926 NORTH ARDMORE AVENUE v. COUNTY OF LOS ANGELES

Appellant’s Opening Brief on the Merits

Cal.March 25, 2015

No. $222329 IN THE SUPREME COURT OF CALIFORNIA 926 NORTH ARDMORE AVENUE,LLC, SUPREME COURT Plaintiffand Appellant - E V. COUNTY OF LOS ANGELES, MAR 25 2015 Defendant and Respondent. Frank A. McGuire Clerk Deputy After A Decision By The Court OfAppeal, Second Appellate District, Division Seven, Case No. B248356 Los Angeles County Superior Court, No. BC 476670 The Honorable Rita Miller, Judge Presiding OPENING BRIEF ON THE MERITS LEMOINE SKINNERIII (SBN 55363) *DANIEL M. KOLKEY (SBN 79102) LSkinner@fisherbroyles.com DKolkey@gibsondunn.com FISHERBROYLES, LLP JULIAN W. POON (SBN 219843) 1334 8th Avenue JPoon@gibsondunn.com San Francisco, CA 94122 LAUREN M.BLAS (SBN 296823) Telephone: (415) 566-1365 LBlas@gibsondunn.com MARTIE P. KUTSCHER (SBN 302650) MkKutscher@gibsondunn.com GIBSON, DUNN & CRUTCHER LLP 555 Mission Street, Suite 3000 San Francisco, CA 94105-2933 Telephone:(415) 393-8200 Facsimile: (415) 393-8306 Attorneys for Plaintiff and Appellant 926 North Ardmore Avenue, LLC No. $222329 IN THE SUPREME COURTOF CALIFORNIA 926 NORTH ARDMORE AVENUE,LLC, Plaintiffand Appellant . V. COUNTY OF LOS ANGELES, Defendant and Respondent. After A Decision By The Court Of Appeal, Second Appellate District, Division Seven, Case No. B248356 Los Angeles County Superior Court, No. BC 476670 The Honorable Rita Miller, Judge Presiding OPENING BRIEF ON THE MERITS LEMOINE SKINNERIII (SBN 55363) *DANIEL M. KOLKEY (SBN 79102) LSkinner@fisherbroyles.com DKolkey@gibsondunn.com FISHERBROYLES, LLP JULIAN W. POON (SBN 219843) 1334 8th Avenue JPoon@gibsondunn.com San Francisco, CA 94122 LAUREN M.BLAS(SBN 296823) Telephone: (415) 566-1365 LBlas@gibsondunn.com MARTIE P. KUTSCHER (SBN 302650) MkKutscher@gibsondunn.com GIBSON, DUNN & CRUTCHER LLP 555 Mission Street, Suite 3000 San Francisco, CA 94105-2933 Telephone: (415) 393-8200 Facsimile: (415) 393-8306 Attorneys for Plaintiff and Appellant 926 North Ardmore Avenue, LLC Il. HI. IV. TABLE OF CONTENTS Page ISSUE PRESENTED FOR REVIEW...0... oe ccececcssssesseeseeteeeseseeeeeeneees l INTRODUCTION 0... ceeeeceeeneeseessereseseeeeseseceasssasessesseesseeeaeesarenss 1 - FACTUAL AND PROCEDURAL BACKGROUND...ees6 Ownership OfThe Property...ceeeseseesecreesseesssesesesessecessersseenes6 1, Beryl And Gloria Averbook Establish A Family Trust...........6 2. Beryl Averbook Passes AWay.......:csscssesecesesseeseeneeereesensensers6 3. The Property Is Transferred To Ardmore..........eseeeeseeeneerees6 4. The Family Trust Transfers Its Interest In Ardmore To BA Realty oo... ccceescescessesceessesseseessessessessessossessessessessescessnseneeenes7 5. The Family Trust Distributes Its Interest In BA Realty To The Four Subtrusts 00.0.0... cccseeeesesessecsseeeseeerssassesssenrasesneeens7 The Transaction At ISSUC .0........ se sessessesereeeeeeeeessesssevesseesneeseenes 8 The County Demands Payment OfThe Documentary | Transfer Tax........ccccscccccsescessessesessnscssssesesessuesseesssssessesesssesesssersseenenees 10 Ardmore Files A Claim For A Refund ....... ccc ecessecesssssenseceeseenneees 11 ArdmoreFiles Its Reflrnd Action... ceessssecssesseseseessesseseseeserenes 12 The Court OfAppeal Affirms The Trial Court’s Denial OfA Refund .........cccccessccssscceesscscssccsscceenanecseeeacessseeesascesesnssesersseessaesesseeenses 14 ARGUMENT.......c:ccessscesscecscesseseesssessecseecseseassaeeaeeeaseesseeeeseeeseserasenss 16 Section 11911’s Origin And Plain Text Show That The | Documentary Transfer Tax May Be Imposed Only On Documents Conveying Realty 0.0...cess eeseceesseeeseesenscnsnesesneesevel 6 1. The Relevant Statutory Canons ..........ceeeesssseeseseeesnseeeeseees 17 2. The DTTA’s OFigiNS esccscssssssssestensoee seseaecossesseeseeeseeeseeees 18 3, The DTTA’s Plain Language Demonstrates ThatIt Authorizes A Tax Only On Documents That Directly Convey Realty... ceeecscssesessessecsseeceessessseessseeesseseseeseanerseees21 a. Section 11911 & Former 26 U.S.C. Section 4361 vo.cccceeccccesssssccseccccecesccccsceceereceeues21 b. Section 11925 & Former 26 U.S.C. Section 4383 oo... ceececeesseccceectecececscescoesscccereees26 C. Other DITA SOCtIONS.........ccsessecesccesccceenseesseees31 The DTTA’s Legislative History Confirms That The Act Goes No Further Than The Federal Stamp Act oo...eeeseeseeeens33 The Case Law Construing The DTTA Does Not Support Applying The Tax To A Change In Ownership OfAn Entity That Owns Real Property .......ceceeesseesesseeessecssreeceesensesesessoseeeeeseees 37 The Court OfAppeal And The County May Not Rely On Subsequent Legislative Enactments To Impliedly Amend The DTTAueecccecscccsseccssncsesessnsenecsseseseceseeseseaeeeseesessstssesseeecneredeneeeeeseaeey43 1. The Statutes Enacted A Decade Later To Implement Proposition 13 Should Not Be Read To Amend The DTTA ByImplication...........cccesesesesesseneeeeeseteeeeesreneresseees43 a. Proposition 13’s Implementing Provisions Reflect A Different Purpose And Cannot Be Applied To The DTTA...........43 b. The Structure OfThe Revenue And Taxation Code Also Distinguishes Property Taxes From Excise Taxes.............04..46 2. Other Subsequent Legislative Enactments Also Do Not Expand The Reach Of The DITA...cece ceccsseeneeeneeenseneees48 a. Invoking Senate Bill No. 816 And Assembly Bill No. 563 To Expand The DTTA’s Scope Would Be Contrary To The Constitution 0... ce eecesceessceseneeseecesneetseees49 b. Settled Rules Of Statutory Construction Argue Against Relying On Bills Enacted il In 2009 And 2011 To Interpret The DITA... eecccesseseecetsceesceeseeseccssssnsnessessnesesenenees 50 C. Senate Bill No. 816 And Assembly Bill No. 563 Are Consistent With Ardmore’s Interpretation Of The DTTAocc51 E. Extending The DTTA To ReachTransfers OfInterests In Entities That Directly Or Indirectly Own Realty Is Not Necessary To Avoid, And Would Actually Produce, Adverse COMSEQUENCES 00... eeeescceseessecnssseescesscsesseenseeseesenseesescesesnsesseessesseeees 53 F, The County Has Waived Its Argument That Section 11925 Authorizes The Imposition OfA Tax On Ardmore........cceeeseeee55 V. CONCLUSION......cccsesccssceeressessncsscescnssresseeseessucnsesseeneserssescnueaeeatens 57 ADDENDUM OF STATUTES1...cececcccesssseessseessecenseeseeeeesseesaeeseeesesenenes 59 ili TABLE OF AUTHORITIES Page(s) Cases Adoption ofKelsey S. (1992) 1 Cal.4th 816wccsscscssssrecesecsecsseesssesaeeseeseeeeseeecsesssesesaasossenstesorenseess 17 Agnew v. State Bd. ofEqualization (1999) 21 Cal.4th 310 oo... ceceesssecesscecsscscesseeesecssesersseessssesssssssesesessesssesseseess 5,18 American Federation ofTeachers v. Bd. ofEducation (1980) 107 Cal.App.3d 829 ooo eecsesseessessesssseeessessessssssssesesssnssessssessssesserses 47 Apple Inc. v. Superior Court (2013) 56 Cal.4th 128 oo... ccccscsescsessecssscscesececcsecesseeseessseeesetesseeserssesseeeneses 46, 50 Berry vy. Kavanagh (6th Cir. 1943) 137 F.2d 574... .ccccccscccsssscssssssscscccssceeeceseesseeesscseeeesscarssseessessessasessensess 4,25 Brown v. County ofLos Angeles (1999) 72 Cal.App.4th 665 oo... scecsssesssesssesssssssssssecssesesensecssesesssesesessseneensets 38 City ofCathedral City v. County ofRiverside (1985) 163 Cal.App.3d 960 oo... eeeesssscsscssesssssssersssssseeeesseeesneseeseessesserees 18, 37 City ofHuntington Beachv. Superior Court (1978) 78 Cal.App.3d 333... .cecssescsssssesssssssesessssssessessessesenseseessenrenssensssseenenes 47 County ofLos Angeles v. Southern Cal. Edison Co. (2003) 112 Cal.App.4th 1108 occccsssesssseeseceeneessenesseeresssassnessensesassesseees 24 Douglas Aircraft Co. v. Johnson (1939) 13 Cal.2d 545 wocicccccsssesseseessessccsecececseccseesesesesessseesessossssseeaseessessenassass 47 Edison Cal. Stores, Inc. v. McColgan (1947) 30 Cal.2d 472 voccecccccssesssssscsseecsssceecsseeseneeeeesasseeesseecessssseseseeusenses 18, 25, 54 Endler v. United States (D.N.J. 1953) 110 F.Supp. 945 ...c.ceeecsseseecesscserseeescasssssevsssesseessesseessseesaeeenssesessestenesaees 19 Estate ofStephens (2002) 28 Cal.4th 665 oo..cccccccccscsscscsssccssecsscsssecsssssssssesseeesseessesesecsseesssseeesesesenees 24 Fielder v. City ofLos Angeles (1993) 14 Cal.App.4th 137 ...cccccceeessssecsscseeseessssssesesssesessssssensesessseesenessenees 18, 37 Ginns v. Savage (1964) 61 Cal.2d 520 vecceccccccscsssssssessecesscsscssscessssccesecseeesseesenessseseeeseaseaseesseeeseees 4] Grafton Partners L.P. v. Superior Court (2005) 36 Cal.4th 944 oiicccccsesseccssectscseecssessecseeeaeeeseeeseesacesscesereestenseats 23, 25 iv Hess v. Ford Motor Co. (2002) 27 Cal.4th 516 wo... ccccscsscssscnecsesseesseesseessesseseseeecseseseeessssesasvsecsessneseaseness 18 Holmes v. McColgan (1941) 17 Cal.2d 426 ooi..ceccecsscscecssessecsscnecssresseesseereeessssesessseesssssenseesessessaesensoeass 20 In re Hoddinott (1996) . 12 Cal.4th 992 oo... .ccccccsccsscssssseceseesnecseceseesscesseecsecereeessnserseseeesersaeesaeeneees 36 In re Sean W. (2005) 127 Cal.App.4th 1177 oo. cceeseseessecseesseeseesseessssessesessseseseeesesveseneeaee 51 In re White (1969) 1 Cal.3d 207 ...c...ccscesessssscssccseeseecseesseesseessecsneesseessaseseecsseseascsessessasesnsonnts 51 Innes v. McColgan (1941) AT Cal.App.2d 781... ccseeccsscscsecsersesscssssesscesesesseeseesseeseesessesseeessenssaenes 20 Khajavi v. Feather River Anesthesia Medical Group (2000) 84 Cal.App.4th 32 oo.eeessessesessssssersessscsecesscsssessssersssesnecssesenseneeesenees 17 Kraus v. Trinity ManagementServices, Inc. (2000) 23 Cal.4th 116 oo... cccceesscsscsscsscceesseeesersesencerseceseseessesssesesesssescsesneneees 22 Long Beach Police Officers Assn. v. City ofLong Beach (1988) A6 Cal.3d 736 .....ccscsscsssssssscsscsncseeecsecsesesseseecssessessssoeseeecseesssesesessaseusegs 4,17 McClung v. Employment Development Dept. (2004) 34 Cal.4th 467 0... ccecsccscccssssessecsecesecesessssssesessessssssseesssseesaessecseesssess 49, 50 McDonald’s Corp. v. Bd. ofSupervisors (1998) 63 Cal.App.4th 612 ....... seeaeessesceseeseensesecaeeateneeeesesecsesensossessessarsas 38, 41, 42 McLaughlin v. State Bd. ofEducation (1999) 75 Cal.App.4th 196 ....ccccccesscssscsesceeneeessssesssssessssssssssassesesssesesesssseenenseees 51 Microsoft Corp. v. Franchise Tax Bd. (2006) 39 Cal4th 750 oo... .cccccssccsessesceessecscsecssseseesecesesssensssneuseeseeeseenessesseseeseee D3 Ocean Ave. LLC v. County ofLos Angeles (2014) 227 Cal.App.4th 344 oeeicscssssscessssrscsssessesssessseeseessesessessesssenesssenseseees 52 People ex rel. Dept. ofPublic Works v. County ofSanta Clara (1969) 275 Cal.App.2d 372 ...cescsscssseessscesscssessesseesseessessenees veeeenetseeseeeseeers 18, 37 People v. Cruz (1996) 13 Cal.4th 764... cccccsccsecseecsesereenenesessenseenserensnenensaserererensneneenteees 17, 33, 36 People v. Gray (2014) 58 Cal.4th 901 ooo. ccecessccscscesesececeeeeeceneeseesseesesecssssesssvessassessseseesesseenses 39 People v. Hull (1991) 1 Cal.4th 266 ..........ccceeececsessscsccesevsssesscessssecesscsecesssscsssnsnsesessesssseeessceesees 47 People v. Navarro (2007) 40 Cal.4th 668 occ ccceccccccccsessssssssssccscucccensseseesecesececeseeceesseseseeesseeananssees 49 Peralta Community College Dist. v. Fair Employment and Housing Commission (1990) 52 Cal.3d 40 oo... cccecccccesessssecesscsssssssscsssssscesscessssseecseesnsnstscessseseecesees 46, 50 Preston v. State Bd. ofEqualization (2001) 25 Cal.4th 197 vicecccccesssccccccesssscccccsccccccsssscssseccsseceseeceseeceesseteecesseenensessnes 17 Professional Engineers v. Dept. ofTransportation (1997) 15 Cal.4th 543 voce ciceccscssccccsssccccssesssssssessessceessseceeesccessasesstereesssenesesees 54 Rich v. Ervin (1948) 86 Cal.App.2d 386 occccsscssecscessesesseesseneeerseesssesessesnssesssseneasesessaesesseses 24 Scottsdale Insurance Co. v. MV Transportation (2005) 36 Cal.Ath 643 .o.cccccccccccsscccsscesscscseccecscecssesssscssccesecesessesstessssssssessievesseees 56 Shuwa Investment Corp. v. County ofLos Angeles (1991) 1 Cal.App.4th 1635... cescesccsessssescscsssssessssssssesesssseessseseesesseeseessseseeses 53 Socony-Vacuum Oil Co. v. Sheehan (E.D. Mo. 1943) 50 F.Supp. 1010eeeeecssesesscssesssceessssensessecseesessesseesesessessessenessseesaes 26 Sterling Park, L.P. v. City ofPalo Alto (2013) 57 Cal4th 1193 ......ceccccecsssssccccecesssssssssesssscesesesssssseceeeeenensecessnaneessesees 22, 23 Teamsters v. United States (1977) BL US. 324ieesessssesssseesesesesceeessenenenesennenesstsnenseeesneneneensneasenesanenesenens 46 Thrifty Corp. v. County ofLos Angeles (1989) 210 Cal.App.3d 881 weeceseseeeseeseecneees 4, 15, 20, 34, 36, 38, 39, 40, 41 Title Insurance & Trust Co. v. County ofRiverside (1989) AB Cal.3d 84 .ccccccccccccccsscsccccccessscsscccccccccesessssscsececcsseveveseecesseeeeeeseeetesseseea 44 Twentieth Century Fox Film Corporation v. County ofLos Angeles (1990) © 223 Cal.App.3d 1158 vcccsssssssssssssesssssseseecsessssesee sevsescanssteeesesesen 3, 44, 45 United States v. Seattle-First Bank (1944) 321 U.S. 583ee eeesssessescsesssessrsssessessssessesessescsssesseecsessneceesesesessesesseseesssenees 26 Ward v. Superior Court (1997) 55 Cal.App.4th 60 occcccseeeeessesscesssssscssssssssessecsesseseesseesssssssensaesesesiees 24 White v. Rosenthal (1934) 140 Cal.App. 184 oo. .cecessseessesrecnsessesssssssssesecresesesecssseeseneeneeessesenenes 24 vi Williams v. Superior Court (1993) 5 Cal.4th 337 oo. ccscsccssssscessceecsscecsececssesssesssnssssseseseeeseseesseesesesnsesseesrsenes 17 Yates v. United States (2015) 135 S.Ct. 1074 oo... ceeessccscssecssecsecesceescssssssecsssessssesscesseseesssesssasessesseeees 23 Constitutional Provisions Cal. Const., art. XTITA, § Lioncccsssseesessssnseeeesesssseseeenssssennsceressreeess 44 Cal. Const., art. XTITA, § 2.0... ceeccccccsccccsssnsecesssssssesecessssesessersssssseeessssaeeees 44 Former Cal. Const., art. XITIA, § 3 .......cccccccesecsessssseeeessecssesesssceessesssessenseese 49 State and LocalStatutes Code Civ. Proc., § 1858 wo. ceecescccessnecceeseccseesssseceeceesnensneessessecsssessenceesasens 36 County of Santa Clara Code, § A30-39.6 0... ceeccscesseestcceseerteseseceneeessseees 50: L.A. Cnty. Code, § 4.60.020 0...eeeeccssccscessnteeessneessecesseeeneetseesessenees 10, 11 L.A. Mun. Code,art. 1.9, § 21.9.1 occcccscccccsssssseeesessccsessssesseeeesssaeees 11 Rev. & Tax. Code, § 60 wc. cecsscccsssscscssssceeseeceessssesesssessssecsesseesssesseesensess 44 Rev, & Tax. Code, § 64cece ieeesessscssessssecsssesssesssseseesssensesssreesseserseeares 44 Rev. & Tax. Code, § 104 vss.sevesecsessuseseeseceesuueeseessssssevssssessesesesssnsssneees 24 Rev. & Tax. Code, § 105 wccececsssssccccsseeeeceeecesssenecesscessseeeessessseessnseseaees 24 Rev. & Tax. Code, § 106 wo... .ccescccsssseccssnscceeccesesssecesseeeessnseessecensesesnseesees 24 Rev. & Tax. Code, § 408 oo... escsssccssteesseecessensceeseeserneeseneeses 13, 48, 51 Rev. & Tax. Code, § 408.4vcssesssessseeesssanessanstseesvese 48, 51 Rev, & Tax. Code, § 480.1 occ. ccesccssccsssscesececesesscecseeeeessesessneesstessaeessees 10 Rev. & Tax. Code, § 480.2 oo... ccccssscnecessstececerscesteesessnneceetasessaeesessanes 10 Rev. & Tax. Code, § 11911] ceeccscserececeneeecsserecssessneeeraees 2,5, 6, 21, 57 Rev. & Tax. Code, § LIQ1L.L wieeccesseeeeeseeesteeeeessseeseceesessseeesssseeeees 32 Rev. & Tax. Code, § 11922 oieccsscccencecesssneecesseeesseecessesereseesessneeeees 5 Rev. & Tax. Code, § 11925 occccssccccsssscssssssenereeeesssceeecsssseeesnees 4, 16, 27 Rev. & Tax. Code, § 11932 oon eeeeesesseeeeeceeseeseseeeaecneeessenseseneesaeessees 32 Rev. & Tax. Code,§ 11933 vo... cceccccccescecsssseseecnececssecssseeesseessesensesesseeeees 33 Rev. & Tax. Code, § 5146 ccccesccccssssesstesssssscecsesesesesessneeessessatees 11,12 S.F. Bus. & Tax. Regs. Code, art. 12C, § L114 wceccsecssesseeeeeseesseeees 50 Stats. 