Justia Tax Law Opinion Summaries

Articles Posted in California Courts of Appeal
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Bernard and Sheila created the Family Trust and transferred their home to themselves as trustees. The trust became irrevocable upon the death of the surviving spouse, when the estate would be distributed to Sheila’s 13 children, including Bohnett. Sheila died in 2003. Bernard died in 2008. The property was rented out. The rent was deposited into the trust’s bank account. In 2012, the trustee filed a successful Claim for Reassessment Exclusion for Transfer Between Parent and Child (Proposition 58 claim), listing Sheila and Bernard as transferors, her children as transferees, and the date of Bernard’s death as the date of transfer.In 2013, the property was transferred by the trustee to Bohnett. A Preliminary Change of Ownership Report listed the trust as the seller/transferor, stated that the purchase was a transfer between parent(s) and child(ren), and listed the sale price as $1,030,000. The trustee distributed the money in equal shares to the 13 siblings. A second Proposition 58 claim listed Sheila and Bernard as transferors and Bohnett as transferee, leaving blank the date of transfer.The county found that there was a 12/13 change in ownership and reassessed the property from $157,731 to $962,873 for 2012/2013, and $963,114 for 2013/2014. Bohnett filed unsuccessful Applications for Changed Assessment. The court of appeal affirmed in favor of the County. The purchase by one beneficiary from his siblings and co-beneficiaries was not a parent-child transfer exempt from reassessment for property tax purposes. View "Bohnett v. County of Santa Barbara" on Justia Law

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This appeal arose out of a property tax refund action brought by Chinese Theatres against the County. After remanding to the Los Angeles County Assessment Appeals Board to reduce the value of real property owned by Chinese Theatres and to correct the tax roll, the trial court awarded Chinese Theatres attorney fees under Revenue and Taxation Code section 1611.6.The Court of Appeal reversed the postjudgment order awarding Chinese Theatres fees, holding that Chinese Theatres was not entitled to attorney fees under section 1611.6. The court explained that, under a plain reading of section 1611.6, attorney fees are permitted in a tax refund action where: (1) a county board fails to make requested findings; or (2) the court concludes the board's findings are so deficient that it remands the matter with directions for the board to make findings that "fairly disclose [its] determination" on the point at issue, including a "statement of the method or methods of valuation used in appraising the property." In this case, neither of these circumstances exists and thus Chinese Theatres is not entitled to attorney fees under section 1611.6. View "Chinese Theatres, LLC v. County of Los Angeles" on Justia Law

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In 2013, Phillips purchased Humboldt County property at a public trustee sale for $153.806.41, comprising two 80-acre parcels, two miles from a public road. The terrain is mostly steep and wooded. There is a 1,508-square-foot, three-bedroom manufactured home on a permanent foundation that uses a solar generator system, a spring-fed water system, and a septic system. The property was previously purchased in 2000 for $125,000; in 2001 the modular home was added, costing $85,000. Phillips filed multiple applications challenging the prior owner’s $469,976 assessment.The Assessor reappraised the property at $415,000. Phillips cited Revenue and Taxation Code 110(b): the purchase price of real property is rebuttably presumed to be its “fair market value” “if the terms of the transaction were negotiated at arms-length between a knowledgeable transferor and transferee neither of which could take advantage of exigencies. Phillips argued that the price he paid for the property had to be treated as its taxable value and challenged the Assessor’s comparable sales analysis, The Board determined the value to be $250,000. Phillips filed a tax refund action. On remand, the Board found the 2013 fair market value was $335,000.The court of appeal affirmed that the property was not obtained in an open market transaction, there was substantial evidence to support the Board’s conclusion as to its assessed value of the property, and Phillips’ due process rights were not violated. A foreclosure sale is by nature not an open market transaction supporting the application of the section 110 presumption; even where that presumption applies, it may be rebutted by evidence that the property's fair market value is otherwise. View "Phillis v. County of Humboldt" on Justia Law

