Report 2011-120 Recommendation 7 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 #7 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 determine if it needs to revise the W-2 forms for the other employees to whom Caltrans provided housing benefits, including the four employees who worked at its Chilao Maintenance Station.

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 SCO. According to Caltrans, the SCO reviewed the opinion and consulted with the legal counsel for the 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.

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 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's 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)

California State Auditor's Assessment of 60-Day Status: Partially Implemented

All Recommendations in 2011-120

Agency responses received after June 2013 are posted verbatim.