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Tax litigation seeks to protect local California businesses

In a legal challenge that claims that a recent real estate tax measure will hurt local California businesses, two plaintiffs have initiated a tax litigation procedure that seeks to have it declared illegal. The suit alleges that the Centinala Valley high school district is attempting to raise money to hire extra teachers and expand school programs by illegally and disproportionately assessing higher local real estate parcel taxes on businesses in the district. Four local elementary school districts in the area are also named in the tax litigation procedure along with the Centinala Valley High School district.

The plaintiffs allege it is unfair that local home owners will have a lesser real estate tax obligation for each land parcel than local businesses will. The suit claims that the tax rate should be the same by law for all real estate parcels regardless of whether the owners are residential or commercial. One of the plaintiffs is also a former member of the Centinela Valley School Board.

Representation for the plaintiffs has described the original modification of the prior uniform parcel taxation law, known as Measure CL, as an election strategy. The claim has been made that the strategy behind Measure CL was to maintain lower real estate taxes for local homeowners living in the district and gain voter approval. In their defense against the parcel tax litigation, the five school districts describe the 70 percent vote last November in favor of the higher tax rate for businesses as one made in support of public education.

In California, the parcel tax is used mainly to provide funding for public education and state law specifies that the tax be uniform. In 1978, an amendment to the California constitution, Proposition 13, enabled local government to levy special taxes if the measure is approved by two-thirds of the district voters. The recent measure voted in levies a square-foot tax rate of 2 cents on their residential lots while nonresident land holdings are taxed at a rate of 7.5 cents per square-foot. If the plaintiff's parcel tax litigation efforts succeed in proving that Measure CL is illegal, the school district stands to lose an estimated $7 million in tax proceeds. Both sides of the suit are facing a precedent-setting case whose outcome can affect additional and future parcel tax collection issues throughout the state.

Source: The Daily Breeze, "Litigation seeks to invalidate South Bay school parcel tax," Rob Kuznia, June 21, 2013

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