The California Supreme Court, in Franchise Tax Board v. Sup. Ct. of San Francisco (No. S176943, June 6, 2011), unanimously reversed a Court of Appeal decision allowing jury trials in actions for refunds of state income taxes, holding that California taxpayers have no constitutional right to a jury trial to resolve disputed tax refunds.
Tom Gonzales, representing his son’s estate, filed a complaint in 2006 alleging that the estate had paid over $15 million as part of a tax amnesty program and reserved the right to seek a refund. He sought a refund of state personal income taxes from 2000 and 2001 and demanded a jury trial. The trial court denied a motion by the Franchise Tax Board to strike the jury demand. The Franchise Tax Board then sought and was denied writ relief at the Court of Appeal. The Court of Appeal declined to disturb the trial court’s finding, deciding as a matter of first impression that the right to a jury existed in an action for refund of state income taxes.
The California Supreme Court reversed the Court of Appeal. Writing for the Court, Associate Justice Carol Corrigan held that although jury trials had once been allowed in personal rights of action against individual tax collectors, modern tax refund claims were different: “[S]tatutory actions for tax refunds from the government have generally not been placed in the same class as the common law right of action against individual tax collectors. 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.”
The opinion draws on parallels in federal law, stating that “[a]t common law, sovereign immunity barred actions against the government, by way of jury trial or otherwise …[and] [t]he right to a jury trial provided by the Seventh Amendment to the United States Constitution does not apply in statutory actions against the federal government,” and that this principle has been applied to federal tax refund actions, therefore there was no independent statutory or state constitutional basis for a right to jury trial in state tax refund actions.
In many circumstances it would be valuable for taxpayers to have the right of a jury. The California State Supreme Court’s decision, although limited to California state income tax, could have ramifications for taxpayers who request juries in tax cases other than income taxes.