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Quote of the Day - Fire, water and government know nothing of mercy. - Unknown
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Unequal Application Of Tax To Water Rights Holders Declared Unconstitutional

Some four years ago, the State of California levied small, three-cents-per-acre-foot water usage fees on some 7,000 family farmers, and succeeded in collecting some $20 million.  That fee was just overturned by the court as unconstitutional, and the State Water Resources Control Board must now refund the fees. 

Proposition 13 just struck another blow to regulatory fees applied to those who hold water rights in the State of California.  You remember Prop 13 - it was a Constitutional amendment that limits real property (land) tax rates and assessments, and places restrictions on state and local government's power to tax real property. 

You wouldn't think that Proposition applies to water rights, but while water rights are a real property right, here we're talking about regulatory fees, which is an exception to the tax restrictions of Prop 13.  You know the government - if they want revenue, they'll just call a tax something else.  Given the exception, the fees imposed can't exceed the reasonable cost of providing services necessary to the activity for which the fee is charged and can't be levied to bring in revenue to the agency.

The California State Water Resources Control Board asked the California Board of Equalization to tax (er, excuse me, exact annual regulatory fees) on water rights held by water rights permits and licenses, including those who simply entered into a contract with those who held the water rights.  Most of the holders of these rights were in the Central Valley of California, and the small fee quickly added up because of the amount of water used. 

The case, California Farm Bureau Federation v. California State Water Resources Control Board, turned on two issues:  the unequal application of the fee (only 40% of the water users were being taxed) and the lack of direct application of the fee charged by the government to the benefit provided by the government. 

In other words, it was just a tax, and not everyone was taxed. 

Printer friendly page Permalink Email to a friend Posted by J. Craig Williams on Sunday, January 21, 2007 at 11:00 Comments Closed (0) |
 
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