The New Year Brings New Rules for the Digital Millennium Copyright Act.

By: Robert V. Hawn, Esq.

In 1998, Congress enacted the Digital Millennium Copyright Act (“DMCA”) . This act enacted many things including a protection for online services who allow content from users which may be in violation of another’s copyright to not be liable for a copyright infringement.

The current rule states that a service provider or website operator will not be liable for monetary relief for an infringement of copyright by users posting content on the provider’s site as long as the service provider meets certain qualifications. [1]

Here’s what’s new Paper is out and the electronic online system is in.

The change to this act states that in order for the online service provider to be immune for copyright infringement for its users’ content, the online service provider must:

1)Re-register their designated agent online with the US Copyright Office ( here ) by December 31, 2017 (Along with the $6 fee); and

2)Make the Designated Agent known to the public on the service provider’s website; including their contact information that matches with the US Copyright Office. [2]

The designated agent is an agent who will be the point of contact with the copyright owner for claims of infringement by the online service provider.

Renew every 3 years

The Designated Agent must be renewed every three years. [3] Further, if the online service provider amends or resubmits a Designated Agent the three year renewal will restart on that modification date.

The copyright office has made a few videos to help with creating and managing the Designated Agent ( here ).

Here’s what you need to do:

If you are an online service provider that allows users to upload content, you need to follow the appropriate qualifications in 17 U.S.C 512 and follow the new addition to the rule by:

1) Registering a Designated Agent with the US Copyright Office (here) by December 31, 2017 ; and

2) Making this Designated Agent known to the public on the service provider’s website.

By following 17 U.S.C 512, the online service provider will increase its chances of being immune from liability arising out of infringing material uploaded by a user. To learn more, check out the following sites:

DMCA:

https://www.gpo.gov/fdsys/pkg/USCODE-2016-title17/html/USCODE-2016-title17-chap5-sec512.htm

US Copyright Designated Agent registration:

https://www.copyright.gov/dmca-directory/

Helpful FAQ on the DMCA Designated Agent:

https://www.copyright.gov/dmca-directory/faq.html

US Copyright DMCA Designated Agent Tutorial videos:

https://www.copyright.gov/dmca-directory/help.html

37 U.S.C. 201.38 Designation of agent to receive notification of claimed infringement

https://www.copyright.gov/title37/201/37cfr201-38.html

The information appearing in this blog does not constitute legal advice or opinion. Such advice and opinions are provided by the firm only upon engagement with respect to specific factual situations. Specific questions relating to this article should be addressed directly to Strategy Law, LLP.


[1] 17 U.S.C. 512 (a)

[2] Id . 512 (c)(2)

[3] 37 U.S.C. 201.38 (c)(4)

A Last-Minute Word to the Wise for Soon-to-be Corporations and LLCs in CA

As we get closer to the end of the year, there are a couple of extremely important tax-related items to remember for anyone who may be getting close to starting a corporation or LLC, preparing to file their Articles of Incorporation, looking to expand their operations into California, or just may be thinking of doing so. The items I am referring to are the $800 minimum tax and the 15-day end of the year tax exemption. But first, with the holiday season now in full swing, let’s start off with a quick tale.

Once upon a time, there was a company called C&L Pacific, a newly formed S Corporation that had four shareholders and intended to do business in California. On December 12 th , 2011, C&L Pacific mailed its Articles of Incorporation to the office of the Secretary of State of California, with the intent of becoming “incorporated.” Their Articles were officially marked “filed” two days later, on December 14 th . However, they were not processed until March 24 th , 2012, and C&L Pacific subsequently did not learn about the Articles of Incorporation being processed until April 2012, after which the company then proceeded to conduct business operations.

