Interview with Jaclyn Zumaeta of the Office of Tax Appeals
Vol. 18
August 2018
Page
What is your current role at the Office of Tax Appeals (OTA) and what are your major job responsibilities there?
I’m the Assistant Chief Counsel at the Office of Tax Appeals. Basically, I directly manage the group of attorneys that are making the recommendations to the Administrative Law Judges (ALJs). Every case is going to have a write up done by a group of tax attorneys and its my group that writes the recommendations. Right now, I am reviewing all those write ups. I also am doing a lot of work trying to get the office off the ground. We currently are working on getting a new case management system up and running. We are using a Salesforce based system to keep track of all of our cases and make sure all of the work is in there so we can easily access it. Its also great for things like Public Records Act requests. Anyone from across the country can request copies of briefs as anything that happens in the Office of Tax Appeals is a public record, though we will redact them for personal information before we send them out. The Salesforce system is going to make it very easy for us going ahead. I had a request yesterday from someone in New York for a case—we can just go into that case, pull it up, and get the documents out to the people who want them. We’re also working on getting fully staffed. We have a lot of jobs that are open right now at the Office of Tax Appeals so job opportunity notices are going to go out soon. So it’s busy, but fun!
So it’s my understanding that Salesforce is not something that most government agencies or lawfirms use to track their cases. Its really cool to be able to put this new technology in at the very beginning.
The California Department of Technology has been helping us get it off the ground. Salesforce is so customizable that you can basically make it do whatever you want it to. It has all the capabilities that we needed and it’s a living, breathing system. That was something that was really important to us, as the Office of Tax Appeals is so new that we don’t really know what we will need yet. It was really important to us that down the road, if we needed a new field, or we needed to add something to Salesforce, that we could. The system has to be something that will help us in the future. We want to make sure that we’re working as efficiently as possible. That was one of the complaints about the Board of Equalization, that it wasn’t moving very fast. Things were slow, they were inefficient. It’s really important to us that we are doing things as efficiently as possible.
You’ve mentioned that you manage a group of lawyers making recommendations to the ALJs at the Office of Tax Appeals? Are there other groups of lawyers at the Office of Tax Appeals as well?
There are two groups at the Office of Tax Appeals. There are the Administrative Law Judges and then we have what we call the Foundation group. The Foundation Group is the group that I manage. The ALJs are managed by a presiding ALJ. The group of lawyers that are in the Foundation unit are the ones who make sure that the cases are fully briefed. If there is anything missing, they will send out additional briefing requests. They write up the recommendations as if they were deciding the case, and then it goes on to the ALJs to review those recommendations, hold the hearing, and make any additional comments. Some things change at hearing. Sometimes new information is presented and sometimes the testimony of the parties changes things, so the ALJs will work that into the recommendations.
What does a typical day look like for you? From morning to evening, and beyond if you’re working beyond that?
A lot of what I do right now is more administrative work, making sure that my staff has everything that they need, and making sure that we’re working in the best way possible. We are trying to figure out a new way to assign cases. The old system was so paper based that a lot of our attorneys are used to having a file and walking around with this file. A lot of my day is change management and making sure that everyone is using the new Salesforce system and making sure everyone is adopting this new method of doing things, so that we are consistent. I also handle a lot of requests from the public, mostly tax practitioners, who have questions and call in. We had a backlog of cases that were ready to be reviewed when they came over to OTA so I am working on reviewing those. We continue to get cases that our Foundation unit is working through, so I’m reviewing those too. We’re also doing a lot of training right now. We have Administrative Procedures Act training and training on how to use Bloomberg and Westlaw the best way possible.
Right now, what I’m doing is a little bit different than what I will be doing long term. It’s a transition period right now. Most of my day is spent doing admin stuff and trying to get the agency moving forward and helping out Kristen Kane, our Chief Counsel, who is really inundated with work. Anything I can take off of her plate, I try to do that as well. Kristen was the only person at OTA for a while and she has done an amazing job of pulling it off the ground and getting everything started. Now as its getting going, there are more and more moving parts so I try to take on things for Kristen. We also have Mark Ibele, our Director, and Jeanna Wimberly, our admin director, who are both great as well. Everyone is working really hard.
Can you talk about what you love most about your work?
