This court has repeatedly recognized that "money is the lifeblood of modern government. Money comes primarily from taxes, and, as the importance of a predictable income stream from taxes has grown, governments at all levels have established procedures to minimize disruptions..." that would interfere with essential public operations. (Batt v. City and County of San Francisco (2007) 155 Cal.App.4th 65, 71 [65 Cal.Rptr.3d 716] (Batt); see Flying Dutchman Park, Inc. v. City and County of San Francisco (2001) 93 Cal.App.4th 1129, 1135-1136 [113 Cal.Rptr.2d 690] (Flying Dutchman); Helms Bakeries v. St. Bd. Equalization (1942) 53 Cal.App.2d 417, 421 [128 P.2d 167].) This principle is of sufficient magnitude to warrant a constitutional prohibition on any "legal or equitable process ... to prevent or enjoin the collection of any tax" (Cal. Const., art. XIII, § 32 (article XIII, section 32)), reinforced by numerous statutes to the same effect. In Daar v. Alvord (1980) 101 Cal.App.3d 480 [161 Cal.Rptr. 658], the Court of Appeal held that an action aimed at challenging and halting the collection of a local property tax would not evade these prohibitions by being framed as one intended to prevent governmental waste under Code of Civil Procedure section 526a (section 526a).
In 2008, the voters of San Francisco amended the existing municipal payroll tax in a manner one taxpayer—who, not incidentally, was not subject to the tax—believed unlawful for a number of reasons. He filed a complaint for declaratory relief that the amending measure was invalid, and sought an injunction "preventing the expenditure of taxpayer monies in implementing, applying or enforcing" the measure. Following Daar, the trial court concluded that the taxpayer lacked standing to challenge the measure, and dismissed the complaint.
Although we do not agree that Daar is controlling, we do agree with the trial court's ultimate conclusion. The crucial point distinguishing Daar is the existence of a state statute expressly prohibiting interference with the collection of a real property tax in language virtually identical to article XIII, section
After a full and fresh reexamination of the issue, we believe there are weighty policy reasons why no California taxpayer plaintiff has ever been permitted to halt implementation of a local tax. The hostility to the interruption of local tax revenues—of which article XIII, section 32 is but one example—traces back to the 19th century. There are legitimate concerns for limiting the ability of persons not required to pay a tax themselves to challenge the validity of that tax, particularly when they would enjoy a more advantageous position than given to persons actually required to pay it. And the most obvious negative consequence of allowing legal challenges by persons lacking a direct financial interest in the operation of a tax is the unacceptable risk of paralyzing the financial stability of local governments with a flood of lawsuits. In light of our analysis, we agree with the trial court's ultimate conclusion that plaintiff lacked standing. We thus affirm the judgment of dismissal.
In 1970, the City and County of San Francisco (City) enacted a Payroll Expense Tax Ordinance (Payroll Tax). (S.F. Bus. & Tax Regs. Code, § 901 et seq.) It imposed a tax one and one-half percent "upon every person engaging in business within the City." (Id., § 903; see id., § 903.1.) The scope of the tax on "payroll expense" applied to "compensation paid to, on behalf of, or for the benefit of an individual, including salaries, wages, bonuses, commissions, property issued or transferred in exchange for the performance of services ... and any other form of compensation, who, during any tax year, performs or renders services, in whole or in part in the City." (Id., former § 902.1, subd. (a).)
In 2004, the City's voters enacted Proposition K, which extended the Payroll Tax to "pass-through" entities, which were defined as including "a trust, partnership, corporation described in Subchapter S of the Internal Revenue Code of 1986, ... limited liability company, limited liability partnership, professional corporation, and on other person or entity ... which is not subject to the income tax imposed by Subtitle A, Chapter 1 of the Internal Revenue Code of 1986, ... or which is allowed a deduction in computing such tax for distributions to the owners or beneficiaries of such person or entity." (S.F. Bus. & Tax Regs. Code, § 902.2; see id., § 902.1.)
