J. H. McKnight Ranch, Inc. v. Franchise Tax Board

Opinion

GEMELLO, J.

In 1995, the Franchise Tax Board (Board) informed the J. H. McKnight Ranch, Inc. (McKnight) that it had underpaid state taxes by approximately $97,000. McKnight protested without success, then paid the disputed tax and filed a refund claim. In discussions with McKnight, the Board reiterated the view that the tax was owed, but offered to deny the refund claim summarily so that McKnight could proceed in court. McKnight accepted the offer and filed suit.

The Board now concedes that under the contested liability doctrine, no tax was ever owed. It nevertheless suggests that…