May It Please The Court

RSS Feeds
MIPTC Author
About J. Craig Williams

May It Please The Court
by Leonard Rivkin
Barnes & Noble CLE Books

Weblog Comments
Return to the Weblog

Quote of the Day - Hopefully I will be able to maintain or at least level their taxes and look at a way that we can reduce taxes, My goal is to prevent future tax increases we need to hold the line on taxes. - Barbara Perez
Claim Your Profile on Avvo

California's State Board of Equalization's End-run Attempt Around Prop 13 Thwarted

If you run a business, you know all about the California State Board of Equalization.  It's a euphemestically named government organization that is our equivalent of the IRS.  You know, those folks who collect taxes.

Proposition 13 was enacted by California voters in an attempt to keep property taxes down.  The SBE's mission, it seems, is to figure out ways to increase tax revenue to the state.  One of the ways the SBE tried to do that was to avoid the annual decrease in the value of fixtures (those things that are attached to real property, like machines bolted to the floor and the like).

You see, each year, fixtures depreciate, which means less taxes are due because the value of those fixtures have declined.  Worn out.  Not as useful as the year before.  Requires more maintenance.

You get the idea.

Well, so did the SBE, and they saw tax revenues slip away.  Until some bright bulb in the SBE got the idea to reclassify fixtures as real property.  We all know that real property increases in value over time - at least that was the theory that fueled the sub-prime mortgage crisis, but that's a whole 'nother story for another day.

In the SBE's test-dummy attempt to pull this switcheroo, the SBE applied this theory to the petroleum industry first before attempting to apply it to every other industry in California.  If you think about that plan, it wasn't the smartest.  The petroleum industry has cash flow, and lots of it - especially since we keeep buying gas for our cards and trucks.  So when the petroleum industry caught wind of this plan, it tasked its association, the Western States Petroleum Association, to file a legal challenge.

The WSPA did just that, citing to the agoe-old division between the valuation of fixtures and the valuation of real property, and the attendant accounting methodologies used to appraise those two items. Accountants depreciate fixtures, but not real estate.

Prop 13 was designed to limit taxes, not increase them, and the Court saw right through the SBE's plan, telling the government to keep the distinction between fixtures and real property, never the twain to meet.

Your fixtures are once again safe from the evil overlord of taxes. 


Posted by J. Craig Williams on Friday, January 20, 2012 at 09:08 Comments (1)


Comments by Neck pain relief from on Wednesday, January 25, 2012 at 13:02 - IP Logged
I do not know if ití»s just me or if everybody else encountering issues with your site. It seems like some of the text in your content are running off the screen. Can someone else please provide feedback and let me know if this is happening to them as well? This might be a problem with my browser because Ií»ve had this happen previously. Cheers

Add your Comments
You may also leave audio comments by calling our audio comment line at 206-338-3088. Leave us a message and we'll post it here.

Please do not include any HTML or URLs in the comment field. If included, your comment will not be accepted.
*Indicates required fields
Character Count: