Justia Tax Law Opinion Summaries

The Supreme Court of California ruled that the Taxpayer Protection and Government Accountability Act (TPA), a proposed initiative measure, could not be placed on the November 2024 general election ballot. The TPA sought to revise the California Constitution by requiring voter approval for any new or increased state or local tax, and by expanding the definition of "tax" to include a wider range of government charges. The petitioners, the Legislature of the State of California, Governor Gavin Newsom, and former Senate President Pro Tempore John Burton, argued that the TPA was invalid because it attempted to revise the California Constitution via citizen initiative, and because it would seriously impair essential government functions.The court agreed with the petitioners, finding that the TPA would substantially alter the basic governmental framework set forth in the California Constitution. The court noted that the TPA would eliminate the Legislature's ability to levy taxes without prior voter approval, shift power between the executive and legislative branches, and transform local revenue-raising by requiring that exempt charges go through legislative rather than administrative processes. The court concluded that these changes were so significant that they amounted to a revision of the Constitution, which could not be enacted by initiative. The court therefore issued a writ of mandate directing the Secretary of State to refrain from placing the TPA on the November 2024 election ballot. View "Legislature of the State of California v. Weber" on Justia Law

A dispute arose over whether a transfer of property from a family corporation to a trust constituted a "change in ownership" under California's Proposition 13, which would trigger a reassessment of the property's value for tax purposes. The Los Angeles County Assessor determined that the transfer did constitute a change in ownership because the transfer eliminated the interests of individual shareholders who held nonvoting stock in the corporation. The Los Angeles County Assessment Appeals Board reversed this decision, asserting that the beneficial interest in the corporation's real property was held by the persons who controlled the corporation through its voting stock. The Superior Court granted a petition by the assessor to vacate the Appeals Board's decision, and the Court of Appeal affirmed the Superior Court's decision.The Supreme Court of California affirmed the Court of Appeal's decision. The court held that the term "ownership interests" in the relevant statute, Revenue and Taxation Code section 62, subdivision (a)(2), refers to beneficial ownership interests in real property, not interests in a legal entity. For a corporation, these beneficial ownership interests are measured by all corporate stock, not just voting stock. The court rejected the argument that the term "stock" in section 62, subdivision (a)(2) must be interpreted to mean voting stock. The court concluded that the transfer of the properties from the corporation to the trust resulted in a change in ownership because the proportional beneficial ownership interests in the properties did not remain the same before and after the transfer. View "Prang v. Los Angeles County Assessment Appeals Board" on Justia Law

The Supreme Court affirmed the judgment of the court of appeal in this dispute , holding that Oakland did not show on demurrer that its challenged fees at issue in this case were exempt from the voter approval requirements set forth in article XIII C of the California Constitution.In 2012, the City of Oakland approved two contract granting private waste haulers the right to operate a public utility for waste collection services. As consideration for the "special franchise right," the waste haulers agreed to pay certain fees to Oakland. In question was how such fees should be treated under article XIII C, which sets forth voter approval requirements that apply to taxes imposed by local government. The court of appeals concluded that the fees were not exempt from the requirements of section XIII C. The Supreme Court affirmed, holding that Oakland failed to show, as a matter of law, that article XIII C applied to the franchise fees at issue in this case. View "Zolly v. City of Oakland" on Justia Law

The Supreme Court held that the City and County of San Francisco (San Francisco) can lawfully apply a tax collection requirement, which requires parking lot operators to collect a tax from drivers who park their cars in paid parking lots and remit the proceeds to the city, to state universities that operate paid parking lots in the city, holding that the collection requirement is not unconstitutional.San Francisco, a consolidated city and county that has adopted a charter for its own governance, requires that state universities collect the parking tax at issue with whatever parking fees they charge and remit the proceeds to the city. The trial court concluded that the universities were exempt from compliance with the parking tax ordinance. The court of appeal affirmed, concluding that the constitutional principles articulated and applied in In re Means, 14 Cal.2d 254 (1939), and Hall v. City of Taft, 47 Cal.2d 177 (1956), exempts state agencies from collecting and remitting the parking tax. The Supreme Court reversed, holding that charter cities may require state agencies to assist in the collection and remittance of municipal taxes and that San Francisco's collection requirement is a valid exercise of its power from which state universities are not immune. View "City & County of San Francisco v. Regents of the University of California" on Justia Law

The Supreme Court affirmed the judgment of the trial court and court of appeal sustaining Defendants’ demurrer in this case, holding that customers who have paid sales tax reimbursement on purchases they believe to be exempt from sales tax are not authorized to file suit to compel the retailers to seek a tax refund from the California Department of Tax and Fee Administration (Department) when there has been no determination by the Department or a court that the purchases are exempt.A customer who has paid excess sales tax reimbursement has no statutory remedy to obtain a refund from the Department directly. In Javor v. State Board of Equalization, 12 Cal.3d 790 (1974), however, the Supreme Court authorized a customer suit to compel certain retailers to seek a tax refund where the Board of Equalization, upon determining that the retailers had collected excess sales tax reimbursement, had promulgated rules to provide refunds to overpaying customers. The lower courts declined to extend Javor to authorize a similar judicial remedy under the circumstances of this case. The Supreme Court affirmed, holding that plaintiffs in this case did not have an equitable cause of action to compel the retailers to seek a refund of sales taxes paid to the State. View "McClain v. Sav-On Drugs" on Justia Law

The Supreme Court held that voter approval was not required for a transfer from a utility’s enterprise fund to the city’s general fund.Cal. Const. art. XIIIC prohibits local governments from imposing or increasing any tax without voter approval. Any charge imposed for a service or product that does not exceed the reasonable costs of providing it is excepted from the definition of tax. The City of Redding operated an electric utility as a department of its city government. At issue was whether an annual interfund transfer from the utility’s enterprise fund to the city’s general fund required voter approval where the transfer was intended to compensate the general fund for costs of services that other city departments provide to the utility. The Supreme Court held that because neither the budgetary transfer nor the rate the city charged its utility customers constituted a tax, voter approval was not required. View "Citizens for Fair REU Rates v. City of Redding" on Justia Law

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

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

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

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