Tax
Apr. 16, 2014
Taxpayer group's lawsuit questions fee definition
The Howard Jarvis Taxpayers Association is pushing forward with a Sacramento County Superior Court battle over whether a fire fee passed by lawmakers in 2011 might actually qualify as an unconstitutional tax.
Daily Journal Staff Writer
The Howard Jarvis Taxpayers Association is pushing forward with a Sacramento County Superior Court battle over whether a fire fee passed by lawmakers in 2011 might actually qualify as an unconstitutional tax.
Leaders of the conservative tax policy watchdog argue the $150 fire fee - which applies to owners of homes and businesses located on primarily rural property protected by state fire agency CalFire - should've been defined as a tax.
Under Proposition 26, passed in 2010, that designation would have required it to win two-thirds legislative approval instead of the simple majority vote required to pass a fee.
"A fee is in return for a commodity - like water or electricity - or a service," said Tim Bittle, the association's director of legal affairs. Revenues from the state fire-service charge, which ostensibly go to pay for the cost of defending homes and businesses in CalFire-protected areas, don't clearly benefit the individual property owners who pay the so-called fee, Bittle said.
The term "fee," he added, doesn't apply to "the kinds of things that the revenue for this fee are being spent on, which is mostly ... for the benefit of the general public."
Prop. 26, backed by the California Chamber of Commerce and the Howard Jarvis association, among others, narrowed the use of the term "fee" to refer to efforts to recoup the cost of services and goods provided to payers.
Although some property owners have received inspections to measure fire risks, the Howard Jarvis association argues in its third amended complaint that "the State cannot prove that 'the manner in which ... costs are allocated to a payor bear a fair or reasonable relationship to the payor's burdens on, or benefits received from'" the government.
In its answer to the association's latest complaint, the state broadly denies the group's legal arguments but provides little elaboration. A court hearing hasn't been set.
The state kept the 2012 case on ice for almost a year and a half with multiple demurrers, according to Bittle, but the suit is now moving forward with discovery. The association, which filed the case as a prospective class action on behalf of property owners who paid the fee, has had to narrow the number of parties it's representing.
Out of 825,000 payers, the group now represents between 10,000 and 12,000 - those who've already and unsuccessfully sought a fee exemption from CalFire. Plaintiffs have yet to win class certification.
Several bills have also been introduced regarding the fee. AB 1519, by Tim Donnelly, R-Twin Peaks, would strike penalties for not paying the fee, and AB 1954, by Assemblywoman Diane Harkey, R-Dana Point, would allow fee payers to seek exemption not only through CalFire but also via the State Board of Equalization.
The case is important to the Howard Jarvis association for reasons beyond just the fee in question. Bittle said it could test the strength of Prop. 26 and potentially provide the kind of precedent the anti-tax group wants.
Before 2010, "Courts used to candidly say that the boundary line between fees and taxes was blurred," Bittle said. Judges "decided on a case-by-case basis, which is really difficult for lawmakers and lawyers."
Although the passage of what the association deems "tax-like fees" has dropped since Prop. 26 became law, Bittle said the strength of the measure depends on how it's enforced in court. The association wants "some positive language out of an appellate court - a published decision" requiring that charges passed as fees demonstrate a "closer nexus" between fee payers and the services they receive in return, Bittle said.
Such a precedent would help the association on related issues, including its opposition to county fees for marriage certificates, which fund domestic violence programs, or to proposed fees for automobile owners that would fund anti-theft measures. <a style="color:#123f72;"
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