On December 30, 2008, plaintiff John Chiatello filed a verified complaint challenging the Proposition Q change to the Payroll Tax as applied to "pass-through" entities. Identifying himself as "a resident of the City who owns real property located within the City and pays property taxes," plaintiff stated the aim of his complaint as follows: "Enforcement by the City of the invalid and illegal provisions of Proposition Q will result in wasteful expenditures of taxpayer monies. Code of Civil Procedure Section 526a provides a cause of action to taxpayers such as plaintiff to prevent wasteful expenditures of taxes in this manner. Thus, by this action, plaintiff seeks a declaration that the City may not enforce Proposition Q to tax distributions of profits to owners of pass-through entities."
In his single cause of action—styled for "Taxpayer Action to Prevent Waste—CCP § 526a Declaratory Relief—CCP § 1060"—plaintiff alleged that "Proposition Q's Amendments were not effective" because "the City misled
Plaintiff had additional reasons for assailing the pass-through taxation provisions of Proposition Q. As he alleged at length, "distributions of profits by a Partnership are not compensation for services." "Taxation of Profit Distributions" was also invalid because it was prohibited by Revenue and Taxation Code section 17041.5, which forbids local government from imposing an income tax. Finally, plaintiff alleged that Proposition Q was invalid because it "violates the Single Subject Rule ... in the City's Charter."
Plaintiff alleged that declaratory relief "declaring the invalidity of Proposition Q is necessary to prevent the actual and threatened expenditure of taxpayer monies in implementing and applying these invalid and unlawful provisions, including but not limited to the development of new forms and procedures for submitting and processing such returns, the creation of website materials addressing the changes to the Payroll Expense Tax, the training of staff to handle returns and issues under these new provisions, and the costs of enforcement as taxpayers attempt to comply with the law. The expenditure of these funds is a waste of taxpayer monies and requires immediate adjudication of the legality of Proposition Q." Plaintiff prayed for a declaratory judgment "pursuant to Code of Civil Procedure Section 526a" determining that "any expenditure of taxpayer monies to implement, apply or enforce ... Proposition Q to be a waste of taxpayer monies," prohibited by state law, and enacted in violation of the City's single subject rule; in addition, plaintiff also prayed for issuance "of a judgment pursuant to Code of Civil Procedure Section 526a restraining and preventing the expenditure of taxpayer monies in implementing, applying or enforcing ... Proposition Q."
The City interposed a general demurrer to the complaint. In addition to arguing that Proposition Q was validly drafted and adopted, the City maintained that "plaintiff lacks standing to challenge San Francisco's Payroll Expense Tax." Citing Daar v. Alvord, supra, 101 Cal.App.3d 480, the City explained that "in tax disputes, the rule is `Pay First, Litigate Later,' precluding injunctive or declaratory relief," and "plaintiff may not invoke section 526a to subvert the `pay first' rule."
In his opposition to the demurrer, plaintiff cited a number of decisions as authority that he did have standing to press his claim based on section 526a. Plaintiff argued that the "pay first" principle did not apply to him because he "is not subject to the Payroll Expense Tax," and thus had no obligation to pay
The trial court conducted two hearings. The first was largely devoted to the issue of whether plaintiff had standing to prosecute the action. However, the court continued the matter for a week so that it could "take a harder look at the [Proposition] 218 aspect." After hearing additional argument on that issue, the trial court issued this order: "Plaintiff lacks standing to sue. This Court may not grant injunctive relief to prevent tax collection. (See Daar v. Alvord[, supra,] 101 Cal.App.3d 480.) Plaintiff fails to allege he is injured or will be injured by Proposition Q. Any party who may be injured by Proposition Q has an adequate remedy to challenge its validity by paying the tax first and then bringing a claim for refund before seeking judicial relief. [¶] Leave to amend is denied. The text of the amendments to [San Francisco Business and Taxation Regulations Code] section 902.1(d) was included in the voter pamphlet, and the effect of Proposition Q was adequately explained to voters. There is no reasonable likelihood that plaintiff will be able to state a valid cause of action."
