Judge Margaret L. Oldendorf, Case 22BBCV00511 2023-05-04 Tentative Ruling

Judge: Margaret L. Oldendorf, Case: 22BBCV00511, Date: 2023-05-04 Tentative Ruling

This is an action for a refund of allegedly overpaid of taxes. Janelle Polk (Polk) sues Defendant California Franchise Tax Board (FTB) alleging she overpaid taxes for tax years 2015, 2016, and 2018. She seeks a refund of the amounts she has overpaid.

The undisputed evidence establishes that Polk owes money for each of those tax years. The law requires a taxpayer pay any disputed tax amount as a prerequisite to litigating it. As Polk has not done this, the FTB is entitled to judgment as a matter of law.

Summary judgment is appropriate where a defendant establishes it is entitled to judgment as a matter of law. Code Civ. Proc. §437c(c). A defendant moving for summary judgment has met its burden of establishing that a cause of action has no merit if it shows that one or more elements of the cause of action cannot be established. Section 437c(p)(2).

After a return is filed the FTB examines it and determines the correct amount of tax to be assessed. Rev. & Tax Code §19032. If it determines that the tax calculated by the taxpayer is less than the tax disclosed by the examination, the FTB mails a notice of deficiency to the taxpayer. Section 19033. Within 60 days of mailing of each proposed deficiency assessment the taxpayer may file a written protest with the FTB, specifying the amount upon which the protest is based. Section 19041. If no protest is filed within the 60-day period, the amount of the proposed deficiency becomes final. Section 19042.

If a protest is timely filed, the FTB reconsiders the deficiency assessment and, if requested, grants a hearing. The FTB may act on the protest in whole or in part. Section 19044. The FTB’s action on the protest, whether in whole or in part, is final upon the expiration of 30 days from the date when it mails notice of its action to the taxpayer, unless within those 30 days the taxpayer files a written appeal. Section 19045. After the Office of Taxpayer Appeals (OTA) determines the appeal, it notifies the taxpayer in writing. Section 19047. That determination is final 30 days later unless within that time the taxpayer files a petition for a rehearing. Section 19048.

When a deficiency is determined and the assessment becomes final, the FTB mails notice, and a demand to the taxpayer for payment. The deficiency assessment is due and payable at the expiration of 15 day from the demand. Section 19049.

Jarrod Reiser offers testimony on behalf of the FTB. Based on the information provided in paragraph 1 of his Declaration, Reiser is qualified to authenticate Exhibits 1-10 (listed below). The Declaration of Douglas Beteta, counsel for FTB, authenticates Exhibits 11 and 12.

Polk’s objections to the Reiser Declaration (Objections 11-38) are overruled. Reiser provides sufficient facts to establish personal knowledge of the subject matter about which he speaks and the exhibits he authenticates. His statements are not conclusory, speculative, or improper opinion, and they do not assume facts.

The FTB argues Polk’s claims for tax refunds are barred because she has not fully paid the taxes owed for the challenged years.

Article XIII Section 32 of the California Constitution and Tax & Rev. Code §19382 provide for a “pay first, litigate later” scheme. This requires any taxpayer who wishes to challenge an assessment to first pay it. The FTB relies on Cal. Const. Art. XIII, Sect. 32 and Rev. & Tax Code §19832 and multiple cases,[1] all of which establish the “pay first, litigate later rule.”

In this action, Polk sues for a refund for tax years 2015, 2016, and 2018. Complaint at ¶¶ 13-15. The issue presented by this motion is whether she fully paid the taxes determined by the FTB to be owing for those years. If she did not, then she is barred from proceeding with her claims.

As set forth below, the undisputed evidence establishes that for each of the tax years 2015, 2016, and 2018, Polk did not pay all the amounts the FTB determined were owed. Accordingly, she has no basis for pursuing her claims for refunds.

The FTB has presented evidence establishing that in April 2022 it issued a Notice of Assessment to Polk for the tax year 2015. The Notice was mailed to her last known address. Undisputed Material Facts (UMFs) 2, 3; Reiser Declaration ¶4 and Exhibit 1 (showing a proposed assessment of $10,846.81). Polk did not protest the assessment within 60 days, and it became final. UMF 4; Reiser Declaration, ¶4. In August 2022, the FTB mailed a State Income Tax Balance Due Notice to Polk’s last known address. As of February 2023, she has not fully paid the balance due; and Polk admits this. According to the FTB there is an unpaid balance of $1,169.71. UMFs 5, 6; Reiser Declaration, ¶¶ 5, 6 and Exhibits 2, 11, and 12.

Polk’s objections to this evidence (Objection Nos. 1, 2, 11-16, 33, and 38) are overruled. Polk offers no competing evidence that demonstrates the existence of a triable issue of material fact. Therefore, the undisputed evidence is that Polk owes money on her 2015 taxes. Thus, she cannot litigate the amount owed for the Tax Year 2015. Her claim therefore lacks merit as a matter of law.

In January 2021, the FTB mailed to Polk’s last known address a Notice of Proposed Assessment for the Tax Year 2016 (in the amount of $6,558.38). UMFs 7, 8; Reiser Declaration, ¶7 and Exhibit 3. Polk filed a protest. UMF 9; Reiser Declaration, ¶7. In response, FTB issued a response affirming its assessment ($6,646.28) and mailed it to Polk at her last known address. UMF 10; Reiser Declaration, ¶8 and Exhibit 4. Polk appealed that notice of action to the OTA on July 30, 2021. UMF 11; Reiser Declaration, ¶9 and Exhibit 5. Polk subsequently requested a dismissal of her appeal and on April 14, 2022, the FTB dismissed it. UMF 12; Reiser Declaration, ¶10 and Exhibit 6. On April 27, 2022, the FTB mailed Polk a notice reaffirming its prior assessment for Tax Year 2016. UMFs 13, 14; Reiser Declaration, ¶11 and Exhibit 7. On May 16, 2022, the FTB mailed a State Income Tax Balance Due Notice to Polk at her last known address. UMF 15; Reiser Declaration, ¶12 and Exhibit 8. As of February 2023, Polk has not paid the outstanding assessment in full. She admits this; a balance of $6,990.27 remains. UMF 16; Reiser Declaration, ¶13 and Exhibits 11 and 12.

Polk’s objections to this evidence (Objection Nos. 3-8, 17-26, 34, and 38) are overruled. Polk again offers no evidence in opposition that demonstrates the existence of a triable issue of material fact. Therefore, the undisputed evidence is that Polk owes money on her 2016 taxes and thus cannot litigate the amount owed for Tax Year 2016. This claim therefore lacks merit as a matter of law.

In June 2022, the FTB issued Polk a notice of proposed assessment for the Tax Year 2018, in the amount of $28,137.98. It was mailed to Polk’s last known address. UMFs 17, 18; Reiser Declaration, ¶14, Exhibit 9. Polk did not protest the assessment, and it became final 60 days later. UMF 19, Reiser Declaration, ¶14. On September 19, 2022, the FTB mailed to Polk a State Income Tax Due Notice. UMF 20; Reiser Declaration, ¶ 15, Exhibit 10. As of February 2023, Polk has an outstanding balance of $27,444.76 for the 2018 Tax Year. UMF 21; Reiser Declaration, ¶16 (as corrected by the Reiser Reply Declaration).

Polk’s objections to this evidence (Objection Nos. 9, 10, 27-32, 35-37) are overruled. Polk offers no evidence in opposition demonstrating the existence of a triable issue of material fact. Therefore, the undisputed evidence is that Polk owes money on her 2018 taxes and thus cannot litigate the amount owed for Tax Year 2018. This claim also lacks merit as a matter of law.

Based on the undisputed evidence, the FTB is entitled to summary judgment in its favor. Polk has not offered any evidence that would establish a triable issue of material fact. Consequently, Polk cannot pursue a challenge to the tax assessments, or seek a refund as to Tax Years 2015, 2016, and 2018.

The undisputed evidence establishes that Polk has not fully paid the taxes assessed for any of the years for which she seeks a refund. Based on the “pay first, litigate later” rule, her claims are barred as a matter of law.

Summary judgment is therefore granted in favor of Defendant Franchise Tax Board and against Plaintiff Polk. Defendant is instructed to lodge and serve an appropriate proposed Judgment within 10 days, and to provide notice of this ruling.

[1] Pacific Gas & Electric Co. v. State Board of Equalization (1980) 27 Cal.3d 277; People ex rel. Franchise Tax Bd. v. Superior Court (1985) 164 Cal.App.3d 526, 545-546 (disapproved on other grounds in Dana Point Safe Harbor Collective v. Superior Court (2010) 51 Cal.4th 1); Horack v. Franchise Tax Board (1971) 18 Cal.App.3d 363, 370 [“As was noted by the Supreme Court in its opinion in Aronoff v. Franchise Tax Board, Supra, the Revenue and Taxation Code does not provide for the judicial review of a tax assessment prior to the collection of the tax. A suit to recover alleged overpayments is the exclusive means of obtaining judicial review of tax proceedings.”].