To: Board of Supervisors
From: Robert Campbell, Auditor-Controller
Report Title: Deny claim filed for unitary property taxes paid for tax year 2019/20
☒Recommendation of the County Administrator ☐ Recommendation of Board Committee
RECOMMENDATIONS:
DENY the claim filed by TransBay Cable, LLC in the total amount of $1,042,412, plus interest, in unitary property taxes paid for tax year 2019/2020.
FISCAL IMPACT:
No fiscal impact.
BACKGROUND:
In April 2024, TransBay Cable, LLC (“Claimant”) submitted a claim for refund of unitary property taxes against the County, essentially alleging that the statutory formula used to calculate their property tax rate violates the California Constitution and the US Constitution. Claimant requests interest on the requested refund amount. [This claim is provided in Attachment A.]
In January 2023, Santa Clara County prevailed before the Court of Appeal on the basis that the statutory tax rate imposed on property owned by such entities does not violate the California Constitution.
ANALYSIS:
Under the California Constitution, certain property owned or used by utilities and telecommunication companies, among others, is annually assessed by the State Board of Equalization ("BOE"). (Cal. Const., article XIII, § 19.) The amount of such "unitary property" assessments attributed to the County by the BOE are then taxed by the County in accordance with a statutory formula. (See Rev. & Tax. Code,§ 100.)
The Auditor-Controller uses the amount of unitary property assessments annually provided by the BOE to calculate the amount of taxes to be levied on these properties in accordance with a formula mandated by state law (Rev. & Tax. Code, § 100). Based on this formula, the unitary tax rate for 2019/2020 is 1.6865%. The Auditor-Controller has confirmed that the rate was correctly calculated pursuant to the State law, and the Office of the State Controller has deemed it correct.
Claimants argue that they are entitled to a partial refund of taxes on the grounds that they were illegally levied because the formula used to calculate the rate is unconstitutional. However, the County is given no discretion on its calculation of the unitary tax rate; it is a mandated formula set by the State. A January 2023 decision from the California Court of Appeals has affirmed the constitutionality of the rate. (County of Santa Clara v. Sup. Ct. (2023) 87 Cal.App.5th 347.) For these reasons, the claim should be denied.
Additionally, Claimant’s claim is denied as untimely per Revenue & Taxation Code section 5097(a)(2) because there is no evidence that it was submitted within four years of the first installment payment of property taxes.
CONSEQUENCE OF NEGATIVE ACTION:
Failure to take the recommended action would result in interest continuing to accrue on a potential court-ordered refund of property taxes.
cc: Rebecca Hooley, Assistant County Counsel; Jaskiran Samra, Deputy County Counsel; Laura Strobel, County Administrator’s Office