Plaintiff perfected this timely appeal from the judgment of dismissal entered in due course.
"Because this case comes to us on a demurrer for failure to state a cause of action, we accept as true the well-pleaded allegations in plaintiffs' first amended complaint. `"We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed." [Citation.] Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.]'" (Evans v. City of Berkeley (2006) 38 Cal.4th 1, 6 [40 Cal.Rptr.3d 205, 129 P.3d 394].) We likewise accept facts that are reasonably implied or may be inferred from the complaint's express allegations. (Curcini v. County of Alameda (2008) 164 Cal.App.4th 629, 633, fn. 3 [79 Cal.Rptr.3d 383]; Traders Sports, Inc. v. City of San Leandro (2001) 93 Cal.App.4th 37, 43 [112 Cal.Rptr.2d 677].) "`"A demurrer tests the legal sufficiency of the complaint ...." [Citations.] On appeal from a dismissal after an order sustaining a demurrer, we review the order de novo, exercising our independent judgment about whether the complaint states a cause of action as a matter of law. [Citations.] When the trial court sustains a demurrer without leave to amend, we must also consider whether the complaint might state a cause of action if a defect could reasonably be cured by amendment. If the defect can be cured, then the judgment of dismissal must be reversed to allow the plaintiff an opportunity to do so. The plaintiff bears the burden of demonstrating a reasonable possibility to cure any defect by amendment. [Citations.]'" (Batt, supra, 155 Cal.App.4th 65, 71, quoting Flying Dutchman, supra, 93 Cal.App.4th 1129, 1134-1135.)
However strict the concept of standing may be in other contexts, it has been considerably relaxed by section 526a, which provides in pertinent part: "An action to obtain a judgment, restraining and preventing any illegal expenditure of, waste of, or injury to, the estate, funds, or other property of a county, town, city or city and county of the state, may be maintained against any officer thereof, or any agent, or other person, acting in its behalf, either by a citizen resident therein, or by a corporation, who is assessed for and is liable to pay, or, within one year before the commencement of the action, has paid, a tax therein. This section does not affect any right of action in favor of a county, city, town, or city and county, or any public officer; provided, that no injunction shall be granted restraining the offering for sale, sale, or issuance of any municipal bonds for public improvements or public utilities...."
In point of fact, this liberality has twice outrun the literal statutory language. Notwithstanding the plain language of section 526a identifying the plaintiff as "a citizen resident," it can be invoked by nonresident taxpayers. (Irwin v. City of Manhattan Beach (1966) 65 Cal.2d 13, 18-20 [51 Cal.Rptr. 881, 415 P.2d 769].) And courts have applied section 526a to agencies of the state, even though only local governmental units and officers are named in the statute's text. (Serrano v. Priest (1971) 5 Cal.3d 584, 618, fn. 38 [96 Cal.Rptr. 601, 487 P.2d 1241]; Blair v. Pitchess, supra, 5 Cal.3d 258, 268; see Cates v. California Gambling Control Com., supra, 154 Cal.App.4th 1304, 1308-1309 [failure of state officials to collect money due under gaming compacts]; Vasquez v. State of California (2003) 105 Cal.App.4th 849, 854 [129 Cal.Rptr.2d 701] ["It is established that an action lies under section 526a ... to enforce the government's duty to collect funds due the State."]; see also Cornelius v. Los Angeles County etc. Authority (1996) 49 Cal.App.4th 1761, 1775-1776 [57 Cal.Rptr.2d 618] and decisions cited.)
Waste does not encompass the great majority of governmental outlays of money or the time of salaried governmental employees, nor does it apply to
Daar v. Alvord cannot be understood without appreciating the role played by article XIII, section 32, which provides: "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."
