayer submits a statement of facts and discussion of the law, and the facts as stated by the taxpayer are accepted unless the tax agency objects.
  • Where there is a disagreement on the facts, the burden will be on the taxpayer to come forward with supporting evidence.

In an informal discussion after the conclusion of the meeting, Mr. Morazzini said that the Office of Administrative Hearings is proud of their long and successful run at conducting fair hearings in many contexts with flexibility being a paramount concern. At least at the outset, there will be no written rules on the presentation of evidence. Mr. Morazzini said that the Administrative Procedures Act and, generally, the rules of evidence allow ALJs to fashion orders responsive to discovery requests by either or both of the taxpayer or the agency, as required under the circumstance. Either party will have the right to request a preliminary meeting with an ALJ, or the ALJ can order a preliminary meeting. The preliminary meeting is intended to be informal, and will give taxpayers the opportunity to request the production of documents, stipulations and admissions. Note that OTA anticipates that the preliminary meeting will be attended by only one ALJ, although A.B. 102, the authorizing legislation, calls for a panel of three ALJs.

Section 13 of A.B. 102 provides that OTA shall conduct all adjudicated hearings and proceedings under the Administrative Procedures Act.  (Government Code section 15674(a)(3).)  Also, A.B. 102 provides that to the extent possible, the OTA regulations shall be consistent with the American Bar Association’s (August 2006) Model State Administrative Tax Tribunal Act. Taxpayers wanting further clarification regarding likely OTA procedures can look to these Acts for guidance. In particular, Government Code sections 11507.5, and 11507.6, and 11507.7 of the Administrative Procedures Act, provide discovery rules applicable to Chapter 4.5 (Administrative Adjudication: General Provisions) and to Chapter 5 (Administrative Adjudication:  Formal Hearing). In addition Section 11 (Discovery and Stipulation) of the ABA Model State Administrative Tax Tribunal Act, attached here, provides broad discovery rights, including the taking of depositions and the right to issue subpoenas.

Other sections of the Administrative Procedures Act provide additional rules that will be applicable to proceedings in the OTA. See e.g. section 11430.10, et. seq. (prohibiting ex-parte communication), section 11420.10, et. seq. (authorizing use of alternative dispute resolution), and section 11420.10, et. seq. (Administrative Adjudication Bill of Rights).

As discussed in a previous post on this topic, the OTA will begin its operations on January 1, 2018.