Report 2011-120 Recommendation 5 Responses
Report 2011-120: California Department of Transportation: Its Poor Management of State Route 710 Extension Project Properties Costs the State Millions of Dollars Annually, Yet State Law Limits the Potential Income From Selling the Properties (Release Date: August 2012)
Recommendation #5 To: Transportation, Department of
To ensure that all taxable fringe benefits or gifts state employees receive are appropriately included in their gross income, Caltrans should work with the state controller to identify the statute of limitations for employers to report adjustments to employee gross income to the federal Internal Revenue Service and the California Franchise Tax Board.
6-Month Agency Response
Caltrans stated that it received the independent legal counsel's opinion, which indicated there is no tax liability for State employees paying below-market rent under these circumstances, and shared the opinion with the State Controller's Office (SCO). According to Caltrans, the SCO reviewed the opinion and consulted with the legal counsel for the Franchise Tax Board (FTB) on the matter. Caltrans stated that, on February 12, 2013, the SCO reported to the agency that it and the FTB concurred with the independent legal counsel's opinion. Finally, Caltrans stated that it subsequently notified State employees who are tenants.
- Response Date: February 2013
California State Auditor's Assessment of 6-Month Status: Fully Implemented
60-Day Agency Response
Caltrans stated that it obtained consent from the Attorney General's Office (attorney general) to retain independent legal counsel specializing in taxation to provide legal advice on the tax issues raised in this recommendation. Caltrans also stated that it sent a request for proposal on September 14, 2012, to several law firms listed on the State Bar of California's (state bar) Web site. According to Caltrans, upon receiving a legal opinion from the selected firm, it and the agency will evaluate the appropriate course of action for it and the State. (See 2013-406, p. 169)
- Response Date: October 2012
California State Auditor's Assessment of 60-Day Status: Partially Implemented
Agency responses received after June 2013 are posted verbatim.