Justia California Court of Appeals Opinion Summaries

Property owners (Appellants) paid nearly $12 million in transfer taxes, penalties, and interest based on a 2014 merger that changed their parent companies. Both before and after the merger, Appellants directly owned two properties; only indirect ownership changed. They sought a refund of the sums paid under the San Francisco Business and Tax Regulations Code (SFBTRC).The court of appeal affirmed the dismissal of the suit, rejecting arguments that the tax exceeded San Francisco's authority under Revenue and Taxation Code section 11911 because it uses a higher tax rate and an expanded tax base. San Francisco, as a charter city and a “city and county,” is not bound by the limitations of section 11911. The purported failure to comply with notice and hearing requirements does not entitle Appellants to a refund. At the time of the merger, SFBTRC was triggered as to Appellants’ real property by the transfer of ownership interests in Appellants’ parent entity, consistent with Revenue and Taxation Code section 64(c)(1). SFBTRC 1108 applied due to the termination of Appellants’ parent, a partnership. Appellants are not entitled to a refund based on their argument that San Francisco assessed the wrong entities View "CIM Urban REIT 211 Main Street (SF), L.P. v. City and County of San Francisco" on Justia Law

A tax-sharing agreement between the County of San Benito and the City of Hollister requires the city to pay the county a fixed fee (Additional Amount) per residential unit constructed on land annexed into the city from the county during the period covered by that agreement. Plaintiff’s predecessor entered into an annexation agreement with the city, agreeing to comply with “all applicable provisions” of that tax sharing agreement. When the plaintiff purchased the annexed land and sought to develop it into subdivisions, the city informed the plaintiff that it was liable for the Additional Amount fees. Plaintiff paid the fees under protest, then sued, seeking a declaration of its rights and duties under various written instruments.The court of appeal affirmed a defense judgment. Plaintiff is contractually liable for the Additional Amount by the terms of the annexation agreement. Any challenge to the calculation of the Additional Amount is beyond the scope of a declaratory relief action and time-barred. The court rejected the plaintiff’s arguments that neither the annexation agreement nor the tax sharing agreement requires the plaintiff to pay the Additional Amount and that the fees violate the Mitigation Fee Act and federal constitutional constraints on development fees as monetary exactions. View "BMC Promise Way, LLC v. County of San Benito" on Justia Law

Plaintiffs challenged a surcharge that Long Beach imposes on its water and sewer customers by embedding the surcharge in the rates the Water Department charges for service. The surcharge funds are transferred from the Water Department to the city’s general fund, to be used for unrestricted general revenue purposes. The surcharge was approved by a majority of the city’s voters under California Constitution article XIII C. The plaintiffs argued that notwithstanding majority voter approval, the surcharge violates article XIII D, which prohibits a local agency from assessing a fee or charge “upon any parcel of property or upon any person as an incident of property ownership” unless the fee or charge satisfies enumerated requirements the city acknowledges were not met.The trial court found the surcharge unconstitutional and invalid. The court of appeal affirmed the judgment and an award of attorney fees. Because the surcharge qualifies as a “levy other than an ad valorem tax, a special tax, or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property related service,” it satisfies the definition of “fee” or “charge” in article XIII D and must comply with article XIII D, section 6(b)’s requirements regardless of voter approval. View "Lejins v. City of Long Beach" on Justia Law

The primary issue in this case was whether imposing sales tax on in-state lessors of business equipment to a title insurer violated Article XIII, section 28(f) of the California Constitution. The California Department of Tax and Fee Administration (Department) contended it did not because the lessor, not the title insurer/lessee, was the taxpayer. In the Department’s view, whether the lessee reimburses the lessor for its sales tax obligation was strictly a matter of contract and did not implicate the constitutional limit on taxing insurers. Conversely, First American Title Insurance Company (First American) pointed out that in equipment leases not involving an insurer, the state assesses a use tax, not a sales tax. But where, as here, the lessee is constitutionally exempt from paying use tax, Regulation 1660(c)(1) solved that problem by providing that the sales tax applied instead. First American argued that as a result, Regulation 1660(c)(1) imposed a de facto use tax on title insurers in violation of Article XIII, section 28(f). The trial court agreed with First American and ordered the Department to “remove, strike out and otherwise give no force or effect to that portion of Regulation 1660(c)” providing that when the lessee is not subject to use tax, the sales tax applies. The Court of Appeal reversed: “Article XIII, section 28(f) does not prohibit a sales tax whose legal incidence is on a lessor, even though the economic burden of the tax is ultimately borne by the title insurer/lessee.” View "First American Title Insurance Co. v. Cal. Dept. of Tax and Fee Admin." on Justia Law

