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Full title: Status Conference Statement Regarding Debtors' Objection Pursuant to 11 U.S.C. § 502(b) Claim No. 107 (RE: related document(s)643 Objection to Claim). Filed by Creditor California Franchise Tax Board (Attachments: # 1 Declaration of Ryan Ivanusich In Support Of Franchise Tax Board's Response to Debtors' Objection # 2 Declaration of Cara M. Porter In Support Of Franchise Tax Board's Response to Debtors' Objection.pdf # 3 Certificate of Service) (Porter, Cara) (Entered: 05/20/2021)

Document posted on May 19, 2021 in the bankruptcy, 5 pages and 0 tables.

Bankrupt11 Summary (Automatically Generated)

5 INTRODUCTION 6 Efforts to resolve Debtors’ long-standing dispute regarding the state income tax liabilities 7 of MIPS Technologies, Inc. (collectively with its successors, MIPS) for the tax year ending 8 June 30, 2013 have stalled, and Debtors ask the Court to delay resolution of this action even 9 further. While FTB has no 16 objection to a continuance based on Debtors’ proclaimed interest in submitting an Offer in 17 Compromise to its Settlement Bureau, FTB urges the Court to encourage Debtors to take 18 affirmative steps to promptly resolve the relevant tax liability.Among other things, FTB argued that the forthcoming 16 administrative protest determination, drafted by an FTB Tax Counsel with institutional 17 knowledge and expertise in California tax law, would provide value to this Court in any 18 determination of the amount of tax liability Debtors owe FTB for the 2013 tax year. It appearing Debtors were not committed to pursuing either the administrative protest 3 process with FTB or the claim objection process before this Court, FTB was agreeable to a two-4 week continuance of the preliminary hearing on the Objection (and related briefing schedule).Moreover, in the event that Debtors file a declaration on or before 12 22 days before the preliminary hearing that attests to their submission of responses to the two set13 of IDRs and/or an OIC to FTB, FTB agrees that Debtors may also request a continuance of the 14 preliminary hearing to a mutually agreeable date of the parties on or after 90 days thereafter.

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Document Contents

1 ROB BONTA Attorney General of California 2 MICHAEL D. GOWE Supervising Deputy Attorney General 3 CARA M. PORTER Deputy Attorney General 4 State Bar No. 266045 455 Golden Gate Avenue, Suite 11000 5 San Francisco, CA 94102-7004 Telephone: (415) 510-3508 6 Fax: (415) 703-5480 E-mail: Cara.Porter@doj.ca.gov 7 Attorneys for Creditor California Franchise Tax Board 8 IN THE UNITED STATES BANKRUPTCY COURT 9 FOR THE NORTHERN DISTRICT OF CALIFORNIA 10 SAN JOSE DIVISION 11 12 13 In re: CASE NO. 20-50682 (MEH) 14 WAVE COMPUTING, INC., et al., CHAPTER 11 (Jointly Administered) 15 Debtors.1 FRANCHISE TAX BOARD’S STATUS CONFERENCE STATEMENT 16 REGARDING DEBTORS’ OBJECTION PURSUANT TO 11 U.S.C. § 502(b) TO 17 CLAIM NO. 107 18 Date: May 27, 2021 19 Time: 10:00 a.m. Courtroom: 11 20 Judge The Honorable M. Elaine Hammond 21 22 California Franchise Tax Board (FTB) submits this status conference statement in response23 to Debtors’ First Supplemental Brief in Support of the Objection to Claim No. 107 24 (Docket No. 1344, filed May 6, 2021), filed by Wave Computing, Inc. and its debtor affiliates 25 (collectively, Debtors). Debtors filed the Objection Pursuant to 11 U.S.C. § 502(b) to Claim 26 1 The debtors in these chapter 11 cases are Wave Computing, Inc., MIPS Tech, Inc., 27 Hellosoft, Inc., Wave Computing (UK) Limited, Imagination Technologies, Inc., Caustic Graphics, Inc., and MIPS Tech, LLC (collectively, Debtors). The Debtors’ mailing address is 28 3201 Scott Blvd., Santa Clara, CA 95054.

