Laws, Regulations & Annotations

Property Taxes Law Guide – Revision 2017

California Constitutional Provisions

ARTICLE XIII Revenue and Taxation

Section 32

Sec. 32. Collection of tax may not be obstructed. No legal or equitable process shall issue in any proceeding in any court against this State or any officer thereof to prevent or enjoin the collection of any tax. After payment of a tax claimed to be illegal, an action may be maintained to recover the tax paid, with interest, in such manner as may be provided by the Legislature.

Construction.—An action by public utility companies seeking mandamus and declaratory relief to compel the Board to adjust the assessment of their real property to its 1975–76 value in accordance with Article XIII A of the Constitution is barred by the provisions of this section. Pacific Gas & Electric Co. v. State Board of Equalization, 27 Cal.3d 277. This section broadly limits in the first instance the power of the courts to intervene in tax collection matters and applies if the prepayment judicial determination sought would impede tax collection. That an action turns on a challenge to the Board's demands for information does not alone lift the constitutional bar. The Board may compel the disclosure of information if its inquiry is authorized, its requests are specific, and the information sought is reasonably relevant to the inquiry. The role of the court in assessing the propriety of a prepayment challenge to a demand for information is that of examining the Board's authority to undertake the inquiry. Thus, prepayment relief must be limited to those instances in which it is clear that under no circumstances can the Board prevail and establish its claim, and only then may a suit for injunction be maintained. Western Oil & Gas Assn. v. State Board of Equalization, 44 Cal.3d 208. A tax assessee is not prohibited by this section from obtaining prepayment judicial relief from an assessor's demand for information if the assessee can show that the information is not reasonably relevant to the proposed tax. Although the constitutional provision prohibits judicial relief from a challenged tax until after its payment, the ban must yield to the requirements of the Constitution of the United States, and the guarantee against unreasonable searches and seizures rooted in the 4th amendment thereof imposes a requirement of reasonable relevance. The fact that there exists a conceivable basis for the tax itself does not preclude prepayment judicial review of a demand for information which is not relevant. Union Pacific Railroad Co. v. State Board of Equalization, 49 Cal.3d 138.

The Franchise Tax Board cannot be prevented or enjoined from the assessment or collection of any tax. This section means what it says and is, as a part of the fundamental, constitutional law of the state, a constitutional mandate that permits no deviations. Injunctive relief is not available to enjoin the state's collection of a tax, even if the tax statute is unconstitutional and the alleged tax therefore void. People ex rel. Franchise Tax Board v. Superior Court, 164 Cal.App.3d 526. Statutes governing administrative tax refund procedures, backed as they are by a plenary constitutional authority, are to be strictly enforced. Farrar v. Franchise Tax Board, 15 Cal.App.4th 10. This section generally bars prepayment review of tax measures, not only by suits for injunctive relief but also by actions for declaratory relief or mandamus. The addition of Revenue and Taxation Code Section 12202.1 as the result of the 1988 enactment of initiative Proposition 103 does not justify an exception to this section. Calfarm Ins. Co. v. Deukmejian, 48 Cal.3d 805. This section did not bar a class action brought by a city on behalf of all local governments in the state against the state, in which it was alleged that Stats. 1978, Ch. 2, extending mandatory coverage under the state's unemployment insurance law to include state and local governments and nonprofit corporations, mandated a new program or higher level of service on local agencies for which reimbursement by the state of local compliance costs was required under Article XIII B of the Constitution. The city was not challenging, directly or indirectly, the validity or application of the unemployment insurance law as such, or the propriety of any "tax" assessed thereunder; rather it claimed that all its costs of affording unemployment compensation to its employees were subject to a statutory and constitutional subvention that the state refused to make. City of Sacramento v. State of California, 50 Cal.3d 51.

