July 30, 2019 California Superior Court rules San Francisco's voter-approved commercial rent tax and homelessness tax are legal On July 5, 2019, the San Francisco Superior Court (court) upheld the legality of San Francisco's commercial rent tax and homelessness tax, both of which were approved by voters in June and November 2018, respectively. The court ruled that the public — not lawmakers — placed these tax initiatives on the ballot and, therefore, they required simple majorities to pass and not the more onerous two-thirds majority requirement. The first initiative, Proposition C — the Commercial Rent Tax for Childcare and Early Education, was placed on the June 2018 ballot and received 51% approval. The initiative funds quality early care and education for young children by imposing an additional tax on revenues earned from leasing warehouses and other commercial spaces, at rates of 1% and 3.5%, respectively. The second initiative, Proposition C — the Gross Receipts Tax for Homelessness Services, was placed on the November 2018 ballot and received 61% approval. The initiative funds permanent housing, mental health services, and access to hygiene programs for the homeless by imposing an additional tax on businesses in San Francisco with gross receipts over $50 million. The Howard Jarvis Taxpayers Association challenged the legality of these taxes in two separate cases, arguing that the initiatives should have been classified as a "special tax," which under the California Constitution and San Francisco Charter require a two-thirds supermajority vote for passage. Superior Court Judge Ethan Schulman, citing the California Supreme Court's decision in California Cannabis Coalition v. City of Upland, 3 Cal.5th 924 (2017) as precedent, ruled, in both cases, that the supermajority vote requirement for special taxes applies only to new taxes placed on the ballot by lawmakers. In so ruling, the court reasoned thatthe two-thirds voter threshold requirement (imposed by Proposition 13 and Proposition 218 under the California Constitution and Article XVII of the San Francisco Charter) is restricted only to tax initiatives put forward by local governments, and that their restrictions were never meant to apply to citizen initiatives placed on the ballot. The Howard Jarvis Taxpayers Association has said that it will appeal both rulings. Implications San Francisco is proceeding to collect the homelessness tax while the matter is debated in the courts. Collected taxes will be set aside until a final determination is made. If a taxpayer chooses to waive its right to a refund for the homelessness tax, San Francisco will grant a credit equal to 10% of the amount waived. ———————————————
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