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By: Matthew Jones
The California Franchise Tax Board has been dealing with a lawsuit for approximately 28 years. However, the lawsuit has finally come to an end due to the United States Supreme Court’s recent ruling. The highest court in the United States issued a ruling that shields states from private lawsuits filed in other states, thereby implicating the “sovereign immunity” principle. In reaching its decision, the Supreme Court overturned a 40-year-old precedent to now “hold that states retain their sovereign immunity from private suits brought in the courts of other states.”
The lawsuit, Franchise Tax Board v. Hyatt, was filed by a resident of California who earned millions of dollars in royalties from a computer patent. He then sold his California home and moved to Nevada, where he claimed his primary residence. This is significant because Nevada had no state income tax. However, the California Franchise Tax Board claimed the plaintiff who sued owed more than $10 million in taxes to the state of California despite his residency in Nevada. After the audit was upheld, the individual filed the lawsuit in Nevada.
If you have any questions or would like more information, please contact Matthew Jones at [email protected].