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The Presidio, formerly a military base, is now a National Park, within San Francisco's Golden Gate National Recreation Area. It is an exclusive federal enclave. The 1940 Buck Act (4 U.S.C. 105–110.) authorizes states and local jurisdictions to impose income taxes on activities in federal areas, or on residents of such federal areas, to the same extent and with the same effect as though such land was not a federal area. The 1996 Presidio Trust Act created a wholly-owned government corporation to manage the Presidio, exempt from certain federal laws and regulations. In 2000, section 103(c)(9) was amended to read: “The Trust and all properties administered by the Trust and all interest created under leases, concessions, permits and other agreements associated with the properties shall be exempt from all taxes and special assessments of every kind by" California, and its political subdivisions. Letterman paid the city business registration fees and gross receipts taxes. Letterman later sought refunds totaling $76,880.52, plus interest, arguing that section 103(c)(9) exempts “rents earned by subletting real property leased from the Presidio Trust.”.The court of appeal affirmed the dismissal of the suit. Section 103(c)(9) exempts a lessee of property in the Presidio only from the payment of property taxes; it does not purport to exempt any other party from the payment of an otherwise applicable tax other than a tax on the property itself. View "Letterman Digital Arts Ltd. v. City & County of San Francisco" on Justia Law

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The trustees of the Amen Family 1990 Revocable Trust challenge the Assessor's reassessment of property the Trust received from a corporation that the Trust had partially owned. Although there were at least five owners of the stock of the transferor corporation (including the Trust) and the transferee was solely the Trust, the Trust contends that the proportional ownership interest exception applied because it had owned all the voting stock in the corporation.The Court of Appeal affirmed the trial court's judgment in favor of the Assessor and upholding the reassessment. The Assessor argues that "stock" in Revenue & Taxation Code section 62(a)(2) means exactly what it says—stock—and applies to all classes of stock, including for present purposes both voting and non-voting stock. Under this interpretation, the Assessor was right to reassess the property after the transfer because the proportional ownership interests, as measured by all the stock of the transferor corporation, had changed. Finally, the "Primary Economic Value" test in section 60 also supports that all stock is considered in applying section 62(a)(2). View "Prang v. Amen" on Justia Law

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A city-owned utility charges rates to its customers that do not "exceed the reasonable costs" of providing the utility service, but at the end of each fiscal year, the city routinely invokes its power under the city's charter to, via multiple steps, transfer the "surplus" in the utility's revenue fund—the amount left over after paying all "outstanding demands and liabilities" which, if transferred, will not have a "material negative impact" on the utility's "financial condition" (L.A. Charter, section 344(b))—to the city's general fund. Plaintiff filed suit against the city defendants, alleging that this routine practice by the city constitutes a "tax" that requires voter approval.The Court of Appeal affirmed the trial court's dismissal of the action challenging the practice as being an unlawful "tax." The court held that the city's alleged, ongoing practice of transferring a “surplus” from the DWP's revenue fund to the city's General Fund where, as also alleged, the rates charged by the DWP to its customers nevertheless do not exceed the costs of providing electricity to them, does not constitute a "tax" for three reasons. First, the practice does not satisfy the definition of a "tax" under the plain language of the California Constitution. Second, this conclusion is the one that best accords with the purpose behind the Constitution's restrictions on local taxation, namely to stop local governments from extracting even more revenue from California taxpayers. Third, Citizens for Fair REU Rates v. City of Redding (2018) 6 Cal.5th 1, strongly suggests that the city's yearly transfers of surplus funds do not constitute a "tax" when they do not cause the DWP's rates to exceed its costs of providing electricity. In this case, because plaintiff will be bound in any future amended complaints by the same verified allegations that doom his claims now, the court concluded that he cannot cure these defects by amendment and the trial court properly sustained the demurrer without leave to amend. View "Humphreville v. City of Los Angeles" on Justia Law

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Plaintiff filed suit against Fresno Unified and the Contractor, alleging that they violated California's competitive bidding requirements, the statutory and common law rules governing conflicts of interest, and Education Code sections 17406 and 17417. Based on the Court of Appeal's review of the four corners of the construction agreements and resolution of Fresno Unified’s board, the court concluded that plaintiff properly alleged three grounds for why Education Code section 17406's exception to competitive bidding did not apply to the purported lease-leaseback contracts. The court also concluded that California's statutory and common law rules governing conflicts of interest extended to corporate consultants and plaintiff alleged facts showing Contractor participated in creating the terms and specifications of the purported lease-leaseback contracts and then became a party to those contracts. After remand, the further proceedings included defendants' motion for judgment on the pleadings, which argued the lawsuit had become moot because the construction was finished and the contracts terminated. The trial court agreed.The Court of Appeal reversed, holding that defendants and the trial court erroneously interpreted plaintiff's lawsuit as exclusively an in rem reverse validation action. Rather, plaintiff is pursuing both a validation action and a taxpayer action. In this case, plaintiff asserts violations of California's competitive bidding laws and Education Code sections 17406 and 17417 along with conflicts of interest prohibited by Government Code section 1090 and common law principles. The remedy of disgorgement is available under these counts asserted in plaintiff's taxpayer's action even though the Construction Contracts are fully performed. Therefore, the counts in plaintiff's taxpayer's action seeking disgorgement are not moot. The panel remanded for further proceedings. View "Davis v. Fresno Unified School District" on Justia Law