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1 No. 107 of FTB (Objection) on October 21, 2020. While the parties tentatively reached an 2 agreement to continue the preliminary hearing on this matter, the parties have not yet documente3 their agreement. As such, FTB files this status conference statement out of an abundance of 4 caution. 5 INTRODUCTION 6 Efforts to resolve Debtors’ long-standing dispute regarding the state income tax liabilities 7 of MIPS Technologies, Inc. (collectively with its successors, MIPS) for the tax year ending 8 June 30, 2013 have stalled, and Debtors ask the Court to delay resolution of this action even 9 further. They tardily filed their 2013 Return in October 2014, initiated a protest of the related tax10 liability with FTB in November 2018, and filed their objection to FTB’s claim in this bankruptcy11 case in October 2020. Yet the amount of MIPS’s tax liability for the 2013 year remains 12 unresolved and unpaid, and Debtors now request that the Court allow them more time so that the13 can submit a good faith settlement offer to FTB’s Settlement Bureau. Additionally, Debtors 14 request that the Court set a status conference regarding their claim objection in approximately 15 90 days, and retain jurisdiction over the pending objection to FTB’s claim. While FTB has no 16 objection to a continuance based on Debtors’ proclaimed interest in submitting an Offer in 17 Compromise to its Settlement Bureau, FTB urges the Court to encourage Debtors to take 18 affirmative steps to promptly resolve the relevant tax liability. 19 PROCEDURAL HISTORY OF THE TAX LIABILITY 20 MIPS filed its return for the 2013 tax year (2013 Return) on October 2, 2014, after the 21 extended due date of April 15, 2014. Declaration of Melissa Louie in Support of FTB’s Respons22 to Objection to Claim, filed November 6, 2020, Doc. 717-1 (Louie Decl.), ¶¶ 6, 7. MIPS 23 amended its return for the 2013 tax year on December 15, 2014. Louie Decl., ¶ 10. FTB audited24 MIPS’ 2013 Return, and on September 18, 2018, issued a Notice of Proposed Assessment of 25 $9,142,481.25. Louie Decl., ¶¶ 11-14, Ex. B. 26 In November 2018, MIPS protested the NPA. Louie Decl., ¶ 15. As is standard for a 27 protest hearing, on June 2, 2020, the FTB Tax Counsel from the Multistate Tax Bureau who is 28 handling MIPS’s protest, propounded information and document requests (IDRs) on MIPS.

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1 Declaration of Ryan Ivanusich in Support of FTB’s Response to Objection to Claim, filed 2 concurrently herewith (Ivanusich Decl.), ¶¶ 4, 5. The protest hearing officer followed up with 3 MIPS to request a response to the first IDRs on multiple occasions, including a September 16, 4 2020 letter again asking for a response to the first IDRs. Ivanusich Decl., ¶ 5. On December 17, 5 2020, the protest hearing officer propounded the second IDRs on MIPS. Ivanusich Decl., ¶ 6. 6 The protest hearing officer also followed up with MIPS to request a response to the second IDRs 7 on multiple occasions. Id. 8 The protest hearing and taxpayer’s responses to IDRs are an integral consideration in 9 completing a protest determination. Ivanusich Decl., ¶ 7. To date, despite repeated follow-up 10 efforts by FTB, MIPS has failed to respond to the first and second IDRs, or any attempt to set up 11 a protest hearing. Ivanusich Decl., ¶ 8. As a result of MIPS’s failure to respond to the IDRs, the 12 protest determination is not yet complete. Ivanusich Decl., ¶ 9. 13 In October 2020, Debtors objected to FTB’s timely-filed claim in this bankruptcy case. 14 Dkt. 643. FTB responded to the Objection in a November 6, 2020 brief in preparation for the 15 preliminary hearing. Dkt. 717. Among other things, FTB argued that the forthcoming 16 administrative protest determination, drafted by an FTB Tax Counsel with institutional 17 knowledge and expertise in California tax law, would provide value to this Court in any 18 determination of the amount of tax liability Debtors owe FTB for the 2013 tax year. Response of19 FTB to Objection, Dkt. 717, 1:20-2:2; 17:11-27. 20 On November 13, 2020, with Debtors aiming for a confirmation hearing in February 2021,21 the parties stipulated to a schedule for further briefing and a continued preliminary hearing date 22 regarding the Objection for February 25, 2021. Dkt. 748. 23 Shortly before the February 2021 preliminary hearing date, Debtors transitioned from their 24 bankruptcy counsel to the reorganized debtors’ counsel and the parties executed a second 25 stipulation, continuing the hearing date to April 28, 2021, with a corresponding extension of the 26 briefing schedule. Dkt. 1208, 1215. 27 Before the deadline for Debtors’ reply brief, on or about March 19, 2021, the parties met 28 and conferred regarding another continuance of the hearing date. Declaration of Cara M. Porter