A declaratory relief judgment entered in favor of an individual who purchased real property at a trustee's sale, adjudging that the documentary transfer tax must be based upon the purchase price, without regard to the amount of indebtedness attached to the property and assumed by the purchaser, did not improperly prevent or enjoin a tax in violation of this section, which applies to actions against the State, not to those involving assessments by local governments. Brown v. Los Angeles County, 72 Cal.App.4th 665. A taxpayer did not fail to exhaust his administrative remedies before seeking a declaratory relief judgment ordering the Board to refrain from requiring payment of interest as a precondition to acting upon his claim for refund for taxes which had already been paid in full, since consideration of the validity of the Board's policy did not involve any issue subject to determination through the administrative refund remedy available to him. Agnew v. State Board of Equalization, 21 Cal.4th 310. Parties bringing declaratory relief action to challenge the constitutionality of a local government fee were not barred by the rule of "pay first, litigate later," doctrine of exhaustion of administrative remedies, or doctrine of adequate legal remedy; plaintiffs had paid the challenged fee, and the administrative refund process was inadequate to address their comprehensive constitutional challenge to the ordinance's validity. Under these circumstances, if a tax ordinance or law provides the taxpayer with no mechanism for a constitutional challenge to the entire structure under which the ordinance or law operates, then the exhaustion doctrine does not apply and recourse to the administrative agency is not required before initiation of court action. Andal v. City of Stockton, 137 Cal.App.4th 86.

Tax.—This section unambiguously states that an action may be maintained after payment of a tax claimed to be illegal, and it makes no mention of interest on the tax. Accordingly, it deprives a court of jurisdiction only to prevent or enjoin the collection of any tax, and prepayment of interest as well as the tax is not a prerequisite to either an administrative claim for refund or a subsequent legal action for refund of taxes. Agnew v. State Board of Equalization, 21 Cal. 4th 310; Chen v. Franchise Tax Board, 75 Cal. App. 4th 1110.

Local tax.—This section applies to local taxes as well as to state-imposed taxes, and payment of a challenged assessment is required before seeking declaratory or injunctive relief. Injunctive or declaratory relief will not be granted where there is a plain, complete, speedy, and adequate remedy at law. Flying Dutchman Park, Inc. v. San Francisco, 93 Cal.App.4th 1129.

Claims for refund.—This section limits taxpayers' actions to recover taxes to the manner provided by the Legislature. Where claims for refund have not been settled either administratively or judicially, it is appropriate for the State Board of Equalization to retain those funds, pending the outcome of those claims. Rider v. San Diego County, 11 Cal.App.4th 1410. The California Constitution expressly provides that actions for tax refunds must be brought in the manner prescribed by the Legislature. This constitutional limitation rests on the premise that strict legislative control over the manner in which tax refunds may be sought is necessary so that governmental entities may engage in fiscal planning based on expected tax revenues. Because Article XIII, Section 32 vests the Legislature with plenary control over the manner in which tax refunds may be obtained, a party must show strict, rather than substantial, compliance with the administrative procedures established by the Legislature. IBM Personal Pension Plan v. City and County of San Francisco, 131 Cal.App.4th 1291. The power of the State to provide the remedy of an action to recovered alleged overpayments of taxes as the exclusive means of judicial review of tax proceedings is unquestioned. Therefore, where the Legislature has provided an adequate remedy at law for taxpayers seeking refunds of taxes paid, a taxpayer must utilize it within applicable time limitations and is not entitled to a writ of mandate to overturn a Board of Equalization decision against its interests. Nast v. State Board of Equalization, 46 Cal.App.4th 343.

A telephone company state assessee forfeited its right to file a property tax refund action because it failed to check the box on its reassessment petition form indicating that the petition was to serve as a claim for refund, and did not otherwise notify the State Board of Equalization pursuant to Revenue and Taxation Code Sections 5148, subdivisions (f) and (g), that it intended its petition to serve as a claim for refund. Sprint Telephony PCS, L.P. v. Board of Equalization (2015) 238 Cal.App.4th 871.