Based on those facts, C&L Pacific assumed it did not have to file a tax return for 2011 or pay the minimum corporation tax of $800 for that year. However, it was mistaken. Outlined in the ruling from C&L Pacific’s appeal before the Franchise Tax Board (FTB), California’s Revenue and Tax Code (R & TC) §23153 states that “[A] corporation becomes liable for the $800 minimum tax when it incorporates in California, qualifies to do business in California, or if it is actually doing business in California.” So, when does a corporation’s existence, or “incorporation,” begin? Even though C&L Pacific did not start doing business in California until 2012 and the Articles of Incorporation were not processed until 2012, California’s Corporations Code § 200 says, “[a] corporation ‘incorporates’ in California on the date that its articles are filed with the Secretary of State,” meaning that C&L Pacific was incorporated on December 14 th , 2011 when the Articles were marked filed, rather than in March 2012 when they were processed.

As for whether the taxpayer was required to file a tax return for the 2011 tax year, if C&L Pacific had waited just a day longer to mail their articles, they would have qualified for the 15- day end of the year tax exemption, which would have excused the taxpayer from being required to file a return. “A corporation is not subject to the minimum franchise tax (and is not required to file a return) if it did not do business in California during the taxable year, and the taxable year was 15 days or fewer” (R & TC §23114).

So not only would the taxpayer have avoided needing to file a return, they also would have not been required to pay the $800 minimum tax for the 2012 tax year since C&L Pacific would have qualified under the “First-year-free” tax exemption rule, under R & TC §23153(f). The FTB did not assess the minimum franchise tax for 2011 because C&L Pacific qualified for the first-year-free exemption but this exemption was lost for 2012. The taxpayer was assessed a $432 per-shareholder penalty by the FTB, and ordered to file a tax return for the 2011 tax year, because the Board deemed the “taxpayer’s failure to distinguish between the importance of the filing date and processing date” to not be reasonable cause for failing to file.

As soon as a corporation or LLC files Articles with the Secretary of State of California, the taxpayer is formed in the state of California. So if you won’t be doing business until the new year, make sure you don’t file before the last two weeks of the current year. And as a side note – this all could have been avoided if C&L Pacific hadn’t mailed in its Articles for filing. We file documents over the counter in Sacramento to skip the months long wait for mailed filings and for clear tracking of filing dates.

The information appearing in this blog does not constitute legal advice or opinion. Such advice and opinions are provided by the firm only upon engagement with respect to specific factual situations. Specific questions relating to this article should be addressed directly to Strategy Law, LLP.

Reverse Veil Piercing: Another Reason to Pay Your Bills

By: Tamara B. Pow, Esq .

A recent California Court of Appeals case ( Curci Investments, LLC v. Baldwin ) means California LLC assets could be at risk for a member’s personal liability. Baldwin borrowed $5.5 million from an investment firm, as a predecessor to Curci Investments Inc. (“Curci”). Fast forward three years to the due date and Baldwin does not repay his debt. Curci files a lawsuit to collect the debt, but agrees to stipulate to an extension to allow Baldwin to pay his debt over time. At the end of that extension in 2012, Baldwin still does not pay back the investment firm, so the trial court in California files an Entry of Judgment against Baldwin for $7.2 million, including prejudgment interest and attorney fees and costs. In 2014, Curci files a motion seeking charging orders against some of the business entities that Baldwin may have invested in or been involved in some way. The court grants this motion for 36 entities which then made no distributions. The court then rules against Curci when Curci tries to access Baldwin’s assets through Baldwin’s LLC, in what is known as “reverse veil piercing.” The court was concerned with the possibility of harming innocent shareholders and corporate creditors, allowing judgment creditors to bypass standard judgment collection procedures, and using an equitable remedy when legal remedies are available. Most of all, however, the court ruled against Curci because it believed that reverse veil piercing was not available in California.

Here is the interesting part. Baldwin had previously formed and held interests in hundreds of corporations, partnerships, and LLCs, 36 of which were included in Curci’s motion seeking charging orders. The business in question is JPBI LLC, a Delaware LLC used for the exclusive purpose of holding and investing Baldwin and his wife’s cash balances. From 2006 to 2012, JPBI distributed roughly $178 million to Baldwin and his wife, (during which time Baldwin borrowed money, agreed to the stipulation to extend the date to pay the investment firm and was ordered by the court to repay Curci). To top it all off, Baldwin owned 99% of JPBI LLC, while his wife owned the remaining 1%.