1979, ch. 242, § 4... eecsesecseesseceseereeeeeseeseseeeeneacesensatsasetsnsseeeeneeeeeess 47 vil Federal Statutes 26 U.S.C. § 675(4) voccccccscccsnecereceeseetsecceseeeseersaeersaeesessneecaserseesns 12, 13, 55, 56 26 ULS.C. § 676 vo eeccccsesccssectseeseeceesecessseseseeeseaeesesesecsseesseasenesensensseaeeseneeeeaes 12 26 ULS.C. § 708 woe ceescsscessecscessscesevenersseeessceaeesseenaeerseeesasessssssseeenevareraee 27,55 former 26 U.S.C. § 4321... ccccscccsssccesseeccsssceceseseceessenerseseeeseecssenenseees 19, 35 former 26 U.S.C. § 4361 oo.eceeeecesseeeceseecseseeereesesesveessseneesssessueess 19, 21 former 26 U.S.C. § 4383 ooo.ccesseeessececseecessseessesseeesseeseseesersesetesesensens 28 Rules Cal. Rules of Court, rule 8.516(8)..........c:ccccssscccssscecesesseceeesreseseeteeeerseeeoeaes 56 State and Federal Regulations 26 C.F.R. § 301.7701-2occeeesceeeecneceseeeseessecseessnecsesenseassssseseesssesssesseseaes 56 former 26 C.F.R. § 47.436 1-1... ceescseesceceseescseeessesesssesseeseresenssenasons 19, 25 former 26 C.F.R. § 47.4361-2 voce ceceessessseescsssscsseesssssseecessesesseessesseesseseness 26 former 26 C.F.R. § 47.4361-3oceceeesseesseessssesseeesseesesensenseseeseeseteneessaes 19 Cal. Code Regs.,tit. 18, § 23038eccecsesesseseeensereeressseesseessenesrsesseees 56 . Other Authorities 3 Assem. J. (2009-2010 Reg. SeSS.).... cc secscssesecsscstsesseeseteetsessseneeseeeseres 50 51 Ops.Cal.Atty.Gen. 50 (1968)........cecsesssesseesseenenetseensnssessteneneerenseensees 38 51 Ops.Cal.Atty.Gen. 55 (1968) 0... .cecccessereseeeesesseeeeneneeseeeesesestecsnseeensees 38 53 Ops.Cal.Atty.Gem. 252 (1970) .....ecscsecseeesseesssensssrenesessssesetesseeessesees 38 56 Ops.Cal.Atty.Gen. 79 (1973) ..ccsccssccsessssensssssresseressseesnenseeensesnsesenetseses 38 62 Ops.Cal.Atty.Gen. 87 (1979) ..seescsecsesscsessescssesssssneetsessssessssneeseeneseeenss 38 9 Witkin, Summary 10th (2005) Tax, § 320... ceeseeesesseneeteessereneeenees 42 Assem. Com. on Revenue and Taxation, Analysis of Assem. Bill No. 748 (1979-1980 Reg. Sess.) Oct. 29, 1979 ....cccsccsessseseseeseseseseeseenesses 45 Assem. Com. on Revenue and Taxation, Analysis of Sen. Bill No. 837 (1967-1968 Reg. Sess.) May 23, 1967 .....cccesessssesssesssereseesesseenrens 34 Assem. Daily J. (2011-2012 Reg. Sess.).....cceccesesseresessssessssesessetesersnrens 50 Black’s Law Dict. (10th €d.)......ice eeecectseeesesseeseeecntsesseesseneesssssesaeeenteesnees 22 viii H.RRep. No. 433, 89th Cong., Ist Sess. (1965), 111 Cong. ReC. 1645 v..eccccccccscssscesseessncesesecssseecsevseeerseossevsuesseeesensseeseeeeeeneeneseees 19, 20 H.R.Rep. No. 481, 85th Cong., 2d Sess. (1957) ....ccsesessesneeeeeeeeeneaeneenes 29 H.R.Rep. No. 525, 89th Cong., Ist Sess. (1965), 111 Cong. Rec. 1645 voeecccccccsssscscsssssssseesseseessecesceesesetssesscessasensecsnseseesonscsesssstseseeseseseeesesses 20 Legis. Analyst, Analysis of Proposition 13, The Jarvis-Gann Property Tax Initiative (1977-1978 Reg. SeSS.)...c.scssseesereteeteteteeeetees 46 Legis. Analyst, Analysis of Sen. Bill No. 837 (1967-1968 Reg. Sess.) as amended June 8, 1967 oo... sceceeseseereeseecsestensesestesessssnesseees 34 Legis. Secs., Enrolled Bill Rep. on Senate Bill No. 837 (1967-1968 Reg. Sess.) Aug. 17, 1967 ...csecsssseeseereeseseeeesesessensensssecesenessetstereeeees 20 Ops. Cal. Leg. Counsel, No. 25569 (Aug. 1, 1967) on Sen. Bill No. 837, printed in 3 Sen. J. (1967-1968 Reg. SSS.) ......cssesseseeesestenensens 34 Scalia & Garner, Reading Law:TheInterpretation of Legal Texts (2012) veeseccsscssssssssesssesscssccanesssssesscssnecscsseceuecuessecneeneensnneessessrensessenssesssesseees 3D Sen. Bill No. 837 (1967-1968 Reg. Sess.) as amended April 4, 1967........ 35 Sen. Comm. on Revenueand Taxation, Summary of Senate Bill No.816 (2009-2010 Reg. SeSS.) ...seesseesscsssecssssersseseseeeeresetecesetsesssetees JD Sen. Daily J. (2009-2010 Reg. SeSS.)......ccscsesssssesesreseeserseetseesteteneseerenes 50 Sen. Daily J. (2011-2012 Reg. Sess.)......ccessessescereeresrsseseseesensteneeereeaeeeees 50 Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of Assem. Bill No. 583 (1995-1996 Reg. Sess.) as amended Aug.23, 1996 .eececcccssscesscsseseessceesecsccsecenseceasesecsesssesesesensesssseseessssssessedsaesseeeesresnteee 29 Sen. Rules Com., Off. of Sen. Floor Analyses, Analysis of Assem. Bill No. 1428 (1999-2000 Reg. Sess.) as amended May 3, 1999........... 31 Sen.Rep. No. 2090, 85th Cong., 2d Sess. (1958)......ecsssseeseeeseertstetesseneess 29 ix I. ISSUE PRESENTED FOR REVIEW Does Revenue and Taxation Code section 11911 authorize a county to impose a documentary transfer tax based on a change in ownership or control of a legal entity that directly or indirectly holds title to real property? Il. INTRODUCTION Revenue and Taxation Code section 11911!—a part of the Documentary Transfer Tax Act of 1967 (‘DTTA”)—authorizes counties and cities to impose a documentary transfer tax “on each deed, instrument, or writing by which any lands, tenements,or other realty sold ... [are] granted, assigned, transferred or otherwise conveyedto... [a] purchaseror purchasers, or any other person or persons, by his or their direction ... .” Although this tax has always been limited to writings that convey realty, the Court ofAppeal below transformed section 11911 into a tax on the conveyanceofinterests in legal entities if they indirectly (or directly) own realty. To do so,the court erroneously relied on concepts embodiedin statutes found in a different division of the Revenue and Taxation Code, which postdated the DTTA by more than a decade, and which were enacted for an entirely different purpose. In this case, trusts established for a mother, Gloria Averbook, transferred 90 percent of their interests in a partnership, BA Realty LLLP ! All statutory references are to the Revenue and Taxation Code unless otherwise specified. (“BA Realty”), to two trusts that she had createdfor her sons, Bruce and Allen Averbook. BA Realty did not hold title to any realty and instead owned a limited liability company, 926 North Ardmore Avenue LLC (“Ardmore”), which,in turn,held title to an apartment building bearing that same addressin Los Angeles (the “Property”). Title to the Property never changed, and BA Realty remained the ownerofthe limited liability company that owned the Property. Thus, there was no “deed ... or writing ... by which any... realty sold [was] ... conveyed to ... [a] purchaser,” upon which a documentary transfer tax could be imposed. (§ 11911.) Nevertheless, the Court of Appeal upheld the County’s imposition of such a tax on Ardmore, which had nevertransferred its Property. The court held that under the DITA, counties are “permitted to impose a documentary transfer tax based on the transfer of more than 50% of the interest in a partnership that was the sole member ofan LLCthatheldtitle to realty.” (926 NorthArdmore Avenue, LLC v. County ofLos Angeles (2014), slip opn., p. 7.) To reach that conclusion, the Court of Appeal construed “realty sold” under 999 section 11911 “to have the same meaningas ‘change ofownership’” underthe statutes implementing Proposition 13 (id. at pp. 22, 30), although those statutes are found in a different division of the Revenue and Taxation Code, concern a different kind of tax, and have a different purpose. Specifically, the Court ofAppealrelied on section 64, whichtriggers a reappraisal of the value of property upon a “change of ownership” for purposesofassessing the annual property tax due under Proposition 13. That trigger serves a specific purpose relevant to Proposition 13: “In enacting section 64, subdivision (c), the Legislature sought to avoid inequality between the tax burden imposed onresidential property due to its rapid turnoverrate and that borne by corporate property in view ofits lower turnover rate” and thus it established a trigger for more frequently reappraising corporate property. (Twentieth Century Fox Film Corporation v. County ofLos Angeles (1990) 223 Cal.App.3d 1158, 1161 (Twentieth Century Fox).) Statutes providingfor a different kind oftax in a different division ofthe Revenue and Taxation Code, enacted over a decade later using different language for a different purpose, cannotpossibly shedlight on the Legislature’s earlier intent in enacting the DITA.Indeed,it is ironic that a statute designed to implement a constitutional measure that restricted taxes is being used to expandthe taxes authorized under the DTTA. Correctly construed, section 11911 authorizes the imposition of a documentary transfer tax only on documents that convey “realty sold” for the following reasons: First, the plain language of, and the past practice of applying, section 11911 only permits a documentary transfer tax to be imposed on 39 66.documents that “gran[t], assig[n], transfe[r], or otherwise conve[y]” “realty sold.” It does not authorize a tax on transfers of interests in legal entities becausethey directly or indirectly ownrealty. Second, “[b]ecause section 11911 was patterned after the former [Federal Stamp A]ct and employs virtually identical language as that act, [courts] must infer that the Legislature intended to perpetuate the federal administrative interpretations ofthat federal act.” (Thrifty Corp. v. County of Los Angeles (1989) 210 Cal.App.3d 881, 884 (7,hrifty).) Those federal interpretations generally limited the tax to documents by which “realty [is] sold”or to “agreement|s] to transfer[title]” to realty. (Berry v. Kavanagh (6th Cir. 1943) 137 F.2d 574, 575-576 (Berry).) . Third, the words of a statute “must be construed in context, keeping in mind the statutory purpose,” and “statutory sections relating to the same subject must, to the extent possible, be harmonized.” (Long Beach Police Officers Assn. v. City of Long Beach (1988) 46 Cal.3d 736, 746 (Long | Beach).) Here,otherstatutory sections within the DTTAprohibit the tax from 99 66being levied on “anytransfer ofan interest in [a] partnership [i]n the case of any realty held by a partnership,” unless the partnership terminates, in which case “the partnership ... shall be treated as having executed an instrument wherebythere was conveyed... all realty held by the partnership.” (§ 11925, subds.(a), (b).) This language reinforces the interpretation ofthe DTTAthat (1) the documentary transfer tax may not be levied on the transfer of an interest in a partnership (as here) and (2)the triggering event for the levy is the “execut[ion of] an instrument whereby there was conveyed... realty held by the partnership.” (§ 11925, subd. (b).) Elsewhere, the DITA exempts from the tax any state or political subdivision “when [an] exempt agency is acquiringtitle” (§ 11922)—an exemptionthat again reinforces the general rule that the document must convey the realty before the tax may belevied. Fourth, if any ambiguity remains, it must “be resolved in favor of the taxpayer” (here, Ardmore). (Agnew v. State Bd. ofEqualization (1999) 21 Cal.4th 310, 326 (Agnew), supersededby statute on other grounds.) The Court of Appeal did not even acknowledge, muchless apply, this well-established canonofstatutory interpretation. In sum, the plain language of the DTTA, as confirmed by the long- standing interpretations ofthe federal Stamp Act on which it waspatterned, only authorizes the imposition of a tax “on each deed, instrument, or writing by which any lands, tenements,or otherrealty sold... [are] granted, assigned, transferred or otherwise conveyedto ... [a] purchaser.” (§ 11911, subd. (a).) Accordingly, the transfer of interests in a partnership that, in turn, owned a companythat, in turn, held realty—thetitle to which never changed—is not subject to a documentary transfer tax. This Court should therefore reverse the Court of Appeal’s decision, grant Ardmore’s request for a refund of the documentary transfer tax already paid, and remandtoallow the lowercourts to determine Ardmore’s right to attorneys’ fees and costs. il. FACTUAL AND PROCEDURAL BACKGROUND A. Ownership Of The Property 1. Beryl] And Gloria Averbook Establish A Family Trust The roots ofthis case can be traced back to 1972, when Beryl Averbook and his wife Gloria established a family trust that owned, amongotherassets, an apartmentbuilding located at 926 North Ardmore Avenue(the “Property” or “Apartment Building”). (Slip opn., p. 2.) Under the terms of that trust (hereinafter, the “Family Trust’), upon the death of either spouse, the trust principal would be distributed to four subtrusts: the Survivor’s Trust, the Bypass Trust, the Exempt Marital Trust, and the Nonexempt Marital Trust. (bid.) 2. Beryl Averbook Passes Away Beryl passed away in April 2007, leaving Gloria as the beneficiary of the Family Trust and subtrusts. (Slip opn., p. 2.) Gloria designated her two sons, Bruce and Allen, as successor trustees of the Family Trust. (3RT306:8-12; Pl. Ex. 2.) 3. The Property Is Transferred To Ardmore In August 2008, Bruce and Allen,in their capacity as trustees, created a limited liability company, Ardmore, to “acquire, hold, manage and dispose of” the Property. (Slip opn., p. 3.) The Family Trust was namedasthe sole member of Ardmore. (/bid.) The purposeofcreating the LLC wasto insulate the Averbooks’ other assets from anyliabilities that might arise from the operation ofthe Apartment Building. (3RT319:25-320:14, 324:12-325:2.) On August 24, 2008, the Family Trust conveyed the Apartment Building to Ardmore. (3RT317:21-318:22; Pl. Ex. 19.) 4. The Family Trust Transfers Its Interest In Ardmore | To BA Realty On that same day, the Family Trust conveyedits interest in Ardmore to a Delaware limited liability limited partnership, BA Realty LLLP (“BA Realty”). (@RT318:24-319:17; Pl. Ex. 20.) The general partner of BA Realty was BA Realty Management LLC, which was ownedby the Family Trust, and the Family Trust itself was the limited partner of BA Realty. (3RT316:10-22; Pl. Ex. 17[GWP000592-599].) Bruce and Allen were named as managers ofBA Realty Management LLC. (3RT312:19-313:3; Pl. Ex. 12, p. 3.) Thus, as of August 2008, the Family Trust owned BA Realty, which owned Ardmore, whichheldtitle to the Property. 