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California Legislature votes to strip key powers from state tax board hit by scandal

State Sen. Holly Mitchell (D-Los Angeles) led an effort Thursday to pass a bill overhauling the state's troubled tax board. (Gary Coronado / Los Angeles Times)
State Sen. Holly Mitchell (D-Los Angeles) led an effort Thursday to pass a bill overhauling the state's troubled tax board. (Gary Coronado / Los Angeles Times)

The state Legislature on Thursday voted to strip the state’s scandal-plagued tax board of most of its duties and powers, sending the governor a bill that would transfer taxpayer appeals hearings to a new office of administrative law judges.

The state Board of Equalization has been hit by a series of scandals, including audits showing that it misallocated hundreds of millions of sales tax dollars to the wrong accounts and that elected board members opened field offices and transferred workers without authority to do so.

Sen. Holly Mitchell (D-Los Angeles) said the measure will make structural reforms to address "significant issues of mismanagement and misuse of budget resources and disregard of directives of this Legislature." 

The measure, which also shifts oversight of sales and excise taxes to a new collection office, was sent by the Senate and Assembly to Gov. Jerry Brown, who has told lawmakers he supports the change.

Republicans including Sen. Jeff Stone of Temecula said the action takes away an important process for small businesses that want to appeal tax judgments. Stone said the legislative maneuver used to pass the change was an "abuse" of a process not meant to make sweeping policy change.   

Sen. John Moorlach (R-Costa Mesa) said the bill violates the state Constitution and policies restricting how the Legislature can make major structural changes to state departments. That legal issue could be grounds for a ballot measure to restore the board’s powers, said board member George Runner.

In the Assembly, Budget Committee Chairman Phil Ting (D-San Francisco) said having three panels of administrative law judges hearing appeals will greatly speed up the process, which he noted took 15 years for one case.

“No taxpayer should have to wait 15 years to get their day in court,” Ting said.

Republican Assemblyman Jay Obernolte of Big Bear Lake said having elected board members hear tax appeals allows voters to get help from someone independent from the state bureaucracy and hold officials accountable.

“This bill will eliminate that very important taxpayer protection,” Obernolte said.

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