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Tax Protestor Cases Exhibit
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Adopted November 2, 2000

CALIFORNIA STATE BOARD OF EQUALIZATION

PERSONAL INCOME TAX APPEAL

DECISION

Proposed Assessment Appellant Year Tax Penalties

Guy Blackwell 1996 $2,513.00  $502.60 (accuracy) ¹Case No. 29258 628.25 (demand)

Representing the Parties:

For Appellant: Guy Blackwell For Franchise Tax Board: Andrew O'Boyle, Staff ServicenManager

Counsel For Board of Equalization: Donald L. Fillman, Tax Counsel

QUESTIONS: (1) Whether appellant's California income is subject to California's tax laws.

2) Whether respondent properly estimated appellant's net income and tax liability.

 (3) Whether appellant has maintained a frivolous or groundless position before this Board.

FINDINGS AND DETERMINATION

[1] On February 25, 1997, respondent received a Form 540 that appellant declared was a valid return for 1996. However, it had zeroes on the lines for Federal adjusted gross income, California adjusted gross income, and taxable income. The lines for state wages and total tax were blank. It showed $107 as income withheld, and claimed a refund of $107. As a part of appellant's submittal was a two-page typewritten statement that had blanks to be filled-in. It was a form-type statement alleging that there was no section of the Internal Revenue Code that establishes an income tax liability and other similar allegations. It was addressed to the Internal Revenue Service (IRS) but had been adjusted slightly for appellant's state submittal. Also provided were three Form W-2 reports and a Form 1099- R report.

[2] Respondent did not accept appellant's Form 540 as a valid return. On September 16, 1998, respondent mailed a written notice that notified appellant of penalties that could be assessed, as well as a demand to appellant to file (within 30 days) a 1996 return. There was no response. On March 30, 1999, respondent issued a Notice of Proposed Assessment (NPA) that estimated appellant's taxable income from available information. It calculated additional tax of $2,513.00, an accuracy related penalty of $502.60 (20 percent of the underpaid tax), and a notice and demand penalty of $628.25 (25 percent of the total tax prior to credits). Appellant filed an undated protest that included a request for an oral hearing. It also included a list of contentions including: the notice and demand was not valid; and, appellant had not received income from various political entities (such as the United States, a state, or a foreign government) or income of specified types (such as real estate transactions and unemployment compensation). As requested, respondent scheduled an oral hearing, but appellant failed to appear without notice. Respondent issued a Notice of Action (NOA) dated July 26, 1999, which affirmed the NPA. Appellant's appeal was received by the Board on August 10, 1999.

[3] Appellant's brief, received on November 19, 1999, contends, on page 1, that appellant was not given due process including "a protest hearing consistent with due process." Appellant contends that: (1) the notice and demand was not valid because it was issued by the wrong subdivision of respondent; (2) appellant had reasonable cause for ignoring the notice and demand because it was invalid; (3) respondent's proposed assessment was invalid because it was arbitrary, capricious, and without foundation (including the allegations that forms W-2 and 1099 may only report income from certain sources not applicable to appellant; "a resident, for purposes of income taxation and withholding, is a government employee . receiving income from a government source"); and, (4) appellant should not be penalized for refusing to acknowledge a tax debt under penalty of perjury.

[4] Revenue and Taxation Code (R&TC) section 19087 provides that if a taxpayer fails to file a return, or files a false or fraudulent return with intent to evade the tax, respondent may make an estimate of the net income from any available information. When a taxpayer fails to file a proper return and refuses to provide information requested, he or she is not in a good position to criticize respondent's proposed assessment. (Appeals of Fred R. Dauberger, et al., Cal. St. Bd. of Equal., Mar. 31, 1982.)

[5] Appellant's contentions do not attempt to dispute the correctness of the amounts contained in the NOA. Rather, appellant's contentions are the same type as those heard and uniformly rejected by this Board on numerous occasions, and which both California and United States courts have rejected for many years (see: Appeal of Alfons Castillo, 92-SBE-020, July 20, 1992; Appeal of Walter R. Bailey, 92-SBE-001, Feb. 20, 1992; Appeals of Fred R. Dauberger, et al., supra), a fact pointed out to appellant in the NOA issued on July 26, 1999. Respondent's determination is presumed correct and appellant bears the burden of proving that it is erroneous. (Todd v. McColgan (1949) 89 Cal.App.2d 509.) When a taxpayer fails to present credible, competent, relevant, and uncontradicted evidence as to the issues in dispute, respondent's determination cannot be successfully rebutted. (Appeal of James C. and Monablanche A. Walshe, Cal. St. Bd. of Equal., Oct. 20, 1975.) Appellant has failed to meet this burden.

[6] Revenue and Taxation Code section 19714 provides for a penalty of up to $5,000 for maintaining a frivolous or groundless position before this Board. As indicated above, appellant was notified of this in the NOA. Yet appellant filed and has maintained the present appeal without identifying any legitimate grounds upon which respondent's action may be challenged. We conclude that a frivolous appeal penalty should be imposed against appellant in the amount of $750.

[7] The action of respondent is sustained, subject to the adjustments stated in footnote 1. In addition, a frivolous or groundless appeal penalty, pursuant to section 19714, is imposed in the amount of $750.

FOOTNOTE

¹ Respondent stated that it determined that the accuracy penalty should be withdrawn and a credit given for $107 of state income taxes withheld.

END OF FOOTNOTE

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