5. The Family Trust Distributes Its Interest In BA Realty To The Four Subtrusts On December3, 2008, the Family Trust agreedto distribute its interest in BA Realty to the four subtrusts: approximately 64.7% ofits interest in BA Realty was transferred to the Survivor’s Trust; 23.9% to the Nonexempt Marital Trust; 9.8% to the Bypass Trust, and 0.6% to the Exempt Marital Trust. (See slip opn., p. 3.) The remaining 1% interest in BA Realty was held by BA Realty Management LLC. (3RT316:10-22; Pl. Ex. 17 [GWP000593].) On that same day, Gloria Averbookalso established irrevocable trusts for Allen andhis issue, and Bruce andhisissue (“Allen’s Trust” and “Bruce’s Trust”). (Slip opn., p. 3.) On January 1, 2009, the Survivor’s Trust transferred a 3.4587% interest in BA Realty to Bruce’s Trust, and an equivalent 3.4587% interest to Allen’s Trust. (3RT316:10-22; Pl. Ex. 17[GWP000598].) B. The Transaction At Issue On January 8, 2009,the transaction at issue occurred. Pursuantto the “Master Limited Partner Transfer and Substitution Agreements” (the “Agreements”), the Survivor’s Trust and the Marital Trusts sold their combined remaining 83.1% interest in BA Realty to Bruce’s and Allen’s Trusts. (Slip opn., p.3; 3RT351:20-25, 352:27-353:7, 353:20-354:3, 354:23-355:9, 357:5-19; Pl. Exs. 32, 33, 36, 37.) AsGloria’s son Allen explainedattrial, the purposeofthe transactions wasto provide estate-tax savings for Gloria, to provide sufficient liquidity to cover the estate taxes that would eventually have to be paid, andto facilitate the eventual disposition ofthe interests in BA Realty to Bruce’s and Allen’s issue. (3RT324:12-327:28.) Following this transaction, Bruce’s and Allen’s Trusts each held a 44.6% interest in BA Realty; the Bypass Trust held a 9.8% interest; and BA Really Management LLC continued to hold the remaining 1% general partnership interest. (3RT370:15-27; Pl. Ex. 59[GWP000643].} ] BA Realty BA Realty | Dec. 2008 Jan. 2009 1%. |1% 3 Survivor's | NE Marital (4596) | } Trust (24%) |“Allen's Trust © Bypass Trust | (45%) (99%) Bypass Tust = Marital Trust | (ox) (1%) | 2 BA Realty Mgmt (196) |BA Realty Mgmnt (1%) | Neither the Agreements nor the other documents that facilitaled the transaction mentionedthe Property held by Ardmore. (3RT353:20-357:19; PL. Bxs. 32-39.) Asrequired by title 18, scction 462.180, subdivision (d)(2) of the California Code of Regulations, Ardmore reported these transactionsto the State Board of Equalization through a “Statement of Changein Control and Ownership of Legal Entitics” (the “Statement”). (Sce slip opa., p. 3; 3RT375;6-17; Pl. Ex. 64.) Such statements must be filed whenevera transfer of interests in a legal entity resultsin a changein ownership of propertywithin the meaning of section 64, subdivisions (c) and (d), which address the reappraisal ofproperty under Proposition 13. (See §§ 480.1, 480.2.) In its Statement, Ardmore reported three separate transactions: First, that BA Realty had acquired a 100% interest in Ardmore from the Family Trust on August 24, 2008—a non-taxable event since the Family Trust retained control over the Property before andafterthe transaction; second,that the Family Trust distributed its interests in BA Realty to the four subtrusts on December 3, 2008—-also a non-taxable event since Gloria was also the beneficiary of the subtrusts; and third, that the Survivor’s Trust and two Marital Trusts sold their interests in BA Realty to Bruce’s and Allen’s Trusts on January 8, 2009. Ardmore did not take a position on whether thosefinal sales constituted a change in ownership undersection 64, subdivision (c) or (d). (3RT375:6-17; Pl. Ex. 64, p. 6.) C. The County Demands Payment Of The Documentary Transfer Tax. In 2011, the Registrar-Recorder/County Clerk of the County of Los Angeles sent a Notice and Demand to Ardmore for payment of the documentary transfer tax, invoking both section 11911 and Los Angeles County Code section 4.60.020. (Slip opn., p. 4; Pl. Ex. 66.) The Notice was based on the transfer of the “controlling interest in Ardmore” on January 8, 2009 (erroneously cited as “November8, 2009”) (1CT6, 47), and the amounts were assessed based on the value of the Property on that date. 10 (3RT375:19-26; Pl. Ex. 65.) The Notice sought payment of $2,160.40 in documentarytransfer tax to the County and $8,838 to the City ofLos Angeles. (Slip opn., pp. 4-5; 3RT376:5-377:3; Pl. Ex. 66.) D. Ardmore Files A Claim For A Refund Ardmore paid the tax, and on October 14, 2011, filed a claim for a refund. (10CT2222-2238.) Ardmore arguedthat no tax was due because the subtrusts’ sale oftheir interests in BA Realty to Allen’s and Bruce’s Trusts did not convey “realty” within the meaning of section 11911 or County Code section 4.60.020. (Slip opn., p. 5.) Ardmore also argued that the only provision in the Revenue and Taxation Code that could have authorized a transfer tax—section 11925, governing partnerships—did not apply. This provision wouldhave authorized a transfer tax only if BA Realty had terminated as a result of a change in beneficial ownership. But Gloria—whoretainedtheright pursuantto thetrust agreements to reacquire any property that she transferred to Allen’s and Bruce’s Trusts andreplace it with property ofequal value—remainedthe legal 2 Section 11911, subdivision (b) authorizes a city within a county that has authorized a documentary transfer tax to also impose its own documentary transfer tax. The City of Los Angeles’s own ordinance was meant to conform to the DITAexcept for the tax rate. (City ofLos Angeles Mun. Code,art. 1.9, § 21.9.1.) A county may collect the city’s documentary transfer tax on its behalf. (§ 5146.) 11 and beneficial owner ofBruce and Allen’s,Trusts and ofthe Survivor’s Trust. (Slip opn., p. 5; 26 U.S.C. §§ 675(4), 676.)% On December14, 2011, the County rejected Ardmore’s claim. (Slip opn., p. 5; 1CT7.) E. ArdmoreFiles Its Refund Action On January 10, 2012, Ardmore brought an action for a refund of the documentary transfer tax collected by the County and the City, along with a request for attorneys’ fees under Code of Civil Procedure section 1021.5. (Slip opn., pp. 5-6.)4 3 Section 7.23 of Bruce’s and Allen’s Irrevocable Trust Agreements (see 3RT348:6-12, 349:2-9; Pl. Exs. 29[GWP000095], 30[GWP000032]) contains a provision authorizing Gloria, as the grantor, to “reserve the right to reacquire [her] trust property by substituting other property of equivalent value.” Section 7.3(b) ofeach Agreementfurther provided that such powers were exercisable solely by Gloria without the approval or consent of the trustees or other fiduciaries. (See ibid.) Under 26 U.S.C. § 675(4), a grantorofa trust (Gloria) “shall be treated as the owner”ofthe trust where sheretains the “power to reacquire the trust corpus ....” 4 Under section 5146, “[i]f ... any portion of the taxes sought to be recovered were collected by officers of the county for a city ..., an action must be brought against the county for recovery of those taxes.” But notwithstanding section 5146, which alsostates that “whetheror nota city intervenes in [an] action, any judgment rendered for an assessee shall be entered exclusively against the county,”the trial court refused to consider Ardmore’s claim to a refund from the City. Accordingly, if this Court agrees with Ardmore’s interpretation of section 11911, it should either grant Ardmore’s refund request in full or remand for proceedings consistent therewith. 12 Ardmore again argued that the documentary transfer tax could only be imposed “on the sale of real property and not on the sale of legal entities, exceptfor sales of interests in partnerships holding real property that result in the termination of the partnership.” (Slip opn., p. 5.) Ardmorealternatively argued there was no “sale” of a controlling interest in BA Realty because Gloria wastreated as the legal and beneficial ownerofthe Survivor’s Trust and Bruce’s and Allen’s Trusts. (/bid.; see footnote 3, ante.) Attrial, the County admitted that until its 2010 website posting, it had neverpublicly taken theposition that it would impose a documentary transfer tax “on legal entity transfers where no document is recorded ....” (3RT435:7-436:21.) An Assistant Registrar-Recorder for the County testified that before 2010, the County had no meansof assessing the documentary transfer tax on transfers of interests in legal entities that resulted in a “change of ownership” of real property, because it did not have access to the Statements of Change in Control and Ownership of Legal Entities filed with the Board of Equalization. (Slip opn., pp. 6-7; 3RT436:25-437:2.) Onceit waspermitted access to those records,° the County started demanding payment of documentary transfer taxes wheneverit was “advised by the assessor that there was a controlling interest change or some kind of conveyance” under section 64, subdivisions (c) or (d). (Slip opn., pp. 6-7; 3RT450:2-23.) 5 See sections 408, 480.1, and 480.2; see also Section [V.D.2,post. 13 The County’s 2010 website posting explained: The collection is made pursuant to Chapter 4.60 of the Los Angeles County Code, and California Revenue and Taxation Code (‘RTC’) sections 11911 and 11925, and is consistent with case law which defines ‘realty sold’ as having the same meaning as changes in ownership for property tax purposes in RTC section 64(c)(1). (Slip opn., p. 6; 1CT6, 15.) Thetrial court ruled in favor ofthe County,stating that the tax could be basedonthe transfer ofmore than a 50% interest in BA Realty to Bruce’s and Allen’s Trusts because Ardmore could be treated “as a ‘lower-tier entity’ of the partnership” for purposes ofthe DITA (8CTI7 18), such that its property “can be considered ... as the property of the [partnership] for documentary transfer tax purposes.” (8CT1719-1720.) Thetrial court also ruled that even if Ardmore had prevailed on the merits, it would not be entitled to attorneys’ fees. (8CT1720.) On March 8, 2013, the court entered a judgment of dismissal. (Slip opn., p. 7.) F. The Court Of Appeal Affirms The Trial Court’s Denial Of A Refund The Court ofAppeal affirmed the trial court’s decision, concluding that the transfer of interests in BA Realty to Allen’s and Bruce’s Trusts on January 8, 2009 were subject to a documentary transfer tax because “section 11911 permits a documentary transfer tax when transferofinterestin a legal entity results in a ‘change of ownership’ within the meaning of Revenue and Taxation Code section 64, subdivision (c) or (d).” (Slip opn., p. 2.) 14 The Court of Appeal acknowledged that the DITA “‘replace[d] and was patterned after the [portion] of the Federal Stamp Act [applying] to conveyances’”ofreal property. (Slip opn., p. 10, quoting Thrifty, supra, 210 Cal.App.3d at p. 884.) But the court disagreed that its “interpretation of section 11911 is dependent only on federal laws that expired over 45 years ago” because “[t]he state DITA includes no language requiring that it be construed in the same manner as the federal statute it was designed to replace.” (Slip opn., p. 26.) Instead, the court held that the phrase “‘realty Ceesold’” in section 11911 was “‘sufficiently similar’” to the definition of “change in ownership’”in section 64, subdivisions (c) and (d) that the two Oeshould have “‘the same meaning.’” (/d.at p. 22.) The ruling rested on several additional grounds. First, the Court of Appealstated that “[t]he legislative history of the DTTA and the overall structure of the Revenue and Taxation Code support [the] conclusion that section 11911 is generally intended to permit a transfer tax when there has been a ‘change in ownership’ in the property” under section 64. (Slip opn., p. 22.) Second, it reasoned that its conclusion “is also supported by recent changes in the law that suggest the Legislature endorses the view that a transfer tax may be imposed whenthereis a ‘change in ownership’ of a legal entity under section 64, subdivisions(c) or (d).” (Ud. at p. 24.) Third, the court concludedthat the interpretationsofthe former federal Stamp Act were “oflimitedutility in assessing the specific issue in this case” 15 becausethe “former federal tax stamp schemeapplied to multiple categories of transfers,” including transfers of interests in capital stock. Therefore, it was “understandable”that the federal tax would not have applied here in order to avoid “double taxation”ofthe transfer ofstock andthe realty indirectly owned by the partnership. (Slip opn., p. 27.) Finally, the court addressed section 11925, subdivisions (a) and (b), which provide that “{iJn the case of any realty held by a partnership,” a documentarytransfer tax “shall [not] be imposed ... by reason ofany transfer of an interest in the partnership” unless “there is a termination” of the partnership for federal income-tax purposes. (Italics added.) The court concluded that section 11925’s partnership exemption did not apply here “because BA Realty [the partnership] did not holdtitle to the realty; instead,it owned Ardmore [the LLC}, which heldtitle to the realty.” (Slip opn., p. 31.) Accordingly, the court concluded that since section 11925 did not apply, section 11911 could authorize a transfer tax on Ardmore, an LLC. The Court ofAppeal denied Ardmore’s petition for rehearing, andthis Court granted review. IV. ARGUMENT A. Section 11911’s Origins And Plain Text Show That The Documentary Transfer Tax May Be Imposed Only On Documents Conveying Realty The plain language of section 11911, its origins as a near-verbatim descendant ofthe former federal Stamp Act, and the surroundingstatutory text 16 compel the conclusion that section 11911 must be read to authorize the imposition of a documentary transfer tax only on writings conveying realty, not on conveyancesofinterests in /egalentities that directly or indirectly own realty. 1. The Relevant Statutory Canons In interpreting section 11911, this Court’s fundamental task is to “ascertain the intent of the Legislature so as to effectuate the purpose of the law.” (Preston v. State Bd. ofEqualization (2001) 25 Cal.4th 197, 213.) “In order to determine this intent, we begin by examining the language of the statute.” (People v. Cruz (1996) 13 Cal.4th 764, 775 (Cruz).) “‘The statutory language, of course,is the best indicator of legislative intent.’” (Williamsv. Superior Court (1993) 5 Cal.4th 337, 350, quoting Adoption of Kelsey S. (1992) 1 Cal.4th 816, 826.) “Indeed, the most powerful safeguard for the courts’ adherenceto their constitutional role ofconstruing, rather than writing, statutes is to rely on the statute’s plain language.” (Khajavi v. Feather River Anesthesia Medical Group (2000) 84 Cal.App.4th 32, 46.) Ofcourse, the wordsofa statute “must be construed in context, keeping in mindthe statutory purpose, andstatutes or statutory sectionsrelating to the same subject must, to the extent possible, be harmonized.” (Long Beach, supra, 46 Cal.3d at p. 746.) 17 “If... the statutory languageis not clear, then [a court] “may resort to extrinsic sources, such as the legislative history.” (Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 531.) However,“courts, in interpreting statutes levying taxes, may not extend their provisions, by implication, beyond the clear import of the language used,” and “[i]n case ofdoubt, construction is to favor the taxpayerrather than the government.” (Edison Cal. Stores, Inc. v. McColgan (1947) 30 Cal.2d 472, 476 (Edison); accord, Agnew, supra, 21 Cal.4th at p. 326.) 2. The DTTA’s Origins Generally speaking, “[a] documentary transfer tax is the fee paid in connection with the recordation of deeds or other documents evidencing transfers ofownership ofreal property.” (City ofCathedral City v. County of Riverside (1985) 163 Cal.App.3d 960, 962 (Cathedral City).) This means “Tt}he tax is on the document, not the sale.” (People ex rel. Dept. ofPublic Works v. County of Santa Clara (1969) 275 Cal.App.2d 372, 375, fn. 6 (People ex rel. Santa Clara), italics original.) Consequently, the “tax is an excise tax rather than a property tax.” (Fielder v. City ofLos Angeles (1993) 14 Cal.App.4th 137, 145 (Fielder).) The practice of taxing a document that conveys land arose from the English Parliament’s decision to permit “the conveyance of land to be accomplished [through] the execution of a paper or parchmentdeed,” rather than “‘deliver[y] ... [of] a clod ofearth” to the purchaser: “In return for the aid 18 ofthe sovereign authority in thus simplifying conveyancing,the sovereign was of course justified in imposing a tax, the American successor of whichis the stamp tax in question.” (Endler v. United States (D.N.J.1953) 110 F.Supp. 945, 948.) California’s DTTA is a direct descendant of the federal Stamp Act (former 26 U.S.C. § 4301 et seq., repealed by Pub.L. 89-44, Title VIII, | § 802(a)(2), 79 Stat. 159 (1965) [1CT86-96]). That act imposed a tax on conveyances ofrealty (former 26 U.S.C. § 4361 [1CT93]) as well as on the “sale or transfer of sharesorcertificates of stock, ...issued by a corporation” (former 26 U.S.C. § 4321 [1CT88]). According to the former federal regulations, the realty tax was “limited to conveyancesofrealty sold” (former 26 C.F.R. § 47.4361-1(a)(2) (1962) [2CT242]), and historically, “[Lo]nly documentary stamps [were to be] used in payment of the tax imposed by section 4361,” which were to “be affixed to the deed, instrument, or other writing by which the realty is conveyed.” (Former 26 C.F.R. § 47.4361-3(a) (1962) [2CT245].) Congress repealed the Stamp Act pursuant to the Excise Tax Reduction Act of 1965. (See H.R.Rep.No. 433, 89th Cong., Ist Sess. (1965), 111 Cong. Rec. 1645, 1679 [1CT100].) But the effective date of the repeal of the documentary transfer tax on realty was postponed until January 1, 1968, in orderto allow States time to implementtheir own versions ofthe federalact. 19 (H.R.Rep. No. 525, 89th Cong., Ist Sess. (1965), 111 Cong. Rec. 1645, 1753-1754 [1CT107-108].) In 1967, California’s Legislature enacted the DTTA.Its key provisions (like section 11911) are virtually verbatim replicas oftheir federal progenitor (see Section [V.A.3, post), and it became operative upon the Stamp Act’s repeal, “on and after 12:01 a.m. on January 1, 1968.” (Stats. 1967, ch. 1332, § 1, p. 3165 [2CT429].) Because “section 11911 was patterned after the former federal [Stamp] [A]ct and employsvirtually identical language asthat act, [a court] must infer that the Legislature intended to perpetuate the federal administrative interpretations of that federal act.” (Thrifty, supra, 210 Cal.App.3d at p. 884; see also Holmes v. McColgan (1941) 17 Cal.2d 426, 430; Innes v. McColgan (1941) 47 Cal.App.2d 781, 785.) Significantly, California only adopted those sections ofthe Stamp Act authorizing a transfer tax on documents conveying realty; it did not enact (amongstothers) the repealed sections of the Stamp Act authorizing a tax on transfers of shares of stock in corporations. (Slip opn., p. 28; Legis. Secs., Enrolled Bill Rep. on Senate Bill No. 837 (1967-1968 Reg. Sess.) Aug. 17, 1967, p. 1 [3CT449] [explaining that the DTTA“is designed to conform to the existing federal tax on transfers ofreal property”]; H.R.Rep. No. 433, p. 1679 [1CT101] [indicating that the Stamp Act’s stock provisions were repealed more than two years before the DITA wasenacted].) 20 3. The DTTA’s Plain Language Demonstrates ThatIt Authorizes A Tax Only On Documents ThatDirectly Convey Realty A number of provisions of the DTTA, including sections 11911, 11911.1, 11922, 11925, 11932 and 11933, support the conclusion that only documents conveying realty—not documentstransferring interests in legal entities that directly or indirectly own realty—are subject to the DITA. a. Section 11911 & Former 26. U.S.C. Section 4361 Section 11911, subdivision (a) provides: The board of supervisors of any county or city and county, by an ordinance adopted pursuantto this part, may impose, on each deed, instrument, or writing by which any lands, tenements, or otherrealty sold within the county shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser or purchasers, or any other person or persons, by his or their direction, when the consideration or value ofthe interest or property conveyed (exclusive of the value of any lien or encumbrance remaining thereon at the time of sale) exceeds one hundred dollars ($100) a tax attherate of fifty- five cents ($0.55) for each five hundreddollars ($500)or fractionalpart thereof. (Italics added.) Former 26 U.S.C. section 4361 of the Stamp Act, on which section 11911 is modeled, wasvirtually identical: There is hereby imposed,on each deed, instrument, or writing by which any lands, tenements,or other realty sold shall be granted, assigned, transferred, or otherwise conveyed to, or vested in, the purchaser or purchasers, or any other person or persons, by his or their direction, whenthe consideration or value of the interest or property conveyed (exclusive of the value of any lien or encumbrance remaining thereon at the time of sale) exceeds $100, a tax at the rate of 55 cents for each $500 or fractional part thereof. (1CT93.) 21 The plain language of section 11911 states that the tax is imposed on a “writing” by which any “realty sold”is “transferred or otherwise conveyed”to “the purchaser ... or any other person”at the purchaser’s direction. Under long-standing rules ofstatutory construction, section 11911 does not authorize the imposition of a tax on the transfer of an interest in an entity becauseit ownsproperty. First, the canon ofejusdem generis requiresthat “if a statute contains a list of specified items followed by more general words, the general words are limited to those itemsthat are similar to those specifically listed.” (Sterling Park, L.P. v. City of Palo Alto (2013) 57 Cal.4th 1193, 1202.) “[I]f the Legislature intends a general wordto be usedin its unrestricted sense,it does not also offer as examples peculiar things or classes of things since those descriptions then would be surplusage.” (Kraus v. Trinity Management Services, Inc. (2000) 23 Cal.4th 116, 141, superseded by statute on other grounds.) Here, the grouping of the terms, “lands, tenements, or other realty sold,” requires that the subject matterthat is “granted, assigned, transferred, or otherwise conveyed”is “realty sold,” not an interest in an entity that (directly or indirectly) ownsrealty. After all, “lands” (“real property less extensive than either tenements or hereditaments” (Black’s Law Dict. (10th ed.), p. 1011)) and “tenements”(“a house or other building used as a residence” or “apartment” (id. at p. 1697)) are forms of“realty,” not interests in entities. 22 “Realty,” in turn, is defined as “[l]and and anything growing on,attachedto, or erected onit, that cannot be removed....” (/d. at p. 1456). Indeed, Black’s Law Dictionary states that the phrase, “lands, tenements, and hereditaments”—aphrasesimilarto that in section 1 191 1—“wastraditionally used in wills, deeds, and other instruments” and meant“[r]eal property.” (d. at p. 1011.) A transfer ofan interest in a legal entity, even if it owns property, does not fall within the narrower class of transfers that are limited to conveyancesof “realty sold.” Likewise, the canon of noscitur a sociis holds that “the meaning of a word maybeascertained by reference to the meaning ofother terms which the Legislature has associated with it in the statute, and ... its scope may be enlarged or restricted to accord with those terms.” (Grafton Partners L.P. v. Superior Court (2005) 36 Cal.4th 944, 960 (Grafion Partners).) Thus, because “realty sold” is associated with “lands” and “tenements,” the documentary transfer tax may only be imposed on a writing by which “realty” is “sold.” Attributing a broader meaningto “realty sold”is “inconsistent with its accompanying words” and would give “unintended breadth” to the DTTA. (Yates v. United States (2015) 135 S.Ct. 1074, 1085 (plur. opn. of Ginsburg, J.) [concluding that the phrase “tangible object” in the Sarbanes-Oxley Act 23 cannot be understoodto refer to a fish—evenif it is a “tangible object”— becauseit must be read in light of the statutory context].)® Examining the entire phrase—“deeds, instruments, or writings, by which anylands, tenements,or other realty sold shall be ... conveyed”—does not alter this analysis. The object of that phrase is the sale of realty, and “deed[s], instrument[s], or writing[s]” are each necessary to accomplishthis: Deeds “‘convey[] or transfer{] the title to real property.” (Estate ofStephens (2002) 28 Cal.4th 665, 671-672.) Instruments may“transfer[] thetitle to ... real property,” but also may conveylesser interests, like liens. (See Rich v. Ervin (1948) 86 Cal.App.2d 386, 391-392.) And a “writing” may capture methodsoftransfer that do not involve a deed or an instrument, such as a court judgment conveying realty against the wishes of the owner. (See Ward v. Superior Court (1997) 55 Cal.App.4th 60, 64 [contrasting an “instrument” with a “judgmentaffecting thetitle to or possession of real property”]; White v. Rosenthal (1934) 140 Cal.App. 184, 186-187 [contrasting “transfers by operation of law” with “voluntary transfers of the owner’s property”].) 6 Construing writings conveying “realty sold” to include writings transferring interests in companies would also ignore California’s decision to categorize interests in legal entities as personal property, not realty. (§ 106 [‘‘Personal property’ includes all property except real estate.”’]; §§ 104, 105 [defining real estate and improvements, respectively].) Indeed, in County ofLos Angeles v. Southern California Edison Co. (2003) 112 Cal.App.4th 1108, 1122, the court asserted that “realty for purposes of section 11911 ... encompasses only real property and improvements, excluding personal property.” 24 Further, the canon ofnoscitur a sociis restricts the scope ofthe term “writing” by the “other terms which the Legislature has associated with it” such thatit only relates to writings that convey “realty sold.” (See Grafton Partners L.P., supra, 36 Cal.4th at p. 960.) Finally, “courts, in interpreting statutes levying taxes, may not extend their provisions, by implication, beyond the clear import ofthe language used, nor enlarge upon their operation $0 as to embrace matters not specifically included.” (Edison, supra, 30 Cal.2d at p. 476.) Significantly, the federal cases construed the virtually identical language in the federal Stamp Act(then codified at former 26 U.S.C. § 3482) to comport with the above-referenced interpretation. The federal courts ruled that the Stamp Act imposed an “excise” tax upon the “privilege ofselling lands, tenementsor other realty.” (Berry, supra, 137 F.2d at pp. 575-576.)7 In concluding that no tax was due for the principal-to-agenttransfer ofrealty, Berry held that “[t]he burdenofthe tax attaches whenthe property is sold” and “[u]sually the word ‘sold’ meansthe transfer oftitle or an agreement to transfer subsequent for a consideration.” (/bid.) Likewise, in United States v. Seattle-First Bank (1944) 321 U.S. 583, 589, the U.S. Supreme Court held that a statutory consolidation of banks, by 7 Federal, like California, law did not treat interests in legal entities as real property. (See former 26 C.F.R. § 47.4361-1(a)(3) [2CT242].) 25 whichtitle to property and other assets passed to the consolidated entity, was not subject to a documentary transfer tax becausethe “realty was not conveyed to or vested ... by means of any deed, instrument or writing.” (/d. at p. 590.) The Court explained that there was a “complete absence of any of the formal | 99 66instruments or writings upon whichthe stamptaxis laid,” “[nJor can therealty be said to have been ‘sold’ or vested in a ‘purchaseror purchasers’ within the ordinary meaning of those terms.” (/bid.) Other federal authorities are in accord. (See, e.g., Socony-Vacuum Oil Co. v. Sheehan (E.D. Mo. 1943) 50 F.Supp. 1010, 1021; former 26 C.F.R. § 47.4361-2(a), (b) (1962) [2CT242-245] [listing the types of realty conveyances subject to the Stamp Act].) b. Section 11925 & Former 26 U.S.C. Section 4383 Section 11925—the partnership provision of the DITTA—further illustrates why section 11911 should beread tolimit the DITA to documents conveying “realty sold.” | Section 11925 providesin relevant part that a “transfer ofan interest in thepartnership”that directly holds realty does ot constitute a transfer subject to the DITA unlessthe partnership is terminated: (a) In the case ofany realty held by a partnership orotherentity treated as a partnership for federal income tax purposes, no levy shall be imposedpursuantto this part by reason ofany transfer ofan interest in the partnership or other entity or otherwise, if both of the following occur: 26 (1) The partnership or other entity treated as a partnership is considered a continuing partnership within the meaning of Section 708 of the Internal Revenue Codeof 1986. (2) The continuing partnership or other entity treated as a partnership continuesto hold the realty concerned. (b) Ifthere is a termination ofany partnership orotherentity treated as a partnership for federal income tax purposes, within the meaning of Section 708 ofthe Internal Revenue Code of 1986, for purposesofthis part, thepartnership or other entity shall be treated as having executed an instrument whereby there was conveyed, forfair market value... all realty held by the partnership or other entity at the time of the termination. . (c) Not more than one tax shail be imposed pursuantto this part ... by reason of a termination described in subdivision (b), and any transfer pursuantthereto, with respect to the realty held by a partnership.... (§ 11925,italics added.) Undersection 708 of the Internal Revenue Code, a partnership is continuing unlessit is terminated. (26 U.S.C. § 708(b).) And a partnership terminates if “within a 12-month period there is a sale or exchange of 50 percent or moreofthe total interest in partnership capital and profits.” (Jbid., italics added.) In that event, section 11925, subdivision (b), expressly treats the termination as the legal equivalent ofthe partnership having “executed an instrument” conveying “all realty held by the partnership ... at the time of termination.” Accordingly, the language ofsection 11925 reinforcesthe interpretation that the DTTA only imposes a tax on documents that directly conveyrealty, and not on documents that convey an interest in legal entities, as explained below: 27 First, section 11925, subdivision (a) makesclear that “[i]n the case of any realty held bythe partnership ..., no levy shall be imposed... by reason of any transfer of an interest in the partnership” as long as the partnership is continuing. It therefore distinguishes a transfer ofan interest in a partnership that holds realty (not taxed) from a conveyanceofrealty (taxed). Second, section 11925, subdivision (b) treats the termination of a partnership as the constructive “execut[ion of] an instrument” whereby “all realty held by the partnership” is “conveyed for fair market value.” There would be no need to describe a partnership’s termination as a constructive execution ofan instrument conveyingrealty ifthe latter was not the event that triggered the imposition of a documentary transfer tax. The Court of Appeal assumed that section 11925 “is an exemption to the transfer tax authorized undersection 11911” and thus reasoned that section 11911 must, by implication, authorize taxing the transfer of interests in non- partnership entities, like LLCs,that hold title to realty. (Slip opn., p. 29.) Butthe origins of section 11925, which waspatterned upon former 26 U.S.C. section 4383, demonstrate that the provision barring a tax on transfers of interests in partnerships was not an exemption, but rather a measure designed to address the anomalies arising from the then-prevailing ““agoregate’ approach topartnerships.” Under that approach, any change ina partnership’s composition dissolved the partnership and could trigger the transfer of its realty: “[A] partner whose interest is transferred ... is treated as 28 transferring ... his pro rata share of the underlying assets ofthe partnership.” (H.R.Rep. No. 481, 85th Cong., 2d Sess. (1957), p. 10 [1CT149].) However, Congress noted that the Internal Revenue Service had nonetheless adopted the “entity” approach and had “taken the position that no tax is to be imposed until there is a changeoflegaltitle to the realproperty, irrespective ofthe changes ofinterests in the partnership.” (Id. at p. 11 [1CT150]; italics added.) Former 26 U.S.C. section 4383 was enacted to adopt the “entity” approach and prevent every transfer of an interest in a partnership from triggering the documentary transfer tax: “[T]here is a question as to whether tax is presently imposed where there is merely a change ofinterests in the partnership and no changein legaltitle of real property, Not to impose a tax ... follows the ‘entity’ approach for partnerships. [{]] The ‘entity’ approachis generally more practicable andis less likely to cause inequities and to lead to frequent calculations of tax resulting from minor changesin a partnership.” (Sen.Rep. No. 2090, 85th Cong., 2d Sess. (1958) [1CT153].) The codification ofthe “entity approach”prevented every transferofan interest in a partnership from dissolving the partnership and requiring the conveyanceofrealty.’ 8 The “aggregate” theory of partnerships (adopted in the Uniform Partnership Act of 1914) was comprehensively replaced only when the Revised Uniform Partnership Act andits “entity approach”to partnerships were adopted by the National Conference of Commissioners of Uniform State Lawsin 1993, and by California in 1996. (See Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis ofAssem.Bill No. 583 (1995- [Footnote continued on next page] 29 Consequently, the Court of Appeal erred in inferring that the DTTA authorized the taxation oftransfers ofinterests in legal entities that held realty, from which section 11925 purportedly carved out a limited “exemption.” (Slip opn., p. 29.) Rather, section 11925 was enacted for the purpose of conforming the tax treatment of partnerships holding realty to that already accordedto otherlegal entities, transfers of interests ofwhich did not dissolve them and werenot understood to subject them to a documentary transfer tax. Thus, section 11925’s prohibition against taxing transfers in partnership interests actually reinforces Ardmore’s position that only conveyances of realty are subject to the DITA. Subdivision (d) of section 11925 also does not support the view that the Legislature intended to tax transfers of interests in legal entities that hold property. (Slip opn., pp. 22-24.) Subdivision (d) exempts “transfer[s] ... that result[] solely in a change in the method of holdingtitle to ... realty” where the “proportional ownership interests in the realty ... remain the same [Footnote continued from previous page] 1996 Reg.Sess.) as amended Aug.23, 1996, pp. 3-4 [Motion for Judicial Notice (““MJN”) Ex. G, pp. 97-98].) Under the Revised Uniform Partnership Act, “there is no longer the need to conveytitle from the old partnership to the new partnership every time there is [a] change in partners.” (/d. at p. 4 [Ex. G, p. 98].) 30 immediately after the transfer.”9 California had first recognized LLCs in 1994, and that subdivision was enacted to counter county recorders’efforts to impose documentary transfer taxes when legal entities converted into LLCs and transferredtheir real property to the newly-formedentity, thereby enabling such transfers to occur without triggering the DITA. (Sen. Rules Com., Off. of Sen. Floor Analyses, Analysis of Assem. Bill No. 1428 (1999-2000 Reg. Sess.) as amended May3, 1999, p. 2 [3CT622].) Thus, under subdivision (d), even conveyancesoftitle to realty were expressly exempted from the tax where only the method ofholdingtitle changed. Accordingly, subdivision (d), properly read, evinces the Legislature’s _ intent to exempt otherwise-taxable conveyancesofrealty. This exemption for these particular conveyancesoftitle to realty offers no support for reading the DTTAto reach transfers of interests in entities that hold realty but do not transfertitle. Cc. Other DTTASections _ 9 Section 11925, subdivision (d) providesin relevantpart: “No levy shall be imposed pursuant to this part by reason of any transfer between an individual or individuals and a legal entity or between legal entities that results solely in a change in the method ofholdingtitle to the realty and in which proportional ownership interests in the realty ... remain the same immediately after the transfer.” 31 The languageofsection 11911’s neighboring statutory provisions also confirms that the DITA only imposesa transfer tax on writings conveying realty. For instance, section 11922, patterned after former 26 U.S.C. section 4362(b), exempts the United States or any agency or instrumentality thereof, or any state or territory, from the tax, when the “exempt agency is acquiring title.” (Italics added.) This reinforces the notion thatthe imposition of the documentary transfer tax turns on the conveyanceoftitle to realty. Section 11932 provides that “[i]f a county has imposeda tax pursuant to [the DTTA], every documentsubject to tax that is submitted for recordation shall show on the face of the document the amount of tax due and the incorporated or unincorporated location of the lands, tenements, or other realty described in the document.” (Italics added.) Documents that convey realty, not interests in entities that hold realty, are the type of writings contemplated by these terms. Section § 11911.1 provides that a city or county ordinance which imposes the documentary transfer tax “may requirethat each deed, instrument, or writing by which lands, tenements, or otherrealty is sold, granted, assigned, transferred, or otherwise conveyed shall have noted uponit the tax roll parcel number.” This further demonstrates that the writings contemplated by the DTTA are those that convey realty, not writings that transfer interests in 32 entities holding a numberofassets (including realty), and which one would not expect to specify parcel numbers. Similarly, section 11933 provides that where a county “has imposed a [transfer] tax ..., the recorder shall not record any deed, instrument, or writing subject to the tax ... unless the tax is paid at the time of recording,” again reinforcing that the DTTA wasintendedto authorize the imposition ofa tax on instruments conveying realty, since such instruments are the type of documentsthat are recorded. In sum,the plain text of section 11911, the interpretation ofthe federal statute after which it was patterned, and its accompanyingstatutory provisions all compel the same conclusion: A documentary transfer tax may only be imposed under the DTTA on a writing that directly conveysrealty sold to another party. In Ardmore’s case, the operative writing (namely,. the Agreements) did not convey property. Indeed, they never once mentionedthe realty, or even Ardmore. Assuch,they fall outside the purview ofthe DITA, and no documentary transfer tax should have been imposed. B. The DTTA’s Legislative History Confirms That The Act Goes No Further Than The Federal Stamp Act “To the extent that uncertainty remains in interpreting statutory language ... both legislative history and the ‘widerhistorical circumstances’ of the enactment may be considered. [Citation.]” (Cruz, supra, 13 Cal.4th at pp. 782-783.) 33 Thelegislative history ofthe DITA further supports Ardmore’s reading ofthe statutory language. It confirms that the California Legislature’s intent in enacting the DITA was merely to continue the long-standing judicial and administrative understandingsofthat portion ofthe former federal Stamp Act that our Legislature enacted nearly verbatim in the DITA. (Enrolled Bill Rep. on Assem. Bill No. 837, p. 1 [3CT449] [noting that the bill “is designed to conform to the existing federal tax on transfers ofreal property which expires January 1, 1968”]; Ops. Cal. Leg. Counsel, No. 25569 (Aug. 1, 1967) on Sen. Bill No. 837, printed in 3 Sen. J. (1967-1968 Reg. Sess.), pp. 4738-4739 [3CT503-504] [noting that the DITA was“quite similar”to the federal documentary stamp tax and should be “construed in the same manner as the federal law’’]; Assem. Com. on Revenue and Taxation, Analysis ofSen. Bill No. 837 (1967-1968 Reg. Sess.) May 23, 1967 [3CT565] [noting that the DTTA was “essentially the sameas the federal tax whichis to be discontinued on January 1, 1968”]; Legis. Analyst, Analysis of Sen. Bill No. 837 (1967- 1968 Reg. Sess.) as amended June 8, 1967 [2CT438] [referring to a “substantially similar federal tax which expires January 1, 1968]; accord, Thrifty, supra, 210 Cal.App.3d at p. 884.) The legislative history predating the DTTA’s final approval by the Governor on August 23, 1967 (Stats. 1967, ch. 1332, § 1, p. 3162 [2CT426]) also demonstrates that the Legislature intended the documentary transfertax to extend no further than the conveyanceofrealty sold: The Legislative Analyst 34 stated that the DITA would “authorize counties ... to levy a tax upon the transfer of real property” (Legis. Analyst, Analysis of Sen. Bill No. 837 [2CT434]), and in the Legislative Counsel’s view, it would “authorize counties and cities to impose a tax on documents evidencinga transferofreal property” (Ops. Cal. Leg. Counsel on Sen. Bill No. 837, 3 Sen. J. at p. 4738 [3CT503]). Other sources confirm thatthe intent ofthe Act was to “impose a tax on instruments ofconveyance with respectto real property” (Sen. Bill No. 837 (1967-1968 Reg. Sess.) as amended April 4, 1967 [2CT400]), or upon the “sale of an interest in real property” (Legis. Analyst, Analysis of Sen. Bill No. 837 [2CT439]; see also Enrolled Bill Rep. on Assem. Bill No. 837, p. 1 [3CT449] [describing the DTTA as a “deedtransfer tax on instruments of conveyance with respect to real property”]). These statements, coupled with the Legislature’s decision not to enact the portion ofthe federal act imposing documentary transfer taxes on transfers ofsharesor certificates ofstock (see former 26 U.S.C. § 4321 [1CT88]) reflect the Legislature’s unmistakable intentto limit the tax to documents evidencing conveyancesofrealty. The Court of Appeal’s contrary reading of the legislative history conflicts with well-settled principles: First, the court stated that its interpretation of section 11911 was not dependentuponthe interpretation ofthe Stamp Act because “[t]he state DTTA includes no language requiring that it be construed in the same manneras the 35 federal statute it was designed to replace.” (Slip opn., p. 26.) But “[t]he fundamental task of statutory construction is to ‘ascertain the intent of the lawmakers’”(Cruz, supra, 13 Cal.4th at p. 774), and the unmistakableintent here was “to replace” the Stamp Act with a state law “patterned after the Federal Stamp Act ... which [had] expired ....”. (Thrifty, supra, 210 Cal.App.3d at p. 884.) This is confirmed by the DITA’s use ofvirtually identical language from the relevant portions of the federal Stamp Act. Second,the court dismissed reliance on the federal Stamp Act because “the former federal tax stamp scheme applied to multiple categories of transfers,” such as transfers of interest in capital stock. Therefore, “the conveyancetaxset forth in former section 4361 [regarding realty] would not apply to the type of transaction at issue here [involving Ardmore]” because doing so would result in “double taxation: one set of stamp taxes for the transfer ofinterests in the legal entities themselves and a second stamptax for the realty held by the lower-tier entity.” (Slip opn., pp. 27-28.) But our Legislature’s deliberate decision not to enact the federal provisions applying the tax to transfers ofstock andcertificates actually shows that the DITA wasnot intended to tax transfers of interests in entities, but only conveyancesofrealty. (See In re Hoddinott (1996) 12 Cal.4th 992, 1002; Code Civ. Proc., § 1858 [“In the construction of statute ..., the office of the Judge is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted”’].) 36 Finally, the Court of Appeal stated that federal law was of“limited utility” in interpreting the DTTA because LLCs did not exist in California until 1994, long after the repeal of the Stamp Act. (Slip opn., p. 28.) But many other types of legal entities existed when the Stamp Act wasin effect. Nothing suggests that LLCs should betreated any differently than any ofthose otherentities. C. The Case Law Construing The DTTA Does Not Support Applying The Tax To A Change In Ownership OfAn Entity That OwnsReal Property Forthe 48 years since its enactment, California courts have neveronce, until the Court of Appeal’s decision in this case, applied the DTTA to the transfer of interests in entities that directly or indirectly ownrealty. Instead, they have consistently ruled that the tax “is the fee paid in connection with the recordation of deeds or other documents evidencing transfers of ownership of real property.” (Cathedral City, supra, 163 Cal.App.3d at p. 962.) This means the “tax is an excise tax rather than a property tax” (Fielder, supra, 14 Cal.App.4th at p. 145) and “is on the document, not the sale” (People ex rel. Santa Clara, supra, 275 Cal.App.2d at p. 375, fn. 6). Moreover, courts have consistently recognized that “[b]ecause section 11911 was patterned after the former federal act and employs virtually identical language as that act, we must infer that the Legislature intended to perpetuate the federal administrative interpretations of that federal act.” 37 (Thrifty, supra, 210 Cal.App.3d at p. 884; Brown v. County ofLos Angeles (1999) 72 Cal.App.4th 665, 669 [federal regulations followed in determining amount of documentary transfer tax owed based on purchaseofproperty at trustee’s sale].)10 In departing from this long-standing precedent, the Court of Appeal stated that it was “follow{ing] prior case law that has interpreted the term ‘realty sold” in section 11911 to have the same meaningas the phrase ‘change ofownership’ as usedin the property tax provisions.” (Slip opn., p. 19.) The court stated that it “agree[d] with Thrifty and McDonald’s conclusion that where,as here, the DITA doesnot directly address whethera particular type of transaction qualifies as ‘realty sold’ within the meaning ofsection 11911, courts may look to the definitions of ‘change in ownership’ set forth in the property tax provisions” because: [S]imilar terms used “in the same code and governing ... analogous subject[s]” should generally “be defined consistently” unless “countervailing indications require otherwise.” (Slip opn., p. 22, quoting Thrifty, supra, 210 Cal.App.3d at p. 886; see also McDonald's Corp. v. Bd. ofSupervisors (1998) 63 Cal.App.4th 612, 615-616 (McDonald’s).) 10 Several attorney-general opinions also rely on federal regulations in determining whether the DITA encompassesvarioustransfersofrealty. (See, e.g., 62 Ops.Cal.Atty.Gen. 87 (1979); see also 56 Ops.Cal.Atty.Gen. 79, 82 (1973); 53 Ops.Cal.Atty.Gen. 252, 255 (1970); 51 Ops.Cal.Atty.Gen. 55 (1968); 51 Ops.Cal.Atty.Gen. 50, 52 (1968).) 38 But neither Thrifty nor McDonald’s nor the rules of statutory construction support the Court ofAppeal’s extension ofthe DTTAto transfers that result in a “change in ownership” set forth under the “property tax provisions” implementing Proposition 13. First, the phrase “realty sold” under section 11911 (enacted in 1967)is | notsufficiently similar to the phrase “change in ownership”defined in section 64 over a decade later to implement Proposition 13’s amendment to our Constitution to warrant giving them the same meaning. Although well- established principles ofstatutory construction dictate that “[a] word or phrase is presumed to bear the same meaning throughout a text” (Scalia & Garner, Reading Law: The Interpretation of Legal Texts (2012), p. 170; see also People v. Gray (2014) 58 Cal.4th 901, 906), there is no “sufficiently similar phrases” canon. Tothe contrary, “where the documenthas used one term in one place, and a materially different term in another, the presumptionis that the different term denotes a different idea.” (Scalia, Reading Law, supra,at p. 170, italics added.) Further, neither 7hrifty nor McDonald’s lends support to the Court of Appeal’s holding. The question in Thrifty was whether a “20-year lease with an option to renew for 10 yearsis of sufficient longevity ... to approximate an ‘ownership’ right” subject to a documentary transfer tax undersection 11911. (Thrifty, supra, 210 Cal.App.3d at p. 885.) In analyzing whether such a lease could constitute “realty” and thus trigger the DTTA, the court looked to 39 federal law, acknowledgingthat “[b]ecause section 11911 was patternedafter the former federal act and employsvirtually identical languageas that act, we must infer that the Legislature intended to perpetuate the federal administrative interpretations of that federal act.” (/d. at p. 884.) Federal regulations interpreting the former federal act specified that “ordinary leases of real property for a definite term of years’ were generally not subject to a transfer tax,” but “under former federal law a lease was subject to a transfer tax whenit was of sufficient duration to approximate an interest such as an estate in fee simple or a life estate.” (Thrifty, supra, 210 Cal.App.3d at p. 884.) In holding that “Thrifty’s 20-year lease with an option to renew for 10 years wasnotofsufficient longevity to constitute ‘realty sold’ undersection 11911”(id.at p. 886), the court decidedto take “guidance” from the definition of “change in ownership” undersection 61, subdivision (c)(1), which definedit to include “[t]he creation of a leasehold interest in taxable real property for a term of 35 years or more”(id. at p. 885) because “realty sold” under section 11911 was “sufficiently similar to the phrase ‘change in ownership’ contained in the same code and governing an analogoussubject, to warrant that each phrase be defined to have the same meaning”(id. at p. 886).1 11 The Court of Appeal here suggested that Thrifty “ultimately rejected the federal rule used to determine whattype ofleasehold interests qualified for [Footnote continued on next page] 40 The County and the Court of Appeal have latched onto Thrifty’s — statement that “[w]hile the Documentary Transfer Tax Act does not define ‘realty sold’ that phrase is sufficiently similar to the phrase ‘change in ownership’ ... to have the same meaning.” (Thrifty, supra, 210 Cal.App.3d at p. 886; slip opn., p. 20.) But that assertion was made in the context of resolving the question ofthe nature ofthe realty interestthat is subject to the tax. The court did not suggest that the “change in ownership” rules under Proposition 13 should be imported into the determination of what kind of transfer triggers the decade-earlier-enacted DITA. Indeed, Thrifty never addressed whethera transferofinterest in an entity holding property is subject to the DITA. “[A]nopinionis not authority,”ofcourse,“for a proposition not therein considered.” (Ginns v. Savage (1964) 61 Cal.2d 520, 524 fn. 2.) McDonald’s similarly did not consider whether the transfer of an interest in an entity that directly or indirectly owned realty was subject to the DTTA. Instead, it addressed whether an amendmentto a lease that yielded.a total leaseholdperiod of more than 35 years could be subject to the DITA. (McDonald’s, supra, 63 Cal.App.4th at p. 616.) There, McDonald’s entered into a lease for 21 years with three renewal options offive years, and after [Footnote continued from previous page] a transfer tax.” (Slip opn., p. 27.) To the contrary, Thrifty simply did not find adequate guidance in federal law on that question, and only then turned to state law for an answer. 41 exercisingits first option to renew, agreed to an amendedlease that extended the term 18 years with two renewal optionsoffive years each. (Jd. at p. 614.) Whenthe amendedlease wasrecorded, the county considered McDonald’s as having had continuous possession of the leased premises for 51 years, and imposeda transfer tax of $990. (Ibid.) McDonald’s cited Thrifty for the proposition that “the phrase ‘realty sold’ used in section 11911 includes leaseholds of 35 years or more,” relying on the definition of section 61, subdivision (c)(1). (McDonald’s, supra, 63 Cal.App.4th at p. 615.) But McDonald’s declined to subject the lease to the tax because when the lease was amended, the remaining term of the lease was 28 years, and “in case of doubt statutes levying taxes are construed most strongly against the governmentandin favorofthe taxpayer.” (Id. at p. 617.) Thus, McDonald’s does not support the Court of Appeal’s decision to apply section 11911 to documents that transfer interests in partnerships.!2 In sum, the case law supports the conclusion that the documentary transfer tax is a tax on a deed or other document conveying “realty sold” and that the long-standinginterpretations of the former federal Stamp Act should 12 The Court of Appeal also relied on 9 Witkin, Summary 10th (2005) Tax, § 320, p. 463, for the proposition that “realty sold”is similar to “change in ownership.” (Slip opn., p. 22.) But Witkin was merely citing Thrifty for that proposition. 42 mark the outer bounds of the virtually verbatim provisions enacted by our Legislature in the DTTA. D. The Court Of Appeal And The County May Not Rely On Subsequent Legislative Enactments To Impliedly Amend The DTTA Asnoted, the Court ofAppeal and the County erroneously relied on the statutes that implemented Proposition 13, and particularly section 64, to interpret the DTTA. In so doing, they improperly relied on subsequent legislative enactments, which wereintendedto restrain the growth ofstate and local property taxes, in order to markedly expand an entirely different tax statute (the DTTA) that had been enacted more than a decade earlier. The court’s and the County’s reading finds no support in the structure of the Revenue and Taxation Code, runs afoul of canons of statutory construction, and violates constitutional limitations on the implementation ofnew taxes. 1. The Statutes Enacted A Decade Later To Implement Proposition 13 Should Not Be Read To Amend The DTTABy Implication There is no support for the Court ofAppeal’s (and County’s) elemental premisethat section 11911’s reference to writings conveying “realty sold”to “purchasers” should be construed to have the same meaning as a “change of ownership” underthe statutes implementing Proposition 13. a. Proposition 13’s Implementing Provisions Reflect A Different Purpose And Cannot Be Applied To The DTTA Morethan a decade after the DTTA was enacted, California voters approved Proposition 13, adding article XIIIA to our Constitution. 43 Proposition 13, entitled the People’s Initiative to Limit Property Taxation, serves a completely different purpose than the DITA does: It was designed to limit the growth of state and local property taxes by, inter alia, capping the maximum amountofany ad valorem tax onreal property to one percentofthe “full cash value” ofthe property. (Cal. Const., art. XIIIA, §§ 1, subd. (a), 2, subd.(a).) Under Proposition 13, county assessors may reassessreal property atits current market value only when it is purchased, newly constructed, or undergoes a “change in ownership.” (Cal. Const., art. XIIIA, § 2, subd. (a).) Section 60, in turn, defines a “change in ownership”as “‘a transfer ofa present interest in real property ....” Under section 64, subdivision (a), “the purchase or transfer of ownershipinterests in legal entities, such as corporate stock or partnership or limitedliability companyinterests, shall not be deemedto constitute a transfer of the real property of the legal entity.” (See Title Insurance & Trust Co. v. County ofRiverside (1989) 48 Cal.3d 84, 89 (Title Insurance & Trust Co.), Twentieth Century Fox, supra, 223 Cal.App.3d at p. 1163.) | However, subdivisions (c) and (d) of section 64 do provide two exceptions to that rule.13_ These sections, which generally provide that 13, Section 64, subdivision (c)(1) provides that when control is obtained through “direct or indirect ownership”of a majority ownership interest in [Footnote continued on next page] 44 “mergersor other transfer[s] ofmajority controlling ownership should result in a reappraisal of the corporation’s property,” were enacted to “achieve some degree of parity [in] the tax burden imposed on individual and corporate purchasers ofreal property,” because individual properties change hands more frequently than do corporate properties. (Twentieth Century Fox, supra, 223 Cal.App.3d at pp. 1161, 1164; see also Title Insurance & Trust Co., supra, 48 Cal.3d at p. 95 [“the equalization of the tax burden between individual and corporate purchasers ofreal property is an obvious purposeofthe provision”]; Assem. Com. on Revenue and Taxation, Analysis of Assem. Bill No. 748 (1979-1980 Reg. Sess.) Oct. 29, 1979, p. 27 [MJN, Ex. A,p. 2].) Butthere is no indication that the Legislature intended this exception to apply in any other context, and certainly not to the earlier-enacted DTTA. Indeed, “[t]he declaration of a later Legislature is of little weight in 3determining the relevant intent of the Legislature that enacted the law [Footnote continued from previous page] another legal entity, this constitutes a “change of ownership ofthe real property ownedbythe ... legal entity in which the controlling interestis obtained.” Section 64, subdivision (d) similarly provides that where more than 50 percent of the total interests of a legal entity that ownsreal property are transferred “by any ofthe original coowners in one or moretransactions,” that transfer results in “a change in ownership ofthat real property owned by the legal entity.” These provisions reflect “the ‘ultimate control’ theory, which looks throughthe title holder [of corporate property] to the entity ultimately responsible.” (Twentieth Century Fox, supra, 223 Cal.App.3d at p. 1163.) 45 (Peralta Community College Dist. v. Fair Employment and Housing Commission (1990) 52 Cal.3d 40, 52 (Peralta), citing Teamsters v. United c States (1977) 431 U.S. 324, 354, fn. 39), “especially ... where ...‘a gulf of 999decades separates the two[legislative] bodies’” (Apple Inc. v. Superior Court (2013) 56 Cal.4th 128, 145 (Apple Inc.)). To the contrary, in contemporaneously analyzing Proposition 13 for the Legislature in 1978, the Legislative Analyst advised that “the prohibition [in Proposition 13] against a ‘transaction’or‘sales’ tax on real property would not preclude an additional sales or use tax on tangible personal property,” but that “fa]jn extension ofthe existing documentary transfer tax, which is imposed on the transfer of equity in real property, probably would be prohibited.” (Legis. Analyst, Analysis ofProposition 13, The Jarvis-Gann Property Tax Initiative (1977-1978 Reg. Sess.) p. 42 [MJN, Ex. F, p. 91].) b. The Structure Of The Revenue And Taxation CodeAlso Distinguishes Property Taxes From Excise Taxes The Court ofAppeal’s holding that “a documentary tax may be applied to transfers ofinterests in legal entities ... ifthe transfer results in a ‘change of ownership’ under section 64”(slip opn., p. 30) is misplaced for another reason. This holding requires using statutes in one division ofthe Revenue and Taxation Code, which come under different headings, to interpret earlier- 666enacted statutes in a separate division of that code. “‘[C]hapter and section 46 headings [of an act] may properly be considered in determining legislative intent’ [citation], and are entitled to considerable weight.” (People v. Hull (1991) 1 Cal.4th 266, 272, quoting American Federation ofTeachers v. Bd. of Education (1980) 107 Cal.App.3d 829, 836.) Specifically, the Revenue and Taxation Code is divided into two divisions. Division 1 governs “Property Taxation,” which includes Part 0.5, which is entitled “Implementation of Article XIIIA of the California Constitution” and includes section 64. (See Stats. 