TO: Board of Supervisors
FROM: Tracy A. Schulze - Auditor-Controller
REPORT BY: Edward Brown - Accountant-Auditor I
SUBJECT: Authorization for the Auditor-Controller to deny State assessed unitary property tax refund claims for Tax Years 2019-20 and 2021-22
RECOMMENDATION
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Deny three (3) State assessed unitary property tax refund claims for return of 2019-20 taxes paid on Assessor Parcel No. 799-000-161 and 2021-22 taxes paid on Assessor Parcel Nos. 799-000-162 and 799-000-218 in accordance with Revenue and Taxation Code section 100 and Sections 5096 and 5097 (two Telecom, one Utility company). (Fiscal Impact: $3,353,653 Revenue; Discretionary)
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BACKGROUND
The Auditor-Controller’s Office has received three property tax refund claims from unitary property owners (AT&T, Pacific Bell, and PG&E) for paid 2019-20 and 2021-22 taxes. The property owners’ claim states the unitary property tax rate is in excess of the rate allowed by the California Constitution and have requested a refund of $3,353,653 plus interest.
The claimants have challenged the State requirements and state they are entitled to a partial refund on the grounds the taxes were erroneously or illegally collected, or illegally assessed or levied and gave the following reasons:
a. Property tax rate applied to compute claimant’s property taxes was in excess of the rate applied in the same year to property in the county assessed by the assessor of Napa County, in violation of Article XIII, Section 19 of the California Constitution.
b. The property tax rate applied to compute claimant’s property taxes exceeded the rate allowed by Article XIIIA, Section 1 of the California Constitution.
c. The property tax assessment violates the Equal Protection Clause of the United States Constitution.
d. The property tax collected exceeds the amount allowed by Proposition 13.
The Auditor-Controller’s Office has followed all the requirements of the Revenue and Taxation Code Section 100 directing the establishment and calculation of the unitary tax rate for tax years 2019-20 and 2021-22. The unitary tax rate process has been previously audited by the State Controller’s Office and deemed calculated in compliance with State law. The Telecom companies claiming refunds have already litigated similar claims in Santa Clara County, resulting in a published court opinion rejecting their allegations as grounds for a refund and upholding state law as constitutional. County of Santa Clara v. Superior Court, 87 Cal. App. 5th 347 (2023). Napa County is similarly defending a judgment in our favor at the First Appellate District in San Francisco (Pacific Bell Telephone Company et al. v. County of Napa and California State Board of Equalization, Court of Appeal Case No. A170169).
In consultation with the County Counsel, the Auditor-Controller’s Office has reviewed the claims and audited County practices for unitary taxation. Napa County follows the requirements of Revenue and Taxation Code section 100 for the calculation of unitary tax rate. Therefore, the Auditor - Controller has determined that no refund is allowable to the property owners and requests the Board to instruct the Auditor-Controller’s Office to deny the claims. This is the sixth year of this request.
Requested Action: The Auditor-Controller is requesting the Board’s authorization to deny the claims.
FISCAL & STRATEGIC PLAN IMPACT
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Is there a Fiscal Impact? |
Yes |
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Is it currently budgeted? |
No |
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Is it Mandatory or Discretionary? |
Discretionary |
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Is the general fund affected? |
No |
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Future fiscal impact: |
If further claims for other tax years are received, there would be similar reductions to property tax revenue for those years. |
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Consequences if not approved: |
The County would not be in compliance with Revenue and Taxation Code 100. |
ENVIRONMENTAL IMPACT
ENVIRONMENTAL DETERMINATION: The proposed action is not a project as defined by 14 California Code of Regulations 15378 (State CEQA Guidelines) and therefore CEQA is not applicable.