COPY
$202037 E
2 'PREME COURT
LED
IN THE SUPREME COURT OF THE SEP 20 2012
STATE OF CALIFORNIA Prank A. McGuire Clerk
oaeteeEen
JOHN W. MCWILLIAMS
Plaintiff and Appellant,
Vv.
CITY OF LONG BEACH,
Defendant and Respondent.
NOTICE OF MOTION
AND MOTION FORJUDICIAL NOTICE
IN SUPPORT OF THE CITY OF LONG BEACH’S OPENING
BRIEF ON THE MERITS
After Decision of the Second Appellate District of the
Court ofAppeal
Case No. B20083|
Appeal from the Superior Court of
the State of California for the County of Los Angeles, Case No. BC361469
Honorable AnthonyJ. Mohr, Presiding
_CITY ATTORNEY’S OFFICE COLANTUONO & LEVIN, PC
ROBERT E. SHANNON(43691) MICHAEL G. COLANTUONO(14355!)
J. CHARLES PARKIN (159162) SANDRAJ. LEVIN (130690)
MONTE H. MACHIT (140692) TIANA J. MURILLO (255259)
333 West Ocean Blvd., | 1" Floor 300 S. Grand Ave., Suite 2700
Long Beach, CA 90802-4664 Los Angeles, CA 90071-3137
(562) 570-2200 (213) 542-5700
(562) 436-1579 (fax) (213) 542-5710 (fax)
111706.4 PO
$202037
IN THE SUPREME COURT OF THE
STATE OF CALIFORNIA
JOHN W. MCWILLIAMS
Plaintiff and Appellant,
V.
CITY OF LONG BEACH,
Defendant and Respondent.
NOTICE OF MOTION
AND MOTION FORJUDICIAL NOTICE
IN SUPPORT OF THE CITY OF LONG BEACH’S OPENING
BRIEF ON THE MERITS
After Decision of the Second Appellate District of the
Court of Appeal
Case No. B20083|
Appeal from the Superior Court of
the State of California for the County of Los Angeles, Case No. BC361469
Honorable Anthony J. Mohr, Presiding
CITY ATTORNEY’S OFFICE COLANTUONO & LEVIN, PC
ROBERT E. SHANNON(43691) MICHAEL G. COLANTUONO(143551)
J. CHARLES PARKIN (159162) SANDRAJ. LEVIN (130690)
MONTEH. MACHIT(140692) TIANA J. MURILLO (255259)
333 West Ocean Blvd., 11“ Floor 300 S. Grand Ave., Suite 2700
Long Beach, CA 90802-4664 Los Angeles, CA 90071-3137
(562) 570-2200 (213) 542-5700
(562) 436-1579 (fax) (213) 542-5710 (fax)
111706.4
To the Honorable Chief Justice and Associate Justices of the
Supreme Court:
Please take notice that, pursuant to California Rule of Court 8.252
and Evidence Codesection 452, subds.(b), (c) and (h), Petitioner City of
Long Beach hereby submits this Notice of Motion and Motion for Judicial
Notice In Supportof its Opening Brief on the Merits, and movesthis Court
to take judicial notice for the purposes of the Opening Brief on the Merits
filed concurrently herewith of the following true and correct documents,
Exhibits A through L to the Declaration of Tiana J. Murillo attached hereto:
A. Internal RevenueService Revenue Ruling 1979-404, 1979-2 C.B. 382
B. Internal Revenue Service Notice 2006-50
C. Internal Revenue Service Notice 2007-11
D. Long Beach Municipal Code § 1.08.010
E. Long Beach Municipal Code § 1.08.130
F. Long Beach Municipal Code §§ 3.48.060 & 3.48.070
G. Long Beach Municipal Code§ 3.68.160
H. Chapter 1724 of the Statutes of California, Volume 2, 1958 and 1959
I. Excerpts from Chapter 1681 of the Statutes of California, Volume2,
1962 and 1963 (pp. 3266-3267)
J. Office of the Legislative Counsel’s Report on Assembly Bill No. 405,
dated June 29, 1959
111706.4
K. Excerpts from the California Law Revision Commission
Recommendationrelating to Sovereign Immunity, Number1, dated
January 1963 (pp. 803-805, 807-809). The full text of this document
can be found at
http://clrc.ca.gov/pub/PrintedReports/*Non%20Searchable/Pub043.pdf.
L. Excerpts from the California Law Revision Commission
Recommendation Relating to Sovereign Immunity, Number2, dated
January 1963 (pp. 1003, 1005, 1024-1041). The full text of this
document can be foundat http://clre.ca.gov/pub/Printed-
Reports/*Non%20Searchable/Pub044.pdf.
This motion is based on the attached Memorandum of Points and
Authorities, which contains the information as stated in Rule of Court
8.252(a), true and correct copies of the above documents, which are
attached as Exhibits A through L to the Declaration of Tiana J. Murillo, and
the proposed order granting this motion.
DATED: September 10, 2012 ROBERT E. SHANNON
J. CHARLES PARKIN
MONTE H. MACHIT
LONG BEACH CITY ATTORNEY’S
OFFICE
333 West Ocean Blvd., 11Floor
Long Beach, CA 90802-4664
(562) 570-2200
(562) 436-1579 (fax)
111706.4
111706.4
MICHAEL G. COLANTUONO
SANDRAJ. LEVIN
TIANA J. MURILLO
COLANTUONO & LEVIN, PC
Hava_&.Uae.
TianaJ. Murillo
300 S. Grand Ave., Suite 2700
Los Angeles, CA 90071-3137
(213) 542-5700
(213) 542-5710 (fax)
ATTORNEYS FOR DEFENDANT/
RESPONDENT
MEMORANDUMOF POINTS AND AUTHORITIES
I. INTRODUCTION
With the few exceptions noted in the discussion below, the
documents attached to this Motion for Judicial Notice are included in the
record on appeal in this matter. Respondent the City of Long Beach (the
“City”) collects them here, in one volume,for the convenience of the Court
and the parties. The new materials constitute relevant provisions of the
Long Beach Municipal Code, federal materials to illuminate the underlying
dispute and portions of the legislative history of the Government Claims
Act provisions in issue in this matter.
Hl. THE REQUESTEDJUDICIAL NOTICE IS APPROPRIATE
A. General Principles of Judicial Notice
Courts mayjudicially notice duly enacted municipal resolutions and
ordinances. (Cal. Evid. Code § 452, subds. (b) and (h); see also, Jordan v. Los
Angeles County (1968) 267 Cal.App.2d 794, 798 [Evidence Code § 452(b)
“permits judicial notice of legislative enactments of ‘any public entity in
the United States.’”]); Shapiro v. Board of Directors of Centre City (2005) 134
Cal.App.4th 170, 174, fn. 2 [judicial notice of municipal resolution].) A
reviewing court may take judicial notice of any matter specified in
Evidence Code § 452. (Cal. Evid. Code § 459.)
“Judicial notice is the recognition and acceptance by the court, for
use by ... the court, of the existence of a matter of law or fact that is
relevant to an issue in the action without requiring formal proof of the
-l-
111706.4
matter.” (Lockley v. Law Office of Cantrell, Green, et al. (2001) 91 Cal.App.4th
875, 882 [citations and quotations omitted]; Cal. Evid. Code § 454). The
underlying theory of judicial notice is that a matter judicially noticed is a
law orfact that is not reasonably subject to dispute. (Lockley v. Law Office of
Cantrell, Green, et al. (2001) 91 Cal.App.4th at 882; Cal. Evid. Code
§ 452(h).)
B. The Court Should Notice the Internal Revenue Service
Ruling and Notices
The Court should take notice of the documents in Exhibits A
through C. These documents constitute evidence of regulations or
legislative enactments issued under the authority of the Internal Revenue
Service, a public entity of the United States. Further, such documents are
not reasonably subject to dispute, and are capable of immediate and
accurate determination by resort to sources of reasonably indisputable
accuracy. As such, these documents maybe judicially noticed pursuantto
Evidence Code sections 452(b) and (h). (Ste. Marie v. Riverside County
Regional Park & Open Space District (2009) 46 Cal.4th 282, 293, fn. 7 [judicial
notice permissible for regulations and legislative enactments issued by or
under the authority of any public entity in the United States].)
The Internal Revenue Service Revenue Ruling and Internal Revenue
Service Notices presented as Exhibits A through C were not provided to
the trial court. However, on April 30, 2008, the City requested that the
Court of Appeal take judicial notice of the Internal Revenue Service Ruling
and Notice contained in Exhibits A and B. On May 27, 2008, the Court of
-2-
111706.4
Appeal granted the City’s request for judicial notice. Prior to the instant
motion, the City has not soughtjudicial notice of Exhibit C.
Exhibits A through C are relevant to this appeal which, among
other issues, concerns the interpretation of the City’s ordinancesaffecting
the telephone users tax in issue here. These documents will therefore
illuminate the underlying dispute, as more fully explained in the City’s
Opening Brief on the Merits.
C. The Court Should Notice Relevant Municipal Ordinances
The Court should take notice of the documents attached as Exhibits
D through G.These are duly acted municipal ordinances and are subject to
notice pursuant to Evidence Code section 452 (b) and (h). Pursuant to
Evidence Codesection 459, this Court may notice these matters on appeal.
Long Beach Municipal Code (“LBMC”) sections 3.48.060, 3.48.070
and 3.68.160 (Exhibits F and G, respectively) were provided to the trial
court and the court took notice of those ordinances.! On April 30, 2008, the
City requested that the Court of Appeal take judicial notice of LBMC
sections 3.48.060 and 3.68.160, and on May 27, 2008 the Court of Appeal
' The City cited and requested notice of LBMCsections 3.68.160, 3.48.060
and 3.48.070 along with its Demurrer to McWilliams’ Complaint. The trial
court granted the City’s Demurrer due to Respondent's failure to comply
with those ordinances. Accordingly, although this record is silent as to the
trial court’s action on the request for notice, it appears the trial court took
notice of these ordinances. Whether or not it did so, it is proper for this
Court to do so underthe authorities noted above.
-3-
111706.4
granted that request. However, prior to the instant motion, the City has not
sought notice of LBMC sections 1.08.010 or 1.08.130 (Exhibits D and E,
respectively).
Each of the documents proposed for notice in Exhibits D through G
is relevant to this appeal, as each will aid the Court's understanding of the
City’s municipal ordinances disputed in this appeal; specifically, exhibits D
through G are relevant to the Court’s determination whether the City’s
ordinances allow class claims, as more fully explained in the City’s
Opening Brief on the Merits.
D. The Court Should Take Notice of Relevant Legislative
History of the Government Claims Act
The Court should judicially notice the documents in Exhibits H
through L, which constitute relevant portions of the legislative history of
the provisions of the Government Claims Act contested in this appeal.
Exhibits K and L are reports of the Law Revision Commission that
the Courts of Appeal have found to be the legislative history of the
provisions of the Government Claims Act in issue here. (Pasadena Hotel
Dev. Venture v. City of Pasadena (1981) 119 Cal.App.3d 412, 415 fn. 3.) These
may be noticed pursuant to Evidence Code section 452(c). Further, the
Court should take notice of Exhibits H, I and J, which evidencelegislation,
and may be noticed pursuant to Evidence Code sections 452(c) and (h).
(See also Elsner v. Uveges (2004) 34 Cal.4th 915, 929 [legislative history
appropriate for judicial notice].)
111706.4
Exhibits H through L reflect facts not reasonably subject to dispute
and capable of immediate and accurate determination by resort to sources
of reasonably indisputable accuracy. (Souza v. Westlands Water Dist. (2006)
135 Cal.App.4th 879, 886, fn. 1 [Court judicially noticed water district
notice to landowners].)
The documents marked as Exhibits H through L were not presented
to the trial court. However, on April 11, 2012, the City requested that the
Court of Appeal take judicial notice of Exhibits J, K and L. On April 12,
2012 the Court of Appeal granted Respondent's request for judicial notice.
Prior to the instant motion, the City has not sought notice of the
documents markedas Exhibits H and I (1959 and 1963 California statutes).
Each of the documents proposed for notice in Exhibits H through L
are relevant here. They will assist the Court in understanding the
Government Claims Act, the history and meaning of which is relevant to
this appeal. Further, these materials demonstrate that the word “statute” as
used in Government Code section 905, subd. (a) includes local ordinances
like the City’s, notwithstanding the contrary definition of the term
included in Government Codesection 811.8.
E. The City’s Motion for Judicial Notice Complies with Rule of
Court 8.252
The Court should likewise take judicial notice of the documents in
Exhibits A through L because the City’s Motion complies with California
Rule of Court 8.252.
111706.4
First, as discussed in Sections II B. through D., supra, this motion is
relevant to the City’s Opening Brief on the Merits because Exhibits A
through C evidence regulations or legislative enactments issued under the
authority of a Federal agency. These documents illuminate the nature of
the instant action. Second, Exhibits D through G are municipal ordinances
underlying the case; notice of Exhibits D through G will help the Court
interpret the City’s ordinances. Third, Exhibits H through L evidence the
legislative history of the Government Claims Act, the interpretation of
whichis contested here.
Finally, as discussed above, the documents provided as Exhibits F
and G were presented to the trial court, but the documents in Exhibits A
through E and H through L were not. Documents A through C were not
presented to the trial court because, at the demurrer stage, it was not
necessary for the City to address the IRS ruling that formed one of the
bases of McWilliams’ complaint. Exhibits D and E were not presented to
the trial court because at that time a further exploration of the construction
of the City’s ordinances was not required. Likewise, the documents in
Exhibits H through L were not presented to the trial court because, at the
trial level, the question of whether “statute” in Government Codesection
905, subd. (a) includes municipal ordinances was not in issue, and
therefore the legislative history of the Government Claims Act was not in
issue.
Accordingly, this motion complies with California Rule of Court
8.252.
111706.4
CONCLUSION
Therefore, the City respectfully submits that this Court should,after
expiration of opposing counsel's opportunity to respond underrule 8.54,
subd. (a)(3) of the California Rules of Court, grant the City of Long Beach’s
motion to take judicial notice of the materials attached as Exhibits A
through L to the City of Long Beach’s Motion For Judicial Notice In
Support of its Opening Brief on the Merits.
DATED: September 10, 2012 ROBERT E. SHANNON
111706.4
J. CHARLES PARKIN
MONTE H. MACHIT
LONG BEACH CITY ATTORNEY’S
OFFICE
333 West Ocean Blvd., 11t* Floor
Long Beach, CA 90802-4664
(562) 570-2200
(562) 436-1579 (fax)
MICHAEL G. COLANTUONO
SANDRAJ. LEVIN
TIANA J. MURILLO
COLANTUONO & LEVIN, PC
Viana Q.Maw
TianaJ. Murillo
300 S. Grand Ave., Suite 2700
Los Angeles, CA 90071-3137
(213) 542-5700
(213) 542-5710 (fax)
ATTORNEYS FOR DEFENDANT/
RESPONDENT
-7-
DECLARATION OF COUNSEL
[CRC 8.54, subd.(a)(2)]
1. I am an attorney in good standing licensed to practice before
the Courts of this state and counsel of record for Respondent City of Long
Beach. |
2. Attached hereto as Exhibit A is a true and correct copy of
Internal Revenue Service Revenue Ruling 1979-404, 1979-2 C.B. 382.
3. Attached hereto as Exhibit B is a true and correct copy of
Internal Revenue Service Notice 2006-50.
4, Attached hereto as Exhibit C is a true and correct copy of
Internal Revenue Service Notice 2007-11.
5. Attached hereto as Exhibit D is a true and correct copy of
Long Beach Municipal Code § 1.08.010.
6. Attached hereto as Exhibit E is a true and correct copy of Long
Beach Municipal Code § 1.08.130.
7. Attached hereto as Exhibit F is a true and correct copy of Long
Beach Municipal Code §§ 3.48.060 & 3.48.070.
8. Attached hereto as Exhibit G is a true and correct copy of
Long Beach Municipal Code § 3.68.160.
9. Attached hereto as Exhibit H is a true and correct copy of
Chapter 1724 of the Statutes of California, Volume 2, 1958 and 1959.
10. Attached hereto as Exhibit I is a true and correct copy of
excerpts from Chapter 1681 of the Statutes of California, Volume 2, 1962
and 1963 (pp. 3266-3267).
111706.4
11. Attached hereto as Exhibit J is a true and correct copy of the
Office of the Legislative Counsel's Report on Assembly Bill No. 405, dated
June 29, 1959.
12. Attached hereto as Exhibit K is a true and correct copy of
excerpts from the California Law Revision Commission Recommendation
relating to Sovereign Immunity, Number1, dated January 1963 (pp. 803-
805, 807-809). |
13. Attached hereto as Exhibit L is a true and correct copy of
excerpts from the California Law Revision Commission Recommendation
relating to Sovereign Immunity, Number2, dated January 1963 (pp. 1003,
1005, 1024-1041).
I declare under penalty of perjury of the laws of the State of
California that the foregoing is true and correct. Executed on this 10% day
of September2012.
Tiana J. Murillo
111706.4
[Proposed]
ORDERTAKING JUDICIAL NOTICE OF INTERNAL
REVENUE SERVICE RULING AND NOTICES, MUNICIPAL
ORDINANCES ANDLEGISLATIVE HISTORY
Good cause appearing, IT IS HEREBY ORDERED.that the Motion
For Judicial Notice In Support of the City of Long Beach’s OpeningBrief on
the Merits is granted. IT IS ORDEREDthat this Court shall take judicial
notice of the following: _
1. Internal Revenue Service Revenue Ruling 1979-404, 1979-2
C.B. 382.
2. Internal Revenue Service Notice 2006-50.
Internal Revenue Service Notice 2007-11.
Long Beach Municipal Code § 1.08.010.
Long Beach Municipal Code § 1.08.130.
Long Beach Municipal Code §§ 3.48.060 & 3.48.070.
Long Beach Municipal Code § 3.68.160.
Oo
N
D
FT
F
F
Y
Chapter 1724 of the Statutes of California, Volume 2, 1958 and
1959.
9. Excerpts from Chapter 1681 of the Statutes of California,
Volume 2, 1962 and 1963 (pp. 3266-3267).
10. Office of the Legislative Counsel’s Report on Assembly Bill
No. 405, dated June 29, 1959.
111706.4
11. Excerpts from the California Law Revision Commission
Recommendation relating to Sovereign Immunity, Number 1, dated
January 1963 (pp. 803-805, 807-809).
12. Excerpts from the California Law Revision Commission
Recommendationrelating to Sovereign Immunity, Number2, dated
January 1963 (pp. 1003, 1005, 1024-1041).
Dated:
Chief Justice Tani Cantil-Sakauye
111706.4
Rev. Rul. 79-404
1979-2 C.B. 382
ISSUE
Whether the federal excise tax on communication services applies to amounts paid in the United
States for certain communications services between telephonesin the United States and offshore
facilities.
FACTS
X Companyoffers a service that enables communication between ships at sea or other offshore
facilities (such as drilling platforms) and telephone subscribers in the United States. Amessage
or call from a ship's radio station is relayed through an earth satellite, in orbit over the equator, to
a landline station ofX in the United States that is connectedinto the regular long distance
telephone system for completion ofthe call. The procedureis reversed for calls from the United
States. Thus, the service provided by X offers offshore stations access by radio into the United
States land telephone network.
The charge for this service is 3x dollars for the first three minutes or fraction thereof, and Ix
dollars for each additional minute or fraction thereof, regardless of the location of either the Jand
telephone or maritimeradiostations.
LAW AND ANALYSIS
Section 4251 of the Internal Revenue Code imposesa tax on the amounts paid for local
telephoneservice andtoll telephone service.
Section 4252(a)(1) of the Code defines "local telephoneservice" to includetheaccessto a local
telephone system andtheprivilege of telephonic quality communication with substantially all
persons having telephoneorradio stations constituting a part of such system, and any facility or
service provided in connection with such service. The term "local telephone service" does not
include any servicethat is a "toll telephone service" or a "private communicationservice."
Section 4252(b)(1) of the Code definesthe term toll telephone serviceto include a telephonic
quality communication for which thereis a toll charge which varies in amountwith the distance
and elapsed transmission time of each individual communication and the charge is paid within
the United States.
Rev. Rul. 77-49, 1977-1 C.B. 341, holds taxable amounts paid for radio telephonefacilities and
services that make regular telephone service accessible to offshore subscribers. The ruling points
out that such radio service is an adjunctto the landline service by performingthat function.
The merefact that access into the telephone networkis by radio is not a basis for exclusion from
the tax. This is shown bythespecific reference in section 4252(a) of the Code to radio stations,
EXHIBIT A __
and the position of the Service set forth in Rev. Rul. 77-49. The service in this case is similar to
that in Rev. Rul. 77-49 in thatit serves as an adjunct to the American continental telephone
network by making telephonesin that network accessible to the maritime telephonestations.
Literally, the service provided in this case does not come within the definition of "local
telephoneservice" or "toll telephone service" as those terms are currently defined in section 4252
of the Code.It is not local telephone service becauseit provides access to the long distance
telephone system in the United States. It is not toll telephone service because the charge for such
service does not vary with distance and therefore does not meet the requirementof section
4252(b)(1).
It is well established, however, that a statute may be given an interpretation other than that which
follows from its literal language where suchinterpretation is required in order to comport with
the legislative intent.
The Supreme Court has stated:
There is, of course, no more persuasive evidence of the purpose of a statute than the words by
which the legislature undertook to give expression to its wishes. Often these words are sufficient
in and of themselves to determine the purposeofthe legislation. In such cases we have followed
their plain meaning. When that meaning has led to absurdorfutile results, however, this Court
has looked beyond the wordsto the purpose of the act. Frequently, however, even when the plain
meaningdid not produce absurd results but merely an unreasonable one "plainly at variance with
the policy of the legislation as a whole" this Court has followed that purpose, rather than the
literal words. Whenaid to construction of the meaning of words, as usedin the statute,is
available, there certainly can be no "rule of law" which forbids its use, howeverclear the words
may appear on "superficial examination." United States v. American Trucking Associations, 310
USS. 534, 543-44 (1940).
See also Corn Products Refining Company v. Commissioner, 350 U.S. 46 (1955), 1955-2 C.B.
511, a tax case in which the Supreme Court departed from the literal wording of a statute. The
Court did so because to hold otherwise would have been "to defeat rather than further the
purpose of Congress." 350 U.S. at 51, 52.
Thelegislative history of section 4252 of the Code indicates that the type ofservice at issue here
is within the intended scopeoftaxable "toll telephone service."
Prior to the amendmentof section 4252 of the Code by section 302 of the Excise Tax Reduction
Act of 1965, 1965-2 C.B. 568, 577-578, one of the services taxed was "toll telephone service",
which was defined,in part, as a telephone or radio telephone message or conversation for which
(1) there is a toll charge, and (2) the charge is paid within the United States.
Prior to the 1965 amendmentthe communication service considered here would have been
within the definition of toll telephone service. The legislative history pertaining to the Excise
Tax Reduction Act of 1965, 1965-2 C.B. 643 and 676,indicates that Congress intended to
exempt certain private communication services from the tax and repeal the tax on telegraph
service and wire and equipmentservice. There is no indication that Congress otherwise intended
to make changesin the types of service subject to tax.
Theservice in this case is essentially “toll telephone service" as described in section 4252(b)(1)
of the Code, even though the charge for calls between remote maritime stations and stations in
the United States vary with elapsed transmission time only. Thetoll charges described in section
4252(b)(1), that vary in amount with both distance and elapsed transmission time of the
individual communication, reflect Congress’ understanding ofhow the charges for long distance
calls were computedat the time the section was enacted. The intent of the statute would be
frustrated if a new type of service otherwise within such intent were held to be nontaxable
merely because chargesfor it are determined in a manner whichis not within the literal language
of the statute.
HOLDING
The communication service in this case is toll telephone service within the meaningof section
4252(b)(1) of the Code, and amountspaid in the United States for this toll telephone service are
subject to the tax imposed by section 4251 (a).
Notice 2006-50
Communications Excise Tax; Toll Telephone Service
Tabie of Contents
SECTION 1. PURPOSE
SECTION 2. BACKGROUND
SECTION 3. TERMS DEFINED
SECTION 4, EFFECT OF ABIG, OFFICEMAX, AMTRAK, FORTIS, AND REESE BROS.
SECTION 5. REQUESTS FOR CREDIT OR REFUND ,
SECTION 6. EFFECT ON OTHER DOCUMENTS
SECTION 7. DRAFTING INFORMATION
SECTION 1. PURPOSE
(a) In general. As further described in this notice, the Internal Revenue Servicewill follow the holdings of Am. Bankers ins. Groupv.
United States, 408 F.3d 1328 (11th Cir. 2005) (AB/G); OfficeMax, Inc. v. United States, 428 F.3d 583 (6th Cir. 2005); Nat'l R.R.
PassengerCorp. v. United States, 431 F.3d 374 (D.C. Cir. 2005) (Amtrak); Fortis v. United States, 2006 U.S. App. LEXIS 10749 (2d
Cir. Apr. 27, 2006); and Reese Bros. v. United States, 2006 U.S. App. LEXIS 11468 (3d Cir. May 9, 2006). These cases hold that a
telephonic communication for which thereis a toll charge that varies with elapsed transmissiontime and not distance (time-only
service)is not taxable toll telephone service as defined in § 4252(b)(1) of the Internal Revenue Code. As a result, amounts paid for
time-only service are not subject to the tax imposed by § 4251. Accordingly, the governmentwill no longerlitigate this issue and
Notice 2005-79, 2005-46 I.R.B. 952, which states otherwise, is revoked.
(b) Credits and refunds. Taxpayers may be entitled to request credit or refund of the excise taxes paid for the services covered by
this notice. This notice provides guidance regarding these requests. in addition, the Commissionerwill authorize the scheduling of
an overassessment under § 6407 to keep the periodoflimitations open for these requests. This overassessmentwill applyto all
taxpayers andto all taxes paid for the services coveredby this notice beginning with the tax paid on servicesthat werebilled to
customers after February 28, 2003.
SECTION 2. BACKGROUND
(a) In general—(1) Tax imposed. Section 4251(a)(1) imposes a tax on amounts paid for communications services.
(2) Payment of tax. Section 4251(a)(2) providesthat the tax imposed shall be paid by the person paying for the service (taxpayer).
Section 4251(b)(2) providesthat the applicable percentage is 3 percent of amounts paid for communications services.
(3) Collection of tax. Section 4291 provides that the tax is collected by the person receiving the payment(collector). In most cases,
the collector, which is also responsible for paying over the tax to the government, is the telecommunications companythat provides
the communications services to the taxpayer.
(b) Definitions—(1) Communications services. Section 4251(b)(1) provides that the term communications services means(A) local
telephone service; (B) toll telephone service; and (C) teletypewriter exchange service. This notice does not addressteletypewriter
exchangeservice.
(2) Local telephone service. Section 4252(a) provides thatlocal telephone service means(1) the accessto a local telephone
system,andthe privilege of telephonic quality communication with substantially all persons having telephoneorradio telephone
stations constituting a part of such local telephone system; and(2) any facility or service provided in connection with such a service.
Local telephone service does not include any service thatis a toll telephone service as defined in § 4252(b)or a private
communications service as defined in § 4252(d). This notice does not address private communications service.
(3) Toll telephone service—{i) Time and distance. Section 4252(b)(1) provides thattoll telephone service includes a telephonic
quality communication for which there is a toll charge that varies in amount with the distance and elapsed transmission time of each
individual communication and for which the chargeis paid within the United States.
(ii) Periodic charge for a specified area. Section 4252(b)(2) provides that toll telephone service also includes a service which entities
the subscriber, upon paymentof a periodic charge (determined as a flat amount or uponthe basis of total elapsed transmission
EXMIBIT _B
nae
time), to the privilege of an unlimited number of telephonic communicationsto or from all or a substantial portion of the persons
having telephoneor radio telephonestations in a specified area whichis outside the local telephone system area in which the
station provided with this service is located.
(c) Rev. Rul. 79-404. Rev. Rul. 79-404, 1979-2 C.B. 382, concludesthat a long distance telephonecall for which the charge varies
with elapsed transmission time but not with distance is toll telephone service described in § 4252(b)(1).
(d) Notice ofproposed rulemaking. in a notice of proposed rulemaking (REG-141097-02, 2003-1 C.B. 807 [68 FR 15690}; April 1,
2003), the Service proposed an amendmentto the Facilities and Services Excise Taxes Regulations to provide that toll telephone
service described in section 4252(b)(1) may include a communication service for which the charge does not vary with the distance
of each individual communication.
(e) Recentlitigation. ABIG, OfficeMax, Amtrak, and Reese Bros. hold time-only service is not toll telephone service as defined in
§ 4252(b)(1). Further, ABIG, OfficeMax, and Reese Bros. hold that the communications service provided wasnot a service
described in § 4252(b)(2) because the end result was not a “periodic charge” based ontotal elapsed time but rather a monthly bill
based on a summationoftoll charges for individual communications. (In Amtrak, toll telephone service described in § 4252(b)(2)
would have been exempt from tax under the commoncarrier exception in § 4253(f).) ABIG, OfficeMax, Amtrak, and Reese Bros.
also hold that the communications services provided were not local service, notwithstanding the access the services provided to the
local telephone system.(Fortis affirms, in a per curiam opinion,a district court decision reaching the same results.)
(f) Notice 2005-79. Notice 2005-79, 2005-46 I.R.B. 952, states that the Service will continue to assess and collect the tax imposed
by § 4251 onall taxable communications services, including those similar to the services in ABIG.
SECTION 3. TERMS DEFINED
The following terms are defined solely for purposes ofthis notice:
(a) Bundled service. Bundled service is local and long distance service provided undera plan that does not separately state the
chargefor the local telephone service. Bundled service includes, for example, Voice over Internet Protocol service, prepaid
telephone cards, and plansthat provide both local and Jong distance service for either a flat monthly fee or a charge that varies with
the elapsed transmission time for which the service is used. Telecommunications companies provide bundled service for both
landline and wireless (cellular) service.