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1 in Support of FTB’s Response to Objection to Claim, filed concurrently herewith (Porter Decl.), 2 ¶ 2. It appearing Debtors were not committed to pursuing either the administrative protest 3 process with FTB or the claim objection process before this Court, FTB was agreeable to a two-4 week continuance of the preliminary hearing on the Objection (and related briefing schedule). 5 Porter Decl., ¶ 3. FTB agreed to revisit the claim objection process upon the reorganized debtors6 counsel getting up to speed and conferring with Debtors regarding how they wanted to proceed. 7 Porter Decl., ¶ 4. The parties filed the third stipulation regarding the Objection. Dkt. 1296. The8 preliminary hearing was continued to May 27, 2021, and the deadline for Debtors’ reply brief 9 continued to May 6, 2021. Dkt. 1302. 10 On May 6, 2021, Debtors filed their First Supplemental Brief in Support of the Objection t11 Claim No. 107. Dkt. 1344. While the document is styled as a “brief,” it lacks legal argument or 12 authority. Id. Instead, the document reads as a status conference statement. 13 FTB INVITES A GOOD-FAITH OFFER IN COMPROMISE FROM DEBTORS 14 As Debtors indicate, a taxpayer’s Offer in Compromise (OIC) is considered by a separate 15 unit within FTB than the Multistate Tax Bureau, who is handling the protest. Ivanusich Decl., 16 ¶¶ 4, 10. When FTB receives an OIC, action on an ongoing protest—such as the taxpayer’s 17 protest here—halts, pending the outcome of the OIC. Ivanusich Decl., ¶ 11. It is also logical to 18 suspend any pending litigation regarding the tax liability pending the outcome of the OIC. 19 However, Debtors’ ongoing conduct indicates they are not interested in resolving the 20 outstanding 2013 tax liability. Instead, they continue to fail to respond to inquiries from FTB’s 21 protest hearing officer regarding the long-outstanding responses to two sets of IDRs, Debtors 22 have not yet submitted an OIC to FTB, and Debtors have not advanced this claim objection 23 during the last six months. 24 As such, FTB does not oppose a 90-day continuance for the preliminary hearing on the 25 Objection, with a corresponding extension of the briefing schedule that is consistent with the 26 parties’ previous agreements.2 Moreover, should the Court grant the continuance, FTB urges the 27 2 As set forth in each of the parties’ three stipulations regarding the Objection, the deadline for Debtors’ reply is 21 days prior to the preliminary hearing, and the deadline for FTB’28 sur-reply is 7 days prior to the preliminary hearing. Dkt. 748, 1208, 1296.

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1 Court to direct Debtors to either respond to the two sets of IDRs or submit a good faith OIC to 2 FTB before the continued deadline for Debtors’ reply brief. Such direction by the Court will 3 allow the parties and the Court to meaningfully evaluate whether to further continue the 4 preliminary hearing, or whether it appears more appropriate to prosecute the Objection before thi5 Court. Setting a status conference in 90 days is not likely to incentivize Debtors to move forwar6 with resolving the 2013 tax liability; instead, it is an invitation for Debtors to request another 7 continuance. 8 CONCLUSION 9 FTB is agreeable to a continued date for the preliminary hearing on or about August 26, 10 2021, with Debtors’ reply brief due 21 days before the hearing and FTB’s sur-reply brief due 11 7 days before the hearing. Moreover, in the event that Debtors file a declaration on or before 12 22 days before the preliminary hearing that attests to their submission of responses to the two set13 of IDRs and/or an OIC to FTB, FTB agrees that Debtors may also request a continuance of the 14 preliminary hearing to a mutually agreeable date of the parties on or after 90 days thereafter. 15 Dated: May 20, 2021 Respectfully submitted, 16 ROB BONTA 17 Attorney General of California MICHAEL D. GOWE 18 Supervising Deputy Attorney General 19 /s/ Cara M. Porter 20 CARA M. PORTER Deputy Attorney General 21 Attorneys for Creditor California Franchise Tax Board 22 SF2020900407 23 42700557.docx 24 25 26 27 28

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