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Business Taxes Law Guide—Revision 2024
Sales And Use Tax Law
Revenue and Taxation Code
Division 2. Other Taxes
Part 1. Sales and Use Taxes
Chapter 10. Violations
Section 7156
7156. Civil proceedings. (a) In the case of any civil proceeding which is—
(1) Brought by or against the State of California in connection with the determination, collection, or refund of any tax, interest, or penalty under this part, and
(2) Brought in a court of record of this state, the prevailing party may be awarded a judgment for reasonable litigation costs incurred in that proceeding.
(b) (1) A judgment for reasonable litigation costs shall not be awarded under subdivision (a) unless the court determines that the prevailing party has exhausted the administrative remedies available to that party under this part.
(2) An award under subdivision (a) shall be made only for reasonable litigation costs which are allocable to the State of California and not to any other party to the action or proceeding.
(3) No award for reasonable litigation costs may be made under subdivision (a) with respect to any declaratory judgment proceeding.
(4) No award for reasonable litigation costs may be made under subdivision (a) with respect to any portion of the civil proceeding during which the prevailing party has unreasonably protracted that proceeding.
(c) For purposes of this section—
(1) The term "reasonable litigation costs" includes any of the following:
(A) Reasonable court costs.
(B) Based upon prevailing market rates for the kind or quality of services furnished any of the following:
(i) The reasonable expenses of expert witnesses in connection with the civil proceeding, except that no expert witness shall be compensated at a rate in excess of the highest rate of compensation for expert witnesses paid by the State of California.
(ii) The reasonable cost of any study, analysis, engineering report, test, or project which is found by the court to be necessary for the preparation of the party's case.
(iii) Reasonable fees paid or incurred for the services of attorneys in connection with the civil proceeding, except that those fees shall not be in excess of seventy-five dollars ($75) per hour unless the court determines that an increase in the cost of living or a special factor, such as the limited availability of qualified attorneys for the proceeding, justifies a higher rate.
(2) (A) The term "prevailing party" means any party to any proceeding described in subdivision (a) (other than the State of California or any creditor of the taxpayer involved) which—
(i) Establishes that the position of the State of California in the civil proceeding was not substantially justified, and
(ii) (I) Has substantially prevailed with respect to the amount in controversy, or
(II) Has substantially prevailed with respect to the most significant issue or set of issues presented.
(B) Any determination under subparagraph (A) as to whether a party is a prevailing party shall be made—
(i) By the court, or
(ii) By agreement of the parties.
(3) The term "civil proceeding" includes a civil action.
(d) For purposes of this section, in the case of—
(1) Multiple actions which could have been joined or consolidated, or
(2) A case or cases involving a return or returns of the same taxpayer which could have been joined in a single proceeding in the same court, these actions or cases shall be treated as one civil proceeding regardless of whether the joinder or consolidation actually occurs, unless the court in which the action is brought determines, in its discretion, that it would be inappropriate to treat these actions or cases as joined or consolidated for purposes of this section.
(e) An order granting or denying an award for reasonable litigation costs under subdivision (a), in whole or in part, shall be incorporated as a part of the decision or judgment in the case and shall be subject to appeal in the same manner as the decision or judgment.
(f) For purposes of this section, "position of the State of California" includes either of the following:
(1) The position taken by the State of California in the civil proceeding.
(2) Any administrative action or inaction by the State Board of Equalization (and all subsequent administrative action or inaction) upon which that proceeding is based.
History—Added by Stats. 1988, Ch. 1138, in effect January 1, 1989.
Costs awarded under Taxpayer's Bill of Rights should not be offset.—Litigation costs awarded under the Taxpayer's Bill of Rights are not an ordinary debt to the taxpayer which can be offset under Government Code sections 12419.4 and 12419.5. Garg v. State Board of Equalization(1997) 53 Cal.App.4th 199.
This section complements, but does not supplant, provisions for awards of costs under Code of Civil Procedure.—If the trial court determines that the state's position was not "substantially justified" as provided in section 7156, claimant may be awarded "reasonable litigation costs," including reasonable attorney fees. The court may, despite finding that the Board's position was substantially justified, award costs under Code of Civil Procedure section 1032. Agnew v. State Board of Equalization (2005) 134 Cal.App.4th 899.