Oakland businesses must obtain a business tax certificate and pay business license taxes each year, based on the type of activities in which the business is engaged. A separate business tax certificate is required for each activity of the business unless the activity comprises less than 20 percent of the total gross receipts of the business. City tax authorities determine the appropriate business tax classifications based on the information reported by the taxpayer. Host held Port Department permits to occupy space and operate food, beverage, retail, and duty-free concessions at Oakland International Airport. The permits authorized Host to sublease its space to other parties with consent. In 2015, based on an audit of Host’s financial records, an auditor determined that Host owed Oakland unpaid business taxes, penalties, interest, and fees for rental income from subleases,2006-2015. Host had obtained a business certificate and paid business tax for its retail activities, but not for subleasing.Host unsuccessfully appealed, asserting that it was engaged only in retail sales (not commercial subleasing), that the 20 percent exception applied, and that Oakland could not collect some of the back taxes because of the statute of limitations. The Board, the trial court, and the court of appeal upheld the determination of a $371,195.40 tax liability. View "Host International, Inc. v. City of Oakland" on Justia Law

This appeal challenged the validity of a possessory interest tax imposed by the County of Riverside, California (the county) upon lessees of federally owned land set aside for the Agua Caliente Band of Cahuilla Indians (Agua Caliente tribe) or its members. A subset of the more than 450 plaintiffs in this appeal also challenged the validity of voter-approved taxes funding the Desert Water Agency, Coachella Valley Water District, Palm Springs Unified School District, Palo Verde School District, and Desert Community College District. A small minority of the plaintiffs claimed to hold a possessory interest in land set aside for the Colorado River Indian tribe (CRIT), but they argued the challenged taxes were invalid for the same reasons asserted by the other plaintiffs. A trial court upheld the validity of the challenged taxes and plaintiffs’ appeal, arguing the challenged taxes were preempted by federal law. The question of whether the county could impose a possessory interest tax on lessees of land set aside for the Agua Caliente tribe or its members was the subject of repeated litigation in both federal and state courts, and the validity of the county’s possessory interest tax in this context has been repeatedly upheld. During the pendency of this appeal, the Court of Appeal issued its decision in Herpel v. County of Riverside, 45 Cal.App.5th 96 (2020), again upholding the validity of the county’s possessory interest tax under almost identical circumstances as those presented here. Although plaintiffs claim that the Herpel decision was not controlling because it did not consider many of the arguments presented here, the Court concluded the facts and arguments presented in this case did not materially differ from those already considered in Herpel, and plaintiffs did not present any persuasive reason for the Court to depart from that recent decision. View "Albrecht v. County of Riverside" on Justia Law

Alameda County Waste Management Authority sought records from three out-of-county landfills (Waste Connections) that disposed of waste originating in Alameda County. The Integrated Waste Management Act, Public Resources Code sections 40000-49260, permits local government entities to inspect and copy specified records kept by landfills concerning waste received at such landfills originating in the government’s geographic jurisdiction “for the purposes of” verifying reports made by the landfills on “disposal tonnages by jurisdiction of origin” and “as necessary to enforce the collection of local fees.” Waste Connections refused to permit the inspections, contending that the Authority had not shown inspection of the records was “necessary” to enforce its fee ordinance. The Authority attached a copy of its fee ordinance and explained that the fee depends on where tonnage originated, the type and amount of waste, and the party responsible for transporting the waste to the landfill, facts that are documented in landfill weight tags of the kind the statute allows government entities to inspect.The superior court compelled Waste Connections to allow the inspection. The court of appeal affirmed. The “as necessary” language of section 41821.5(g)(2)'s inspection provision requires neither a factual showing nor a factual determination. View "Alameda County Waste Management Authority v. Waste Connections US, Inc." on Justia Law