It is easy to discern why Daar v. Alvord became the prime focus of the parties' dispute. The case involved one of the first decisions in the wake of the passage of Proposition 13 to consider the sea change that measure wrought in the assessment and collection of ad valorem real property taxes. Plaintiff Daar and his company owned real property and paid the taxes assessed on it by Los Angeles County. He then sued county officials for a refund of those taxes, for himself and "all persons and entities similarly situated." (Daar v. Alvord, supra, 101 Cal.App.3d at p. 482.) That part of the suit was not at issue. What was in play was the cause of action for injunctive relief under section 526a "to prevent the defendants from expending those funds constituting the assertedly excessive taxes collected by defendants and, further, to require defendants to impound those funds pending resolution of the matter," namely, Daar's claim that officials were refusing to apply Proposition 13's 1 percent cap to the unsecured portion of the assessment roll. Daar appealed from the trial court's denial of a preliminary injunction. (Daar v. Alvord, supra, 101 Cal.App.3d 480, 482-483.)
Daar's reliance upon section 526a was countered by the defendants invoking "the long established principle, recognized both in the California
The issue of collection was the point the Daar plaintiffs attempted to use to keep their suit alive. The Court of Appeal rejected the attempt: "Plaintiffs do not herein challenge the collection of assertedly illegally imposed taxes by defendants, but rather seek to prevent the collected taxes from being spent by defendants and to require their impounding pending a determination of the lawfulness of imposition of the taxes at the pre-Proposition 13 rate. Defendants contend, however, that, if it is legally permissible to enjoin a governmental entity from spending what it has collected, the constitutional and statutory provisions concerning collection will be rendered totally ineffective, a result unintended by either the framers of the Constitution or the Legislature.
"In resolving the issue presented herein, we consider whether there is any conflict between Code of Civil Procedure section 526a and section 32 of article XIII of the California Constitution and Revenue and Taxation Code section 4807. We have no difficulty in harmonizing these constitutional and
The Daar court used the word "standing" only once, and that obliquely, in a quote from the Supreme Court. (See Daar v. Alvord, supra, 101 Cal.App.3d 480, 484, quoting the excerpt from Blair v. Pitchess, supra, 5 Cal.3d 258, 267-268 set out ante.) Nevertheless, the clear import of its reasoning was that Mr. Daar and his company, as taxpayers liable for real property taxes, lacked standing to seek a prepayment adjudication of the legality of that tax. That it is how it was construed in McKendry v. County of Kern (1986) 180 Cal.App.3d 1165, 1168 [226 Cal.Rptr. 45], the sole reported decision citing Daar.
The obvious relevance of Daar here is the conclusion that section 526a cannot be used to challenge collection of taxes a plaintiff may believe is illegal. But Daar was not the simple collision of that statute and article XIII, section 32. Equally prominent was Revenue and Taxation Code section 4807, which parallels the language of the constitutional provision. Because we believed this point was not adequately addressed in the briefs already on file, we solicited supplemental briefing from the parties. Armed with this additional input, we conclude that Daar is not controlling here.
It must be remembered that Daar involved real property taxes. These were clearly deemed of sufficient importance to the functioning of local government that the Legislature enacted Revenue and Taxation Code section 4807 replicating the constitutional rule of article XIII, section 32 prohibiting efforts to enjoin the collection of such taxes by cities and counties. And it is that statute that is key to a proper understanding of Daar v. Alvord. As far as we can determine, that statute is unique in extending immunity to local taxing authorities. Every other statute extends immunity only to suits against the state or any administering state officer. (See Fish & G. Code, § 8064 [commercial fishing landing tax]; Rev. & Tax. Code, §§ 6931 [sales and use taxes], 8146 [motor vehicle fuel tax], 9171 [use fuel tax], 11571 [private railroad car tax], 12101 [insurance tax], 13682 [gift tax], 19381 [franchise and income taxes], 30401 [cigarette tax], 32411 [alcoholic beverage tax],
The supplemental briefing, and our own research, has found no state statute extending a comparable immunity to city or county officials administering a tax other than on real property.
But if Daar v. Alvord does not bar the courthouse door, must plaintiff thus be admitted and allowed to proceed? Plaintiff identifies a number of decisions, including three from different divisions of this district, which he claims authorize his taxpayer challenge under section 526a to Proposition Q. We have examined those decisions and understand their allure for plaintiff, for several of them do indeed state, or strongly imply, that section 526a can be employed to test the validity of a taxing statute. A close analysis of these decisions demonstrates that they are not direct or controlling authority on the point before us.