All of that would mean nothing, however, without the applicability of reverse veil piercing, the inverse of traditional veil piercing. The trial court thought it to be unavailable in California, based on the decision of another case, Postal Instant Press, Inc. v. Kaswa Corp. (2008), which ruled that the veil of a corporation could not be pierced under certain conditions. However, in the timely appeal filed by the plaintiff, the California Appeals Court was able to differentiate that case from this one, ultimately remanding the case back to the trial court, with instructions to determine whether JPBI’s veil should be pierced. While the Appellate Court did not rule whether JPBI’s veil should be pierced, it did make clear that reverse veil piercing, which is the act of a collector satisfying the debt of an individual through the assets of an entity of which the individual is an insider, is available in California for several reasons:

First, the facts of this case allay any concerns the trial court had based on the previous case. Since Baldwin and his wife owned the entire company, and were in charge of when JPBI distributed money, there were no innocent shareholders involved. Additionally, Curci explored all avenues, and pursued other legal remedies, before filing the motion seeking charging orders. This satisfied the court’s concern that creditors bypass standard judgment collection procedures or other legal remedies.

Second, the previous case applied only to corporations, whereas JPBI is an LLC. Per the trial court, in reading the decision from the previous case, “A third party may not pierce the corporate veil to reach corporate assets to satisfy a shareholder’s personal liability.”

Third, Corporations Code § 17705.03, which Baldwin had used to argue his case, was read by the Appellate Court as the exclusive remedy for reaching the judgment debtor’s “transferrable assets,” not referring to his LLC’s assets.

Fourth, the Revised Uniform Limited Liability Company Act, from which the previous statute came from, included comments that the charging provisions “were not intended to prevent a court from effecting reverse veil piercing where appropriate.”

Next the trial court will have to determine whether Curci can in fact pierce JPBI LLC’s veil to use Baldwin’s assets to satisfy his debt. The court will have to determine this by evaluating the same factors that are applied in a traditional veil piercing case, as well as whether Curci has any plain, speedy, and adequate remedy at law.

The information appearing in this blog does not constitute legal advice or opinion. Such advice and opinions are provided by the firm only upon engagement with respect to specific factual situations. Specific questions relating to this article should be addressed directly to Strategy Law, LLP.

By Reading This Blog, You Are Agreeing To…

By: Robert V. Hawn, Esq.

How many times have you registered or signed up for something online and came across a Terms of Service agreement? The answer is a lot, because vendors want to make sure we agree to their terms before providing a product or service. These days every app we use, every service we enroll in online, and every time we make a one-time online purchase, we are made to enter information about ourselves and our credit card before clicking that button that completes the entire process. And that process almost always comes with some form of notice warning that by clicking that button, you agree to the “Terms and Conditions”.

Whether these terms are enforceable or not depends, in large part, on whether they are conspicuous on the site and whether the user is required to agree to them before getting the product or service ordered. Meyer v. Uber Technologies, Inc. , decided by a Federal Appeals Court in August of this year, illustrates the need for properly designing the process by which the user agrees to terms. Although the case was heard in New York, it was decided under California law.

The plaintiff filed a class action lawsuit against Uber, specifically former CEO Travis Kalanick, although Uber was later joined as a defendant, in the U.S. District Court for the Southern District of NY. The plaintiff alleged that Uber’s ride-sharing application allowed drivers to illegally fix prices individually. The defendants filed a motion to compel arbitration under Uber’s Terms of Service agreement. On appeal, the defendant argued that the Terms of Service was unenforceable.

The primary issue around enforceability was whether the Terms of Service was visible and noticeable enough, or reasonably conspicuous, so that the user knew it was entering into an agreement. If so, the agreement will be enforced against the user even if the user didn’t read the agreement. “While it may be the case that many users will not bother reading the additional terms, that is the choice the user makes; the user is still on inquiry notice,” wrote Judge Chin in the decision of this case.

