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 difference between the fair market rental value of the SR 710 housing and the rent state employees paid for that housing during the applicable calendar years related to the federal and state statute of limitations.
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.
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)
†Response Type refers to the interval in which the auditee is providing the State Auditor with their status in implementing recommendations made in an audit report. Auditees must submit a response regarding their progress in implementing recommendations from our reports at three intervals from the release of the report: 60 days, six months, and one year or subsequent to one year.
*Agency responses received after June 2013 are posted verbatim.