Judge Kenny declared that the sales and use tax clawback provisions of AB 1484 (2012)
violated various constitutional provisions. The clawback provisions of AB 1484 allowed the Department of Finance (DOF) to order city sales and use taxes to be withheld where DOF determined that a city’s successor agency did not pay the amount demanded by DOF in the true-up payment or due diligence review process.
The court declined to rule on the League’s other arguments. With respect to the property tax reduction clawback provisions of AB 1484, the court found that no evidence had been presented that any county auditor-controller had taken, or threatened to take, any action to withhold a city’s property tax. The court concluded that the relief the League requested is not warranted at this time. Further, the court stated League arguments claiming AB 1484 constituted an unconstitutional delegation of authority from the Legislature to DOF, and that DOF had violated the Administrative Procedures Act, would best be addressed in a lawsuit by a city that has been subject to a specific action by DOF. By declining to specifically rule on these arguments, the court has left open the potential for individual cities to assert these arguments in future litigation.
Consistent with the court’s order, the League will prepare a formal order for the court’s signature, and once entry of judgment has been made, the state will have 60 days to decide whether to appeal the ruling to the California State Court of Appeal.