Feb. 9 — A California State Board of Equalization member is backing a bill to tighten monetary contributions to—or at the request of—board members with the goal of ending perceived conflicts of interest at the only elected tax board in the country.
All contributions to members of the SBOE from individuals or companies with an interest in a tax appeal before the board, as well as contributions from them to outside organizations at the behest of a member, would be banned under a bill to be introduced Feb. 10.
SBOE member Fiona Ma (D), who is sponsoring the bill, and Assemblyman Bill Dodd (D), the bill's author, both told Bloomberg BNA they are acting in response to a recent Bloomberg BNA examination of payments from companies with business before the board to nonprofit organizations tied to the wife of SBOE Chair Jerome Horton (D) at his request .
“It goes directly to the fact that they're sitting as a judicial body, which is different from a legislative body,” Dodd told Bloomberg BNA Feb. 8. “Where such important decisions are being made for the financial future of the state, these are important standards to give the public the confidence they deserve in these decisions.”
Ma said board members should avoid even the appearance of a conflict of interest.
“Unlike Senators or Assemblymembers, the votes we make can have an immediate, sometimes multi-million dollar impact on businesses and taxpayers,” Ma told Bloomberg BNA in an e-mail. “BOE can’t be seen as a pay-to-play agency. We should not be putting ourselves in the position where our motivations for voting a certain way are questioned, and I think legislators and the governor will be very receptive to our argument.”
Administrator, Adjudicator
Unlike other elected officials, the five SBOE members both administer the state's tax programs and adjudicate disputes between taxpayers and the state regarding those programs. They are free to accept campaign contributions from those taxpayers with some limits. Their dual roles as politicians and judges are at the heart of the bill.
“By enactment of this act, it is the intent of the Legislature to eliminate the perceived conflicts of interest associated with contributions and behested payments by parties, participants, their agents, and employees related to appeals before the board,” according to the bill.
Like a similar bill introduced in January, Dodd's bill would change the current $249 limit to zero on contributions from taxpayers or their representatives who are parties to an appeal before the board, or who have a financial interest in the outcome of the appeal .
Dodd's bill would go further to expand the definition of prohibited contributions to include payments made at the behest of a board member for a legislative, governmental or charitable purpose. Such payments are legal for California elected officials, as long as they meet disclosure rules.
Horton: $731,835 in Payments
Bloomberg BNA found through its investigation that Horton has reported $731,835 in behested payments since he joined the board in 2009, with most of it going to or through nonprofit organizations tied to his wife and used to host events and buy advertising loosely tied to the board's tax mission. Much of the money or in-kind donations Horton requested came from companies with business before the board.
The bill, amending the Quentin L. Kopp Conflict of Interest Act of 1990, would also expand the current restriction on contributions in the 12 months before a case is heard to apply to the 12 months after the board adjudicates a dispute. Members would be banned from “requesting, suggesting, or accepting” contributions from a taxpayer, representative or interested party in a case in the 12 months following a board decision in a tax appeal.
Dodd said his bill would also address instances in which companies or their representatives have aggregated $249 contributions from multiple employees to avoid the limit. The bill adds employees of a taxpayer, representative or other entity with an interest in a case to the definition of parties or participants to whom the contribution restrictions apply.
Bundled Contributions
Most recently, 40 employees of tax consulting firm Ryan LLC gave Horton $11,000 in $249 increments on Aug. 14, 2014, and 26 Ryan employees gave SBOE Vice Chair George Runner (R) $6,425 in $249 increments on May 19, 2014, according to campaign finance filings with the secretary of state.
Board members who receive contributions that fall under the bill would be required to disclose the contributions and recuse themselves from participating in cases tied to the contributions. Alternatively, the members could participate in the matters if they have returned the contributions within 30 days.
Members who violate the law would face misdemeanor charges, a four-year ban on running for public office or working as a lobbyist, and civil penalties of $10,000.
Taxpayers or their representatives making contributions to individual board members would be required to disclose the contributions to the full board within 30 days.
Potential for Corruption
The SBOE's current rules allowing contributions from individuals or entities to board members who can make decisions that specifically affect the donors create an inherent potential for corruption, Craig Holman, a government affairs lobbyist with Public Citizen in Washington, told Bloomberg BNA Feb. 9.
Even if the contributors don't exert undue influence over the public official receiving the money, questions about whether the money influenced the official's decision will always exist, Holman said.
Although no other body like the SBOE exists in the U.S., Dodd's bill is most akin to laws in 15 other states banning contributions to public officials who have the authority to award contracts to specific individuals or companies, Holman said.
“It is perfectly justifiable for a government agency to determine that the potential is so grave for corruption that rules like this are appropriate,” Holman said.
To contact the reporter on this story: Laura Mahoney in Sacramento, Calif., at lmahoney@bna.com
To contact the editor responsible for this story: Cheryl Saenz atcsaenz@ bna.com