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Proposition 218, the Right to Vote on Taxes Act, generally required local governments obtain voter approval prior to imposing taxes. Plaintiffs Jess Willard Mahon, Jr. and Allan Randall brought this certified class action against the City of San Diego (City) claiming that the City violated Proposition 218 by imposing an illegal tax to fund the City’s undergrounding program. Specifically, plaintiffs contended the City violated Proposition 218 through the adoption of an ordinance that amended a franchise agreement between the City and the San Diego Gas & Electric Company (SDG&E). The ordinance, together with a related memorandum of understanding, further specifies that part of the money to fund the undergrounding budget will be collected by SDG&E through a 3.53 percent surcharge on ratepayers in the City that will be remitted to the City for use on undergrounding (Undergrounding Surcharge). Plaintiffs claim that the surcharge is a tax. Plaintiffs further claim that the surcharge violates Proposition 218 because it was never approved by the electorate. Plaintiffs note that the City has imposed more than 200 million dollars in charges pursuant to the Undergrounding Surcharge during the class period. Through this action, plaintiffs seek a refund of those amounts, among other forms of relief. The City moved for summary judgment, which the trial court granted on two grounds: (1) the Undergrounding Surcharge constituted compensation for franchise rights and thus was not a tax; alternatively, (2) the Undergrounding Surcharge was a valid regulatory fee and not a tax. After review, the Court of Appeal concluded the trial court properly granted the City’s motion for summary on the ground that the Undergrounding Surcharge was compensation validly given in exchange for franchise rights and thus, was not a tax subject to voter approval. View "Mahon v. City of San Diego" on Justia Law

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Manson owns heavy marine construction and dredging equipment, including 60 specialized vessels and over 50 barges. After the Contra Costa County Assessor’s Office assessed property taxes on the value of Manson’s vessels for tax years 2013 and 2014, Manson filed administrative appeals, claiming some of its vessels were exempt from taxation under the Vessel Use Exemption, which provides that “[v]essels of more than 50 tons burden in this State and engaged in the transportation of freight or passengers” “are exempt from property taxation,” Cal. Const. art. XIII, section 3(l). The Board denied Manson’s appeals.The trial court and court of appeal affirmed. Manson did not establish that anyone owned or controlled the sludge it dredged, or that the dredged material could be considered goods, delivered from a consignor to a consignee. The dump scows and barges were moved from the harbor to disposal sites for the purpose of being emptied out so that they could return to the harbor and continue to perform the work for which they were hired; the carrying of the dredged material from the harbor to the disposal sites was merely a necessary byproduct of, and incidental to, that dredging work. Manson’s vessels were engaged in dredging, not in the transportation of goods for hire. View "Manson Construction Co. v. County of Contra Costa" on Justia Law

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The Court of Appeal affirmed the trial court's issuance of a writ of administrative mandamus allowing the Assessor to levy more than four years' worth of escape assessments under Revenue and Taxation Code section 532, subdivision (b)(3). The court held that every single one of the prerequisites for the escape assessments challenged by Downey SPE is not only satisfied, but is undisputedly so. The court also held that the filing requirement set forth in section 480.1 is not satisfied when the taxpayer acquiring the legal entity recorded a document with less than all the information required by section 480.1. Therefore, taxpayers must strictly comply with those aspects of the notice requirements of section 480.1. In this case, it is undisputed that Downey SPE's act of recording the Certificate with the County Recorder's Office did not strictly comply with section 480.1's informational requirements (because it lacked several categories of information) or with section 480.1's requirement that the information be provided to the State Board. View "Prang v. L.A. County Assessment Appeals Board No. 2" on Justia Law