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Legal Ruling No. 184

May 3, 1956


A corporation cannot file a valid claim for refund while it is under suspension for nonpayment of taxes.

X Corporation was suspended on January 3, 1956 for nonpayment of an arbitrary assessment covering the income year ended December 31, 1954. On March 14, 1956, the taxpayer submitted a claim for refund of tax paid for the income year ended December 31, 1951. The taxpayer has not, as yet, applied for revivor. Advice has been requested as to whether the refund claim is valid. The above ruling is based on Section 23301.

Where a domestic corporation fails to pay franchise tax, Section 23301 provides for suspension, not only of the corporation's right to do business, but also of the right to exercise any corporate powers, rights or privileges, except the right to amend its charter for the purpose of changing its corporate name.  While the legislature recognized the necessity to make an exception insofar as changing the corporate name, no other exceptions are permitted under this provision. Since the filing of a claim for refund would constitute the exercise of corporate powers, the instant taxpayer's attempted filing must be deemed a nullity.

The period within which a claim may be filed expired the day after the taxpayer's attempted filing and therefore a subsequent revivor will not validate the filing. The California courts have held that the filing of a complaint by a suspended corporation is not valid and does not toll the statute of limitations, and a subsequent revivor does not validate the action unless the statute of limitations is still open when the certificate of revivor is issued.  Cleveland v Gore Bros., 14 Cal. App. 2d 681; Hall v Citizens National Bank, 53 Cal. App. 2d 625. By analogy, the same rule applies to the filing of a claim for refund.

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