California Supreme Court Rules Local Agencies Cannot Impose Claim Requirements on Tax Refund Claims in Addition to Government Claims Act Procedures
A local government entity cannot require a person seeking a tax refund to first comply with a local administrative review procedure before submitting a claim to the entity under the Government Claims Act (GCA).
The GCA establishes a standardized procedure for bringing “all claims for money or damages against local public entities,” with limited exceptions. In 2013, the California Supreme Court held that the GCA applies to claims for tax refunds against local government entities. The GCA presentation process generally requires the claimant to file a claim for money or damages with the clerk, secretary, or auditor of the local government entity and provides that the government entity then has 45 days to rule on the claim before it is deemed denied. If the claim is denied, the claimant may bring a lawsuit against the entity on the cause of action alleged in the claim.
Recently, in Tesoro Refining & Marketing v. City of Carson, a taxpayer sued the City of Carson seeking a refund of the City's oil industry business license tax. The City argued that the taxpayer’s claim should be dismissed because the taxpayer did not follow the City’s mandatory administrative review procedure before filing their lawsuit. The California Supreme Court held that the City’s administrative review procedure was not a bar to the lawsuit. It reasoned that the Legislature enacted the GCA to provide uniform procedures for presenting claims for damages. Requiring a taxpayer to follow the City’s administrative review procedures, in addition to the GCA’s procedures, would frustrate the purpose of the GCA.
The Court rejected the characterization that the City’s refund procedures were not a claim but instead an administrative remedy or prerequisite to a claim. The Court reasoned that “claims for money or damages,” as used in the GCA, encompass any prelawsuit demand asserting a right to monetary compensation for an alleged unlawful act or omission. As a result, a taxpayer is not required to comply with such procedures before filing a claim under the GCA or bringing a lawsuit.
Local government entities should review their claims procedures, including tax refund procedures, to make sure they align with the GCA.
If you have any questions regarding this case, the GCA, or tax refund issues, please contact Zach Heinselman or Trisha Ortiz.
