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Tax Law

SALT Scoreboard – California Local Tax Edition

A recent wave of local tax initiatives passed by simple majority vote in cities and counties across California has resulted in either court validation actions or challenges under the state constitution. Article XIII C, Section 2(d) of the California Constitution provides that “[n]o local government may impose, extend, or increase any special tax unless and until that tax is submitted to the electorate and approved by a twothirds vote.” Thus far, trial courts have split as to whether this provision applies to voter-initiated local taxes, and one appellate court already has concluded it does not.

By and large, the cases turn on the interpretation of California Cannabis Coalition v. City of Upland (2017) 3 Cal.5th 924, wherein the California Supreme Court held that Article XIII C, Section 2(b) of the California Constitution does not require voter-initiated local general taxes to be submitted to the electorate at a general election, as opposed to a special election. Article XIII C, Section 2(b) states “[n]o local government may impose, extend, or increase any general tax unless and until that tax is submitted to the electorate and approved by a majority vote” at a “general election.” The Court in Upland concluded that in the context of this specific provision, “local government” does not extend to the electorate and voter initiatives related to local general taxes may be considered in a special election. Given the similarity in language between Article XIII C, Sections 2(b) and 2(d), a San Francisco trial court – and now the First District Court of Appeal – concluded the reasoning and holding of Upland apply and that special taxes introduced by voter initiative only require a simple majority vote. Trial courts in Fresno and Oakland, on the other hand, relied on language in Upland that distinguished the “procedural timing requirement” in Section 2(b) and the “procedural two-thirds vote requirement” in Section 2(d) to conclude Upland does not demand a similar result when interpreting the latter.

This special edition of Eversheds Sutherland’s SALT Scoreboard – California Local Tax Cases, discusses the five key California cases showcasing this divide. A number of the cases are now on appeal, and since one appellate court already weighed in, the question remains whether the California Supreme Court will take review of the case and clarify its decision in Upland.

Read the special edition of the Everesheds Sutherland SALT Scoreboard here.