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We at Thompson Tax & Associates, LLC are dedicated multistate tax professionals committed to relieving you of burdens created by the complexities of state and local tax laws and reporting requirements.

We have over 250 years of experience in government, industry, and Big 4 accounting to help resolve your state tax needs within budget.

We encompass all industries including high tech, financial institutions, motion picture production, construction contractors, service firms, and more.

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Concerned about exposure in other jurisdictions?  Need assistance with taxability of products and services around the country?  Our Consulting Team can help!

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CDTFA and OTA - Are They Transparent and Fair?

It’s been almost six months since Governor Jerry Brown’s budget bill, Assembly Bill (AB) 102 deconstructed the old Board of Equalization into three parts:


  • California Department of Tax and Fee Administration (“CDTFA”),
  • California Office of Tax Appeals (“OTA”) and,
  • Board of Equalization (“BOE”), the new and diluted version of itself.


While this new tax law was given the lofty title of the “Taxpayer Transparency and Fairness Act of 2017,” it remains to be seen if it will earn that title.


In this article, we will recap why the old BOE was deconstructed; we will summarize the duties and responsibilities of the three agencies, and we will consider what we could expect from the CDTFA and the OTA.




According to the findings of the Legislature, AB 102 was enacted because, “the BOE’s current practices support inappropriate interventions by board members in administrative and appeal-related activities, all of which led to inconsistencies in operations, breakdowns in centralized processes, and activities contrary to state law and budgetary and legislative directives.”




The new BOE is a shadow of its former self with the passage of AB 102. Prior to the breakup, the old BOE had 4,500 employees – it now has just 200 employees, including the four elected Equalization Members and the State Controller, its ex-officio member.


The new BOE lost its administrative authority over the massive sales and use tax program as well as over 30 other tax and fee programs. Just as significant, it lost its administrative appellate authority over these tax and fee programs, including Franchise Tax Board appeals.


The new BOE’s responsibilities are now reduced to the following: reviewing, equalizing or adjusting property tax assessments; assessing taxes on insurers, and; assessing and collecting alcoholic beverage taxes.




Effective July 1, 2017, the CDTFA takes over responsibility for all that the old BOE was responsible for prior to the enactment of AB 102, except those responsibilities that the new BOE retained and those duties that the OTA will receive on January 1, 2018. The CDTFA is established under the Government Operations Agency and reports to an agency secretary appointed by Governor Brown.  The new director of the CDTFA is Mr. Nicolas Maduros, who served as chief of staff at the U.S. Small Business Administration from 2014 to 2017 but does not appear to have any tax background.  Operationally, the management, staff, policies and procedures remain the same except for changes to form numbers and email addresses to reflect the new agency name.




Effective January 1, 2018, the new BOE relinquishes its adjudicatory powers to the OTA for all taxes and fees except the powers retained by the new BOE. The OTA is in the process of creating three-member tax appeals panels consisting of administrative law judges. The OTA will establish hearing offices in Sacramento, Fresno and Los Angeles. The new OTA Director is Mr. Mark Ibele, who served as staff director of the California State Senate Committee on Budget and Fiscal Review since 2013, but does not appear to have any tax or tax appellate background.


The OTA is in the process of hiring and training an appellate staff of 18 attorneys. To date, they have hired only 12 attorneys, so we should expect significant delays in the scheduling and hearing of cases. Moreover, the 12 attorneys are presently receiving intensive training in income tax, sales and use tax as well as the other 30 tax and fee programs.  As such, it remains to be seen how much knowledge these new attorneys will be able to absorb by the time they begin to hear appeals, which are expected to begin in the Winter of 2018.


What’s Next


From a taxpayer’s perspective, we should not expect to see much change at the CDTFA. The only significant change at the CDTFA was the removal of the five elected Board Members. It is unlikely that the new Director will be able to implement any significant change to the longstanding tax practices of the old BOE because management and staffing have not changed. In fact, due to the Director’s lack of tax administration background and experience we expect that the Director will be learning his new job for at least the next year.  Even the most experienced tax practitioners find the tax and fee programs of the CDTFA to be extremely complicated, so it is not unreasonable to conclude that Mr. Maduros will rely heavily on the existing managers and staff to affect policies and procedures.


Consequently, one should expect that the tax programs administered by the CDTFA will at best operate as they have in the past, but at worst will become more unfriendly to taxpayers as managers and staff operate unchecked by the balance provided by the former elected Board Members.


The operation of the OTA elicits far more questions for taxpayers because the OTA is a completely new construction. Here are some of the questions that we have at Thompson Tax:


  • How much tax knowledge and experience do the appellate attorneys have?
  • Will any of the attorneys come from the former BOE?
  • What will the three-panel decisions look like – will taxpayers feel that the hearings were “transparent and fair?”
  • Will past practices and decisions from the former BOE be honored or will the OTA take California taxes in a different and less friendly direction?
  • Will the decisions of the panels indicate that some panels are friendlier to taxpayers than other panels?
  • Will taxpayers be able to ask for the removal of an administrative law judge that has been shown to be unfriendly to taxpayers?


The development of the OTA will be watched very closely over the next couple years by all interested parties:  taxpayers, practitioners and the Legislature.