Articles Posted in Supreme Court of California

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Charges that constitute compensation for the use of government property are not subject to Proposition 218’s voter approval requirements. To constitute compensation for a property interest, however, the amount of the charge must bear a reasonable relationship to the value of the property interest, and to the extent the charge exceeds any reasonable value of the interest, it is a tax and requires voter approval. Plaintiffs contended that a one percent charge that was separately stated on electricity bills issued by Southern California Edison (SCE) was not compensation for the privilege of using property owned by the City of Santa Barbara but was instead a tax imposed without voter approval, in violation of Proposition 218. The City argued that this separate charge was the fee paid by SCE to the City for the privilege of using City property in connection with the delivery of electricity. The Supreme Court held that the complaint and stipulated facts adequately alleged the basis for a claim that the surcharge bore no reasonable relationship to the value of the property interest and was therefore a tax requiring voter approval under Proposition 218. The court remanded the case for further proceedings. View "Jacks v. City of Santa Barbara" on Justia Law

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The County of Los Angeles can impose a documentary transfer tax on a written instrument that transfers beneficial ownership of real property from one person to two others if the document reflects an actual transfer of legal beneficial ownership made for consideration. This action arose from a series of transactions among trusts maintained for the benefit of Averbook family members. At issue on appeal was the transfer of a particular building. In 2011, the Los Angeles County registrar-recorder demanded payment of the county’s documentary transfer tax, explaining that the transfer tax was due because the Building had undergone a change in ownership. Plaintiff filed this refund action, arguing that no tax was due. The trial court denied the claim. The Court of Appeal affirmed. The Supreme Court affirmed, holding that, under the circumstances of this case, Plaintiff’s refund claim was properly rejected because transfer of a beneficial interest in the Building was a sale, accompanied by consideration and effected by a document of transfer. View "926 North Ardmore Avenue, LLC v. County of Los Angeles" on Justia Law

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An individual’s standing to sue under Cal. Code Civ. Proc. 526a does not require the payment of a property tax, as an allegation that the plaintiff has paid an assessed tax to the defendant locality is sufficient under section 526a. The trial court filed a stipulated order and judgment of dismissal dismissing for lack of standing Plaintiff’s complaint for declaratory and injunctive relief challenging the manner in which the City of San Rafael and County of Marin enforced Cal. Veh. Code 14602.6. The court of appeal affirmed, concluding that an individual plaintiff must be liable to pay a property tax within the relevant locality, or have paid a property tax during the previous year, to have standing. The Supreme Court reversed, holding that the court of appeal erred when it held that payment of a property tax was required under section 526a. View "Weatherford v. City of San Rafael" on Justia Law

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When an assessment on nonexempt property is challenged on the ground that the taxpayer does not own the property involved, the taxpayer must seek an assessment reduction through the assessment appeal process before the county board of equalization or a county assessment appeals board or obtain a stipulation under Cal. Rev. & Tax Code 5142(b) that such proceedings are unnecessary in order to maintain a postpayment superior court action under Cal. Rev. & Tax Code 5140 that seeks reduction of the tax. The Supreme Court overruled Parr-Richmond Industrial Corp. v. Boyd 43 Cal.2d 157 (1954) to the extent that the decision provides otherwise. Because this holding operates only prospectively, the Supreme Court affirmed the judgment of the court of appeal in this action where Plaintiffs brought timely assessment appeal proceedings under Cal. Rev. & Tax Code 1603 (a). The court of appeal held that “where, as here, the taxpayer claims [an] assessment is void because the taxpayer does not own the [assessed] property, the taxpayer is not required to apply for an assessment reduction under section 1603, subdivision (a) to exhaust its administrative remedies.” View "Williams & Fickett v. County of Fresno" on Justia Law

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The City of San Diego adopted an ordinance imposing a tax on visitors for occupancy in hotels located within the City. The tax, known as the transient occupancy tax, is calculated as a percentage of the “rent charged by the operator” of the hotel. The City of San Diego issued transient occupancy tax assessments against online travel companies (OTCs) on the basis that the OTCs were liable as the “operator” of every hotel. The OTCs appealed. A hearing officer found that the OTCs owed tax on the amount retained by the OTCs above the amount remitted to the hotels as the agreed wholesale cost of the room rental. The superior court vacated the decision, concluding that OTCs are not operators of the hotels and that the markup the OTCs charge for their services is not part of the rent subject to the tax. The court of appeal affirmed. The Supreme Court affirmed, holding (1) under the ordinance, the operator of a hotel is liable for tax on the wholesale cost plus any additional amount for room rental the operator requires the OTC to charge the visitor under the “rate party” provisions of hotel-OTC contracts; but (2) OTCs are not operators within the meaning of the ordinance. View "In re Transient Occupancy Tax Cases" on Justia Law

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Plaintiff filed a class action lawsuit against the City of Los Angeles challenging the validity of a certain tax and seeking a refund of taxes. In 2007, during discovery proceedings in the underlying litigation, the trial court determined that certain documents the City possessed were privileged under either the the attorney-client privilege or the privilege for attorney work product. In 2013, Plaintiff filed a request under the California Public Records Act seeking to obtain copies of documents relating to the tax at issue. The City’s administrative office, in response, inadvertently provided Plaintiff with some of the privileged documents. The City filed a motion for an order compelling the return of the privileged material. The trial court denied the motion, concluding that the production of the documents under the Public Records Act had waived any privilege. The Court of Appeal affirmed. The Supreme Court reversed, holding that Cal. Gov’t Code 6254.5, which generally provides that “disclosure” of a public record waives any privilege, applies to an intentional, not an inadvertent, disclosure. Remanded. View "Ardon v. City of Los Angeles" on Justia Law

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In 1974, the state of California joined the Multistate Tax Compact, which contained an apportionment formula and permitted a taxpayer election between the Compact’s formula and any other formula provided by state law. In 1993, the Legislature adopted a different apportionment formula by amending the Revenue and Taxation Code to provide that, notwithstanding the Compact’s provisions, the new apportionment formula “shall” apply. Between 1993 and 2005, six multistate corporations (Taxpayers) paid income tax calculated under the new formula but then sought a refund, contending that they remained entitled to elect between the new statutory formula and that contained in the Compact. The trial court concluded that the Legislature could, consistent with the Compact, eliminate the election provision. The court of appeal reversed. The Supreme Court reversed, holding that the Legislature may properly preclude a taxpayer from relying on the Compact’s election provision. View "Gillette Co. v. Franchise Tax Bd." on Justia Law