Van Atta v. Scott (1980) 27 Cal.3d 424 [166 Cal.Rptr. 149, 613 P.2d 210] involved a taxpayer action filed pursuant to section 526a challenging a county's application of state statutes providing for pretrial release of persons facing criminal charges. Although there is much space devoted in the opinion to the scope and operation of section 526a (Van Atta v. Scott, supra, at pp. 447-450), there was no issue of the validity of tax collection.
Lundberg v. County of Alameda, supra, 46 Cal.2d 644 involved a taxpayer suit aimed at a county exempting certain property from taxation. Thus, although it did involve a taxation measure, the point of the litigation was not to challenge the validity of that measure, or try to halt collection of taxes, but was meant to increase the amount of taxes collected by compelling county authorities to cease granting exemptions. That is precisely the opposite of what plaintiff is seeking.
Pacific Motor Transport Co. v. State Bd. of Equalization (1972) 28 Cal.App.3d 230 [104 Cal.Rptr. 558] (Pacific Motor Transport Co.) involved a declaratory relief action by trucking firms challenging the validity of an administrative rule and its application to them. Although the details are sparse, it appears that the two firms believed that "conducting intracity and intercity operations `as separate enterprises' might lessen the overall tax burden." (Id. at p. 240.) Taking note of Revenue and Taxation Code former section 10276, the language of which paralleled the terms of article XIII, section 32, Division One of this district allowed the challenge to the validity of the regulation to proceed under Government Code former section 11440 (now § 11350).
"Care must be taken in judicial proceedings under Government Code section 11440 as they relate to such tax regulations, that the relief be limited in the statute's language to `a judicial declaration as to the validity of' the questioned regulation.... The relief afforded may not `prevent or enjoin' or otherwise hamper present or future tax assessment or collection effort against the plaintiff or anyone, as proscribed by section 10276. It will be presumed that the governmental agency will respect a judicial declaration concerning a regulation's validity. If it does not the taxpayer's remedy lies in paying the assessed taxes and then commencing action based upon such invalidity for their refund." (Pacific Motor Transport Co., supra, 28 Cal.App.3d 230, 236.)
Pacific Motor Transport Co. is distinguishable on a number of points. Unlike here, it was an action against a state taxing agency. Unlike here, it involved a challenge to an administrative regulation. Unlike here, it was not a taxpayer action brought under section 526a, but a statutorily authorized challenge brought by parties who were actually subject to the tax. Further, it relied on an immunity statute that has subsequently been repealed. (See
TRIM, Inc. v. County of Monterey (1978) 86 Cal.App.3d 539 [150 Cal.Rptr. 351] (TRIM) involved a suit by a taxpayers' organization alleging that "some real property in Monterey County was properly assessed for property tax purposes at 100 percent of its fair market value, while other [real] property in the county was assessed at substantially less than the fair market value." (Id. at pp. 541-542.) Division Three of this district stated that "section 526a has ... been construed to authorize a taxpayer to contest the legality of a taxing statute." (Id. at p. 542.) Again, the gist of the challenge was that "the county is wasting money because it is not collecting all that it could in revenues." (Id. at p. 543.) And even so, Division Three held that "these allegations are insufficient to state a cause of action for relief under Code of Civil Procedure section 526a." (Ibid.) There was no challenge to the validity of a tax, only the claim that unequal application was depriving the county of money to which it was entitled.