I’m a tax nerd and I love the technical aspects of tax. I like doing tax work and I like that I’m in a job that lets me do both technical and managerial work. I also love the people who I work with. I love that we’re in a collegial environment where we can bounce ideas off one another and we’re really in a situation where we can talk to each other. In the Foundation unit, we’re all tax practitioners, we’re all technicians, and so the nerdy things that we like to talk about, we can do that. I work with a really smart group of people who are amazing. So that’s probably my favorite part actually.
How did your career begin and how did you get to working at the Office of Tax Appeals today?
I went to law school at the University of San Diego (USD). I had gotten my undergraduate degree in Criminology and I thought I wanted to be a criminal defense attorney. I wrote my thesis on false confessions in interrogations and I definitely thought I wanted to be a criminal defense attorney. So, I went to law school and while I was in law school, I worked at the Public Defender’s Office in San Diego. I then realized that it was so heavy and it was really hard for me to leave the work at work. And I didn’t know if it was something I could do for my whole life. It was emotionally draining for me. At the same time, I was taking a tax class since at USD, Tax I is mandatory. I loved it. It just clicked. I liked it, it was fun, and it was something that at the end of the day, I don’t think about at night, at least not in a heavy way. Sometimes I’m thinking about the way that things work, but I’m not sad about it. That was something that was really important to me.
I got involved in the Tax Appeals Assistance Program at USD and started representing clients in their appeals before the Franchise Tax Board. During that time, I was lucky enough to get to do an oral argument in the Tax Appeals Assistance Program. There, I met Jozel Brunett, who is now the Chief Counsel of the Franchise Tax Board, and she told my supervising attorney in the Tax Appeals Assistance Program that she was impressed by me and that if I ever wanted a job, to give her a call. So, when I was looking for a job after law school and after I had gotten my LL.M., I called her up and she said they didn’t have any positions open, but were going to, so I should come in and intern with them and I would be able to apply for a fulltime job when a position did open up. So that’s what I did. I worked at the Franchise Tax Board for almost 8 years. Two of those years, I spent on loan to the Board of Equalization where I was the Franchise Tax Board liaison to Jerome Horton. It was a great experience because I got to learn a lot about sales and use taxes and property tax which the Franchise Tax Board doesn’t deal with. I also got to see tax administration from the fact finder’s point of view as I was making recommendations to him. I was doing for Jerome Horton what my staff does now for the ALJs. So I think it was really useful for me to be able to look at it from both sides.
When I got back to FTB, I was offered a position at PricewaterhouseCoopers (PwC), which I decided to take. I really liked my job at the Franchise Tax Board, but I liked the idea of seeing things from the taxpayer’s perspective. I thought it made me more well-rounded. I had a short tenure at PwC, but I really liked it. I think had the Office of Tax Appeals not happened and had this job not come up, I would have stayed at PwC for a lot longer. I liked being there and I liked the creativity it afforded me. There was a lot of ability to be creative for clients and think things through in a way that I hadn’t done at Franchise Tax Board. Something that was important to me was seeing all three perspectives—I had worked for the tax agency, I had worked for the fact finder, and then I worked for PwC for the taxpayer. And so, out of the blue, the opportunity for this job popped up. I applied for it and thought I would never get it. So that’s another thing I recommend, apply for everything because you never know what you’re going to get. You will think that you won’t get it, but you might. It happened that way for me and I just started at the Office of Tax Appeals in December.
In your opinion, what is the most interesting current issue in tax law?
I think everyone is buzzing about tax reform. It’s huge and I think, from a state perspective, the conformity issues are what is most interesting right now. Most sections of California law don’t automatically conform to federal law. There has to be a Bill passed in the Legislature to conform to a version of the Internal Revenue Code (IRC), and even then it’s only selective conformity. But there are certain things, like provisions of the IRC dealing with deferred foreign subsidiary income under Subpart F to the extent they apply in water’s-edge elections and things like that, that have rolling conformity to the IRC. So, I think those are really interesting issues that are going to come up. Subpart F income is income that is earned by foreign subsidiaries, and for California purposes, would need to come in to a water’s-edge report. For a water’s-edge filer, you only need to file for companies that are in the United States. The exception to that is if you have Subpart F income, which is to prevent companies from doing things abroad to prevent taxation or lower taxation in lower tax jurisdictions. If you have one of those, where you’re being taxed in a lower tax jurisdiction abroad, you have to report the income now versus when the income repatriates to the United States. That’s an issue that’s really interesting in conformity right now.
