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City of Fillmore v. State Board of Equalization

April 20, 2011

CITY OF FILLMORE, PLAINTIFF AND RESPONDENT,
v.
STATE BOARD OF EQUALIZATION, DEFENDANT AND RESPONDENT; CITY OF INDUSTRY ET AL., INTERVENERS AND APPELLANTS.



APPEAL from a judgment of the Superior Court of Los Angeles County, David P. Yaffe, Judge. (Los Angeles County Super. Ct. No. BS120799)

The opinion of the court was delivered by: Croskey, Acting P. J.

CERTIFIED FOR PUBLICATION

Reversed with directions.

The City of Industry and the City of Livermore appeal a judgment dismissing without prejudice their petition in intervention for a writ of mandate against the State Board of Equalization (SBE). Industry and Livermore sought the reallocation of local sales tax revenues in administrative proceedings before the SBE. The SBE's Allocation Group issued a decision in favor of Industry and Livermore and against the City of Fillmore, and later issued a supplemental decision. After the time to appeal had passed with no appeal, Fillmore sought to appeal the supplemental decision. The Allocation Group decided to refer the matter to the SBE's Appeals Division to consider Fillmore's appeal.

Industry and Livermore petitioned the trial court to compel the SBE to implement the supplemental decision, alleging that the supplemental decision is final and the SBE has no jurisdiction to consider an untimely appeal. The trial court concluded that it could not interfere with the ongoing administrative review proceedings and therefore sustained Fillmore's demurrer to the petition without leave to amend based on the failure to exhaust administrative remedies.

We conclude that Industry and Livermore need not await the completion of the administrative review proceedings before seeking relief in court. After deciding this threshold question, we also conclude that the supplemental decision is final and that Industry and Livermore are entitled to a writ of mandate compelling the SBE to implement the supplemental decision.

FACTUAL AND PROCEDURAL BACKGROUND

1. Administrative Proceedings

Livermore and Industry filed petitions with the SBE to reallocate local sales tax revenues. They argued that Fillmore and certain retailers had devised a means to divert sales tax revenues away from neighboring cities where the taxable business activities actually occurred by setting up sham offices in Fillmore and claiming that the taxable business activities occurred in Fillmore.

The SBE's Allocation Group issued a decision on August 4, 2008, stating that sales by a particular taxpayer did not occur in Fillmore and that the sales tax revenues allocated to Fillmore for the fourth quarter of 2007 would be reallocated. The decision stated that Fillmore could appeal the decision within 30 days by requesting an appeals conference. The Allocation Group sent a letter to the taxpayer on August 12, 2008, explaining its decision. On August 28, 2008, Fillmore requested a 30-day extension to respond to the decision. The Allocation Group granted the extension as requested.

Fillmore, through its outside counsel, appealed the decision by the Allocation Group and requested an appeals conference in a letter dated September 26, 2008. Fillmore's letter referred to the Allocation Group's letter of August 12, 2008, as a "Supplemental Decision." The Allocation Group stated in a letter dated October 27, 2008, that the matter was being forwarded to the Appeals Division and that an appeals conference would be scheduled. The letter included a summary analysis explaining the decision by the Allocation Group. The Allocation Group sent another letter dated November 10, 2008, confirming that the matter had been forwarded to the Appeals Division and that an appeals conference would be scheduled. The letter also stated that Fillmore's appeal had not presented any new information that would cause the Allocation Group to change its position.*fn1

The SBE notified the parties on or about January 12, 2009, of an appeals conference scheduled for February 17, 2009. Fillmore, through its outside counsel, requested a continuance to early April 2009 in a letter dated January 21, 2009. The SBE notified Fillmore in a letter dated January 30, 2009, that the appeals conference "has been cancelled because it was scheduled prematurely." The letter stated that the dispute had been referred back to the Allocation Group "so it can issue the supplemental decision required by California Code of Regulations, title 18, section 1807, subdivision (b)(7). Petitioner or any notified jurisdiction may thereafter appeal the supplemental decision by filing an objection with the Allocations Group within 30 days of the date of the mailing of the supplemental decision. (Cal. Code Regs., tit. 18, § 1807, subds. (b)(8) & (c)(1).) If a timely objection is submitted, the petition will be forwarded to the Case Management section to schedule a conference."

The Allocation Group issued a supplemental decision on February 11, 2009, granting the petitions for reallocation. The six-page supplemental decision specified the amounts of sales tax revenues to be reallocated from Fillmore to Livermore, Industry, and other cities and explained in greater detail than the prior summary analysis the basis for the decision. The supplemental decision stated that any party objecting to the supplemental decision must submit a written objection within 30 days after the date of the supplemental decision, pursuant to California Code of Regulations, title 18, section 1807, subdivision (b)(8). A cover letter also stated that Fillmore could appeal the supplemental decision within 30 days.

Fillmore, through its outside counsel, requested a 30-day extension to respond to the supplemental decision in a letter dated March 9, 2009. The Allocation Group granted an extension in a letter dated March 11, 2009, stating that any appeal from the supplemental decision must be filed by April 15, 2009.

Meanwhile, a dispute arose regarding Fillmore's legal representation. The SBE asserted that the private attorneys retained by Fillmore could not represent Fillmore in administrative proceedings before the SBE unless Fillmore adopted a resolution pursuant to Revenue and Taxation Code section 7056, subdivision (b) certifying that the attorneys were contractually "prohibited . . . from performing consulting services for a retailer during the term of the contract" (ibid.). Taking the position that the SBE could not disclose confidential taxpayer information to the attorneys absent such a resolution by Fillmore, the SBE corresponded with Fillmore city officials rather than with its attorneys.

Fillmore and its attorneys failed to appeal the supplemental decision by the deadline of April 15, 2009. Accordingly, the Allocation Group stated in a letter to Fillmore's Director of Finance dated April 28, 2009, that the supplemental decision had become final:

"We did not receive an appeal of our February 11, 2009, Supplemental Allocation Group Decision by the date specified, April 15, 2009, in our letter granting your request for an extension. We now consider under Regulation 1807(b)(8) our proposed allocations as estimated in our Supplement Decision to be final. Accordingly, we will process the reallocation of local tax for the fourth quarter 2007 in the amount of $1,246,678."

Fillmore, through its outside counsel, protested in a letter dated May 1, 2009, stating, "Fillmore has a pending appeal of the reallocations for which a hearing has been promised but never granted." Fillmore argued that the SBE could not "summarily deny" its purported appeal by declaring the supplemental decision to be final. Fillmore filed a formal objection to the supplemental decision on May 7, 2009, and requested an appeals conference.

The Allocation Group referred the matter to the SBE's Appeals Division on May 19, 2009, noting the existence of a dispute as to the finality of the supplemental decision. The SBE notified the parties on or about July 2, 2009, of an appeals conference scheduled for August 27, 2009.

2. Trial Court Proceedings

Fillmore filed a petition in the trial court in May 2009, seeking a writ of mandate compelling the SBE to allow Fillmore to be represented by its legal counsel of choice in the reallocation proceedings. Industry and Livermore applied for and were granted leave to intervene in the mandamus proceedings, and filed a petition in intervention in June 2009.*fn2 Industry and Livermore allege that the supplemental decision is final and that the SBE has no jurisdiction to conduct an appeals conference for the purpose of reconsidering its final decision. They seek a writ of mandate compelling the SBE to implement its supplemental decision by reallocating the tax proceeds for the fourth quarter of 2007 and all of ...


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