Division Four held that the county and the individual had standing to sue to compel the board to alter its interpretation of the state law as exempting geothermal steam from county taxation: "Taxpayer suits are well recognized in California jurisprudence and are explicitly authorized by statute. (Code Civ. Proc., § 526a.) Among other things, section 526a has been interpreted as authorizing a taxpayer to contest the legality of a taxing statute. [(Citing Lundberg v. County of Alameda and TRIM.)]" (County of Sonoma, supra, 195 Cal.App.3d 982, 989.) The court further noted that judicial scrutiny of the board's interpretation argument "need not disrupt the orderly administration of the tax laws." (Id. at p. 990.) However, Division Four ultimately held that the individual and the county were entitled to no relief by virtue of an intervening amendment to the state statute expressly exempting sales of geothermal steam from county taxation, together with a legislative declaration that the amendment "was intended to be declaratory of existing law and to `codify the longstanding administrative practice of the State Board of Equalization which interprets Section 6353 ... as exempting steam from sales and use taxation.' (Stats. 1986, ch. 420, § 2.)" (County of Sonoma, supra, at pp. 988, 990-995.)
As evident from its citation of Lundberg v. County of Alameda and TRIM, what was at issue in County of Sonoma was an exemption from taxation, and thus a failure to collect revenues, not an actual expenditure that could be characterized as waste. Like Pacific Motor Transport Co., it was an action against a state taxing agency. And there was no issue of judicial process hampering collection of sales tax. (See Humane Society of the United States v. State Bd. of Equalization (2007) 152 Cal.App.4th 349, 361, fn. 7 [61 Cal.Rptr.3d 277].)
The final authority cited by plaintiff
The statute at issue in San Miguel was not a true taxing statute, in the sense that it did not itself generate revenue, but is more properly characterized as a statute allocating revenue already generated by other statutes. (See the text of Rev. & Tax. Code, former § 97.03, subd. (c) quoted in San Miguel, supra, 25 Cal.App.4th 134, 141-142, fn. 5.) Even if the San Miguel plaintiffs had succeeded in having the statute overturned, the net effect would not have reduced homeowner's property tax bill, or diminished the revenues available to any governmental unit. This would explain the absence of any effort to halt collection under the statute. The difficulties with the conclusion carried forward from County of Sonoma have already been addressed.
This review establishes that none of the authorities cited by plaintiff stands foursquare for the proposition that section 526a may be employed to challenge the validity of an actual taxing statute, much less that such a challenge can secure declaratory and injunctive relief prohibiting collection of that tax.
These are not mere dusty words from a bygone age. Their pertinency has, if anything, gained as "the operations of government" have expanded exponentially to meet the demands of modern life. Justice Field's words continue to be quoted by California courts—and the United States Supreme Court—to this day. (E.g., State Bd. of Equalization v. Superior Court (1985) 39 Cal.3d 633, 638-639 [217 Cal.Rptr. 238, 703 P.2d 1131]; Pacific Gas & Electric Co. v. State Bd. of Equalization (1980) 27 Cal.3d 277, 283 [165 Cal.Rptr. 122, 611 P.2d 463]; Modern Barber Col. v. Cal. Emp. Stab. Com., supra, 31 Cal.2d 720, 731-732; Flying Dutchman, supra, 93 Cal.App.4th 1129, 1136; Levin v. Commerce Energy, Inc. (2010) 560 U.S. ___, ___ [176 L.Ed.2d 1131, 130 S.Ct. 2323, 2330]; California v. Grace Brethren Church (1982) 457 U.S. 393, 410-411, fn. 23 [73 L.Ed.2d 93, 102 S.Ct. 2498].)
The rationale for this federal abstention is that a taxpayer lacks standing because the financial interest "shared with millions of others, is comparatively minute and indeterminable ... remote, fluctuating and uncertain." (Frothingham v. Mellon (1923) 262 U.S. 447, 487 [67 L.Ed. 1078, 43 S.Ct. 597] (Frothingham) (decided with Massachusetts v. Mellon).) "The administration of any statute, likely to produce additional taxation to be imposed upon a vast number of taxpayers, the extent of whose several liability is indefinite and constantly changing, is essentially a matter of public and not of individual concern. If one taxpayer may champion and litigate such a cause, then every other taxpayer may do the same, not only in respect of the statute here under review but also in respect of every other appropriation act and statute whose administration requires the outlay of public money, and whose validity may be questioned. The bare suggestion of such a result, with its attendant inconveniences, goes far to sustain the conclusion which we have reached, that a suit of this character cannot be maintained." (Frothingham, supra, at p. 487.) "The party who invokes the [judicial] power must be able to show not only that the statute is invalid but that he has sustained or is immediately in danger of sustaining some direct injury as the result of its enforcement, and not merely that he suffers in some indefinite way in common with people generally." (Id. at p. 488; cf. Fairchild v. Hughes (1922) 258 U.S. 126, 129 [66 L.Ed. 499, 42 S.Ct. 274] (maj. opn. of Brandeis, J.) ["Plaintiff has only the right, possessed by every citizen, to require that the Government be administered according to law and that the public moneys be not wasted."].) The court deemed it "of much significance that no precedent sustaining the right to maintain suits like this has been called to our attention." (Frothingham, supra, at p. 487.)
These considerations have not found expression in California decisions considering section 526a. Nevertheless, an analysis of the substantive issues (see Flast v. Cohen, supra, 392 U.S. 83, 102) persuades us that the underlying reasoning is equally transferrable to the context of taxpayer actions brought under that statute to challenge the validity of local taxing statutes.
The principle that courts should refrain from enjoining collections exacted by a taxing statute first appeared in the California Constitution in 1910. (See Eisley v. Mohan, supra, 31 Cal.2d 637, 640.) But it had already been receiving judicial recognition for almost a century. (See Dows, supra, 78 U.S. 108, 111, citing Heywood v. City of Buffalo (1856) 14 N.Y. 534; Hannewinkle v. Georgetown, supra, 82 U.S. 547, 548, citing Heywood and Mooers v. Smedley (N.Y. 1822) 6 Johnson's ch. 27.
The concerns behind article XIII, section 32, Dows, and the federal decisions about taxpayer standing are clearly germane even if they have not been codified. "`The fear that persistent interference with the collection of public revenues, for whatever reason, will destroy the effectiveness of government has been expressed in many judicial opinions'" (State Bd. of Equalization v. Superior Court, supra, 39 Cal.3d 633, 638-639, quoting Modern Barber Col. v. Cal. Emp. Stab. Com., supra, 31 Cal.2d 720, 731) and has not lost any force. If anything, in these post-Proposition 13 times of restricting the ability of local government to develop new sources of revenue, interference could have even more drastic consequences.
The academic examinations of section 526a do not show that taxpayer actions have been allowed to challenge the validity of a tax or halt collections of revenue. And one of the studies, echoing Frothingham, in fact acknowledges the possibility that taxpayer actions could be used for improper reasons such as "challeng[ing] political decisions" or "constant harassment of officials" leading to "vexatious litigation" that "may plague the courts when state taxpayers' suits are brought before them." (Note, California Taxpayers' Suits: Suing State Officers Under Section 526a of the Code of Civil Procedure (1976) 28 Hastings L.J. 477, 496-497; see Collins & Myers, The Public Interest Litigant in California: Observations on Taxpayers' Actions (1977) 10 Loy. L.Rev. 329; Frothingham, supra, 262 U.S. 447, 487; cf. Com., Taxpayers' Suits: A Survey and Summary (1960) 69 Yale L.J. 895, 909-910 ["Taxpayers' suits' potential for harassment may encourage governmental immobility and inhibit progressive community action ... and unduly burden city officials who must defend against such suits ..."].) The examination of the California decisions undertaken above likewise shows the absence of a single reported instance where tax collection has been enjoined. Like the United States Supreme Court, we deem this precedential void of almost 140 years significant as circumstantial confirmation that such a power—subject to extraordinary exceptions as suggested in Dows—does not generally exist. (See Frothingham, supra, 262 U.S. 447, 488.)