(b) Local-only service. Local-only service is local telephone service, as defined in § 4252(a), provided under a pian that does not
include !ong distance telephoneservice or that separately states the charge for local service onits bill to customers. The term also
includes services andfacilities provided in connection with service described in the preceding sentence even though these services
andfacilities may also be used with long distance service. See, for example, Rev. Rul. 72-537, 1972-2 C.B. 574 (telephone
amplifier); Rev. Rul. 73-171, 1973-1 C.8. 445 (automatic call distributing equipment); and Rev. Rul. 73-269, 1973-1 C.B. 444
(special telephone).
(c) Long distance service. Long distance service is telephonic quality communication with persons whose telephonesare outside the
local telephone system ofthecaller.
(d) Nontaxable service. Nontaxable service means bundled service and long distance service.
SECTION 4. EFFECT OF ABIG, OFFICEMAX, AMTRAK, FORTIS, AND REESE BROS.
(a) Tax treatment of communications service after ABIG, OfficeMax, Amtrak, Fortis, and Reese Bros. The Service will follow AB/G,
OfficeMax, Amtrak, Fortis, and Reese Bros. Accordingly, taxpayers are no longer required to pay tax under § 4251 for nontaxable
service. In addition, collectors or taxpayers may requesta refund of tax paid under § 4251 on nontaxable service that wasbilled to
the taxpayers during the period after February 28, 2003, and before August 1, 2006 (the relevant period).
(b) Tax on local-only service. Collectors should continue to collect and pay over the § 4251 tax on amounts paid for local-only
service. As noted in section 3(b) of this notice, local-only service includes amounts paid forfacilities or services providedin
connection with local telephone service. Thus, for example, tax will continue to be imposed on amounts paid by a taxpayerfor
renting an amplifier phone provided in connection with local telephone service that is subject to tax.
(c) Effect on collectors. Collectors are directed to cease collecting and paying over tax under § 4251 on nontaxable service thatis
billed after July 31, 2006, and are not required to report to the IRS any refusal by their customers to pay any tax on nontaxable
service thatis billed after May 25, 2006. Collectors should not pay over to the IRS any tax on nontaxable service thatis billed after
July 31, 2006. The form will require collectors to certify that for the third quarter of 2006 the § 4251 tax reported on the Form 720
doesnot include any tax on nontaxable service that wasbilled after July 31, 2006. Consequently, the IRS will denyall taxpayer
requests for refund of tax on nontaxable service that wasbilled after July 31, 2006. All such requests should be directed to the
collector. in addition, collectors may repay to taxpayers the tax on nontaxable service that wasbilled before August 1, 2006, but are
not required to repay such tax. Collectors may also request a refund or make an adjustmentto their separate accounts, as
appropriate, subject to the provisions of § 6415 and section 5(d)(4) of this notice. Collectors must continue to collect and pay over
tax under § 4251 on amounts paid for local only service.
SECTION 5. REQUESTS FOR CREDIT OR REFUND
(a) In generalI—(1) Request mustfollow this notice. Tne Commissioner agreesto credit or refund the amounts paid for nontaxable
service if the taxpayer requests the credit or refund in the manner prescribed in this notice.
(2) Form of request. Taxpayers may request a credit or refund of tax on nontaxable service that wasbilled after February 28, 2003,
and before August 1, 2006, only on their 2006 Federal income tax returns. For this purpose, the 2006 income tax return is the
incometax return for calendar year 2006 orfor the first taxable year including December 31, 2006. Forms 1040(series), 1041,
1065, 1120 (series), and 990-Twill include a line for requesting the overpayment amount. Personsthat are not otherwise required to
file a federal income tax return must nevertheless file a return to obtain the credit or refund. Except as provided in section 5(d)(4) of
this notice, a request for this credit or refund on any other form (such as a Form 720, 843, or 8849)will not be processed by the
Service. Taxpayers will be permitted to request the safe harbor amount under paragraph (c) of this section only if they have paid all
taxesbilled by their service provider after February’28, 2003, and before August 1, 2006.
(3) Guidance on the form. Theinstructions to the respective federal income tax return forms will provide additional guidance. The
forms and instructions will require taxpayers to certify that (1) the taxpayer has not received from the collector a credit or refund of
the tax paid on nontaxable servicebilled during the relevant period and (2) the taxpayerwill not ask the collector for a credit or
refund of that tax and has withdrawn any such request that was previously submitted. The instructionswill aiso require that
taxpayers, except for those individuals using the safe harbor amount, retain records that substantiate the request. These records
should include bills from the collector that show the amountof tax charged for nontaxable service for each month during the relevant
period and receipts, canceled checks, or other evidence that the amount requested was actually paid.
(b) Period of request. The Commissionerwill authorize the scheduling of an overassessment under § 6407 to preserve the period of
limitations during which taxpayers may request refundsof the tax on nontaxable service that wasbilled to customers after February
28, 2003, and before August 1, 2006. Therefore, requests may be madefor credits or refunds of tax paid for nontaxable service
billed after February 28, 2003, and before August 1, 2006.
(c) Amountof the request—(1) Requests by individual taxpayers—(i) Safe harbor amount. Individual taxpayers may request a safe
harbor amount. No documentation will be required to be submitted or kept to support the safe harbor request. However, taxpayers
will be permitted to request the safe harbor amount only if they have paid all taxes billed by their service provider after February 28,
2003, and before August 1, 2006; have not received a credit or refund of these taxes from the service provider, and either have not
requested such a credit or refund from the service provider or have withdrawn any such request. The amount of this safe harboris
still under consideration and will be announcedin later guidance.
(ii) Actual amount. Taxpayers that do not request the safe harbor amount may request a credit or refund of the actual amountof tax
they paid.
(d) How to file—(1) Requests by individual taxpayers. Individual taxpayers may request a credit or refund of federal excise taxes
paid on nontaxable service only on their 2006 Form 1040, 1040A,or 1040-EZ, U.S. Individual Income Tax Return. |ndividuals who
are not otherwise required to file a federal income tax return must neverthelessfile Form 1040EZ-T to request the credit or refund.
Individual taxpayers, including ScheduleC filers, may request either the safe harbor amountor the actual amountof tax paid for
nontaxable service.
(2) Requests by taxpayers other than individual taxpayers. Taxpayers other than individual taxpayers (entities) may request only the
actual amountof tax paid on nontaxable service billed during the relevant period. No safe harbor amountis allowed for entities.
(3) Requests by entities—(i) In general. Entities may request a credit or refund of federal excise taxes paid on nontaxable service
only on their 2006 incometax returns. Any part of the credit or refund attributable to tax payments that were deducted as an ordinary
and necessary business expense(including in the determination of unrelated business taxable income) must be includedin income
for the taxable yearin which the refund is received or accrued to the extent that the tax payments reduced the amountof federal
income tax (or unrelated business income tax) imposed.
(ii) Partnerships. A partnership, as defined in § 7701(a)(2), may request a credit or refund of federal excise taxes paid on nontaxable
service only onits 2006 Form 1065, U.S. Return of Partnership Income. Any amountof the credit or refund included in partnership
income and anyinterest on the credit or refund must be reported on the partnership's return for the taxable year in which received or
accrued and must be allocated to its partners on the Schedule K-1, Partner’s Share of Income, Deductions, Credits, etc., for that
taxable year.
(iti) S Corporations. An S Corporation, as defined in § 1361, may request a credit or refund of federal excise taxes paid on
nontaxable service only on its 2006 Form 1120S, U.S. Income Tax Retum for an S Corporation. Any amountof the credit or refund
included in S Corporation income and anyinterest on the credit or refund must be reported on the S Corporation's return for the
taxable year in which received or accrued and mustbe allocatedto its shareholders on the Schedule K-1, Sharehoider’s Share of
Income, Deductions, Credits, etc., for that taxable year.
(iv) Estates andtrusts. An estate or a trust, as defined in § 301.7701-4(a) of the Procedure and Administration Regulations, may
request a credit or refund of federal excise taxes paid on nontaxable service only on its 2006 Form 1041, U.S. Income Tax Return
for Estates and Trusts. Any amountof the credit or refund included in the estate's or trust’s income and anyinterest on the credit or
tefund must be reported on the estate’s or trust's Form 1041, U.S. Income Tax Return for Estates and Trusts, for the taxable year in
which received or accrued. However,for a trust that is treated as owned by the grantor or other person under subpart E (§ 671 and
following), part !, subchapter J, chapter 1 of the Internal Revenue Code (grantortrust), the ownerof the trust may request a credit or
refund of federal excise taxes treated as paid by the owner for nontaxable service only on its applicable 2006 federal tax return.
(v) Tax exempt organizations. An organization that is described in § 501(a) may request a credit or refund of federal excise taxes
paid on nontaxable service only on its 2006 Form 990-T, Exempt Organization Business Income Tax Return. Tax exempt
organizations that are not otherwise requiredto file a federal income tax return must neverthelessfile Form 990-T to request the
credit or refund. Any amountof the credit or refund includedin the organization's unrelated business taxable income must be
reported on the organization’s Form 990-T, Exempt Organization Business Income Tax Return,for the taxable year in which
received or accrued. An organization that is subject to tax on its interest income must also report any interest on the credit or refund
onits Form 990-T, Exempt Organization Business Income Tax Retum,for the taxable year in which received or accrued.
(vi) Corporations. A corporation, as defined in § 7701(a)(3), that is not described in section 5(d)(3)(iii) of this notice may request a
credit or refund of federal excise taxes paid on nontaxable service only on its 2006 Form 1120 (series) income tax return (generally,
Form 1120, U.S. Corporation Income Tax Return). Any amountof the credit or refund included in the corporation's income and any
interest on the credit or refund must be reported on the corporation’s income tax return for the taxable year in which received or
accrued. Corporations that are not otherwise required tofile a federal income tax return must neverthelessfile Form 1120 (series) to
request the credit or refund.
(vii) Other nonfiling entities. Entities that are not otherwise requiredtofile a federal income tax return must file Form 990-T to
request the credit or refund.
(4) Requests and adjustments by collectors—{i) Section 6415 conditions to allowance. The conditions to allowance described in
§ 6415 applyto all requests and adjustments by collectors, as defined by section 2(a)(3) of this notice. Thus, a request by a collector
is allowed only if the person that paid over the tax establishesthat it has repaid the amountof the tax to the person from whom the
tax was collected, or obtains the written consent of such personto the allowance of the credit or refund.
(ii) Requests for regular method collectors—(A) In general. A personthat collected the tax imposed by § 4251 on nontaxable service
and paidit over to the government based on amounts actually collected under § 40.6302(c)-1(a)(2)(i) of the Excise Tax Procedural
Regulations (regular method collectors) may request a credit or refund.
(B) Form of the request. Regular method collectors may use Form 720X, Amended Quarterly Federal Excise Tax Return,line 1, IRS
No. 22, for credit or refund of amounts collected and repaid to taxpayers.
(iii) Account adjustments for alternative method collectors. A person that collected the tax imposed by § 4251 on nontaxable service
and paid it over to the government based on amounts considered as collected under § 40.6302(c)-1(a)(2)(ii) (alternative method
collectors) may adjust the separate account for the amount of an overpayment. The required adjustment to the separate accountis
described in § 40.6302(c)-3(b)(2)(ii)(C). The adjustmentis reflected on Form 720, ScheduleA,line 2, but may not reduce tax fiability
on Form 720 below zero.
(e) Interest on the credit or refund included in income.If a taxpayer requests a credit or refund of the actual amountoftax paid,
interest on the credit or refund of the tax paid for nontaxable service must be included as incomeon the taxpayer's income tax
return for the taxable year in which the interest is received or accrued. Thus, individuals are generally required to report the interest
on their 2007 incometax returns.
(f} Estimated tax effects. Although the credit or refund allowed to a taxpayer underthis notice will be requested on the taxpayer's
income tax return, it is not a credit against tax for purposes of §§ 6654 and 6655. Accordingly, the taxpayer may not take the credit
or refund into accountin determining the amountof the required installments of estimated tax for 2006. In determining the amountof
the required installments of estimated tax for 2007, the incomeattributable to the credit or refund is taken into account on the date
the incomeis paid or credited in the case of a cash method taxpayer and on the date the return making the requestisfiled in the
case of an accrual method taxpayer.
(g) Requests that do notfollow the provisions of this notice. Requests that do not follow the provisions of this notice (whetherfiled
before orafter its publication}—
(1) Will not be processedto the extent they relate to the tax paid on nontaxable service that wasbilled after February 28, 2003; and
(2) Will be processed normally to the extent they relate to the tax paid on nontaxable service that wasbilled before March 1, 2003.
SECTION 6. EFFECT ON OTHER DOCUMENTS
Notice 2005-79, 2005-46 I.R.B. 952, is revoked. Rev. Rul. 79-404, 1979-2 C.B. 382, will be revoked in a later revenue ruling.
SECTION 7. DRAFTING INFORMATION
The principal authorof this notice is Taylor Cortright of the Office of the Associate Chief Counsel (Passthroughs and Special
Industries). For further information regarding this notice, contact (202) 622-3130 (not toll-free call).
internal Revenue Bulletin: 2007-5
January 29, 2007
Notice 2007-11
Communications Excise Tax; Toll Telephone Service
Table of Contents
SECTION 1. PURPOSE
SECTION 2, BACKGROUND
SECTION 3. STANDARD AMOUNT
SECTION 4. DISTINCTION BETWEEN LOCAL-ONLY SERVICE AND BUNDLED SERVICE
SECTION 5. CLARIFICATION OF DEFINITION OF BUNDLED SERVICE
SECTION 6. PREPAID TELEPHONE CARDS (PTC)
SECTION 7. PREPAID CELLULAR TELEPHONES
SECTION 8. CHARGES IN CONNECTION WITH LOCAL-ONLY SERVICE
SECTION 9, PERSON TO MAKE REQUESTIF TAXPAYER IS NO LONGER IN BUSINESS OR DECEASED
SECTION 10, EFFECT OF NOTICE 2006-50 ON STATE AND LOCAL TELECOMMUNICATIONS TAXES
SECTION 11. NO OBLIGATION OF TELECOMMUNICATIONS PROVIDERS TO SUPPLY RECORDS TO CUSTOMERS
SECTION 12. BUSINESS AND NONPROFIT ESTIMATION METHOD
SECTION 13. FORM 1040EZ-T, REQUEST FOR REFUND OF FEDERAL TELEPHONE EXCISE TAX
SECTION 14. MODIFICATION OF PROVISION REGARDING REQUESTS FOR CREDIT OR REFUND
SECTION 15. EFFECT ON OTHER DOCUMENTS
SECTION 16. DRAFTING INFORMATION
SECTION 1. PURPOSE
This notice amplifies, clarifies, and modifies Notice 2006-50, 2006-25 I.R.B. 1141. That notice provides thatthe tax imposed by
§ 4251of the Internal Revenue Code(relating to communications excise tax) does not apply to amounts paid for long distance
service and bundled service (collectively, nontaxable service) and also provides that taxpayers may requesta credit or refund of tax
on nontaxable service that wasbilled to the taxpayer after February 28, 2003, and before August 1, 2006, only on their 2006 federal
incometax returns. This notice—
(a) Provides the conditions under which individual taxpayers may use the standard amounts announcedin IR-2006-137 (August 31,
2006) on their 2006 federal income tax returns to request a credit or refund of the excise tax paid on nontaxable service;
(b) Provides guidance regarding the Business and Nonprofit Estimation Method, announcedin IR-2006-179 (November 16, 2006);
(c) Answers questions that have been raised since the issuance of Notice 2006-50; and
(d) Modifies the requirementfor claims filed on or before May 25, 2006.
SECTION 2. BACKGROUND
For the statutory backgroundof the tax imposed by § 4251, see section 2 of Notice 2006-50. Whenusedin this notice, /ocai-only
service, long distance service, and nontaxable service have the meaning given to the termsin section 3 of Notice 2006-50. Bundled
service has the meaning given to the term by section 5 of this notice.
SECTION 3. STANDARD AMOUNT
(a) Conditionsto allowance of standard amount. A request for credit or refund of the standard amount, instead of the actual amount
of federal communications excise tax paid for nontaxable service, may be made on a 2006 Form 1040 Series, U.S. Individual
Income Tax Retum,if any personfiling the return, or any dependentlisted on the return—
(1) Paid for any nontaxable service (other than for a prepaid telephone card or prepaid cellular telephone) that wasbilled to the
taxpayer after February 28, 2003, and before August 1, 2006;
(2) Paid all federal communications excise taxesbilled by their telecommunications provider after February 28, 2003, and before
August 1, 2006; :
(3) Has not received a credit or refund of these taxes from the telecommunications provider,
(4) Has not requested a credit or refund from the telecommunications provideror, if so requested, has withdrawn any such request;
and
(5) Did notfile any other claim or requestfor credit or refund with the IRS for the federal communications excisetax for a period after
February 28, 2003.
(b) Calculating standard amounts—(1) In general—(i) 2006 Form 1040 Series (other than EZ). To determine the standard amount,
taxpayers mustfirst determine the number of exemptions for which they are entitled on their 2006 Form 1040 Series federal income
tax return (other than the 2006 Form 1040 EZ). The Instructions to the 2006 Form 1040 Series federal incometax return and
Publication 501, Exemptions, Standard Deduction, and Filing Information, provide guidance on determining the correct numberof
exemptions. Once the individual determines the number of exemptions, the individual can select the appropriate standard amount
based upon the numberof those exemptions. Individuals should refer to the 2006 federal income tax return instructions to ensure
that the standard amountis entered on the appropriate part of the return.
(ii) 2006 Form 1040 EZ. Online 5, a taxpayer that checks the box for “you”is treated as having one exemption. A taxpayer that
checks the boxes for “you” and “spouse”is treated as having two exemptions.
(2) Amounts—(i) For each 2006 Form 1040 Series federa! incometax return filed showing one exemption for purposes of
determiningthe standard amount, the standard amountallowed on that return is $30.
(ii) For each 2006 Form 1040 Series federal income tax return filed showing two exemptionsfor purposes of determining the
standard amount, the standard amountallowed on that return is $40.
(iii) For each 2006 Form 1040 Seriesfederal income tax return filed showing three exemptions for purposesof determining the
standard amount, the standard amountallowed on that return is $50.
(iv) For each 2006 Form 1040 Series federal income tax return filed showing four or more exemptions for purposes of determining
the standard amount, the standard amount allowed on that return is $60:
(c) interest. The standard amount represents both the overpaymentof the federal communications excise tax paid on nontaxable
service and the interest on that overpayment.
(d) Actual Amounts. To request a credit or refund for the actual amountof federal communications excise tax paid, taxpayers must
complete Form 8913, Credit for Federal Telephone Excise Tax Paid, and attach that form to their 2006 Form 1040 Series federal
incometax return.
(e) Examples. The following examplesillustrate the application of this section.
Example 1. A, anindividual, files a joint return with Z, A’s spouse. A meets the conditions to allowance described in paragraph(a)of
this section. A used the 2006 federal income tax return instructions to determine that their correct number of exemptionsis two. A
may requestthe credit or refund of the federal communications excise tax under § 4251 for $40.
Example 2. B, an individual, used the 2006 federal income tax return instructions to determine that she had one exemption. B further
used hertelephonebills for the period March 1, 2003, through July 31, 2006, to determine thatthe total amountpaid for federal
communications excise tax under § 4251 for nontaxable service to all telecommunications providers was $45. Completing Form
8913 and attaching it to her 2006 Form 1040 Series federal income tax return, B may request a credit or refund of $45, the actual
amount she paid in federal communications excise tax on nontaxable service under § 4251. As an alternative, B may request a
credit or refund of the standard amount of $30 without having to complete Form 8913.
SECTION4. DISTINCTION BETWEEN LOCAL-ONLY SERVICE AND BUNDLED SERVICE
(a) Technology for transmitting telephone call. The method for sending or receiving a call, such as on a landline telephone, wireless
(cellular) telephone or some other method, does not affect whether a serviceis local-only or bundled.
(b) Combinedlocal exchanges. If two or more telecommunications providers combine their resources to expand the geographic area
that each treats as “local” service and eachbills its customers for that service as local-only service, then that service is local-only
service.
(c) Billing method. Section 3(a) of Notice 2006-50 and section 5 of this notice provide that bundled service is local and long distance
service provided under a plan that does not separately state the charge for the local telephone service. Thus, if local and long
distance service is billed to a customeron a single bill but the telecommunications company separately states the amountpaid for
local-only service and the amountpaid for jong distance service, the amountpaid for local-only service is subject to federal
communications excise tax.
(d) Examples. The foliowing examplesillustrate the application ofthis section.
Example 1. Customer A purchases telecommunications service from B, a telecommunications provider. Such service includes both
local-only service and long distance service. B's bill to A states $X for telecommunications service. The bitl does not separately state
a chargeforeither local-only service or long distance service. Since the bill does not separately state the charge for local-only
service, the service is a bundled service. Thus, the entire amount of A’s telecommunications service is bundled service and thus
nontaxable service.
Example 2. Customer C purchases telecommunications service from D, a telecommunications provider. Such service includes both
local-only service and long distance service. D'sbill to C states $X amountfor telecommunications service. Thebill further states $Y
amount for focal-only service and $Z amountfor long distance service. Since the charges for local-only service and long distance
service are separately stated, the service is not bundled service. Accordingly, only the amounts charged for long distance service
are for nontaxable service; tax is imposed on the amounts paid for the local-only service.
SECTION 5. CLARIFICATION OF DEFINITION OF BUNDLED SERVICE
(a) Presentdefinition. Section 3(a) of Notice 2006-50 defines bundled service as local and long distance service provided under a
plan that does not separately state the charge for the local telephone service. Bundied service includes, for example, Voice over
Internet Protocol service, prepaid telephone cards, and plans that provide both local and long distance service foreither a flat
monthly fee or a charge that varies with the elapsed transmission time for which the service is used. Telecommunications
companies provide bundled service for both landline and wireless (cellular) service.
(b) Reasonfor clarification. The example in the second sentence of the definition of bundled service incorrectly assumesthatall
Voice overInternet Protocol (VoIP) service would provide both local and long distance service and that the charges for the two
services would not be separately stated. As noted in section 4(a) of this notice, the method of transmitting a call is not a factorin
determining whethera service is local-only or bundled. Accordingly, a VoIP service that provides local-only service is treated as
local-only service.
(c) Revised definition. Accordingly, the definition of bundled serviceis clarified to read as follows:
Bundled service is local and Jong distance service provided under a plan that does not separately state the charge for the local
telephone service. Bundled service includes plans that provide both local and long distance serviceforeither a flat monthly fee or a
charge that varies with the elapsed transmission time for which the service is used. Telecommunications companies provide
bundled service for both landline and wireless (cellular) service. If Voice over internet Protocol service provides both locai and long
distance service and the charges are not separately stated, such service is bundled service.
SECTION 6. PREPAID TELEPHONE CARDS(PTC)
(a) In generat{1) Prepaid telephone cards. Section 4251(d) and § 49.4251-4 of the Facilities and Services Excise Taxes
Regulations provide rules for prepaid telephone cards (PTC). Section 49.4251-4(b) defines PTC as a card or similar arrangement
that permits its holder to obtain a fixed amount of communications services by meansof a code (such as a personalidentification
number(PIN)) or other access device provided by the carrier and to pay for those services in advance. The amount paid for PTCsis
determined underthe rules of §§ 4251(d)(1) and (2) and § 49.4251-4(c). Under this notice, the PTC will be treated as nontaxable
service unless a PTC expressly statesit is for local-only service.
(2) Other cards. This section does not address cards that permit the holder to purchase various services in addition to
telecommunications services. Such services include, but are notlimited to, ring tone downloads, music downloads, text messaging,
picture messaging, web browsing, game downloads, or screen saver downloads.
(b) Application of the tax—(1) Definitions. Section 49.4251-4(b) provides that—
(i) Carrier means a telecommunications carrier as defined in 47 U.S.C. 153.
_ (ii) Holder meansa person that purchases otherthan for resale.
(iti) Transferee meansthe first person that is not a carrier to whom a PTCis transferred by a carrier.
(2) Imposition, liability, and collection. Section 4251(d) provides that the § 4251 tax is imposed onthe transfer of a PTC to a
transferee; § 49.4251-4(d)(1) providesthat the personliable for the tax is the transferee and that the person responsible for
collecting the tax generally is the carrier transferring the PTC to the transferee. Section 49.4251-4(d)(1) further providesthatif a
holder purchases a PTCfrom a transferee reseller, the amount the holder pays for the PTC is not treated as an amount paid for
communications services and thus tax is not imposed on that payment.
(c) Personeligible to request credit or refund. The transferee is the personliable for the tax paid on a PTC and thus generally is the
personeligible to request a credit or refund of the tax it paid. The carrieris eligible to request a credit or refund only if it meets the
conditions of section 5(d)(4) of Notice 2006-50. The holderis notliable for the tax and thus cannot requesta credit or refund.
SECTION 7. PREPAID CELLULAR TELEPHONES
(a) In general{1) Prepaid cellular telephones. Certain telecommunications providers offer wireless (cellular) telecommunications
service on a prepaid service basis (prepaid telephones) whereby a customer purchasesthe cellular telephone with a set numberof
minutes available for telecommunications. When the customer exhausts the numberof minutes on the prepaid telephone, the
customer may purchase additional minutes. The customer does not enter into a contract with the telecommunications provider; there
are no service chargesafter the additional purchase and no monthly bills. Under this notice, the prepaid telephonewill be treated as
nontaxable service unless the termsof the prepaid telephone service expressly stateit is for local-only service.
(2) Otherprepaid cellular telephones. This section does not address arrangements that permit the holder to purchase various
servicesin addition to telecommunications services. Such services include, but are not limited to, ring tone downloads, music
downloads, text messaging, picture messaging, web browsing, game downloads, or screen saver downloads.
(b) Application ofthe tax. Rules similar to the rules for PTCs, as described in section 6 of this notice, apply to prepaid telephones.
Thus,the personliable for tax is the person (transferee) that buys the prepaid telephone from the telecommunications provider
(carrier) and the carrier is responsible for collecting the tax. Any holder of a prepaid telephone (that is, a person that buys the
prepaid telephoneotherthanfor resale) is not liable for tax.
(c) Person eligible to request credit or refund. The transferee is the person liable for the tax paid on a prepaid telephone and thus
generally is the person eligible to request a credit or refund of the tax it paid. The carrieris eligible to requesta credit or refund only
if it meets the conditions of section 5(d)(4) of Notice 2006-50. The holderis not liable for the tax and thus cannot requesta credit or
refund.
SECTION 8. CHARGES IN CONNECTION WITH LOCAL-ONLY SERVICE
(a) Background. Section 3(b) of Notice 2006-50 defines local-only service as including certain services andfacilities providedin
connection with local telephone service, even though these services mayalso be used in connection with long distance service. As
examples, the notice cites to Rev. Rul. 72-537, 1972-2 C.B. 574 (telephone amplifier), Rev. Rul. 73-171, 1973-1 C.B. 445 (automatic
call distributing equipment), and Rev. Rul. 73-269, 1973-1 C.B. 444 (special telephone).
(b) Subscriberline charges. |n addition to the examplesin paragraph(a) of this section, amounts paid for subscriberline charges,
which are described in Rev. Rul. 87-108, 1987-2 C.B. 260, are also amounts paid for local telephone service. This charge may
appearon bill as “Federal Access Charge,” “Customer or Subscriber Line Charge,” or “Interstate Access Charge.”
(c) Universal service fees—(1) Background. All telecommunications companies that provide interstate and international
telecommunications service contribute to the federal Universal Service Fund (USF). Their contributions support four Universal
Service programsestablished and overseen by the Federal Communications Commission (FCC). Some telecommunications
companies recovertheir contribution to the USF directly from their customers bybilling them for this charge. The FCC doesnot
require companies to pass onthese costs to their customers. Each company makesa business decision about whether and how to
recover USFcosts. A companythat separately states this charge on bill may call it a “Federal Universal Service Fee” or “Universal
Connectivity Fee.”
(2) Application. Because telecommunications providers charge the USFto their customers in connection with their customers’ long
distance service, amounts paid for separately stated USF amounts are not amounts paid for local-only service.
SECTION 9. PERSON TO MAKE REQUESTIF TAXPAYERIS NO LONGERIN BUSINESS OR DECEASED
Neither Notice 2006-50 northis notice create any special rules regarding the person to request a credit or refund of tax for a
taxpayerthat no fonger exists or is deceased. The samerules that apply to requests for credits or refunds of other federal taxes also
apply to similar requests of the tax imposed under § 4251. These rules depend upon the facts and circumstancesrelating to the
reasonsthat the taxpayer no longer exists. The Form 8913 Instructions and Publication 559, Survivors, Executors, and
Administrators, provide general guidance for taxpayers regarding deceased taxpayers.
SECTION 10. EFFECT OF NOTICE 2006-50 ON STATE AND LOCAL TELECOMMUNICATIONS TAXES
Neither Notice 2006-50 northis notice affect the ability of state or local governmentsto impose orcollect telecommunication taxes
under the respective statutes of those governments. :
SECTION 11. NO OBLIGATION OF TELECOMMUNICATIONS PROVIDERS TO SUPPLY RECORDS TO CUSTOMERS
The IRS has been asked to require telecommunications providers to supply their customers with those customers’
telecommunicationsbills for periods after February 28, 2003, and before August 1, 2006. Neither Notice 2006-50 northis notice
requires telecommunications providers to supply billing records to their customers.
SECTION 12. BUSINESS AND NONPROFIT ESTIMATION METHOD
(a) In general. This section provides rules for the Business and Nonprofit Estimation Method (EM)thateligible entities may use to
determine the amountoftheir credit or refund for nontaxable service. Eligible entities may, but are not required to, use the EM
instead of the actual amountof federal communications excise tax they paid on nontaxable service to calculate the amountoftheir
credit or refund.
(b) Definitions. The following definitions apply to this section.
(1) Eligible entity means—
(i) Any—
(A) Businessentity (including a corporation or partnership);
(B) Trustor estate;
(C) Tax-exempt organization; and
(D) Individua! ownerof rental property and any self-employed individual (including an independent contractor, sole proprietor, or
farmer) but only if the individual (including a married couplefiling a joint return) reports gross rental and business incometotaling
more than $25,000 on his or her 2006 federal income tax return;
(ii) That was in operation during any time from March 1, 2003 through July 31, 2006; and
(iit) That received and paid for telecommunications service that was reflected on bills dated in April 2006 and September 2006.
(2) Total telephone expenses meansall amounts paid to every telecommunications provider used bythe eligible entity for telephone
service that were billed after February 28, 2003, and before August 1, 2006. These amountsinclude, but are not limited to, amounts
paid for long distance service, local-only service, bundled service, 900 numberservice, universal service fees, federal, state, and
local taxes. If an eligible entity is billed for telephone and non-telephone services on onebill each month and does not separately
track non-telephone servicesin its books and records, the entire amount of thatbill is included in total telephone expenses. An
eligible entity may determine the amountofits total telephone expenses by examining its books and records, including, for example,
its general ledger, check register, and canceled checks.
(3) Employee means any person working for the taxpayer full or part time as reported on theeligible entity's Form 941, Employer's
Quarterly Federal Tax Return, for the 2™ quarter of 2006, other than any person employed as a househoid employee,in a non-pay
status, on a pension, or an active memberof the Armed Forces. ‘
(c) Using the EM to determine the amountof the credit or refund—{1) Determining the federal excise tax as a percentage of the
telephonebill—(i) First, determine the amount of federal communications excise tax onall telephonebills dated in April 2006 andall
telephonebills dated in September 2006. The amountis generally separately stated on the bill as “FET” or “federaltax’.
(ii) Next, for all the April telephonebills and all the Septembertelephonebills, divide the amount of federal communications excise
tax included on thebills by the total telephone expensesonthe bills. The resulting amounts are the April and September
percentages, respectively.
(iii) Next, subtract the September percentage from the April percentage. For purposesofthis notice, this amountis the federal
excise tax percentage (FETP).
(2) Capping the FETP—(i) Determine the number of employees.
(ii) For taxpayers with 250 or fewer employees, the FETP is capped at 2 percent.
(iii) For taxpayers with more than 250 employees, the FETP is capped at 1 percent.
(d) Calculating the amountof the credit or refund—(1) Records kept on a monthly basis.If the entity has maintainedits telephone
expense records on a monthly basis, multiply the FETP amount by the taxpayer's monthly total telephone expenses for each month
of the 41 month period from March 2003 through July 2006. The productof this calculation is the taxpayer's credit or refund amount.
(2) Records kept on an annualbasis.If the entity has maintainedits telephone expense records on an annual basis rather than a
monthly basis, prorate its annual amount equally to each month of that year. Thus, for example, a taxpayer maintaining annual
telephone expense records for 2003 would divide its total telephone expenses by 12. Next, the taxpayer would use that monthly
amount to complete the calculations for the credit or refund amount for 2003.
(e) Actual Amounts. Use of the EM is optional. Taxpayers may use the actual amounts paid for federal communications excise tax
for nontaxable service to determine the amountof their credit or refund.
(f) Examples. The following examplesillustrate the application of this section.
Example 1—(i) Facts. Business A has 250 employees. A’s April 2006 telephonebill is $1,700, including federal communications
excise tax of $47.60. A's September 2006 telephonebill is $1,600, including federal communications excise tax of $24.00. A’s total
telephone expenses,for which it does not have monthly records, are as follows:
2003 — $10,800.00
2004 — $16,000.00
2005 — $20,000.00
2006 — $20,571.37.
(ii) Determining the April and September percentages.A’s April percentage is 2.8 percent (47.60 + 1,700). A’s September
percentage is 1.5 percent (24 + 1,600).
(iii) Determining the FETP. The difference between A's April percentage and Septemberpercentageis 1.3 percent (2.8 - 1.5). Thus,
the FETPis 1.3 percent.
(iv) Capping the FETP. Because A’s number of employees does not exceed 250, A’s FETPis not capped at 1 percent.
(v) Prorating. Because A did not maintain its total telephone expense records by month, it prorates those amounts equally to each
month within the March 2003 — July 2006 period for each particular year. For 2003,A dividesits total telephone expenseof
$10,800 by 12 and multiplies that result by 10 (the number of months between March and December). ([10,800 + 12] x 10 = 9,000.)
For 2006,A dividesits total telephone expense of $20,571.37 by 12 and multiplies that result by 7 (the number of months between
January and July). ((20,571.37 + 12] x 7 = 12,000.)
(vi) Calculating the amountof the credit or refund. Using the EM, the amountof A’s credit or refund is calculated as follows:
2003: $9,000 x .013 = $117 (117+10 = 11.7) Monthly amount $11.70
2004: $16,000 x 013 = $208 (208+12 = 17.33) Monthly amount $17.33
2005: $20,000 x .013 = $260 (260+12 = 21.67) Monthly amount $21.67
2006: $12,000 x .013 = $156 (156+7 = 22.29) Monthly amount $22.29
(vii) Reporting the credit or refund amounts on Form 8913—(A) Because the credit or refund period does notalign with the calendar
quarters, Form 8913 requires taxpayers to report the credit or refund amounts in 13 three-month intervals and one two-month
interval. Thus, A would report credit or refund amounts on Form 8913 asfollows:
March, April, May 2003 — $35.10 (11.70 x 3 = 35.10)
June, July, August 2003 — $35.10 (11.70 x 3 = 35.10)
September, October, November 2003 — $35.10 (11.70 x 3 = 35.10)
December 2003, January, February 2004 — $46.36 (11.70 + [17.33 x 2] = 46.36)
March, April, May 2004 — $51.99 (17.33 x 3 = 51.99)
June, July, August 2004 — $51.99 (17.33 x 3 = 51.99)
September, October, November 2004 — $51.99 (17.33 x 3 = 51.99)
December 2004, January, February 2005 — $60.67 (17.33 + [21.67 x 2] = 60.67)
March,April, May 2005 — $65.01 (21.67 x 3 = 65.01)
June, July, August 2005 — $65.01 (21.67 x 3 = 65.01)
September, October, November 2005 — $65.01 (21.67 x 3 = 65.01)
December 2005, January, February 2006 — $66.25 (21.67 + [22.29 x 2] = 66.25)
March,April, May 2006 — $66.87 (22.29 x 3 = 66.87)
June, July 2006 — $44.58 (22.29 x 2 = 44.58)
(B) After determining the amountofcredit or refund using the EM, A reports the amounts on Form 8913, and attaches the Form
8913 to A’s 2006 federal income tax return.
Example 2. The same facts as Example 1 except that A has 500 employees. A’s FETP is capped at 1 percent. Thus, A must make
the same calculation as in Example 1 to determine the proper amountof A’s credit or refund of federal communications excise tax
using the FETPof 1 percent, rather than 1.3 percent.
SECTION 13. FORM 1040EZ-T, REQUEST FOR REFUND OF FEDERAL TELEPHONE EXCISE TAX
Individuals who do not haveto file a federal income tax return and who meetthe conditions for requesting a refund of the federal
communications excise tax mayfile Form 1040EZ-T to request the refund. Individuals requesting a refund of actual amounts of
federal communications excise tax paid must complete Form 8913 and attach that form to the Form 1040EZ-T.
SECTION 14. MODIFICATION OF PROVISION REGARDING REQUESTS FOR CREDIT OR REFUND
(a) Present requirement. Section 5(g) of Notice 2006-50 provides asfollows:
Requests that do notfollow the provisions of this notice. Requests that do not follow the provisions of this notice (whetherfiled
before or afterits publication)}—
(1) Will not be processed to the extent they relate to the tax paid on nontaxable service that wasbilled after February 28, 2003; and
(2) Will be processed normally to the extent they relate to the tax paid on nontaxable service that wasbilled before March 1, 2003.
(b) Reason for modification. Many of the pending refund claims that werefiled on or before May 25, 2006, include refund claims for
nontaxable service that wasbilled before March 1, 2003, and after February 28, 2003. In the interest of sound tax administration and
efficiency, the IRS will processall claims for credit or refund that were filed on or before May 25, 2006.
(c) Revised requirement. Accordingly, section 5(g) of Notice 2006-50 is modified to read as follows:
(1) Requests that do not follow the provisions of Notice 2006-50 and that werefiled on or before May 25, 2006, will be processed
normally.
(2) Requests that werefiled on or after May 26, 2006, and do notfollow the provisions of Notice 2006-50, will not be processed to
the extent they relate to the tax paid on nontaxable service that wasbitled after February 28, 2003.
SECTION 15. EFFECT ON OTHER DOCUMENTS
Notice 2006-50 is amplified, clarified, and modified.
SECTION 16. DRAFTING INFORMATION
The principal authorof this notice is Barbara B. Franklin of the Office of the Associate Chief Counsel (Passthroughs and Special
Industries). For further information regarding this notice, contact 202-622-3130 (not a toll-free number).
1.08.010 - Construction.
Unless the provisions of the context otherwise require, these general provisions, rules of
construction and definitions shall govern the construction of this code. The provisions of this code
and all proceedings underit are to be construed with a view to effect its objects and to promote
justice.
(Prior cede § 1308).
1.08.130 - Definitions.
The following words and phrases, wheneverusedin this Code, shall be construed as defined
in this Section unless from the context a different meaning is specifically defined and more particularly
directed to the use of such wordsor phrases:
A.
B.
@
s
c
a
n
”
"Business" includes businesses, professions, trades and occupations, and all and every
kind of calling.
"City" means the City of Long Beach or the area within the territorial City limits of the
City of Long Beach and suchterritory outside of this City over which the City has
_jurisdiction or control by virtue of any constitutional or charter provision, or any law.
"City Attorney” or "Attorney" meansthe City Attorney of this City or such otherofficial as
hereafter may, by law, be designated as the official legal adviserofthis City.
"City Auditor" or "Auditor" means the City Auditor of this City or such person as
hereafter may, by law, be authorized to perform for. the City the duties ordinarily incident
to the office of an official auditor.
"City Clerk" or "Clerk" meansthe City Clerk of this City or such person as hereinafter
may, by law, be authorized to perform the duties now being performed bythat official.
"City Manager" or "Manager" meansthe City Managerofthis City or his successor as
chief executive officer of the City.
"Council" meansthe City Council of this City.
"County" is the County of Los Angeles.
"Engage in" includes commence, engagein, carry on, conduct, maintain, manage and
operate.
“Fiscal year" means the year commencing with July 1st and ending the foliowing June
30th.
"Goods" includes wares or merchandise.
“License fee" includes any charge imposedfor a license, whether the object be
regulation or revenue, or both regulation and revenue.
"May" is permissive,
"Oath"includesaffirmation.
"Office." The useof the title of any officer, employee or office means suchofficer,
employeeoroffice of the City of Long Beach unless otherwsespecifically designated.
"Operate" includes carry on, keep, conduct or maintain.
"Owner" applied to a building or land, includes any part owner,joint owner, tenant,
tenant in common,orjoint tenant, of the whole or a part of such building or land.
"Person" means any natural person, firm, association, joint venture, joint stock
company, partnership, organization, club, company, corporation, businesstrust or the
manager, lessee, agent, servant, officer or employee or any of them, except as
otherwise provided in this Code, or where the context clearly requires a different
meaning.
"Sale" includes any sale, exchange, barter or offer for sale.
"Shall" and "must". Each is mandatory.
"State" is the State of California.
"Street" includesall streets, highways, avenues,lanes,alleys, courts, places, squares,
a
EXHIBIT E
(Prior code § 1400)
sidewalks, parkways, curbs, or other public waysin this City which have been or may
hereafter be dedicated and open to public use, or such other public property so
designatedin anylawofthis State.
"Tenant" or “occupant” applied to a building or land includes any person who occupies
the whole or part of such building or land, whether alone or with others.
"Vote, approval or consent.” Except as may be otherwise provided in connection
therewith, the phrase "vote, approval or consent of the Council or other body" means
the affirmative vote of a majority of those members present at a meeting having a
quorum in attendance. Wheneversaid phrase refers to the members of the Council or
other body rather than to the Council or body as such, the vote required shall be in
relation to the total membership rather than to those members presentat the meeting.
3.48.060 - Refund—Timelimitation of payment.
Any refund made pursuantto this chapter must be authorized by the department head with the
approvalof the city attorney or the city attorney and the city council, provided the refund is made
within one (1) year after payment of the moneyto thecity, or if an application for a refundis filed by
the person entitled to the money, the application therefor must befiled within such one-yearperiod.
(Ord. C-5377 § 7 (part), 1977: prior cade § 2778.3).
3.48.070 - Refund—Conflicting provisions.
If any ordinanceof the city or any law applicable thereto expressly authorizes, in certain
contingencies, the making of a refund of moneypaid to the city or prescribes the procedure therefor,
such ordinance shall control in making the refund. The council declares thatits intent, in adopting this
chapter, is to provide for the making of refunds of moneypaid to the city, under the conditions set
forth in this chapter, not otherwise expressly prohibited by any ordinanceorlaw applicable to the city
or not otherwise expressly authorized by such ordinance orlaw.
3.68.160 - Refunds.
A. Wheneverthe amount of any tax has been overpaid or paid more than once or has been
erroneouslyorillegally collected or received by the city clerk or city treasurer-city tax collector
underthis chapter, it may be refunded as providedin this section.
B. A service supplier may claim a refund or take as credit against taxes collected and remitted the
amount overpaid, paid more than once,or erroneouslyorillegally collected or received, wnen
it is established in a mannerprescribed bythecity treasurer-city tax collector that the service
user from whom the tax has been collected did not owe the tax provided, however, that neither
a refund nor a credit shall be allowed unless the amountof the tax so collected has either been
refundedto the service user or credited to charges subsequently payable by the service user
to the person required to collect and remit.
C. No refund shall be paid under the provisionsof this section unless the claimant established his
or her right thereto by written records showing entitlement thereto.
D. No refund shall be paid underthe provisions of this section unless the claimant has submitted
a claim pursuantto this section.
(ORD-06-0025 § 2, 2006: ORD-O6-0017 § 5, 2006. prior cade § 2480.14).
=XHIBIT _G
Seal
Volume 2
STATUTES OF CALIFORNIA
1958 AND 1959
CONSTITUTION OF 1879 AS AMENDED
MEASURES SUBMITTED TO VOTE OF ELECTORS,
1958 GENERAL ELECTION
GENERAL LAWS, AMENDMENTS TO CODES,
RESOLUTIONS, AND CONSTITUTIONAL
AMENDMENTS
PASSED AT
THE 1958 REGULAR SESSION OF
THE LEGISLATURE
THE 1958 FIRST AND SECOND EXTRAORDINARY
SESSIONS OF THE LEGISLATURE
AND
THE 1959 REGULAR SESSION OF THE LEGISLATURE
Compiled by
RALPH N. KLEPS
Legislative Counsel
102—L-2627
Ch. 1724] 1959 REGULAR SESSION 4133
other agencies and officials as are named in the order. There-
after the proceedings in such case shall be deemed never to
have occurred. The court shall send a copy of the order to each
agency and official named therein, and each such agency and
official shall expunge records in its custody as directed by the
order.
CHAPTER 1724
An act to add Division 3.5 (commencing with Section 700) to
Title 1 of the Government Code, to repeal Section 342 of
the Code of Civil Procedure and to add Sections 313 and
342 to said code, relating to claims against the State, local
public entities and public officers and employees.
