Report 2011-120 Recommendation 3 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 #3 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 establish procedures to notify state employees who rent SR 710 properties that they may be subject to tax implications.

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.

California State Auditor's Assessment of 6-Month Status: Fully Implemented

60-Day Agency Response

Caltrans stated that it has notified state employees who rent SR 710 properties that they may be subject to tax implications. However, Caltrans did not specifically address whether or not it established procedures. (See 2013-406, p. 168)

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.