Tuesday, July 25, 2017

No Property Tax Required for Taxpayer Standing; Else Unresolved

Weatherford v. City of San Rafael, No. S219567 (Cal. Jun. 6, 2017)

Code of Civil Procedure § 526a gives taxpayers standing to bring claims to enjoin wasteful or unlawful expenditures by government entities. The question presented to the Supreme Court here is: What kind of taxes need to be paid to have taxpayer standing? 

Plaintiff is a resident of San Rafael who brought a § 526a case to enjoin the way that city and Marin County impound cars. As a renter, she doesn’t pay property taxes, at least not directly. Some prior Court of Appeal decisions suggested that property tax payment was required. So plaintiff stipulated to an adverse judgment to challenge those decisions. The Court of Appeal reluctantly agreed with the prior cases, holding that only property taxes count and affirmed the dismissal. But the Supreme Court, in a unanimous (with some concurrences) opinion by Justice Cuellar, disagrees and reverses. 
As the Court explains, § 526a “represents a legislative decision to create judicial access for parties that would not otherwise be eligible to seek relief under” traditional “real party in interest” rules or by way of a writ of mandamus. Although the grant of standing is broad, § 526a “does narrow the category of taxpayers able to sue to enjoin certain expenditures of governmental funds.” But it is not so narrow as to require payment of property taxes. Section 526a affords standing, so long as the plaintiff “has paid, or is liable to pay, to the defendant locality a tax assessed on the plaintiff by the defendant locality[.]” Because of the posture of the case—a stipulated dismissal based only on a complaint—the Court declines to get any more granular on what specific taxes might be sufficient. So the articulated standard, vague as it might be, will need to be applied on remand.

The Chief Justice concurs, joined by Justice Liu. The Chief points out that § 526a is “not a model of clarity,” containing as it does “87 words parsed by 19 commas.” Moreover, the statute was drafted in 1909, and has never been amended, even though the way the state and locality assess taxes has changed dramatically over the last 108 years. So she suggests that the Legislature should weigh in and clarify what taxes count.

Justice Kruger concurs as well, also joined by Justice Liu. She notes that the dense text of the statute is unclear about whether taxes need to be “directly” paid. E.g., what about a local sales tax, which is, as a technical matter, paid by a retailer, collected by a state agency, and then remitted to a locality? And what does it mean for taxes to be collected “therein.” E.g., does it mean while the taxpayer is physically within the jurisidiction, or that the locality gets the revenue. Due to the procedural posture of the case, the court doesn’t reach these “fundamental interpretive” questions, so they remain unresolved.


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