[Approved by Governor July 9, 1959. Filed with In effect
Secretary of State July 10, 1959.] September
The people of the State of California do enact as follows:
Section 1. Division 3.5 (commencing with Section 700) is
added to Title 1 of the Government Code, to read:
DIVISION 3.5. CLAIMS AGAINST THE STATE, LOCAL
PUBLIC ENTITIES AND OFFICERS AND EMPLOYEES
CHaprer 2. Cxuaims Aqainst Loca, PusBuic ENTITIES
Article 1, General
700. As used in this chapter, ‘‘local public entity’’ includes ‘tocal pub-
any county or city and any district, local authority or other “*e"”
political subdivision of the State but does not include the
State or any office, officer, department, division, bureau, board,
commission or agency thereof claims against which are
paid by warrants drawn by the Controller.
701. Until the adoption by the people of an amendment Adeption of
to the Constitution of the State of California confirming thetional
authority of the Legislature to prescribe procedures govern- ‘™™™"
ing the presentation, consideration and enforcement of claims
against chartered counties, chartered cities and counties and
chartered cities and against officers, agents and employees
thereof, this chapter shall not apply to causes of action founded
on contract against a chartered city and county or chartered
city while it has an applicable claims procedure prescribed by
charter or pursuant thereto.
702. This chapter applies only to claims relating to causes Causes of
of action which accrue subsequent to its effective date. arecied
703. Articles 1] and 2 of this chapter apply to all claims sxemptions
for money or damages against local public entities except:
(a) Claims under the Revenue and Taxation Code or other
statute prescribing procedures for the refund, rebate, exemp-
tion, cancellation, amendment, modification or adjustment of
4134
Claim
made under
prior law
Claim
procedure as
established
by agreement
STATUTES OF CALIFORNIA [Ch 1724
any tax, assessment, fee or charge or any portion thereof, or of
any penalties, costs or charges related thereto.
.(b) Claims in connection with which the filing of a notice
of lien, statement of claim, or stop notice is required under
any provision of law relating to mechanics’, laborers’ or mate-
rialmen’s liens.
(c) Claims by public officers and employees for fees, sala-
ries, wages, mileage or other expenses and allowances.
(d) Claims for which the workmen’s compensation author-
ized by Division 4 (commencing with Section 3201) of the
Labor Code is the exclusive remedy.
(e) Applications or claims for any form of public assist-
ance under the Welfare and Institutions Code or other pro-
visions of law relating to public assistance programs, and
claims for goods, services, provisions or other assistance
rendered for or on behalf of any recipient of any form of
public assistance.
(f) Applications or claims for money or benefits under any
publie retirement or pension system.
(g) Claims for principal or interest upon any bonds, notes,
warrants, or other evidences of indebtedness.
(h) Claims which relate to a special assessment constituting
a specific lien against the property assessed and which are
payable from the proceeds of such an assessment, by offset of a
claim for damages against it or by delivery of any warrant
or bonds representing it.
(i) Claims by the State or a department or agency thereof
or by another local public entity.
(j) Claims arising under any provision of the Unemploy-
ment Insurance Code, including but not limited to claims for
money or benefits, or for refunds or credits of employer or
worker contributions, penalties or interest, or for refunds to
workers of deductions from wages in excess of the amount
prescribed.
(k) Claims for the recovery of penalties or forfeitures made
pursuant to Article 1 of Chapter 1 of Part 7 of Division 2 of
the Labor Code (commencing at Section 1720).
704. A claim against a local public entity presented in
substantial compliance with any other applicable claims pro-
cedure established by or pursuant to a statute, charter or ordi-
nance in effect immediately prior to the effective date of this
chapter shall satisfy the requirements of Articles 1 and 2 of
this chapter, if such eompliance takes place before the repeal
of such statute, charter or ordinance or before July 1, 1964,
whichever occurs first. Section 716 is applicable to claims
governed by this section.
70. The governing body of a local public entity may in-
elude in any written agreement to which the entity, its gov-
erning body, or anyboardorofficer thereof in an official capac-
ity is a party, provisions governing the presentation, by or
on behalf of any party thereto, of any or all claims arising
Ch. 1724] 1959 REGULAR SESSION
out of or related to the agreement and the consideration and
payment of such claims. The written agreement may incorpo-
rate by reference claim provisions set forth in a specifically
identified ordinance or resolution theretofore adopted by the
governing body. A claims procedure established by an agree-
ment made pursuant to this section exclusively governs the
claims to which it relates, except that the agreement may not
require a shorter time for presentation of claims than the time
provided in Section 715, and that Section 716 is applicable to
all such claims.
Article 2. Presentation, Consideration and Enforcement
of Claims
710. No suit for money or damages may be brought against
a local publie entity on a cause of action for which this chap-
ter requires a claim to be presented until a written claim there-
for has been presented to the entity in conformity with the
provisions of this article.
711.
ule gi
ie 0,
myAe »
VTS
Compiled by
A. C. MORRISON PERE
Legislative Counsel
85-—-L-4573
3266 STATUTES OF CALIFORNIA [Ch. 1681
a
a school district for the formation of a new district, the county
committee shall determine if as to that district the election
shall be held only in such territory. For plans and recommenda-
tions formed pursuant to Sections 3001 to 3009 for the forma-
tion of a newdistrict the county committee shall determine the
territory in which the election shall be held. The election shall
be held in the district or portion thereof in accordance with
such determination.
Sec. 2. Section 1 of this act becomes operative only if
Division 5 of the Education Code as proposed to be added by
Senate Bill No. 718 of the 1963 Regular Session is enacted by
the Legislature at such session, and in such case at the same
time as said Division 5 takes effect.
‘
CHAPTER 1681
An act to add Division 3.6 (commencing with Section 810)
to Title 1 of the Government Code, and to amend Sections
340, 1095 and 1242 of the Code of Civil Procedure, and to
repeal Sections 903, 1041, 1042, 13551, 15512, 15513, 15514,
15515 and 15516 of the Education Code, and to repeal Sec-
tion 1012 of, and Article 6 (commencing with Section 1181)
of Chapter 4 of, Division 4 of the Education Code as pro-
posed to be added by Senate Bill No. 718 of the 1963 Regular
Session, and to repeal Article 1 (commencing with Section
1950) of Chapter 6 of Division 4 of Title 1 of, Article 6
(commencing with Section 50140) of Chapter 1 of Part 1 of
Division 1 of Title 5 of, Article 3 (commencing with Section
53050) of Chapter 1 of Part 1 of Division 2 of Title 5 of,
and Sections 2002.5, 39586, 54002, 61627 and 61633 of, the
Government Code, and to amend Sections 943 and 954 of,
and to repeal Chapter 23 (commencing with Section 5640)
of Part 3 of Division 7 of, the Streets and Highways Code,
and to repeal Article 10 (consisting of Section 51480) of
Chapter 2 of Part 7 of Division 15 of, Chapter 5 (commenc-
ing with Section 60200) of Part 3 of Division 18 of, and
Sections 22725, 22726, 22730, 22731, 31083, 31089, 31090,
35750, 85751, 35755, 35756, 50150 and 50152 of, the Water
Code, and to amend Sections 6005, 6610.3 and 6610.9 of the
Welfare and Institutions Code, and to repeal Sections 71754,
71755 and 71756 of the Water Code as added by Chapter
156, Statutes of 1963, and to repeal Section 10 of Chapter
641 of the Statutes of 1931 (Flood Control and Flood Water
Conservation District Act), relating fo lalility of public en-
tities and. public officers, servants and employees.
{Approved by Governor July 15, 1963. Filed with
Secretary of State July 17, 1963.)
The people of the State of California do enact as follows:
Srection 1. Division 3.6 (commencing with Section 810) is
added to Title 1 of the Government Code, to read:
Ch. 1681] 1963 REGULAR SESSION
3967
DIVISION 3.6. CLAIMS AND ACTIONS AGAINST
PUBLIC ENTITIES AND PUBLIC EMPLOYEES
PART 1. DEFINITIONS
810. Unless the provision or context otherwise requires,
the definitions contained in this part govern the construction
of this division.
$10.2. ‘*‘Employee’’ includes an officer, employee, or serv-
ant, whether or not compensated, but does not include an in-
dependent contractor.
810.4. ‘‘Employment’’ includes office or employment.
810.6. ‘‘Enactment’’ means a constitutional provision,
statute, charter provision, ordinance or regulation. ,
810.8. ‘‘Injury’’ means death, injury to a person, damage
to or loss of property, or any other injury that a person may
suffer to his person, reputation, character, feelings or estate, of
such nature that it would be actionable if inflicted by a private
person, ;
811. ‘‘Law’’ includes not only enactments but also the
decisional law applicable within this State as determined and
declared from time to time by the courts of this State and of
the United States.
811.2. ‘‘Public entity’’ includes the State, the Regents of
the University of California, a county, city, district, public
authority, public agency, and any other political subdivision
or public corporation in the State.
811.4. ‘‘Public employee’? means an employee of a public
entity.
811.6. ‘‘Regulation’’ means a rule, regulation, order or
standard, having the force of law, adopted by an employee or
agency of the United States or of a public entity pursuant to
authority vested by constitution, statute, charter or ordinance
in such employee or agency to implement, interpret, or make
specific the law enforced or administered by the employee or
agency.
811.8. ‘‘Statute’’? means an act adopted by the Legislature
of this State or by the Congress of the United States, or a
statewide initiative act.
PART 2. LIABILITY OF PUBLIC ENTITIES
AND PUBLIC EMPLOYEES
CHarter 1. GENERAL Provisions RELATING TO LIABILITY
Article 1. Scope of Part
814. Nothing in this part affects liability based on contract
or the right to obtain relief other than money or damages
against a public entity or public employee.
814.2. Nothing in this part shall be construed to impliedly
repeal any provision of Division 4 (commencing with Section
ec
RALPH N. KLEPS -
LEGISLATIVE COUNSEL
ANGUS Cc. MORRISON
CHIEF DEPUTY
BERNARD CZESLA
GEORGE KH. MURPHY
PRINCIPAL DEFUTIES
STANLEY M. LOURIMORE
DEPUTY In CHARGE
Los ANGELES OFFICE
LAWRENCE G. ALLYN
TERRY L, BAUM
Barnana C. Carars
VIRGINIA COKER
KENT L. DECMAMBEAU
F. RICHARD E, GARDELLA
STATE OF CALIFORNIA . S,Goure |
EpseEt W. Haws
Office of Legislative Counsel Rowen. Minexaw
Owen K, Kuns
3021 STATE CAPITOL. SACRAMENTO 14 ERNEST H, Kunz
321 STATE BUILDING, LOS ANGELES 12.- : ANN M. MACKEY
RYAN M,. PoLsTra
June 29, 1959 ReythWatvenen
ROsE Woops
REPORT ON ASSEMBLY BILL NO. 405. BRADLEY
SUMMARY 2 Adds Ch. 2 of a new Div. 3.5, Title 1, Gov. C.,
repeals and adds Sec. 342, C.C.P., adds Sec. 313,
C.C.P., re claims against local public entities.
Prescribes a general procedure for the
presentation of claims for money or damages against
local public entities which are defined to exclude
the State of California and those of its agencies
whose claims are paid by Controller's warrants
onthe State.Treasury. » Exempts.certain claims for
money, including. claims relating to taxes, salaries
andwages,. workmen's compensation, unemployment
insurance, public assistance, bonds and other such
matters. Permits special claim procedures in con-
tractual matters and, until July 1, 1964, permits
continued use of unrepealed local procedures.
Requires presentation of: a written claim con-
taining specified information as a prerequisite to.
suit against a local. publicentity, but provides
that defects in claim are waived unless notice is
given to claimant. Claims for personal injuries or
injuries to personal property or growing crops must
be presented within 100 days after accrual of cause
of action and other claims within one year of accrual
of cause of action. Provides for partial rejection.
of claim and prohibits suit on allowed portion.
Permits amendment of claim. Unless law otherwise
requires as to the particular local public entity,
requires that an action be brought against such entity
within the time allowed by the statute of limitations
if the action were against a private person.
Establishes special procedure for extending
time to file claim in cases of minority, disability
Report on Assembly Bill No. 405 ~ p. 2
FORM:
or death.
Permits local public entities to establish
claims procedure consistent with general statute
for matters excluded from it and not covered by
other provisions of law.
Approved. TITLE: Approved.
CONSTITUTIONALITY: Approved.
COMMENT:
TLB:fo
This bill is one of six (A.B. 405 ~
A.B. 410) sponsored by the-Law Revision
Commission relating to claims against public
entities and having as a principal purpose
the creationof agreater degree. of uniformity
in the law in this field. This program is dis-~
cussed in a report of the Commission titled
"The Presentation of Claims Against Public
Entities," dated January, 1959.
Ralph N. Kleps
Legislative Counsel
eeeEO
Terry L. Baum
Deputy. Legislative Counsel
STATE OF CALIFORNIA
CALIFORNIA LAW
REVISION COMMISSION
RECOMMENDATION
relating to
Sovereign Immunity
Number 1—Tort Liability of Public Entities
and Public Employees
January 1963
Cauirornia Law REvIsion CoMMISSION
School of Law
Stanford University
Stanford, California
NOTE
This pamphlet begins on page 801. The Commission’s annual
reports and its recommendations and studies are published in
separate pamphlets which are later bound in permanent volumes.
The page numbers in each pamphlet are the same as in the volume
in which the pamphlet is bound. The purpose of this numbering
system is to facilitate consecutive pagination of the bound volumes.
School ef Law
Stanford University
JAMES A. COREY
iMember of the Senate
©. O. Sox 1239
Merced
STATE OF CALIFORNIA
CALIFORNIA LAW REVISION COMMISSION
COMMISSION STAFF
JORN H. DeMOULLY
Euecutive Secretory
JOSEPH B. HARVEY
Assistont Executive Secrefary
SOM 0. SHOCK
Assistant Counsel
GEORGE $. GROSSMAN
Adminitrative Assistont
To His ExceLLency, EDMUND G. BRowN ofce of and Stell
Governor of California . . sponterdGaiety
and to the Legislature of California Stontord, Californie
January 2, 1963
The California Law Revision Commission was authorized by
Resolution Chapter 202 of the Statutes of 1957 to make a study
to determine whether the doctrine of sovereign or governmental
immunity in California should be abolished or revised.
On January 27, 1961, the California Supreme Court, in Muskopf
vy. Corning Hospital District, 55 Cal.2d 211, decided that the doc-
trine of sovereign immunity would no longer protect the State and
other public entities in California from civil liability for their torts.
At the same time, the Court decided Lipman v. Brisbane Elemen-
tary School District, 55 Cal.2d 224, in which it stated that the
doctrine of discretionary immunity, which protects public officers
and employees from liability for their discretionary acts, might
not protect public entities from liability in all situations where
the officers and employees are immune.
In response to these decisions, the Legislature enacted Chapter
1404 of the Statutes of 1961. This legislation suspends the effect
of the Muskopf and Lipman decisions until the ninety-first day
after the adjournment of the 1963 Regular Session of the Legis-
lature. At that time, unless further legislative action is taken, the
State and other public entities in California will be liable for their
torts under the conditions set forth in the Muskopf and Lipman
cases.
