by: Jeffrey Quinn
Three cheers for Nevada District Court Judge Jessie Walsh, who just last week hammered the California Franchise Tax Board in its relentless pursuit of Nevadan Gilbert Hyatt, whom California continues to think resides in California!
Recent reportage by the California Taxpayers' Association mentions that just last week, Judge Walsh rejected a motion by the FTB for a new trial, and further rejected the FTB's motion asking her to reduce a Las Vegas jury's award of some $388 million to citizen Hyatt!
Seems FTB alleged "judicial errors" in the former trial, as the basis for a motion allowing a do-over. Judge Walsh, however, sees it a little differently, noting that "FTB essentially relies on previously unsuccessful arguments."
And to add insult to injury, Judge Walsh further ruled that FTB must post a bond in connection with the inevitable appeal to the Nevada Supreme Court. And by the way--California had better start sharpening up its pencil if it thinks it can avoid paying Hyatt's legal tab of some $3.2 million.
Recall that all of this started when Hyatt moved from California to Nevada in 1991, and subsequently received a multi-hefty-million patent license. Looked just like the usual golden goose to the FTB, which commenced a residency audit shortly thereafter, resulting in the inevitable finding of California residency (What a surprise.) and further alleging fraud.
And what really rankled Hyatt was the way in which the California Revenooers conducted themselves during the audit--engaging in any number of sleazy and surreptitious shenanigans. So he sued the blokes in a Nevada court. "Not so fast," claimed the FTB. Who says a Nevada court has any jurisdiction over a California administrative agency like the Franchise Tax Board? And who says FTB employees can be sued just for doing their jobs? They're "immune," claimed FTB.
The United States Supreme Court, that's who! They ruled in 2003 (and unanimously, as we recall) that Hyatt was well within his rights suing in a Nevada court, which is why the whole mess later landed back in Judge Walsh's lap.
And for even another laugh, consider this: California argues that it shouldn't have to post a bond because it's clearly "good" for the money if it loses.
Right--tell that to all the folks who will be getting this year's California tax refunds in the form of IOUs!
So let the blokes pony up the requisite $22 to $37 million per year while their appeal languishes on further in the courts.
Stay tuned--looks like this one will continue to entertain Nevadans for years to come.
CONSULT YOUR TAX ADVISOR - This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation.
Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He is also a contributor to the recently-published twelfth edition of Tax Savvy for Small Business, published by Nolo. He can be reached at 831-7288, and welcomes comments at
jquinn@ashleyquinncpas.com.