Although the determination of whether the Terms of Service is “reasonably conspicuous” requires considering many factors, the analysis focuses primarily on the design of site where the contract is formed. The three appellate judges reviewed the screen size of the plaintiff’s Samsung Galaxy S5 and how the screenshot of the final step of the registration process appears on that screen, the presence of words and other things in close proximity to the “agree” button, and the appearance, location, and interpretive function of the agree button itself. “Clarity and conspicuousness are a function of the design and content of the relevant interface,” wrote Chin.

The court noted a number of aspects of the design. To open an account, a user must click a button marked “Register”. Underneath this button, the screen states “By creating an Uber account, you agree to the TERMS OF SERVICE and PRIVACY POLICY,” with hyperlinks on them, which the user can click if they want to enjoy a little light reading. The court noted that payment screen was uncluttered. There were only fields for the user to enter his or her credit card details, or a button to click in order to use different payment options, and a warning that the user was agreeing to terms when clicking “Register.” The entire screen is visible on one page, with very little scrolling required and no additional pages to review before creating the account. The warning itself is in small font, but is also in bold font, with the hyperlinks in light blue and underlined. As a result, the Court ruled that the design of the screen, and the language used, was reasonably conspicuous.

Notwithstanding, Meyer declared that he was not on actual notice of the hyperlink, that when he was signing up he was not aware of the existence of the Terms of Service. There is no evidence that Meyers had actual notice of the Terms of Service, and the defendants did not point to any evidence from which a jury could infer otherwise. According to Judge Chin, however, California contract law measures assent by an objective standard that takes into account both what the person or entity seeking service said, wrote, or did, and the transactional context in which the person or entity verbalized or acted. California contract law is clear that “an offeree, regardless of apparent manifestation of his consent, is not bound by inconspicuous contractual provisions of which he is unaware, contained in a document whose contractual nature is not obvious.”

Using California’s concept of measuring assent by an objective standard, Judge Chin introduces the notion of a reasonably prudent smartphone user: “Precedent and basic principles of contract law instruct that we consider the perspective of a reasonably prudent smartphone user”. Because of the nature of the design of the contract formation process, the Appeals Court held that “a reasonably prudent smartphone user would understand that the terms were connected to the creation of a user account.” Even if a reasonably prudent user was indeed not aware of the conditions that would be set forth by their clicking of a button, the court held that the user would be “still bound if a reasonably prudent user would be on inquiry notice of the Terms of Service.”

In explaining his decision, Judge Chin further observed “inasmuch as consumers are regularly and frequently confronted with non-negotiable contract terms, particularly when entering into transactions using the internet, the presentation of these terms at a place and time that the consumer will associate with the initial purchase or enrollment… from which the recipient benefits at least indicates to the consumer that he or she is taking such goods or employing such services subject to additional terms and conditions that may one day affect him or her.”

In holding for the defendant, the Appeals Court noted that the “registration process allowed Meyer to review the Terms of Service prior to registering, included a reasonably noticeable hyperlink, and expressly warned the ‘reasonably prudent smartphone’ user that by creating an Uber account, the user was agreeing to be bound by the linked terms.”

This case is very helpful for operators of ecommerce websites, particularly those in California, because it clearly outlines the design parameters required of a website enabled contract formation process. For those creating click through agreements, these guidelines are invaluable.

Is Blockchain Technology the Future? The State of Delaware Will Find Out

By: Robert V. Hawn, Esq.

Delaware recently enacted an innovative law recently to allow an incorporated business in Delaware to keep track of its shares, often referred to as a stock ledger, on a blockchain platform.

You may be wondering why this is such a big deal. For starters, two-thirds of all U.S. listed companies call the state of Delaware home. The state officially has more registered legal entities than residents. Delaware also contains a flexible business legislation and tax framework, and has a reputation for being the catalytic yardstick in corporate law.

Now consider what a blockchain may do. Blockchain technology allows the creations of distributed ledgers. A “distributed ledger” is a mutual, shared ledger between any number of parties that create a single record of transactions, providing one unchangeable, “golden copy” of data that all can trust as valid.

The new law allows an incorporated business to use distributed ledger technology to maintain its stock ledger. The new law, however, does not overturn a number of current Delaware requirements regarding stockholder ledgers. Provisions concerning the ability of the corporation to prepare a stockholder list, and provisions concerning the type of information to be recorded, for example, still remain. The law also does not yet add provisions concerning smart contracts, an automated software program that self-executes when a specific trigger occurs. Smart contracts could be used in a stock ledger application to allow the stock ledger to adjust when it receives trading information.

The law is Delaware’s first step in implementing the Delaware Blockchain Initiative, an effort started by then-Governor Market to use blockchain technology and smart contracts to streamline financial services around Delaware corporations. The hope is that the combination of distributed ledgers and smart contracts can streamline many financial services by automating, among other things, clearing and settlement functions.

You can find the actual law here: https://legiscan.com/de/bill/sb69/2017 .

The information appearing in this blog does not constitute legal advice or opinion. Such advice and opinions are provided by the firm only upon engagement with respect to specific factual situations. Specific questions relating to this article should be addressed directly to Strategy Law, LLP.

California Continues to Lead the Way to Maintain Online Privacy

By: Robert V. Hawn, Esq.

The simmering pot of internet privacy has finally come to a full boil. While the topic has been debated for almost two decades, and a who’s who of web-based giants have made their positions well known, the idea that any regular person could knowingly have any or all of their personal information used, shared, or sold without as much as a simple warning or being asked for permission to do so, has never become more of a reality until late March 2017, when Congress in Washington D.C. voted to repeal federal rules guarding internet privacy. The rules had been put in place by former President Obama, but the repeal was signed by President Trump before these rules could be officially enacted.

A month after the repeal was signed, the public majority was still reeling from the move by the FCC and the administration. By then 14 states, including California, were either taking steps to form legislation in response or had already done so. “California has typically led the nation in privacy laws, but we need to make them more meaningful,” said Assemblyman Ed Chau (D- Monterey Park).

Fast forward to Monday, June 19th, when Mr. Chau introduced a bill to counteract the federal repeal. Assembly Bill 375, also known as AB 375 or the California Broadband Internet Privacy Act, is patterned after the federal provisions that had been in place and aims to protect all online activity and online privacy of California consumers by state law. “The idea that a person should have some say about how their Internet service provider can use, share or sell their personal information is not a controversial question for everyday consumers- it is common sense,” said Chau. “Congress and the Administration went against the will of the vast majority of Americans when they revoked the FCC’s own privacy rules, but California is going to restore what Washington stripped away.”

Here are the boiled-down specifics of AB 375: ISPs would have to receive opt-in consent from their customers to utilize their access to a customer’s information in any way. All consumers would withhold the right to revoke their consent at any time. The opt-in requirement would apply to web browsing history, application usage history, content of communications, Internet Protocol “IP” addresses, geolocation data, financial and health information, information pertaining to minors, names and billing information, Social Security numbers, demographic information, and other personal details such as physical addresses, email addresses, and phone numbers. The bill would also prohibit ISPs from refusing to serve, or limiting service to, customers who don’t provide consent, and it would prevent ISPs from charging penalties to customers or offering discounts or other benefits based on the customer’s decision to provide consent.

So far, AB 375 appears to have a fighting chance. The road to enactment will not be easy. However, the bill has support from over 25 civil rights, consumer protection, privacy, technology, and non- profit organizations, including the ACLU, Electronic Frontier Foundation, and the Privacy Rights Clearinghouse. The bill also appears to have the advantage over any federal pre-emption that would nullify California’s right to implement internet privacy laws, thanks to the Communications Act of 1934. The Act, which was signed into law by Franklin D. Roosevelt, is responsible for the creation of the FCC and contains specific divisions of federal and state duties, including potentially allowing states to have authority over the FCC in cases such as this.

