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California Taxpayers Association v. Franchise Tax Board

On December 13, 2010, the California Court of Appeal held Revenue and Taxation Code (R&TC) Section 19138, which requires a penalty for understating corporate taxes by more than $1 million, is not subject to the two-thirds legislative vote requirement for a “state tax” increase as required by Cal. Const., art. XIII A, § 3, and is therefore valid. The court further concluded that the statute, as properly construed, affords due process. R&TC 19382, provides a constitutionally adequate post-deprivation remedy in the form of a judicial refund action in which taxpayers may contest the validity of the tax penalty under R&TC 19138. (California Taxpayers Assn. v. Franchise Tax Bd. (2010) 190 Cal.App.4th 1139 [118 Cal.Rptr.3d 667].)

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