The 1031 field is really big right now too. Even though tax reform took personal property out of 1031, we still have real property—drop-and-swaps and swap-and-drops which are a hot issue. When a partnership is selling property and some of the partners want to cash out and others want to reinvest, it can create difficulties for a 1031 exchange. In a transaction, the owner of the relinquished property has to be the same as the owner of the replacement property. Partnership interests are also not exchangeable, so you can’t exchange an interest in an LLC for a property interest. So, rather than having a partnership buy a piece of property and exchange it for a property in which only some of the members are owners, you may see an LLC dissolve and distribute the property to the members as tenants-in-common (the drop) and then those individual owners deed the property over to the buyer. Then some of the members exchange their interests into a new property (the swap), while others take cash out. This is what’s called a drop-and-swap. I think we will hear a lot about the drop-and-swap and the related swap-and-drop, as they are a really hot topic in tax right now.
Lastly, do you have any advice for law students or recent law graduates who would like to practice in tax, and in state tax particularly?
I think that getting a wide range of different experiences is really important. The Tax Appeals Assistance Program is something really great to get involved in if you’re interested in tax. I know that the IRS has a federal tax clinic that’s great, that gives you a lot of involvement with issues that are federal-based. In the state program, you deal with a lot of federal issues too because there’s so much conformity, but you also deal with state issues too. So I encourage students to take part in these kinds of programs. Doing internships is so useful. The Franchise Tax Board has a fantastic internship program. In the future, I hope that the Office of Tax Appeals will have an internship program as well. I know that when I worked at PwC, the fact that you interned at a tax agency was huge. It was really important to PwC. Those are the kinds of opportunities that are going to provide great training for you and great experience.
Make sure you also cast a wide net. Never close yourself off to any opportunities. If you think that, for example, maybe you don’t like sales and use tax, you really don’t know that you don’t like it yet until you’ve done it. So give yourself opportunities and be open to new experiences. I didn’t think I would like tax law back when I thought I was going to be a criminal defense attorney, so I would say a lot of the things that I’ve found the most rewarding in my career are things that I didn’t think I would like. I think UC Davis’s Tax Institute in the summer is amazing too. Interacting with people who are in the industry is really important. Go to the Young Tax Lawyers events and meet people. Most of us in the field want to help everyone that we can. We remember what it was like to be out of law school and looking for a job, and so, to the extent that we can, we always want to help. Having a better, stronger, tax community is what’s best for all of us.
Vol. 18
August 2018
Page
What is your current role at the Office of Tax Appeals (OTA) and what are your major job responsibilities there?
I’m the Assistant Chief Counsel at the Office of Tax Appeals. Basically, I directly manage the group of attorneys that are making the recommendations to the Administrative Law Judges (ALJs). Every case is going to have a write up done by a group of tax attorneys and its my group that writes the recommendations. Right now, I am reviewing all those write ups. I also am doing a lot of work trying to get the office off the ground. We currently are working on getting a new case management system up and running. We are using a Salesforce based system to keep track of all of our cases and make sure all of the work is in there so we can easily access it. Its also great for things like Public Records Act requests. Anyone from across the country can request copies of briefs as anything that happens in the Office of Tax Appeals is a public record, though we will redact them for personal information before we send them out. The Salesforce system is going to make it very easy for us going ahead. I had a request yesterday from someone in New York for a case—we can just go into that case, pull it up, and get the documents out to the people who want them. We’re also working on getting fully staffed. We have a lot of jobs that are open right now at the Office of Tax Appeals so job opportunity notices are going to go out soon. So it’s busy, but fun!
So it’s my understanding that Salesforce is not something that most government agencies or lawfirms use to track their cases. Its really cool to be able to put this new technology in at the very beginning.
The California Department of Technology has been helping us get it off the ground. Salesforce is so customizable that you can basically make it do whatever you want it to. It has all the capabilities that we needed and it’s a living, breathing system. That was something that was really important to us, as the Office of Tax Appeals is so new that we don’t really know what we will need yet. It was really important to us that down the road, if we needed a new field, or we needed to add something to Salesforce, that we could. The system has to be something that will help us in the future. We want to make sure that we’re working as efficiently as possible. That was one of the complaints about the Board of Equalization, that it wasn’t moving very fast. Things were slow, they were inefficient. It’s really important to us that we are doing things as efficiently as possible.
You’ve mentioned that you manage a group of lawyers making recommendations to the ALJs at the Office of Tax Appeals? Are there other groups of lawyers at the Office of Tax Appeals as well?