As the most populous state in the U.S., California could have a major impact on the actions of ISPs. The bill currently sits in the California Senate in the Energy, Utilities, and Communications Committee. As of June 13 th , its hearing before the committee was postponed. In the meantime, the national debate to protect online privacy has very strong support in favor of greater protections for consumers, despite the stance of the Trump administration and the current FCC. Members of the public will have until Tuesday, July 18 th to send comments to the FCC on their website, www.fcc.gov . Replies to those comments are due by August 16 th , after which the FCC will make a final decision.

The information appearing in this blog does not constitute legal advice or opinion. Such advice and opinions are provided by the firm only upon engagement with respect to specific factual situations. Specific questions relating to this article should be addressed directly to Strategy Law, LLP.

FinTech 2017: The Changing World of Financial Services and Customer Expectations. A Primer about the FinTech Influence.

By: Jack Easterbrook, Esq.

Financial technology companies, or FinTechs, have experienced a meteoric rise over the last five years. During that period, the amount of investment funneled into FinTechs has risen from $1.5 billion to about $24 billion. They received another shot in the arm several months ago when the Comptroller of the Currency (OCC) announced plans for a new type of license that will allow FinTech companies to provide services nationally under a Special Purpose National Bank Charter, and thereby avoid the arduous process of individual state licensing. To be eligible for this coveted charter, the FinTech Company will have to be engaged in at least one of the following banking functions: receiving deposits, paying checks or lending money.

At the moment, the FinTech occupy only a small part of the overall banking market in the U.S., particularly in the commercial or wholesale markets. However, we have already seen how technology is directly reshaping or disrupting economic sectors including retail, ride sharing (taxi services) and vacation rentals/ travel among them. There is little doubt the FinTechs will have a significant influence on banking services in the future. We may not know yet exactly how, or how fast, but it appears changes are coming.

At Strategy Law, we spend much of our “working day” addressing banking issues, structuring debt transactions, and negotiation and drafting all manner of loan documents. While it is far from clear how FinTech companies will affect the wholesale banking sector in the future, most of the action thus far being on the consumer side of things, one must anticipate that inroads will be made.

One development at the government level, which may have a profound effect, is the new Special Purpose National Bank Charter, which could be a boon for FinTech companies as they will not be required to obtain a license in every state in which they wish to operate, and where regulatory and compliance costs could otherwise amount to between $2 and $5 million a year per company, based on some estimates. Companies can instead operate nationally under a Special Purpose National Bank Charter. However, FinTech companies are not getting off without regulation. Like their more traditional counterparts, they will still be required to, among other things, address financial inclusion as part of a three-year business plan (a standard regulatory requirement), develop a formal plan for failure and have a hands-on board of directors.

It also is likely new battles will be fought in the political realm concerning the activities of the FinTechs, with or without the Special Purpose National Bank Charters. Traditional banks generally don’t espouse an encouraging view on FinTech companies. Camden R. Fine, Chief Executive of the Independent Community Bankers, said, “A FinTech charter poses risks to taxpayers and the financial system by endowing these nonbank companies with a federal bank charter.” Another nebulous cloud lingering over FinTech companies is the status of the deposit insurance offered by the Federal Deposit Insurance Corporation. A further concern expressed by banks and consumer advocates is the possibility that a national charter for FinTech companies could allow new online lenders to evade state caps on interest rates and other local rules designed to cut down on predatory lending. All such topics are certain to be debated going forward.

Time will determine whether FinTech companies actually develop into the powerhouses their proponents claim as their destiny. Regardless of their future, they have already begun affecting the consumer finance industry as they have, according to many experts, changed the expectations consumers have of financial institutions. The online and app-centric models of FinTechs, sometimes offer customers real convenience in conducting banking activities. Importantly, however, they also create and actively market the image that they are friendlier and more convenient. Banks are investing heavily to compete in these areas as well. This begs the obvious question of whether the traditional banks will be at the forefront of utilizing the best techniques the FinTechs offer, incorporating those innovations into their own business practices. For individuals involved in the wholesale areas of debt financing, a related question is whether or how the application of FinTech led technologies will be incorporated into the wholesale sector.

