• Successfully Challenging a Local Tax Scheme

    From useapen@21:1/5 to All on Fri Jan 19 08:32:38 2024
    XPost: ca.politics, alt.business, alt.fan.rush-limbaugh
    XPost: talk.politics.guns, sac.politics

    Richmond is interfering with interstate commerce by exposing Chevron
    to the possibility of being taxed more than once by other cities or states
    for the same business activity.”

    —The San Francisco Chronicle, summarizing the court’s decision

    Like many California municipalities, the Bay Area city of
    Richmond has been struggling to balance its books in
    recent years. But one “tax solution” that Richmond officials
    came up with posed a dangerous, unconstitutional

    Richmond voters had approved Measure T, which converted the local business license tax from a traditional
    per-employee assessment into a tax on the value of the
    raw materials processed by a business. That new tax would
    have looked to the value of crude oil processed at Chevron’s
    Richmond refinery, skyrocketing Chevron’s local tax liability
    from $60,000 to $20 million per year, in a single jump.

    But the “unequivocal evidence” (in the words of the
    reviewing judge) that Chevron had been deliberately
    targeted through this new tax was not sufficient grounds to
    set it aside. Instead, Pillsbury proved that the tax violated
    both federal and state law, in two different respects.

    First, the scheme ran afoul of the Commerce Clause of the
    U.S. Constitution, Pillsbury argued, by failing to “fairly
    apportion” the tax so that there would not be multiple
    taxation of the same business activity if every jurisdiction
    adopted the same scheme. Here, the scheme carried a
    significant risk of multiple taxation.

    Second, because the tax was based on the value of the
    product being used—crude oil in Chevron’s case—it was a
    type of “use tax” that California lawmakers had reserved
    for the state itself, and was therefore off-limits to local
    municipalities like Richmond.

    The judge agreed with Chevron on both arguments,
    invalidating the tax and ordering Richmond to refund the
    company approximately $20 million in overpaid taxes. With
    the early and definitive defeat of this tax scheme, Chevron
    and Pillsbury also put California municipalities on notice that
    similar experiments in targeted taxation were equally
    unlikely to succeed.

    https://www.pillsburylaw.com/images/content/3/4/v2/3465/Litigation- TaxControversy-Chevron-CS.pdf

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