There are two groups at the Office of Tax Appeals. There are the Administrative Law Judges and then we have what we call the Foundation group. The Foundation Group is the group that I manage. The ALJs are managed by a presiding ALJ. The group of lawyers that are in the Foundation unit are the ones who make sure that the cases are fully briefed. If there is anything missing, they will send out additional briefing requests. They write up the recommendations as if they were deciding the case, and then it goes on to the ALJs to review those recommendations, hold the hearing, and make any additional comments. Some things change at hearing. Sometimes new information is presented and sometimes the testimony of the parties changes things, so the ALJs will work that into the recommendations.
What does a typical day look like for you? From morning to evening, and beyond if you’re working beyond that?
A lot of what I do right now is more administrative work, making sure that my staff has everything that they need, and making sure that we’re working in the best way possible. We are trying to figure out a new way to assign cases. The old system was so paper based that a lot of our attorneys are used to having a file and walking around with this file. A lot of my day is change management and making sure that everyone is using the new Salesforce system and making sure everyone is adopting this new method of doing things, so that we are consistent. I also handle a lot of requests from the public, mostly tax practitioners, who have questions and call in. We had a backlog of cases that were ready to be reviewed when they came over to OTA so I am working on reviewing those. We continue to get cases that our Foundation unit is working through, so I’m reviewing those too. We’re also doing a lot of training right now. We have Administrative Procedures Act training and training on how to use Bloomberg and Westlaw the best way possible.
Right now, what I’m doing is a little bit different than what I will be doing long term. It’s a transition period right now. Most of my day is spent doing admin stuff and trying to get the agency moving forward and helping out Kristen Kane, our Chief Counsel, who is really inundated with work. Anything I can take off of her plate, I try to do that as well. Kristen was the only person at OTA for a while and she has done an amazing job of pulling it off the ground and getting everything started. Now as its getting going, there are more and more moving parts so I try to take on things for Kristen. We also have Mark Ibele, our Director, and Jeanna Wimberly, our admin director, who are both great as well. Everyone is working really hard.
Can you talk about what you love most about your work?
I’m a tax nerd and I love the technical aspects of tax. I like doing tax work and I like that I’m in a job that lets me do both technical and managerial work. I also love the people who I work with. I love that we’re in a collegial environment where we can bounce ideas off one another and we’re really in a situation where we can talk to each other. In the Foundation unit, we’re all tax practitioners, we’re all technicians, and so the nerdy things that we like to talk about, we can do that. I work with a really smart group of people who are amazing. So that’s probably my favorite part actually.
How did your career begin and how did you get to working at the Office of Tax Appeals today?
I went to law school at the University of San Diego (USD). I had gotten my undergraduate degree in Criminology and I thought I wanted to be a criminal defense attorney. I wrote my thesis on false confessions in interrogations and I definitely thought I wanted to be a criminal defense attorney. So, I went to law school and while I was in law school, I worked at the Public Defender’s Office in San Diego. I then realized that it was so heavy and it was really hard for me to leave the work at work. And I didn’t know if it was something I could do for my whole life. It was emotionally draining for me. At the same time, I was taking a tax class since at USD, Tax I is mandatory. I loved it. It just clicked. I liked it, it was fun, and it was something that at the end of the day, I don’t think about at night, at least not in a heavy way. Sometimes I’m thinking about the way that things work, but I’m not sad about it. That was something that was really important to me.
I got involved in the Tax Appeals Assistance Program at USD and started representing clients in their appeals before the Franchise Tax Board. During that time, I was lucky enough to get to do an oral argument in the Tax Appeals Assistance Program. There, I met Jozel Brunett, who is now the Chief Counsel of the Franchise Tax Board, and she told my supervising attorney in the Tax Appeals Assistance Program that she was impressed by me and that if I ever wanted a job, to give her a call. So, when I was looking for a job after law school and after I had gotten my LL.M., I called her up and she said they didn’t have any positions open, but were going to, so I should come in and intern with them and I would be able to apply for a fulltime job when a position did open up. So that’s what I did. I worked at the Franchise Tax Board for almost 8 years. Two of those years, I spent on loan to the Board of Equalization where I was the Franchise Tax Board liaison to Jerome Horton. It was a great experience because I got to learn a lot about sales and use taxes and property tax which the Franchise Tax Board doesn’t deal with. I also got to see tax administration from the fact finder’s point of view as I was making recommendations to him. I was doing for Jerome Horton what my staff does now for the ALJs. So I think it was really useful for me to be able to look at it from both sides.