1979, ch. 242, § 4.) In contrast, the DTTA appears in Division 2 of the Revenue and Taxation Code, governing “Other Taxes.” Unlike a property tax, which is assessed based on the value of property, the DITA—an excise tax—is a “privilege tax ... and its paymentis invariably made a condition precedentto the exercise of the privilege involved.” (Douglas Aircraft Co. v. Johnson (1939) 13 Cal.2d 545, 550; City ofHuntington Beach v. Superior Court (1978) 78 Cal.App.3d 333, 340 [the DTTA taxes the “exercise of the right or privilege of transferring [real] property”].) Division 2 covers, among other things, sales and use taxes (part 1), vehicle license fees (part 5), and taxes on corporations(part 11). Each ofthese taxes differs markedly from ad valorem property taxes, which tax the ongoing ownership ofproperty, rather than the privilege of a sale or event. (Compare Division 1, Parts 0.5-14 (§ 50 et seq.) with Division 2, Parts 1-31 (§ 6001 et seq.).) 47 Accordingly, if anything, the structure of the Revenue and Taxation Code undercuts the notion that section 64 (which governs the reappraisal of property for purposes of ad valorem property taxes) also applies to an excise tax (the DTTA), enacted a decade earlierin a different division for a different purpose. 2. Other Subsequent Legislative Enactments Also Do Not Expand The Reach Of The DTTA The Court ofAppeal also reasonedthat “since the DTTA was adopted in 1967, there have been changesin California law suggesting the Legislature endorses the view that section 11911 permits counties and cities to impose a documentary tax on transfers of interests in legal entities that result in a ‘change of ownership.’” (Slip opn., p. 28.) Specifically, prior to 2009, county assessors were “barred ... from providing county recorders [who enforce the DTTA]accessto statements of change in ownership oflegal entities.” (Slip opn., p. 16.) Senate Bill No. 816 and Assembly Bill No. 563 amended the Revenue and Taxation Code to provide county recorders and city finance officials with access to such statements and records ofany investigation concerning a change in ownership. (§§ 408, subd. (b), 408.4.) The court suggested that the passage ofthose bills in 2009 and 2011 implies that the Legislature now reads the DTTA to incorporate section 64. (Slip opn., pp. 23-24.) Thereare at least three barriers to the Court ofAppeal’s analysis. 48 a. Invoking Senate Bill No. 816 And Assembly Bill No. 563 To Expand The DTTA’s Scope Would Be Contrary To The Constitution “An established rule of statutory construction requires [courts] to construe statutes to avoid ‘constitutional infirmit[ies]."” (McClung v. Employment Development Dept. (2004) 34 Cal.4th 467, 477 (McClung), People v. Navarro (2007) 40 Cal.4th 668, 675.) Here, construing Senate Bill No. 816 and Assembly Bill No. 563 to amend the DTTAto impose a new transaction tax on transfers of interests in entities raises serious constitutional concerns that warrant construing these statutes to avoid rendering them unconstitutional. Specifically, Proposition 13 not only capped ad valorem taxes onreal property, but also amendedour Constitution to (1) require that “any change in State taxes ... whether by increased rates or changes in methods of ‘computation must be imposed by an Act passedby not less than two-thirds of all members elected to each of the two houses of the Legislature,” and (2) prohibit “new ad valorem taxes on real property, or sales or transaction taxes on the sales of real property.” (Former Cal. Const., art. XTIIA, § 3.)!4 14 There have been no material changesin the wording ofArticle XIIIA since then. 49 Thus, interpreting section 11911 based on these subsequently enacted bills (neither of which was enacted by a supermajority vote)!5 to expand or impose a new “transaction tax” based on writings that transfer interests in legal entities would run afoul of article XIITA, section 3 of the Constitution; thus, they should not be construed to do so. (McClung, supra, 34 Cal.4th at p. 477.)16 b. Settled Rules OfStatutory Construction Argue Against Relying On Bills Enacted In 2009 And 2011 To Interpret The DTTA Secondly, as noted earlier, any viewsthat the Legislature may have had in 2011 or 2009 cannot shed light on the Legislature’s intent in enacting the | DTTAalmostfifty years ago. (Peralta, supra, 52 Cal.3d at p. 52; Apple Inc., supra, 56 Cal.4th at pp. 145-146 [declining to credit views of the 2011 Legislature with respect to what the 1990 Legislature intended].) 15 See 3 Assem.J. (2009-2010 Reg. Sess.), p. 3209 [MJN, Ex. B, p. 7]; Sen. Daily J. (2009-2010 Reg. Sess.), pp. 2388-2389 [MJN, Ex. C, pp. 9-10]; Sen. Daily J. (2011-2012 Reg.Sess.), pp. 2206-2207 [MJN,Ex. D, pp. 12-13]; Assem.Daily J. (2011-2012 Reg.Sess.), p. 2909 [MJN,Ex. E, p.15]. 16 The Court of Appeal also erred in relying on amendments to other counties’ tax ordinancesto interpret the DITA. (Slip opn., p. 25, citing County of Santa Clara Code, § A30-39.6; City and County of San Francisco Business and Tax Regulations Code, Art. 12C, § 1114.) Clearly, those /ocal ordinances cannot inform theinterpretation ofthe state DTTA(or Los Angeles County’s own ordinance). Further, even assuming that those counties had the constitutional power to enact such ordinances, unlike Los Angeles County, San Francisco and Santa Clara submitted their ordinances to the electorate for popular approval, as required. (See Cal. Const., art. XIIIC § 2, subd. (b).) 50 Moreover,using bills enacted in 2009 and 2011 to alter the intent ofthe Legislature in enacting a statute more than forty years earlier constitutes an attempt to amend the DTTAby implication. But “the principle ofamendment ... by implication is to be employedfrugally, and only wherethe later-enacted statute creates such a conflict with existing law that there ts no rational basis for harmonizing the twostatutes....’” (McLaughlin v. State Bd. ofEducation (1999) 75 Cal.App.4th 196, 222-223, quoting In re White (1969) 1 Cal.3d 207, 212; see also In re Sean W. (2005) 127 Cal.App.4th 1177, 1187.) Here, neither Senate Bill No. 8 16 nor Assembly BillNo. 563 expressly amended the DTTA to authorize the taxation of “change[s] in ownership.” They merely amended the Revenue and Taxation Code’s property-tax provisions to allow county recorders to access records concerning “change[s] in ownership.” (See §§ 408, 408.4.) Thus, there is no conflict between these provisions and the DTTAthat wouldjustify the Court ofAppeal’s amendment by implication. Cc. Senate Bill No. 816 And Assembly Bill No. 563 Are Consistent With Ardmore’s Interpretation Of The DTTA Finally, the enactment of Senate Bill No. 816 and Assembly Bill No. 563 is consistent with the interpretation of the DITA set forth herein: Affording county recorders the right to access the county assessor’s records allows them to enforce the DTTA’s existing partnership provisions. 51 As explained earlier, section 11925, subdivision (b) deems a constructive conveyanceoftitle to realty to have occurred—whichtriggers a tax—when“there is a termination of any partnership or other entity treated as a partnership for federal income tax purposes, within the meaning of Section 708 ofthe Internal Revenue Code of 1986.” (§ 11925, subd. (b); see Section IV.A.3.b, ante.) Sometransfers ofinterests in partnerships, which require the filing of a statement of change in ownership under Proposition 13’s scheme, can also terminate the partnership under 26 U.S.C. section 708 for purposes of a documentary transfer tax. However,it is also possible to have a termination of the partnership without a taxable change in ownership.!7 Consequently, “legally required forms[that acknowledge ‘changesin control’] ... may or may not trigger a [documentary transfer tax]” under section 11925, and by granting county recordersaccessto thesefilings, Senate Bill No. 816 and Assembly Bill No. 563 “help recorders determine whether” section 11925 “applies to certain changes of ownership.” (Slip opn., p. 18, quoting Sen. Comm. on Revenue and Taxation, Summary of Senate Bill No. 816 (2009-2010 Reg.Sess.).) 17 For example, there is no change in ownership under section 64 where “all of [a partnership’s] membership interests are sold but no one person or entity obtains, directly or indirectly, more than a 50 percentinterest in the [partnership’s] capital and profits.” (Ocean Ave. LLC v. County ofLos Angeles (2014) 227 Cal.App.4th 344, 346-347, 351.) Such a transaction would, however, produce a partnership termination under 26 U.S.C. § 708(b)(1)(B). 52 E. Extending The DTTA To Reach Transfers Of Interests In Entities That Directly Or Indirectly Own Realty Is Not Necessary To Avoid, And Would Actually Produce, Adverse Consequences The Court ofAppeal also defendedits interpretation on the ground that Ardmore’s interpretation of the DITA would permit “property owners to avoid the transfer tax by conveying their real property to a wholly owned, single entity LLC establishedfor the sole purpose ofholdingthe property, and then selling the LLC ... to a third party.” (Slip opn., p. 31.) But there is no basis for this tax-avoidance concern. Under long- standing tax doctrines, a sham ortransitory transfer to an entity that is not supported by a business purpose (something that the transactions at issue in this case have never been suggested to be) could be disregarded. (See,e.g., Microsoft Corp. v. Franchise Tax Bd. (2006) 39 Cal.4th 750, 760 [“For purposesoftaxation, what matters is substance, not form”]; Shuwa Investment Corp. v. County of Los Angeles (1991) 1 Cal.App.4th 1635, 1648 [‘‘the general tax principle [is that] the incidence of taxation depends upon the substance of a transaction rather than its form [Citation.]’”].) But none of these doctrines has any application here.!8 18 Ardmore was an adequately capitalized company that observed corporate formalities at all times. (3RT317:21-318:22, 328:19-330:12, 340:25-341:7, 360:23-361:23.) And, as discussed at section III.A.3, ante, Ardmore was formed for legitimate purposes. 53 Additionally, under general tax principles, “[p]ersons may adopt any lawful meansfor the lessening of the burden of taxes which in one form or another may belaid upon propertiesor profits.” (Edison, supra, 30 Cal.2d at p. 476.) In any event, if the Legislature shares the Court of Appeal’s policy concernsand wishes to expandthe reach ofthe DTTA,it may take steps to do SO. But a changeofthis nature involves the balancing ofmanydelicate policy concerns that under well-established precedent are the province of the Legislature, not the courts. (See Professional Engineers v. Dept. of Transportation (1997) 15 Cal.4th 543, 593 [‘‘Courts do not sit as super- legislatures to determine the wisdom, desirability or propriety of statutes enacted by the Legislature’”].) Finally, far from avoiding adverse consequences, the Court ofAppeal’s interpretation ofthe DTTA produces adverse consequences, two examples of whichfollow. First, under the Court ofAppeal’s decision, the purchaseofaslittle as a 1% interest in a non-partnership entity—ifit results in a change of control or ownership under section 64, subdivisions (c) or (d)—would result in a documentarytransfer tax on the entity based on 100% ofthe fair market value of the real property held by the entity, even if little or no consideration is actually paid for the transfer of that 1% interest. (Slip opn., pp. 13-14.) Further, even though the text of the DITA is designed to levy the tax on the 54 “buyers” or “sellers” of realty, the Court of Appeal’s interpretation would extend the incidence of the tax to minority members of an LLC or a partnership, whoare passive bystandersto the triggering transaction. Second, because minortransfers ofinterests in non-partnershipentities would trigger the DTTA, while substantially larger transfers of interests in partnership interests would not, the Court of Appeal’s decision would render the partnership form far moreattractive, at least from a documentary transfer tax perspective. F. The County Has Waived Its Argument That Section 11925 Authorizes The Imposition Of A Tax On Ardmore In the trial court and the Court of Appeal, the County argued that Ardmorewasa “disregarded entity” for purposes of federal and state income tax law such that BA Realty should be deemed to directly hold Ardmore’s Property andthatthe transfers of interests in BA Realty causedit to terminate under 26 U.S.C. section 708, thereby triggering a documentary transfer tax under section 11925. (County’s RB, pp. 7, 9-10; 7CT1535.) Ardmore contended that BA Realty was not terminated, and even if it was, section 11925 did not apply because BA Realty did not hold any realty.!9 19 On the first point, Ardmore explained below that BA Realty did not terminate under 26 U.S.C. § 708(b)(1)(B) because Gloria Averbook remained the legal and beneficial owner ofBruce’s and Allen’s Trusts for income tax purposes pursuantto the trust instruments and 26 U.S.C. § 675(4). (3RT348:6-12, 349:2-9; Pl. Exs. 29[GWP000095], [Footnote continued on next page] 55 The Court ofAppeal “agree/d]” with Ardmorethat section 11925 “[i]s inapplicable because BA Realty did not holdtitle to the realty; instead, it owned Ardmore, which held title to the realty.” (Slip opn., p. 31, italics added). The court thus declined to decide whether the partnership had been terminated. (/d. at pp. 31-32, fn. 12.) This Court need not, and should not, reach this issue, as the County failed to preserve it for this Court’s review under California Rules of Court, rule 8.504(c); thus, Ardmorewill not addressit here.” [Footnote continued from previous page] 20 30[GWP000032].) Under 26 U.S.C. § 675(4), the grantor of a trust (Gloria) “shall be treated as the owner” of the trust where she retains “a power,”as did Gloria, “to reacquire the trust corpus by substituting other property ofan equivalent value.” (See p. 12, fn. 3, ante; Ardmore’s AOB, pp. 66-67.) On the second point, while Ardmore is disregarded for state and federal income-tax purposes, it remains a separate entity for other purposes and can be subject to other taxes. (See, e.g., 26 C.F.R. § 301.7701-2(c)(iii), (iv), (v) [limiting situations in which entities can be disregardedto federal income taxes, but not employmentor excise taxes]; Cal. Code Regs., tit. 18, § 23038(b)-2, subd. (c)(2) [recognizing disregarded status for state income taxes, but not for other particular taxes specific