The Legislature has statutorily established a three-step process for handling challenges to local property tax assessments and refund requests. A taxpayer seeking judicial relief must first exhaust his remedies before the administrative body empowered initially to correct the error. In the local property tax context, application of the exhaustion principle means that a taxpayer ordinarily may not file or pursue a court action for a tax refund without first applying to the local board of equalization for assessment reduction under Revenue and Taxation Code Section 1603 and filing an administrative tax refund claim under Revenue and Taxation Code Section 5097. For purposes of the exhaustion requirement, the filing of a refund claim under Section 5097 generally does not excuse a taxpayer's failure first to file with the local board of equalization an application for assessment reduction under Section 1603. The third and final step in the process is the filing of an action in superior court pursuant to Revenue and Taxation Code Section 5140. Steinhart v. County of Los Angeles (2010) 47 Cal. 4th 1298.

Mandamus.—Although this section requires payment of a tax before challenging it, it does not require a suit for refund. Rather, it authorizes the Legislature to provide the procedures for challenging a tax, and the Legislature has adopted specific procedures for contesting the Department of Motor Vehicle's fleet registration fees in Vehicle Code Section 8202. As that statute permitted a taxpayer to bring a court action for review of the director's decision, and as its wording was more consistent with administrative mandamus than with an original action for a refund, administrative mandamus was the appropriate procedure for review, provided that the disputed amount had been paid. American President Lines, Ltd. v. Zolin, 38 Cal.App.4th 910. A class action via mandamus seeking to require a county to follow Revenue and Taxation Code Section 1604(c) is not a prohibited class claim for property tax refund. Bunker v. Orange County, 103 Cal.App.4th 542.

Because the taxpayer did not request a new hearing before the board or otherwise challenge the board's determination that it lacked jurisdiction by reason of untimeliness (Revenue and Taxation Code sections 51.5, subdivision (b), 80, subdivision (a)(3)), case law providing that an assessment appeals board can be compelled to hold a hearing when it erroneously fails or refuses to decide an issue did not apply, and mandate relief thus was unavailable. William Jefferson & Co., Inc. v. Orange County Assessment Appeals Board No. 2 (2014) 228 Cal.App.4th 1.

Beneficial interest.—A fire protection district lacked standing to seek a writ of mandate against an assessment appeals board that upheld a lower assessed valuation for a taxpayer's real property, resulting in the district's having to refund previously collected taxes. With respect to the assessed valuation assigned to a particular piece of property, the district did not have any special interest to be served or particular right to be preserved or protected over and above the interest it held in common with the public at large, and thus, it did not meet the beneficial interest requirement for issuance of the writ. Sacramento County Fire Protection District v. Sacramento County Assessment Appeals Board, 75 Cal.App.4th 327.

Action to recover taxes.—A petition for writ of mandamus under Code of Civil Procedure section 1085 does not lie to challenge a property assessment where an adequate remedy at law is available. A suit for a refund of taxes is an adequate remedy. Little v. Los Angeles County Assessment Appeals Board, 155 Cal.App.4th 915.

Decisions Under Former Article XIII, Section 15.

Construction.—The provision of this section relating to suits to enjoin the collection of taxes and to recover taxes claimed to have been illegally collected does not apply to county assessors in assessing or collecting taxes for county purposes. Eisley v. Mohan, 31 Cal.2d 637.

Action to recover taxes.—The provision of this section relating to actions to recover taxes claimed to have been illegally collected does not extend the remedy by action at law to cases other than as provided by statute or under the common law. Consequently, it is not violated by Revenue and Taxation Code, Section 4806. Southern Service Co., Ltd. v. Los Angeles County, 15 Cal.2d 1, 15. See also Westinghouse Electric & Mfg. Co. v. Chambers, 169 Cal. 131, 139, 140; Yasunaga v. Stockburger, 43 Cal.App.2d 396, 401.

The provision of this section relating to actions to recover taxes claimed to have been illegally collected is applicable only to taxes levied under this article. It is not violated, accordingly, by Section 10278 of the Revenue and Taxation Code relating to actions for refund of motor vehicle transportation license tax, a tax not levied under this article. Winters v. State Board of Equalization, 93 Cal.App.2d 87.

The provision of this section allowing recovery of interest is not applicable where, on the basis of the taxpayer's income before renegotiation of its contract with the federal government, the tax was computed properly. Bermite Powder Co. v. Franchise Tax Board, 38 Cal.2d 700.