It is one thing to provide an opportunity for a person or entity to challenge the legality of a tax already paid. Indeed, that opportunity is commanded by due process. (See Batt, supra, 155 Cal.App.4th 65, 71-73 and authorities cited.) However, that person or entity "may not go into court and obtain adjudication of the validity of a tax which is due but not yet paid." (State Bd. of Equalization v. Superior Court, supra, 39 Cal.3d 633, 638.) The City rightly insists that the "Pay First, Litigate Later" principle which is also embodied in article XIII, section 32, cannot be ignored. If plaintiff's construction of section 526a is accepted, the taxpayer not actually subject to a tax will
It cannot be denied that there is considerable force in plaintiff's argument that "a claim for refund could never redress the harm that [the] Complaint and Section 526a seek to prevent—the wasteful expenditure of public monies
The judgment of dismissal is affirmed. The parties shall bear their respective costs on appeal.
Haerle, Acting P. J., and Lambden, J., concurred.
But there is one other matter that is a near-categorical: the state has plenary authority to tax the sale of alcoholic beverages. (Cal. Const., art. XX, § 22; Rev. & Tax. Code, §§ 7282.3, 32010; Batt v. City and County of San Francisco (2010) 184 Cal.App.4th 163, 173 [109 Cal.Rptr.3d 129].) This exclusive authority was apparently deemed so patently obvious that when the City of Los Angeles tried to impose a tax on alcoholic beverages sold by a retailer for consumption on the premises where the sale occurred, and a Los Angeles hotel brought an action under section 526a to enjoin enforcement, the Court of Appeal stopped implementation of the law. (Century Plaza Hotel Co. v. City of Los Angeles (1970) 7 Cal.App.3d 616 [87 Cal.Rptr. 166].) In effect, these unambiguous constitutional and statutory commands served the same function, and achieved the same result, as did Revenue and Taxation Code section 4807 in Daar.
This court has explained that "a party may be an `interested' person for purposes of Government Code section 11350 if ... it ... is or may well be impacted by a challenged regulation." (Environmental Protection Information Center v. Department of Forestry & Fire Protection (1996) 43 Cal.App.4th 1011, 1017-1018 [50 Cal.Rptr.2d 892].) The most obvious impacts are "possible criminal prosecution or [professional] disciplinary action" by a licensing board (Chas. L. Harney, Inc. v. Contractors' Bd. (1952) 39 Cal.2d 561, 564 [247 P.2d 913]; see Sperry & Hutchinson Co. v. Cal. State Bd. of Pharmacy (1966) 241 Cal.App.2d 229 [50 Cal.Rptr. 489]), or loss of statutory benefits (Pacific Legal Foundation v. Unemployment Ins. Appeals Bd. (1977) 74 Cal.App.3d 150, 154-155 [141 Cal.Rptr. 474]).
"In Modern Barber Col. v. Cal. Emp. Stab. Com. [(1948)] 31 Cal.2d 720, 725-726 [192 P.2d 916], California's Supreme Court elaborated on this policy. It was said: `The due process clause does not guarantee the right to judicial review of tax liability before payment.... "The prompt payment of taxes is always important to the public welfare. It may be vital to the existence of a government. The idea that every tax-payer is entitled to the delays of litigation is unreason[able]...."' (See also Aronoff v. Franchise Tax Board [(1963)] 60 Cal.2d 177, 179 [32 Cal.Rptr. 1, 383 P.2d 409].) The taxpayers' remedy, at least ordinarily, is to pay the assessed tax and then commence an action for its refund. As stated in Modern Barber College, at page 726, and Aronoff, at page 179, `The power of a state to provide the remedy of suit to recover alleged overpayments as the exclusive means of judicial review of tax proceedings has long been unquestioned.'" (Pacific Motor Transport Co., supra, 28 Cal.App.3d 230, 234-235.)
Plaintiff's reliance on City of Anaheim v. Superior Court (2009) 179 Cal.App.4th 825 [102 Cal.Rptr.3d 171] is equally unavailing, because there the municipal tax was being challenged by parties actually being assessed the tax.
The federal statute protecting federal taxes—which dates back to 1867—is even more categorical, directing that "no suit for the purpose of restraining the assessment or collection of any [federal] tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed." (Act of Mar. 2, 1867, ch. 169, § 10, 14 Stat. 475, now codified at 26 U.S.C. § 7421(a).)