to LLCs].) Therefore, BA Realty held Ardmore,not realty, for purposesofthe excise tax under section 11925. A party “has failed to preserve [an] issue” for review whereit “neither filed a petition for review norasserted in its answer... that, if [this Court] grant[s| review [ofthe issues raised in the petition, it] should also address [respondent’s] issue.” (Scottsdale Insurance Co. v. MV Transportation (2005) 36 Cal.4th 643, 654, fn. 2; Cal. Rules of Court, rule 8.516(a).) The County indisputably did neither here. 56 V. CONCLUSION For the foregoing reasons, the DTTA doesnot authorize the imposition ofa documentarytransfer tax based on the conveyanceofaninterestin a legal entity that owns realty. Instead, the DTTA’s plain language only imposes a tax on a “deed, instrument, or writing by which any lands, tenements,or other realty sold [have been] ... otherwise conveyed.” (§ 11911.) Consequently, this Court should reverse the Court of Appeal’s judgment, grant Ardmore’s request for a refund of the documentary transfer taxes already paid, and remand to allow the trial court to determine Ardmore’s rights to attorneys’ fees for prosecuting this litigation. Dated: March 25, 2015 Respectfully submitted, FISHERBROYLES, LLP GIBSON, DUNN & CRUTCHER LLP Attorneys for Plaintiff and Appellant 926 North Ardmore Avenue, LLC 57 CERTIFICATE OF WORD COUNT In accordancewith rule 8.520(c) of the California Rules of Court, the undersigned herebycertifies that this Opening Brief on the Merits contains 13,840 words, as determined by the word processing system used to prepare this brief, excluding the cover information,the tables, the signature block, the attachment, andthis certificate. Dated: March 25, 2015 FISHERBROYLES, LLP GIBSON, DUNN & CRUTCHER LLP ay:Dae ee Kbhe Daniel M. Kolkey (/ Attomeys for Plaintiff and Appellant 926 North Ardmore Avenue, LLC 58 ADDENDUM OF STATUTES CALIFORNIA REVENUE AND TAXATION CODE § 11911. Imposition; instruments subject to tax; consideration or value of property; rate; credits. (a) The board of supervisors of any county orcity and county, by an ordinance adopted pursuant to this part, may impose, on each deed, instrument, or writing by which any lands, tenements, or other realty sold within the county shall be granted, assigned, transferred, or otherwise conveyedto, or vested in, the purchaser or purchasers,or any other person or persons,by hisor their direction, when the consideration or value of the interest or property conveyed (exclusive of the value of any lien or encumbrance remaining thereon at the time of sale) exceeds one hundred dollars ($100) a tax at the rate offifty-five cents ($0.55) for each five hundred dollars ($500) or fractional part thereof. (b) The legislative body of any city which is within a county which has imposed a tax pursuant to subdivision (a) may, by an ordinance adopted pursuantto this part, impose, on each deed, instrument, or writing by which any lands, tenements, or other realty sold within the city shall be granted, assigned, transferred, or otherwise conveyedto, or vested in, the purchaser or purchasers, or any other personor persons,by hisor their direction, when the consideration or value of the interest or property conveyed (exclusive of the value of any lien or encumbrance remaining thereon at the time ofsale) exceeds one hundred dollars ($100), a tax at the rate of one-half the amount specified in subdivision (a) for each five hundred dollars ($500)or fractional part thereof. (c) A credit shall be allowed against the tax imposed by a county ordinance pursuant to subdivision(a) for the amountofany tax due to anycity by reason of an ordinance adopted pursuant to subdivision (b). No credit shall be allowed against any county tax for a city tax whichis not in conformity with this part. § 11911.1. Tax roll parcel number. Any ordinance which imposes the documentary transfer tax may require that each deed, instrumentor writing by whichlands, tenements,or other realty is sold, granted, assigned,transferred, or otherwise conveyed, shall have noted uponit the tax roll parcel number. The numberwill be used only for administrative and procedural purposes and will not be proof oftitle and in the event of any conflicts, the stated legal description noted upon the documentshall govern. The validity of such a document. shall not be affected by the fact that such parcel numberis 59 erroneousor omitted, and there shall be no liability attaching to any person for an error in such numberor for omission of such number. § 11922. Instruments of United: States, state, territory or political subdivision, etc. Any deed, instrument or writing to which the United States or any agency or instrumentality thereof, any state orterritory, or political subdivision thereof, is a party shall be exempt from any tax imposed pursuant to this part when the exempt agencyis acquiringtitle. § 11925. Transfer of certain partnership property. (a) In the case of any realty held by a partnership or otherentity treated as a partnership for federal incometax purposes, no levy shall be imposed pursuantto this part by reason of any transfer ofan interest in the partnership orotherentity or otherwise,if both of the following occur: (1) The partnership or other entity treated as a partnership is considered a continuing partnership within the meaning of Section 708 ofthe Internal Revenue Code of 1986. (2) The continuing partnership or other entity treated as a partnership continuesto hold the realty concerned. (b) If there is a termination of any partnership or other entity treated as a partnership for federal income tax purposes, within the meaning of Section 708 of the Internal Revenue Code of 1986, for purposes of this part, the partnership or other entity shall be treated as having executed an instrument wherebythere was conveyed,for fair market value (exclusive of the value of any lien or encumbrance remaining thereon),all realty held by the partnership or other entity at the time of the termination. (c) Not more than onetax shall be imposed pursuantto this part by a county, city and county or city by reason ofa termination described in subdivision(b), and any transfer pursuant thereto, with respect to the realty held by a partnership or other entity treated as a partnership at the time of the termination. (d) No levy shall be imposed pursuantto this part by reason ofany transfer between an individual or individuals and a legal entity or between legal entities that results solely in a change in the method of holdingtitle to the realty and in which proportional ownership interests in the realty, whether represented by stock, membership interest, partnership interest, cotenancy 60 interest, or otherwise,directly or indirectly, remain the same immediately after the transfer. § 11932. Submission ofdocuments subject to tax for recordation; facts to be shown. Ifa county has imposed tax pursuantto this part, every document subject to tax that is submitted for recordation shall show onthe face of the document the amount of tax due and the incorporated or unincorporated location of the lands, tenements, or other realty described in the document. § 11933. Paymentof tax as prerequisite to recording. If a county has imposed a tax pursuantto this part, the recorder shall not record any deed, instrument, or writing subject to the tax imposed pursuantto this part, unless the tax is paid at the time ofrecording. A declaration ofthe amountoftax due, signed by the party determiningthe tax orhis or her agent, shall appear on the face ofthe documentin compliance with Section 11932, and the recorder may rely on that declaration if the recorder has no reason to believethat the full amount of the tax due has not been paid. The declaration shall include a statement that the consideration or value on which the tax due was computed either was, or was not, exclusive of the value of a lien or encumbrance remaining on the interest or property conveyedatthe time ofsale. Failure to collect the tax due shall not affect the constructive notice otherwise imparted by recording a deed, instrument, or writing. Los ANGELES COUNTY CODE § 4.60.020. Imposition of tax—Amount. There is imposed on each deed, instrument or writing by which any lands, tenements or other realty sold within the county of Los Angeles shall be granted, assigned, transferred or otherwise conveyedto or vested in the purchaser or purchasers, or any other personor personsbyhis ortheir direction, when the consideration or value of the interest or property conveyed (exclusive of the value of any lien or encumbrances remaining thereonat the time ofsale) exceeds $ 100.00,a tax at the rate of $.55 for each $500.00 or fractional part thereof. Los ANGELES MUNICIPAL CODE § 21.9.1. Title. This article shall be known asthe “Real Property Transfer Tax Ordinance of the City of Los Angeles.” It is adopted pursuant to the authority contained in Part 6.7 (commencing with Section 11901) ofDivision 2 of the Revenue and Taxation Code of the State of California. It is also enacted underthe authority of Subdivision (d) of Subsection (11) of Section 2 of the Los Angeles City Charter and other authority held as a Charter City. 61 § 21.9.2. Tax Imposed. There is hereby imposed on each deed,instrument or writing by which any lands, tenements, or other realty sold within the City of Los Angeles shall be granted, assigned, transferred or otherwise conveyedto, or vested in, the purchaser or purchasers, or any other person or persons, by his or their direction, when the consideration or value of the interest or property conveyed (exclusive of the value of any lien or encumbrance remaining thereon at the time of sale) exceeds $100.00, a tax at the rate of $2.25 for each $500.00 orfractional part thereof. FEDERAL STATUTORY PROVISIONS Former 26 U.S.C. § 4321. Imposition of tax. There is hereby imposed on eachsale or transfer of sharesor certificates of stock, or ofrights to subscribe for or to receive such sharesorcertificates, issued by a corporation,a tax at the rate of4 cents on each $100 (or major fraction thereof) of the actual value of the certificates, ofthe shares wherenocertificates are sold or transferred, or of the rights, as the case maybe. In no case shallthe tax so imposed on any such sale or transfer be— (1) more than 8 cents on each share, or (2) less than 4 cents on the sale or transfer. Former26 U.S.C. § 4361. Imposition of tax. There is hereby imposed, on each deed, instrument, or writing by which any lands, tenements, or other realty sold shall be granted, assigned, transferred, or otherwise conveyedto, or vested in, the purchaseror purchasers, or any other personor persons, byhis or their direction, when the consideration or valueofthe interest or property conveyed (exclusive of the value of any lien or encumbrance remaining thereonat the time of sale) exceeds $100, a tax at the rate of 55 cents for each $500 or fractional part thereof. Former 26 U.S.C. § 4383. Certain changes in partnerships. (a) Continuing partnerships. In the case of anyshare, certificate, right, or realty held by a partnership,no tax shall be imposed undersection 4321, 4331, or 4361 by reason ofany transfer of an interest in a partnership or otherwise, if— (1) such partnership (or anotherpartnership)is considered as a continuing partnership (within the meaning of section 708), and 62 (2) such continuing partnership continues to hold the share, certificate, right, or realty concerned. (b) Terminated partnerships. If there is a termination of any partnership (within the meaning of section 708)— (1) for purposes of this chapter, such partnership shall be treated— (A) as having transferred all shares, certificates, and rights held by such partnership at the time of such termination; and (B) as having executed an instrument wherebythere was conveyed,for fair market value (exclusive of the value of any lien or encumbrance remaining thereon), all realty held by such partnership at the time of such termination; but (2) not more than onetax shall be imposed undersection 4321, 4331, or 4361, as the case maybe, by reason of such termination (and any transfer pursuant thereto) with respect to the shares, certificates, rights, or realty held by such partnership at the time of such termination. 26 U.S.C. § 708. Continuation of partnership. (a) General rule. For purposes of this subchapter, an existing partnership shall be considered as continuingif it is not terminated. (b) Termination. (1) General rule. For purposes of subsection (a), a partnership shall be considered as terminated only if— (A) no part of any business, financial operation, or venture of the partnership continues to be carried on by any ofits partners in a partnership, or (B) within a 12-month periodthereis a sale or exchange of50 percent or moreofthe total interest in partnership capital and profits. 63 CERTIFICATE OF SERVICE PROOF OF SERVICE I, Carol J. Aranda, declare as follows: I am employed in the County of San Francisco, State of California;I am overthe age of eighteen years and am nota party to this action; my business address is 555 Mission Street, Suite 3000, San Francisco, California 94105, in said County and State. On March 25, 2015, I served the within: OPENING BRIEF ON THE MERITS to each of the persons named below at the address(es) shown,in the manner described. SEE ATTACHED SERVICELIST [VJ BY MAIL:I placed a true copy in a sealed envelope addressed as indicated on the attachedservicelist for collection and mailing at my business location, on the date mentioned above, following our ordinary business practices. I am readily familiar with this business’s practice for collecting and processing correspondencefor mailing with the United States Postal Service. On the same day that correspondenceis placed for collection and mailing, it is deposited in the ordinary course of business with the U.S. Postal Service in a sealed envelope with postage fully prepaid. I am aware that on motion ofthe party served, service is presumed invalid if the postal cancellation date or postage meter date on the envelope is more than one dayafter the date of deposit for mailing contained in the proofofservice. I certify under penalty ofperjury that the foregoingis true and correct, that the foregoing document(s), and all copies made from same, were printed on recycled paper, and that this certificate was executed on March 25, 2015 at San Francisco, California. Service List MarkJ. Saladino, County Counsel Albert Ramseyer, Principal Deputy County Counsel 648 Kenneth Hahn Hall of Administration 500 West Temple Street Los Angeles, CA 90012-2713 Clerk of the Court of Appeal Second District, Division Seven 300 South Spring Street Room 2217 North Tower Los Angeles, CA 90013 Clerk of the Los Angeles County Superior Court Stanley Mosk Courthouse 111 North Hill Street Los Angeles, CA 90012 Attorneysfor Defendant/Respondent, County ofLos Angeles