In the bad old days, taxes were assessed by individual tax collectors with the power to seize property. The only good part was that jury trials were available at common law in actions against tax collectors to recover illegally collected taxes. But once federal tax collectors started transferring tax receipts to the U.S. treasury, and the common law action was replaced by a statutory action, the right to a jury trial disappeared for federal tax refund actions. The California Supreme Court has just decided to follow the federal lead and has held that there is no constitutional right to a jury trial in state tax refund actions.
In Franchise Tax Bd. v Superior Court (Gonzales) (June 6, 2011, S176943) 2011 Cal Lexis 5467, the estate of a deceased taxpayer paid $15 million as part of a tax amnesty program, reserving the right to seek a refund. When the taypayer’s personal representative sought that refund, he demanded a jury trial.
On an issue of first impression, the supreme court held that there was no right to a jury trial in this state income tax refund action.
The court noted that there is no right to a jury trial in tax collection proceedings, and the statutes governing state income tax refunds are silent on the right to a jury trial.
The state constitutional right to a jury trial “is the right as it existed at common law in 1850, when the Constitution was first adopted.” In the court’s analysis, the right to a jury trial depends on whether a claim arising out of a modern statute is “of like nature” or “of the same class” as a common law right of action. Most courts have viewed actions for a refund from the government as “new and distinct proceedings, subject to such conditions as the legislative branch sees fit to impose.”
So, the court reviewed case law comparing statutory tax refund actions to the common law writ of assumpsit. Despite some similarities, the court concluded that the statutory cause of action is fundamentally different from the old private right of action against tax collectors.
Attorneys who want to argue a tax refund case before a jury are out of luck, they’ll have to tell it to the judge instead.
For a discussion of income tax issues in probate administration, go to CEB’s California Decedent Estate Practice, chap 33.
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