Read the TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Foundation Fiscal Fact summarizing this brief at http://www.taxfoundation.org/legacy/show/24309.html.
Statement of the Case
Since 1942, Respondent City of San Diego has imposed a Rental Unit Business Tax (hereafter “RUBT”) on owners of residential rental property within the City. Approximately 139,000 taxpayers (including Appellants) paid the tax, raising some $11 million annually, with the revenue deposited in the General Fund and not used for any landlord-specific purpose. All parties concede that the RUBT is a tax and not a fee, and consequently, concede that it cannot be raised without a vote by the electorate as required by Proposition 218, which passed in 1996.
In 2004, faced with a revenue shortfall, Respondent City adopted Resolution R-299382, imposing a processing charge (termed a “fee”) on landlords and all businesses. The City at the time estimated that the costs of collecting the RUBT was $3.5 million per year, and allocated that amount evenly among all the payers. Appellants paid the processing charge under protest and filed a claim for refund, alleging that the charge was in fact a tax, and invalid for failing to be approved by the electorate. After exhausting administrative appeals, Appellants filed suit.
Cross motions for summary judgment were filed. The court below granted summary judgment for the Respondents, holding that the charge fell within an exception created by Government Code § 50076 in that it covers the costs of the City’s RUBT collection activities. Appellant filed a notice of appeal on April 1, 2008.
Summary of Argument
The processing charge imposed by Resolution R-299382 is a tax because its purpose is to raise revenue for a quintessential government activity (tax collection), as demonstrated by the circumstances surrounding its adoption and statements made by Respondent. The charge is not a “fee” because the revenue from the charge funds no services to the payors, nor does it confer any exclusive benefits or privileges to them, nor does the revenue from the charge fund any program that regulates the conduct of the payors.
Whether tax collection is a “special project” or a general governmental enterprise does not alter the conclusion that the charge is a tax and not a fee. Further, § 50076 does not substitute for the constitutional tax/fee inquiry based upon numerous authorities on tax/fee distinctions, most notably in the California Constitution.
Finding that the processing charge imposed by Resolution R-299382 is a tax would also uphold the purpose and meaning of California Constitution art. XIII C, § 1, which sought debate and voter consent where discrete groups are targeted for revenue increases but the benefits accrue to society at large.Share