Proposition 13 and Proposition 218 amended the California Constitution to require that any special tax adopted by a local government entity take effect only if approved by a two-thirds vote of the electorate. The court of appeal recently interpreted these constitutional provisions “as coexisting with, not displacing, the people’s power to enact initiatives by majority vote” and held that a measure placed on the ballot as a local citizens’ initiative requires a majority, not a supermajority, vote to pass.Sixty percent of San Franciscans voting on Proposition G— an initiative entitled “Parcel Tax for San Francisco Unified School District”—approved the measure. San Francisco filed suit to establish that Proposition G was valid. The complaint against “All Persons Interested” was answered by Nowak, who argued that Proposition G is invalid because it failed to garner the two-thirds vote required by Proposition 13 and Proposition 218. Nowak also contended that a provision of Proposition 218 unique to parcel taxes, (art. XIII D, 3(a)), requires a two-thirds vote of the electorate to enact Proposition G. Nowak sought to distinguish the earlier decisions on the grounds that Proposition G was conceived and promoted by local government officials and was not a valid citizens’ initiative. The court of appeal rejected all of Nowak’s arguments, standing by its earlier decisions. View "City & County of San Francisco v. All Persons Interested in Matter of Prop. G" on Justia Law

Verizon California Inc.’s (Verizon) petitioned the California State Board of Equalization’s (Board) to reduce its assessments for the tax years 2008 through 2012. Verizon paid the taxes levied by the counties for each year based on the Board-assessed values set forth in its petitions. Verizon then joined with Board staff to seek approval from the Board of joint recommendations to lower the assessed values of its property set forth in its petitions. The Board approved the joint recommendations. Verizon then filed actions for refunds for the years 2008 through 2012 arguing that the Board should have adopted the valuations proposed in its petitions. The trial court consolidated the actions. The Board moved for summary adjudication of the claims on the ground the court lacked jurisdiction because in approving the Verizon/Board staff recommendations for reduced valuations Verizon failed to exhaust its administrative remedies with respect to the valuations it claimed in its petitions. The trial court granted the motion for summary adjudication of the consolidated actions based on the Board’s approvals of the parties’ joint recommendations for a reduction in assessed valuations. On this basis, the trial court concluded: “Because of the mutually agreed recommendation[s] on value, no disputed issues were presented to the Board for [tax years] 2008 through 2012. In each of those five years, the Board adopted the revised value that had been jointly recommended by Verizon and [the Board] staff, reducing Verizon’s tax basis by over $1.1 billion in the aggregate. [¶] . . .Verizon cannot ask the Board to adopt a jointly presented reduction in value, receive the agreed reduction, and then turn around and sue for a lower value than it asked the Board to adopt.” Verizon timely appealed the trial court’s decision, arguing again that the Board should have adopted the valuations it proposed in its petitions to the Board to reassess its property. The Court of Appeal determined the statutory ground of the actions required a “dispute” regarding the Board’s assessments of the property. Finding none, the Court affirmed the trial court’s judgment. View "Verizon California v. Board of Equalization" on Justia Law

Humboldt County Ballot Measure S proposed a tax on commercial cultivators of marijuana and was approved by the voters. The tax became operative on January 1, 2017. Measure S allows the Board of Supervisors to amend the law or approve enforcement regulations promulgated by the administrative officer if the action “does not result in an increase in the amount of the tax or broaden the scope of the tax.” The Supervisors amended Measure S in June 2017, and again in April 2018, making the tax applicable to all persons with a cultivation permit, as opposed to just those engaged in cultivation; redefining “cultivation area”; and changing the time when the taxes start to accrue.Silva owns property in Humboldt County. No one cultivated cannabis on the property in 2017. The County sent her an invoice of $40,000 in commercial cannabis cultivation taxes under Measure S for the year 2017–2018. Silva paid the invoice. The County sent an invoice of $54,025 for the year 2018–2019. Silva again paid the invoice.A 2018 petition argued that the amendments impermissibly broadened Measure S. The court of appeal affirmed a ruling in Silva's favor. The trial court was not procedurally barred from considering the challenge to the Board’s amendments. The doctrine of exhaustion of administrative remedies does not apply and the amendments expanded, rather than just clarifying, Measure S. View "Silva v. Humboldt County" on Justia Law