Since the decision in the Afuskopf case, the Commission has de-
yoted substantially all of its time to the study of sovereign im-
munity. The Commission herewith submits its recommendation on
one portion of this subject—tort liability of public entities and
public employees. This is one of a series of reports prepared for
the 1963 legislative session containing the recommendations of the
Commission relating to various aspects of the subject of sovereign
immunity. The Commission also has published a research study
relating to sovereign immunity prepared byits research consultant,
Professor Arvo Van Alstyne of the School of Law, University of
California at Los Angeles.
( 803 )
804. CALIFORNIA LAW REVISION COMMISSION
In formulating its recommendations concerning sovereign immunity, the Commis-
sion first prepared a series of tentative recommendations, each of which related to
a different aspect of the subject. These tentative recommendations were widely
distributed, and comments and suggestions were solicited from all persons and
organizations who expressed an interest in this subject. The State Bar appointed
a special committee to consider the recommendations of the Commission relating to
sovereign immunity, and this Committee has provided the Commission with helpful
comments and suggestions. In addition, representatives of various public entities
and other interested persons have attended the meetings of the Commission as
observers. All comments and suggestions received were considered by the Commission
in preparing its final recommendations.
Although the Commission has devoted the major portion of its time during the
past two years to the study of sovereign immunity, the subject is so vast that a
complete study of all its aspects could not be completed prior to the 1963 legislative
session. The recommendations prepared for the 1963 legislative session are designed
to meet the most pressing problems in regard to governmental tort liability. Other
problems remain to be solved in the areas of activity already studied; and there are
other areas of activity, where claims of liability arise less frequently, that require
attention. Accordingly, the Commission proposes to continue its study of this subject
and to make recommendations to subsequent legislative sessions dealing with the
remaining problems. Among the.topics that may be the subject of future study and
recommendation by the Commission are liability without fault (including liability
for ultrahazardous activities), specific or preventive relief against public entities
and public employees, and liability for injuries to reputational interests (including
defamation and invasion of privacy).
Respectfully submitted,
HERMAN FE. SELVIN, Chairman
TABLE OF CONTENTS
Page
BACKGROUND ___._________-----_--- --+--++--++===---~------- 807
The Need for Legislation______.-...------------------------ 807
Drawing Standards for Governmental Liability__--.--------- 810
The Legislation Proposed by the Commission _--~-~---------- 811
Determination of basic statutory approach____~~~---------~- 811
Formulation of rules governing liability____-_-----~-..------ 811
RECOMMENDATIONS ____-~—~~~-------------------~----------- 814
General Provisions Relating to Liability.-.-..-------------- 814
Dangerous Conditions of Public Property_-..--------------- 819
Background __---------~---.----------------------------- 819
Effect of the Muskopf decision _-__--.-__------------~---~- 821
Recommendation ___.___-__----------------------~------- 821.
Police and Correctional Activities_.___.--_------------~-~---- 826
Fire Protection __-~----~-~-Woeeeeeeeeee 827
Medical, Hospital and Public Health Activities___------------— 829
Tort Liability Under Agreements Between Public Entities____-_ 831
Disposition of Pending Claims and Actions__._--------~-~--~- 832
Amendments and Repeals of Existing Statutes__-_..--------- 833
PROPOSED LEGISLATION ___.-------~~~------------------------ 834
( 805 )
RECOMMENDATION OF THE CALIFORNIA
LAW REVISION COMMISSION
relating to
SOVEREIGN IMMUNITY
Number 1—TortLiability of Public Entities
and Public Employees
BACKGROUND
On January 27, 1961, the California Supreme Court, in Muskopf v.
Corning Hospital District,1 decided that. the doctrine of sovereign
immunity would no longer protect public entities 2 in California from
civil liability for their torts. At the same time, the Supreme Court
decided Lipman v. Brisbane Elementary School District,2 in which it
stated that the doctrine of discretionary immunity, which protects
public employees* from Nability for their discretionary acts, might
not protect publie entities from liability in all situations where the
employees are immune.
In response to these decisions, the Legislature enacted Chapter 1404
of the Statutes of 1961. This legislation suspends the effect of the
Muskopf and Lipman decisions until the ninety-first day after the final
adjournment of the 1963 Regular Session of the Legislature. At that
time, unless further legislative action is taken, the public entities of
California will be liable for their torts under the conditions set forth
-
in the Muskopf and Lipman decisions.
The Need for Legislation
Prior to the Muskopf and Lipman decisions, extensive legislation
relating to the subject of governmentalliability or immunity had been
enacted. This legislation expresses a variety of conflicting policies.
Some statutes create broad immunities for certain entities and others
create wide areas of liability. Some apply to many public entities and
others apply to but one. In some cases, statutes expressing conflicting
policies overlap.° Even where statutes impose liability on public en-
tities, they do so in a variety of inconsistent ways. Some entities are
155 Cal.2d 211, 11 Cal. Rptr. 89, 359 P.2d 457 (1961).
2 As used in this recommendation “public entities” includes the S
tate and all other
public entities. .
255 Cal.2d 224, 11 Cal. Rptr. 97, 359 P.2d 465 (1961).
4As used in this recommendation: “employee” includes
an officer, agent or employee,
but not an independent contractor; and “employment”
includes office, agency or
employment.
8’ For example, Streets and Highways Code Sections 56
40 and 5641 (part of the Im-
provement Act of 1911) provide that cities, counties, re
sort districts and all cor-
porations organized for municipal purposes are immune from
liability for injuries
caused by street and sidewalk defects. It is ikely that these
immunity provisions
apply to several other kinds of districts, for the Improv
ement Act of 1911 has
been incorporated by reference in many other statutes. But Governm
ent Code
Section 53051 provides that cities, counties and school districts a
re liable for such
dangerous conditions. As the Government Code section was
last enacted, it has
impliedly repealed the Streets and Highways Code sectio
ns insofar as cities and
counties are concerned, but not insofar as resort districts and co
rporations or-
ganized for municipal purposes are concerned.
( 807 )
808 CALIFORNIA LAW REVISION COMMISSION
liable directly for the negligence of their employees. Others are not
liable directly, but are required to pay judgments recovered against
their employees even where the judgments result from malicious acts.
Where statutes are not applicable, the courts have determinedliability
on the basis of whether the injury was caused in the course of a gov-
ernmental or proprietary activity. Thus, if the injury oceurred in a
swimming pool (a ‘‘governmental’’ activity), the public entity was
not liable; but if the injury occurred on a golf course (a ‘ proprietary’’
activity), the public entity was liable.
Even where a public entity is immune from liability for a negligent
or wrongful act or omission, the public employee who acted or failed
to act is often personally liable; and many public entities have
assumed the cost of insurance protection for their employees against
this liability.
Thus, even before the Muskopf and Lipman cases were decided, there
was a pressing need for comprehensive legislation to deal with the
problems of governmental liability and immunity.
The effect of the Muskopf and Lipman decisions on the existing stat-
utes is not clear. Statutes that imposeliability upon public entities in
particular areas of activity may be construed either as limitations on
the liability that would exist under these decisions or, in cases where
a rule is declared that is broader than the common law rule that would
be applicable under these decisions, as extensions of governmental
liability.
The problem of reconciling the Muskopf and Lipman decisions with
the existing statutory law could be met by repealing the existing stat-
utes. Then the courts could decide all cases under the general princi-
ple that a public entity is liable for its torts. The federal government
and some of the states have taken this approach. Thus, in some juris-
dictions, a statute merely declares that the government is not immune
from liability for its torts,® while in others, the courts have declared
a similar rule.”
This solution to the problem, though, is fraught with difficulties. No
precise standards for the determination of the liability of government
have as yet been defined by the California courts. Hence, it is impossible
to ascertain how large the potential liability would be if the Muskopf
and Lipmancases were permitted to determine all governmental lia-
bility. The suggestion in the Lipman case that public entities may be
liable for discretionary actions of public employees has given rise to
fears that governmental liability may be expanded to the extent that
essential governmental functions will be impaired. Experience in states
which have left the limits of liability to be determined by the courts
has shown that liability insurance to protect the financial integrity
* United States (28 U.S.C. §§ 1346, 2671-2680) ; New York (N.Y. Cr. Ch. Acr § 8—
State only) ; INInois (37 ILL. ANN, Star. §§ 439,1-439.26 (Smith-Hurd Supp. 1961)
~—State only) ; Washington. (Wash, Stats. 1961, Ch. 186—State only) ; Kentucky
(Ky. Rev. Star, § 44.070—State, negligence only); North Carolina (N.C. GEN.
Stat. § 143-291—State, negligence only); Alaska (ALASKA Comp. LAWS ANN. §
56-2-2—local entities only, as construed in City of Fairbanks v. Schatble, 375P.2d_ 201 (Alaska 1962); ALasKa Comp. Laws ANN. § 56-7-1 et seq.—Stateonly) ; Hawaii (Hawam Rev. Laws § 245A-1 et seqg.—State only).
™New York (Bernardine v. City of New York, 294 N.Y, 361, 62 N.E.2d 604 (1945)—
local entities only); Florida (Hargrove v. Town of Cocoa Beach, 96 So.2d 180, -
60 A.L.R.2d 1193 (Fla. 1957)—local entities only) ; Illinois (Molitor v. KanelandCommunity Unit Dist., 18 Ti.2d 11, 163 N.E.2d 89' (1959)—local entities only) ;
Michigan (Williams v. City of Detrott, 364 Mich. 231, 111 N.W.2d 1 (1961));
Wisconsin (Holytz v. City of Milwaukee, 17 Wis.2d 26, 115 N.W.2d 618 (1962)).
TORT LIABILITY 809
of small public entities is at times prohibitively expensive or impossible
to obtain when there is no defined limit to the potential extent of lia-
bility. As a result, some of these states have enacted legislation that
substantially curtails governmental liability.
The courts, of course, have recognized that the liability of govern-
ment cannot be unlimited. In the Muskopf case, the Supreme Court
stated that it is not a tort for government to govern. In other juris-
dictions where there has been a general waiver of sovereign immunity,
the courts have worked out the limits of liability on a case by case
basis over a period of years. Thus, in New York, the courts have de-
clared that public entities are not liable for failing to enforce the law,
for negligently inspecting buildings or for improperly issuing build-
ing permits. If the limits of governmental liability are not specified by
statute in California, our courts will have to define the limits of such
liability much as the courts in New York have been required to do.
Under this process, though, many years will pass before the extent of
governmental liability can be determined with certainty. Many cases
must be tried and processed through the appellate courts. Large amounts
of both private and public money must be fruitlessly expended in
prosecuting and defending actions where the governmental defendant
cannot be held liable. And in the meantime, while the potential liability
is yet unknown,the financial stability of many public entities may be
unprotected because of the unavailability of. insurance at rates that
they can afford to pay.
There is an immediate need, therefore, for the enactment of compre-
hensive legislation stating in considerable detail the extent to which
public entities will be liable when the legislation suspending the effect
of the Muskopf and Lipman decisions expires. In preparing this legis-
lation, California may profit from the experience of New York and the
federal government in administering their governmental tort laws. The
difficulties the New York and federal courts have experienced in defin-
ing the limits of liability may be avoided here to a considerable extent
by the statement of these limits in statutory form. Where the New York
and federal courts have reached sound conclusions, the rules declared
may be enacted here so that no time or money need be lost in test cases
to determine whether the California courts will reach the same conclu-
sions. Where the courts of these jurisdictions have reached unsound
conclusions and haveeither restricted liability unduly or placed bur-
dens on government that impair its ability to perform its vital fune-
tions, California can meet the problem by declaring a different rule by
statute.
The resulting certainty will be of benefit both to public entities and
to persons injured by governmental activities. If the limits of potential
liability are known, public entities may plan accordingly, may budget
for their potential liabilities, and may obtain realistically priced insur-
ance. Meritorious claims will not be resisted in the hope that the appel-
late courts will create an additional immunity; and unmeritorious
claims will not be pressed in the hope that an existing immunity will
be curtailed or that liability will be extended beyond previously estab-
lished limits.
STATE OF CALIFORNIA
CALIFORNIA LAW
REVISION COMMISSION
RECOMMENDATION
relating to
Sovereign Immunity
Number 2—Claims, Actions and Judgments Against
Public Entities and Public Employees
January 1963
CALIFORNIA Law REVISION COMMISSION
School of Law
Stanford University
Stanford, California
NOTE
This pamphlet begins on page 1001. The Commission’s annual
reports and its recommendations and studies are published in
separate pamphlets which are later bound in permanent volumes.
The page numbers in each pamphlet are the same as in the volume
in which the pamphlet is bound. The purpose of this numbering
system is to facilitate consecutive pagination of the bound volumes.
COMMISSION MEMBERS
HERMAN F. SELVIN
Chairman
S23 West Sth Street
Los Angeles 14
JOHN & McDONOUGH, 5.
Vice Chairman
School of Law
Stanford University
002 First Nationa! Bank Bldg.
San Jose 13
SOSEPH A. BALL
126 Linden Avenve
Long Beach 2
JAMES R EDWARDS
57? Arrowleod Avenues
Sae Bemardine
RICHARD H. KEATINGE
3825 Wilshire Boulevard
Loe Angeles 5
SHO SATO
School of Law
University of Caltfornia
ey
THOMAS E. STANTON, Je.
221 Sansome Street
San Francisco
ANGUS C. MORRISON
Ex Officio
Legislative Cownset
W21 State Capitol
Socvomento 14
STATE OF CALIFORNIA
CALIFORNIA LAW REVISION COMMISSION
January 2, 1963
COMMISSION STAFF
JOHN H. DeMOULLY
Executive Secretary
JOSEPH B. HARVEY
Assistant Executive Secretary
4ON D. SMOCK
Assistant Counsel
GEORGE S. GROSSMAN
Administrative Assistant
To His ExceLLeENoy, EpMUND G. BRowNn
Governor of California
and to the Legislature of California
School of Law
Stonford University
Stanford, Califemle
The California Law Revision Commission was authorized by
Resolution Chapter 202 of the Statutes of 1957 to make a study
to determine whether the doctrine of sovereign, or governmental
immunity in California should be abolished or revised.
The Commission herewith submits its recommendation on one
portion of this subject—claims, actions and judgments against
public entities and public employees. This is one of a series of
reports prepared for the 1963 legislative session containing the
recommendations of the Commission relating to various aspects of
the subject of sovereign immunity. The Commission also has pub-
lished a research study relating to sovereign immunity prepared by
its research consultant, Professor Arvo Van Alstyne of the School
of Law, University of California at Los Angeles.
