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New Enterprise Zone Lawsuit

Dicon Fiberoptics, Inc. has filed a suit in Los Angeles Superior Court against the Franchise Tax Board for denying their claim of Enterprise Zone tax credits. The complaint clearly states an intention to create a precedent setting case, “that could have a significant impact on thousands of taxpayer employers.”

In the complaint filed with the Court, Dicon’s attorneys raise three questions:

Does the California Franchise Tax Board have unfettered authority to retroactively interpret and act upon a construction of the Revenue and Taxation Code that ignores express language concerning the requirements that a taxpayer must meet to receive available tax credits or refunds? Second, does the California Franchise Tax Board deprive a taxpayer of notice and procedural protections when its statutory interpretation creates additional administrative hurdles for taxpayers otherwise eligible to receive credits or refunds? And third, should the law permit the California Franchise Tax Board to deny taxpayers their credit or refunds, in some cases years after approval by an authorized administrative agency specifically tasked to review and certify eligibility for such benefits?

This is essentially the same fundamental issue that has already been decided by the State Board of Equalization in the appeal of Deluxe Corporation. Deluxe Corp., in its BOE appeal, attempted to argue that the FTB had no statutory authority to examine supporting documentation “behind” approved employee vouchers. The BOE decided that the FTB does indeed have that authority. It now appears that Dicon is attempting to have the Courts override that BOE decision.

The Dicon complaint states that in January 2007 they did file an appeal of the FTB’s findings with the BOE, but that on March 1, 2007 that appeal was dismissed. When asked about the reason for the dismissal, the BOE supplied a copy of the dismissal letter which states, in full: “Dear Mr. Dakessian, On February 16, 2007, appellant [Dicon] requested that the above-named appeal for the year ended March 31, 2001 be dismissed. Therefore, the appeal is dismissed.”

The letter of dismissal is addressed to Mr. Marty Dakessian of Dakessian & Associates. Mr. Dakessian is the same attorney involved in the Deluxe appeal (see the case documents linked above). The court documents also connect Dicon to California Credits Group, LLC, who, according to a January 2006 Los Angeles Times article, was the same consulting firm responsible for Deluxe’s credit claims.

Dakessian and California Credits Group are also behind the current case Cyntron Payroll Solutions v. Department of Housing and Community Development in which they are claiming that the state agency improperly propagated vouchering regulations. (I wrote about that case here.)

In two places the Dicon complaint against FTB says, “On March 1, 2007, the SBE dismissed plaintiff’s appeal thereby giving rise to the instant action,” and in one place, “Moreover, plaintiff has exhausted all administrative remedies.” According to BOE Publication 81 it is a normal procedure for an appellant to request an appeal to be dismissed, however, sources at the BOE were not sure if such a dismissal represented an exhaustion of all administrative remedies that would allow a taxpayer to file an action against the FTB in Superior Court.

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