Taxable Talk

Once the judge ruled, this headline was inevitable. After all, Janet Nguyen was up by seven votes (that's right, 7) over Trung Nguyen. So a Nguyen was going to win.

Janet Nguyen was down by seven votes and asked for a recount. After the recount concluded, she was up by seven votes. Trung Nguyen, who was now in second place, filed a lawsuit claiming that the recount was done in an illegal fashion. Yesterday, Judge Michael Brenner ruled that the recount was legal and that Janet Nguyen won by three votes. This afternoon Janet Nguyen will be sworn in as Supervisor for Orange County's 1st District. Ms. Nguyen will be the youngest Supervisor and the first Asian-American (and Vietnamese) Supervisor in Orange County's History.

One result that this election reinforces: your vote matters. I'm not in the 1st Supervisorial District, but those four Trung Nguyen supporters who forgot to vote in February are probably very unhappy right now. (For the record, Trung Nguyen is planning on filing an appeal.)

When you hear that your vote doesn't count, well, think again. Here in Orange County, the First Supervisorial District was without a Supervisor since January, when Lou Correa (elected to the State Senate in November) moved up to Sacramento. Ten candidates ran in the election in February, and the Democrats were hopeful to retain the seat—the Republicans would split the vote.

Indeed, that was the case...well, sort of. The Republicans did split the vote. After the votes were counted, Trung Nguyen (R) led Janet Nguyen (R) by 7 votes. Your vote definitely counts. The Nguyens, by the way, are not related, but are both part of the sizable Vietnamese community of Orange County.

Then there was the (inevitable) recount. And when that was completed, Janet Nguyen was on top by 7 votes. What comes after the recount? The court challenge.

The judge hearing the case, Michael Brenner, noted that California's election law is inconsistent. Hopefully, a ruling will be made soon, so that the district has representation.

A very interesting article from Reuters on the possibility of a decline in state tax revenues. Reuters speculates on (1) lower capital gains revenues, in states such as California, and (2) declining real estate values, in other coastal states (such as New Jersey) impacting tax collections.

As to California, real estate is not likely to be a major factor in state tax collections. Property tax is paid to each county, and mostly stays with the county and cities within each county. However, the issue to watch is the impact of stock options.

Stock options were, in my opinion, the reason why California tax collections increased in 2006. I suspect that taxes from stock options will not increase in 2007 from 2006 (and likely will decrease). This is just speculation based on a small sample size; however, we will get a much clearer picture by the end of April (when the Franchise Tax Board releases collection numbers for April).

In any case, it will be an interesting April and May for budget writers at the state, county, and local levels.

California has a lot of taxes. One of the taxes that most individuals are not aware of is the pesticide tax. As the DPR notes, "California assesses a fee on all pesticide sales, levied at the point of first sale into the state. A “mill” is equal to one-tenth of a cent. This “mill assessment” is 21 mills, or 2.1 cents per dollar of sales. Mill assessment revenues are placed in a special fund used to support the State’s pesticide regulatory program." Of course, the retailers pass this tax on to consumers, but that's another story for another day.

Wal-Mart used to be able to avoid this tax. California changed the law in 2005 so that "big box" retailers can't avoid the tax by having corporate offices in another state. California requires all sellers of pesticides to pay the tax.

Wal-Mart's bill? $1.2 million: $1.09 million from the mill tax, and $110,000 in interest and penalties (according to ISSA). Wal-Mart is pledging to work with the DPR, and given Wal-Mart's push for positive public relations, I'm sure that will be the case.

Given California's looming budget deficit, a million here and a million there can add up.

I've criticized California's Franchise Tax Board on several occasions. However, I am going to praise them when they deserve it, and this is one of those times.

The FTB, in the past, has assessed late payment penalties when payments on some e-filed returns were not remitted with the return (on returns with a balance due). The FTB will be sending out refunds for some taxpayers, for tax years 2002-2005, where:

• The return [was] e-filed


• At least 90 percent of the tax due [was] paid by the original return due date.


• The remaining amount due [was] paid within 21 days after we accept the return.

The FTB correctly notes that you are supposed to fully pay your taxes by the due date of your return (not 90% of your taxes). But the FTB has realized that the payment won't always accompany the return, and is rectifying a problem.

As far as we can tell, none of our clients are impacted by this issue. However, if you think you are, please contact our office so we can review your situation.

FTB Notice