Mooney, Wright & Moore (“MWM”) was successful in representing Elk Hills Power, LLC (“Elk Hills”) in a significant property tax case that culminated in a favorable opinion by the California Supreme Court that was issued on August 12, 2013. MWM served as lead counsel for Elk Hills throughout the litigation, and Paul Mooney argued the case before the California Supreme Court.
In a unanimous opinion written by Justice Ming Chin, the California Supreme Court reversed the Fourth District Court of Appeal’s published decision as well as the trial court’s ruling in favor of the California State Board of Equalization (“Board”). The Board had added millions of dollars to the assessed value of the Elk Hills power plant associated with intangible “emission reduction credits” (“ERCs”), thereby directly taxing intangible rights for property tax purposes in contravention of California law. The Court’s opinion reaffirmed the interpretation of the California Constitution first announced more than sixty-five years ago in Roehm v. Orange County (1948), holding that intangible assets and rights are exempt from property taxation. Specifically, the Court held that the Board is not permitted to directly tax ERCs, or any other intangible asset or right, despite language in California Revenue and Taxation Code §110(e) which allows the taxing authorities in California to “assume the presence” of intangibles that are necessary to the beneficial and productive use of property. The Court’s Opinion is also consistent with prior California Supreme Court and appellate opinions that have applied this constitutional exemption in a wide variety of situations.
The Opinion is important to numerous California property taxpayers – not just those who own power plants. In fact, the case generated thirteen different amicus briefs filed on behalf of a wide variety of different businesses that pay property taxes in California, as well as governmental agencies involved in assessing property taxes throughout the state and certain environmental groups. In addition, because the State of California was one of the first jurisdictions in the country to recognize and uphold the exemption for intangible assets from property taxation, the California Supreme Court’s opinion in the Elk Hills case will likely have national implications by reinforcing the rationale underlying the exemption for intangible assets in other jurisdictions where the law addressing this important issue is not as clear or as well-developed. Click this link to read the Court’s opinion http://www.courts.ca.gov/opinions/documents/S194121.PDF.