Several years from now when we look back at the effect the current FinTech period has had on the banking sector, the ability of FinTech companies to alter customer attitudes about financial services may be the point that is most remembered.

The information appearing in this blog does not constitute legal advice or opinion. Such advice and opinions are provided by the firm only upon engagement with respect to specific factual situations. Specific questions related to this article should be addressed directly to Strategy Law, LLP.

Online Filing Available for LLC Statements of Information

The California Secretary of State has recently updated their process for filing Statements of Information for Limited Liability Companies. Statements of Information can now be filed online using the following link. https://llcbizfile.sos.ca.gov/ The Secretary of State has been processing Statements of Information online for corporations for several years now.

Please note that you will need to have a credit card available to pay the filing fee.

A word of warning from the Secretary of State – all filings and information contained in the filings is public record. Frequently asked questions regarding the public information contained in Statements of Information can be found at http://www.sos.ca.gov/business-programs/pi-faqs/

This is also a good reminder to go online to the Secretary of State’s website http://businesssearch.sos.ca.gov to look at your latest filings. Check that your entity’s last “complete” Statement of Information, (rather than a “no change” filing) has accurate and up-to-date information.

The information appearing in this blog does not constitute legal advice or opinion. Such advice and opinions are provided by the firm only upon engagement with respect to specific factual situations. Specific questions relating to this article should be addressed directly to Strategy Law, LLP.

Serge Filatov was named a 2017 Northern California Rising Star

Congratulations to Serge Filatov for being chosen to the 2017 Northern California SuperLawyers Rising Stars List! Here is a link to the full press release.

Big Changes Are Happening to California Tax Law

By: Tamara B. Pow, Esq.

As of July 1 st , important changes are now being implemented regarding the administrative side of California tax law. The state Legislature has restructured the Board of Equalization (BOE) into three separate entities: the BOE, the California Department of Tax and Fee Administration (CDTFA), and the Office of Tax Appeals (OTA). This change is a result of the recently enacted Taxpayer Transparency and Fairness Act of 2017, signed into law by Governor Jerry Brown during the last week of June.

The reason for this new look, as described in the bill itself, came from a review by the Attorney General, the California State Auditor’s Office, and the State Personnel Board, which determined that the BOE’s workplace culture and practices severely hindered its ability to report exact and reliable information to the public, the administration, and the state Legislature.

Under the new law, the CDTFA will assume the BOE’s administrative and regulatory duties for managing programs involving sales and use taxes, and other business taxes and fees. The CDTFA will be housed within the Government Operations Agency, where the BOE used to be operated, and taxpayer and fee payer account information services and deadlines will remain the same until further notice. Governor Brown has appointed David Botelho, of San Leandro, as the Acting Director of the CDTFA. The BOE, on the other hand, will continue to administer property taxes, alcoholic beverage taxes, and insurance taxes as an independent agency.

The other important change is the creation of the OTA, which will hear tax appeals from the Franchise Tax Board, the BOE, and other tax collecting agencies. The OTA, which will be formed as an independent entity, has also been established as of July 1 st , 2017, but will not begin full operation and hearing appeals until January 1 st , 2018. In the meantime, a Director for the organization will be appointed from within the OTA and the governance structure will need to be established. Stakeholder meetings will be scheduled as the OTA takes form and prepares to take over cases for which the BOE will no longer have jurisdiction after December 31, 2017. The OTA will set up numerous three-member panels of Administrative Law Judges to hear tax appeals in Sacramento, Fresno, and Los Angeles. The number of panels set up within each city will depend on the volume of cases occurring in each geographical location.

More transition information can be found for the new department on its website, www.cdtfa.ca.gov and on www.boe.ca.gov .