When I got back to FTB, I was offered a position at PricewaterhouseCoopers (PwC), which I decided to take. I really liked my job at the Franchise Tax Board, but I liked the idea of seeing things from the taxpayer’s perspective. I thought it made me more well-rounded. I had a short tenure at PwC, but I really liked it. I think had the Office of Tax Appeals not happened and had this job not come up, I would have stayed at PwC for a lot longer. I liked being there and I liked the creativity it afforded me. There was a lot of ability to be creative for clients and think things through in a way that I hadn’t done at Franchise Tax Board. Something that was important to me was seeing all three perspectives—I had worked for the tax agency, I had worked for the fact finder, and then I worked for PwC for the taxpayer. And so, out of the blue, the opportunity for this job popped up. I applied for it and thought I would never get it. So that’s another thing I recommend, apply for everything because you never know what you’re going to get. You will think that you won’t get it, but you might. It happened that way for me and I just started at the Office of Tax Appeals in December.
In your opinion, what is the most interesting current issue in tax law?
I think everyone is buzzing about tax reform. It’s huge and I think, from a state perspective, the conformity issues are what is most interesting right now. Most sections of California law don’t automatically conform to federal law. There has to be a Bill passed in the Legislature to conform to a version of the Internal Revenue Code (IRC), and even then it’s only selective conformity. But there are certain things, like provisions of the IRC dealing with deferred foreign subsidiary income under Subpart F to the extent they apply in water’s-edge elections and things like that, that have rolling conformity to the IRC. So, I think those are really interesting issues that are going to come up. Subpart F income is income that is earned by foreign subsidiaries, and for California purposes, would need to come in to a water’s-edge report. For a water’s-edge filer, you only need to file for companies that are in the United States. The exception to that is if you have Subpart F income, which is to prevent companies from doing things abroad to prevent taxation or lower taxation in lower tax jurisdictions. If you have one of those, where you’re being taxed in a lower tax jurisdiction abroad, you have to report the income now versus when the income repatriates to the United States. That’s an issue that’s really interesting in conformity right now.
The 1031 field is really big right now too. Even though tax reform took personal property out of 1031, we still have real property—drop-and-swaps and swap-and-drops which are a hot issue. When a partnership is selling property and some of the partners want to cash out and others want to reinvest, it can create difficulties for a 1031 exchange. In a transaction, the owner of the relinquished property has to be the same as the owner of the replacement property. Partnership interests are also not exchangeable, so you can’t exchange an interest in an LLC for a property interest. So, rather than having a partnership buy a piece of property and exchange it for a property in which only some of the members are owners, you may see an LLC dissolve and distribute the property to the members as tenants-in-common (the drop) and then those individual owners deed the property over to the buyer. Then some of the members exchange their interests into a new property (the swap), while others take cash out. This is what’s called a drop-and-swap. I think we will hear a lot about the drop-and-swap and the related swap-and-drop, as they are a really hot topic in tax right now.
Lastly, do you have any advice for law students or recent law graduates who would like to practice in tax, and in state tax particularly?
I think that getting a wide range of different experiences is really important. The Tax Appeals Assistance Program is something really great to get involved in if you’re interested in tax. I know that the IRS has a federal tax clinic that’s great, that gives you a lot of involvement with issues that are federal-based. In the state program, you deal with a lot of federal issues too because there’s so much conformity, but you also deal with state issues too. So I encourage students to take part in these kinds of programs. Doing internships is so useful. The Franchise Tax Board has a fantastic internship program. In the future, I hope that the Office of Tax Appeals will have an internship program as well. I know that when I worked at PwC, the fact that you interned at a tax agency was huge. It was really important to PwC. Those are the kinds of opportunities that are going to provide great training for you and great experience.
Make sure you also cast a wide net. Never close yourself off to any opportunities. If you think that, for example, maybe you don’t like sales and use tax, you really don’t know that you don’t like it yet until you’ve done it. So give yourself opportunities and be open to new experiences. I didn’t think I would like tax law back when I thought I was going to be a criminal defense attorney, so I would say a lot of the things that I’ve found the most rewarding in my career are things that I didn’t think I would like. I think UC Davis’s Tax Institute in the summer is amazing too. Interacting with people who are in the industry is really important. Go to the Young Tax Lawyers events and meet people. Most of us in the field want to help everyone that we can. We remember what it was like to be out of law school and looking for a job, and so, to the extent that we can, we always want to help. Having a better, stronger, tax community is what’s best for all of us.