Respectfully submitted,
Herman F. SELVIN, Chairman
( 1003 )
Office of Commission ond Stall
~ TABLE OF CONTENTS
Page
BACKGROUND _.-~~---___-_______----_-_----+ 1007
RECOMMENDATION — 1008
Claims Against Public Entities -- ___ 1008
Unified statutory treatment _-- 1008
Realization of basic claims statute objectives______________ 1008
Prompt notice ~--___---______-__________-_-------_--~- 1008
Opportunity to consider and settle claims_______________ 1008
Relief for persons who could not reasonably have been ex-
pected to present a claim _- - ---- 1009
Formal requisites of claim________________----_----_---__ 1010
Time for official consideration of claim______.-___-__---_.-_- 1011
Reduetion of technical difficulties and resultant expense in
handling of claims _--- __._ 1011
Summary ofsignificant time limitations and other conditions
underexisting law and under the recommended legislation 1012
Actions Against Public Entities and Public Employees__-____- 1014
Consent to suit. --------- +--+ 1014
Time for commencing action on rejected claim____.---__~- 1014
Undertaking by plaintiff ; costs allowable against plaintiff___ 1014
Settlement of pending actions__ -- - --- 1015
Actions against public employees________-_----_-____-__- 1015
Venuein tort actions against the State____-___________-_-__- 1017
Service of summonsin actions against the State___.._______ 1017
Payment of Claims and Judgments___.-_-____--------------- 1018
Payment of tort judgments by local public entities________- 1018
Funding judgments against local public entities with bonds. 1019
Amendments and Repeals_______---------_---------------- 1020
Effective Date of Proposed Legislation________-__.-___-___-- 1020
ProposeD LEGISLATION __________~--___-~-----+------~----~~- 1021
APPENDIX—DISPOSITION TABLE ~-.-___--_------------------- 1093
( 1005 )
1024 CALIFORNIA LAW REVISION COMMISSION
utes of 1959), and to amend Section 8.1 of the Solano
County Flood Control and Water Conservation District Act
(Chapter 1656, Statutes of 1951), and to amend Section 53
of the Solvang Municipal Improvement District Act (Chap-
ter 1635, Statutes of 1951), and to amend Section 8 of the
Sonoma County Flood Control and Water Conservation
District Act (Chapter 994, Statutes of 1949), and to amend
Section 10 of the Sutter County Water Agency Act (Chap-
ter 2088, Statutes of 1959), and to amend Section 23 of
the Upper Santa Clara Valley Water Agency Law (Chap-
ter 28, Statutes of 1962 (1st Ex. Sess.)), and to amend Sec-
tion 2.5 of the Vallejo Sanitation and Flood Control Dis-
trict Act (Chapter 17, Statutes of 1952 (1st Ex. Sess.)),
and to amend Section 13 of the Ventura County Flood Con-
trol Act (Chapter 44, Statutes of 1944 (4th Ex. Sess.)),
and to amend Section 8 of the Yolo County Flood Control
and Water Conservation District Act (Chapter 1657, Stat-
utes of 1951), and to amend Section 10 of the Yuba County
Water Agency Act (Chapter 788, Statutes of 1959), and
to amend Sectton 40 of the Yuba-Bear River Basin Author-
tty Act (Chapter 2131, Statutes of 1959), relating to claims,
actions and judgments against public entities and public
officers, agents and employees.
The people of the State of California do enact as follows:
Section 1. Part 3 (commencing with Section 900) is added
to Division 3.6 of Title 1 of the Government Code as enacted
by Senate Bill No. __ of the 1963 Regular Session, to read:
PART 3. CLAIMS AGAINST PUBLIC ENTITIES
CuapTrr 1. GENERAL
Article 1. Definitions
900. Unless the provision or context otherwise requires, the
definitions contained in this article govern the construction of
this part.
Comment: This section is based on similar provisions found in the
definitions or general provisions portions of various codes. See, for
example, Section 5 of the Government Code.
The definitions contained in Part 1 of Division 3.6 will, of course,
apply to this part. Part 1 contains the following provisions:
810. Unless the provision or context otherwise requires, the defini-
tions contained in this part govern the construction of this division.
810.2. ‘‘Employee’’ includes an officer, agent or employee, but does
not include an independent contractor.
810.4. ‘‘Employment’’ includes office, agency or employment.
810.6. ‘‘Enactment’’ means a constitutional provision, statute,
charter provision, ordinance or regulation.
CLAIMS, ACTIONS AND JUDGMENTS 1025
810.8. ‘‘Injury’’ means death, injury to a person, damage to or loss
of property, or any other injury that a person maysuffer to his person,
reputation, character, feelings or estate, of such nature that it would
be actionable if inflicted by a private person.
811. ‘‘Law’’ includes not only enactments but also the decisional
law applicable within this State as determined and declared from time
to time by the courts of this State and of the United States. —
811.2. ‘‘Publie entity’’ includes the State, the Regents of the Uni-
versity of California, a county, city, district, public authority, public
agency, and any other political subdivision or public corporation in
the State.
811.4. ‘‘Public employee’’ means an employee of a public entity.
811.6. ‘‘Regulation’’ means a rule, regulation, order or standard,
having the force of law, adopted by an employee or agency of the
United States or of a public entity pursuant to authority vested by
constitution, statute, charter or ordinance in such employee or agency
to implement, interpret or make specific the law enforced or admin-
istered by the employee or agency.
811.8. ‘‘Statute’’ means an act adopted by the Legislature of this
State or by the Congress of the United States, or a statewide initia-
tive act.
900.2. ‘‘Board’’ means:
(a) In the ease of a local public entity, the governing body
of the local public entity.
(b) In the case of the State, the State Board of Control.
Comment: “Board” has been defined to facilitate the drafting of
provisions that apply both to the State and to local public entities.
900.4. ‘‘Local public entity’’ includes a county, city, dis-
trict, public authority, public agency, and any other political
subdivision or public corporation in the State, but does not in-
elude the State.
Comment: The definitions of “State” and “local public entity” are
based on the definition of ‘‘local public entity’’ contained in Govern-
ment Code Section 700.
900.6. ‘‘State’’ means the State and anyoffice, officer, de-
partment, division, bureau, board, commission or agency of the
State claims against which are paid by warrants drawn by the
Controller.
Comment: See the comment to Section 900.4.
901. For the purpose of computing the time limits pre-
seribed by Sections 911.2, 911.4 and 912, the date of the ac-
crual of a cause of action to which a claim relates is the date
upon which the cause of action would be deemed to have
accrued within the meaning of the statute of limitations which
1026 CALIFORNIA LAW REVISION COMMISSION
would be applicable thereto if there were no requirement that
a claim be presented to and be acted upon by the public entity
before an action could be commenced thereon.
Comment: This section is based on the second paragraph of Gov-
ernment Code Section 715, which applies to claims against local public
entities. There is no existing comparable statutory provision that ap-
plies to claims against the State.
Article 2. General Provisions
905. There shall be presented in accordance with Chapter 1
(commencing with Section 900) and Chapter 2 (commencing
with Section 910) of this part all claims for money or damages
against local public entities except:
(a) Claims under the Revenue and Taxation Code or other
statute prescribing procedures for the refund, rebate, exemp-
tion, cancellation, amendment, modification or adjustment of
any tax, assessment, fee or charge or any portion thereof, or
of any penalties, costs or charges related thereto.
(b) Claims in connection with which the filing of a notice
of lien, statement of claim, or stop notice is required under
any provision of law relating to mechanics’, laborers’ or ma-
terialmen’s liens. :
(c) Claims by public employees for fees, salaries, wages,
mileage or other expenses and allowances. —
(d) Claims for which the workmen’s compensation author-
ized by Division 4 (commencing with Section 3201) of the
Labor Codeis the exclusive remedy.
(e) Applications or claims for any form of public assist-
ance under the Welfare and Institutions Code or other provi-
sions of law relating to public assistance programs, and claims
for goods, services, provisions or other assistance rendered for
or on behalf of any recipient of any form of public assistance.
(f) Applications or claims for money or benefits under any
public retirement or pension system.
(g) Claims for principal or interest upon any bonds, notes,
warrants, or other evidences of indebtedness.
(h) Claims which relate to a special assessment constituting
a specific lien against the property assessed and which are pay-
able from the proceeds of such an assessment, by offset of a
claim for damages against it or by delivery of any warrant
or bonds representingit.
(i) Claims by the State or by a State department or agency
or by another local public entity.
(j) Claims arising under any provision of the Unemploy-
ment Insurance Code, including but not limited to claims for
money or benefits, or for refunds or credits of employer or
worker contributions, penalties, or interest, or for refunds to
workers of deductions from wages in excess of the amount
preseribed.
CLAIMS, ACTIONS AND JUDGMENTS * 1027
(k) Claims for thé recovery of penalties or forfeitures made
pursuant to Article 1 of Chapter 1 of Part 7 of Division 2 of
the Labor Code (commencing with Section 1720).
(1) Claims governed by the Pedestrian Mall Law of 1960,
Division 13 (commencing with Section 11000) of the Streets
and Highways Code.
Comment: This section is the same in substance as Government
Code Section 703. See new Section 935 for procedure for claims ex-
cepted from Chapters 1 and 2.
905.2. There shall be presented in accordance with Chapter
1 (commencing with Section 900) and Chapter 2 (commencing
with Section 910) of this part all claims for money or damages
against the State:
(a) For which no appropriation has been made or for which
no fundis available but the settlement of which has been pro-
vided for by enactment.
(b) Forwhich the appropriation made or fund designated
is exhausted.
(c) For money or damages (1) on express contract, (2) for
an injury for whichthe State is liable or (3) for the taking or
damaging of private property for public use within the mean-
ing of Section 14 of Article I of the Constitution.
(a) For which settlement is not otherwise provided for by
enactment.
Comment: This section—which restates the substance of portions
of Government Code Sections 620, 621 and 641—-is patterned after Sec-
tion 630 (Title 2 of the Cau. Apmin. Cope) of the Rules of the State
Board of Control.
905.4. Chapter 1 (commencing with Section 900) and
Chapter 2 (commencing with Section 910) of this part shall
not be construed to be an exclusive means for presenting claims
to the Legislature nor as preventing the Legislature from mak-
ing such appropriations as it deems proper for the payment of
claims against the State which have not been submitted to the
board or recommended for payment by it pursuant to Chapters
1 and 2 ofthis part.
Comment: This section is the same in substance as Government
‘Code Section 625.
905.6. This part does not apply to claims against the Re-
gents of the University of California.
Comment: This section codifies existing law as declared by two
trial court decisions which, the Commission is advised, held that neither
the State nor the local public entity claims presentation procedures
apply to claims against the University of California.
1028 CALIFORNIA LAW REVISION COMMISSION
905.8. Nothing in this part imposes liability upon a public
entity unless such liability otherwise exists.
Comment: This section is new. It makes clear that the claims
presentation provisions do not impose substantive liability ; some other
statute must be found that imposes liability.
CHAPTER 2. PRESENTATION AND CONSIDERATION OF CLAIMS
Article 1. General
910. A claim shall be presented by the claimant or by a
person acting on his behalf and shall show:
(a) The name and post office address of the claimant;
(b) The post office address to which the person presenting
the claim desires notices to be sent;
(ec) The date, place and other circumstances of the occur-
rence or transaction which gave rise to the claim asserted ;
(d) A general description of the indebtedness, obligation,
injury, damage or loss incurred so far as it may be known at
the time of presentation of the claim; and
(e) The amount claimed as of the date of presentation of
the claim, together with the basis of computation thereof.
Comment: This section is the sameas the first paragraph of Gov-
ernment Code Section 711, which applies to local public entities. This
section will substitute a more specific statement of the contents of a
claim for the very general statement found in Government Code Sec-
tion 621, which applies to the State and requires that ‘‘any person
having a claim against the State ... shall present it to the board... , _
accompanied by a statement showing the facts constituting the claim.’’
910.2. The claim shall be signed by the claimant or by
some person on his behalf. Claims against local public entities
for supplies, materials, equipment or services need not be
signed by the claimant or on his behalf if presented on a bill-
head or invoice regularly used in the conduct of the business
of the claimant.
Comment: This section is the same as the second paragraph of
Government Code Section 711, which applies to local public entities.
It will eliminate the requirement of Government Code Section 621 that
claims against the State be ‘‘verified in the same manneras complaints
in civil actions.’’ Claims against local public entities are not required
by existing law to be verified. .
910.4. The board may provide forms specifying the infor-
mation to be contained in claims against the public entity. If
the board provides forms pursuant to this section, the person
presenting a claim need not use such form if he presents his
CLAIMS, ACTIONS AND JUDGMENTS 1029
claim in conformity with Sections 910 and 910.2. If he uses
the form provided pursuant to this section and complies sub-
stantially with its requirements, he shall be deemed to have
complied with Sections 910 and 910.2.
Comment: This section is new. It permits public entities to provide
a form that a claimant mayuse in lieu of submitting a claim containing
the information specified in new Section 910. However, a claimant is
not required to use the form provided by the public entity; he may
submit his claim in compliance with new Sections 910 and 910.2.
910.6. (a) A claim may be amendedat any time before the
expiration of the period designated in Section 911.2 or before
final action thereon is taken by the board, whicheveris later,
if the claim as amended relates to the same transaction or
occurrence which gave rise to the origmal claim. The amend-
ment shall be considered a part of the original claim for all
purposes.
(b) A failure or refusal to amend a claim, whether or not
notice of insufficiency is given under Section 910.8, shall not
constitute a defense to any action brought upon the cause
of action for which the claim was presented if the court finds
that the claim as presented complied substantially with Sec-
tions 910 and 910.2 or a form provided under Section 910.4.
Comment: Paragraph (a) governs the amendment of claims. Exist-
ing law applying to local public entities (Government Code Section
711) provides that ‘‘a claim may be amended at any time, and the
amendment shall beconsidered a part of the original claim for all
purposes.’’ There is no existing statutory provision relating to amend-
mentof claims against the State.
Paragraph (b) is based on a portion of Government Code Section
712 which applies to local public entities.
910.8. (a) If in the opinion of the board a claim as pre-
sented fails to comply substantially with the requirements of
Sections 910 and 910.2, or with the requirements of a form
provided under Section 910.4 if a claim is presented pursuant
thereto, the board may, at any time within 20 days after the
claim is presented, give written notice of its insufficiency, stat-
ing with particularity the defects or omissions therein.
(b) Such notice may be given personally to the person pre-
senting the claim or by mailing it to the address, if any, stated
in the claim as the address to which the person presenting the
claim desires notices to be sent. If no such address is stated in
the claim, the notice may be mailed to the address, if any, of
the claimant as stated in the claim.
(c) The board maynot take action on the claim for a period
of 15 days after such notice is given.
1030 CALIFORNIA LAW REVISION COMMISSION
Comment: This section is the same as Government Code Section
712, which applies to local public entities, except that (1) Section 712
provides for notice of insufficiency within 50 days instead of within 20
days, and (2) Section 712 prohibits board action on the claim for a
period of 20 days instead of 15 days. The shorter time limits under
new Section 910.8 are necessary because this legislation is designed to
give the board an opportunity to consider the claim before court action
may be commenced. Underexisting law, there is no similar provision
that provides for notice of insufficiency of claims against the State.
The board may delegate to an employee of the entity the function
of ruling on the sufficiency of claims and giving notice of insufficiency
if the board deems it more convenient to do so than to perform this
function itself. See new Sections 912.8 and 935.4.
911. Any defense based upon a defect or omission in a
claim as presented is waived by failure of the-board to give
notice of insufficiency with respect to such defect or omission
as provided in Section 910.8, except that no notice need be
given and no waiver shall result when the-claim as presented
fails to state either an address to which the person presenting
the claim desires notices to be sent or an address of the claim-
ant.
Comment: This section is the same as Government Code Section
713, which applies to local public entities. No comparable statutory
provision now exists with respect to claims against the State.
911.2. 