Friday, June 22, 2007
C.A. Rejects Waste Suit Over Tax Breaks to Poultry Producers
By TINA BAY, Staff Writer
Animal rights advocates opposing a tax break for the use of allegedly inhumane chicken coops may not challenge the exemption through a taxpayer action for waste, the First District Court of Appeal ruled yesterday.
The advocates’ animal cruelty concerns involve inhumane conduct by beneficiaries of the tax relief rather than by public officials, and thus no governmental action exists on which to base a waste claim, a unanimous Div. Two panel concluded.
Upholding an order by San Francisco Superior Court Judge Ronald E. Quidachay, the panel rejected a suit brought by the Humane Society and several individuals over a state sales and use tax exemption enacted in 2001.
The challenged exemption, found in Revenue and Taxation Code Sec. 6356.5(a), extends to gross receipts from the sale and use of “farm equipment and machinery” that is “used primarily in producing and harvesting agricultural products.” Related provisions define “farm equipment and machinery” as “any tool, machine, equipment appliance, device or apparatus used in the conduct of agricultural operations.”
In passing the exemption, the Legislature charged the State Board of Equalization with its implementation.
The SBE accordingly issued a regulation providing, among other things, that “farm equipment and machinery” specifically encompassed an “egg production or poultry brooding facility,” along with other structures used for the “purposes of housing, raising and feeding of livestock for the commercial production of plants.” The regulation became effective July 7, 2002.
On Feb. 1, 2006, the Humane Society in San Francisco and other plaintiffs filed suit against the SBE seeking to bar application of Sec. 6356.5(a) to poultry producers who kept egg-laying hens confined in “battery cages” in violation of state animal cruelty laws. The suit was brought under Code of Procedure 526a, which permits taxpayers to challenge the government’s wasteful expenditure of public funds.
The state’s choice not to collect revenue from battery cages constituted a waste and unlawful use of public funds because it enabled violations of animal cruelty laws, the plaintiffs argued. Moreover, they asserted, public money was being wasted on paying state employees to evaluate and enforce tax exemptions for battery cages in violation of the law.
Animal Cruelty Laws
A battery cage, as defined in the complaint, is a cage with a floor area of about 16 inches by 18 inches into which three to 10 hens are continuously confined for most of their lives. Under the Penal Code, it is a crime to deprive an animal of proper shelter or to keep an animal confined to an enclosed area without adequate exercise space.
The SBE demurred to the complaint, contending that the validity of the government’s actions in passing Sec. 6356.5 and its implementing regulation was undisputed.
Quidachay sustained the demurrer without leave to amend.
Div. Two agreed that the complaint failed to allege a valid cause of action.
Justice Paul R. Haerle wrote for the panel:
“First of all, the fundamental problem with appellants’ attempt to use
CCP section 526a to stop the improper use of battery cages is that any such use is a significant step removed from any implicated ‘governmental action,’ i.e., the passage and subsequent implementation and administration of section 6356.5. Put another way, the improper conduct alleged by appellants involves not the actions of public officials regarding that statute but, rather, those of some alleged beneficiaries of the tax relief it provides.”
SBE’s alleged failure to deny the tax exemption to battery cage purchasers who put too many chickens into one battery cage is “one very significant step removed from governmental action,” he said.
The justice also opined that siding with the humane society with respect to chicken coops would open the door to an “almost inevitable endless stream of potential litigation” over other types of farm equipment. The same tax relief applicable to battery cages applies to structures used to house cattle, sheep, pigs, and other livestock, he explained, concluding:
“[A] decision in appellants’ favor necessarily means that purchasers/operators of such equipment might well be violating the two Penal Code sections relied on by appellants, and that the SBE might thus be liable in an injunctive or declaratory relief action similar to that initiated here,” he explained.
Haerle added that nothing in Sec. 6356.5’s legislative history even hinted at the cruel or questionable treatment of farm animals.
“But, of course, we in no way wish to be interpreted as discouraging the concededly well-meaning appellants from going to our Legislature and asking for specific statutory bases for pursuing their concerns regarding over-crowded battery cages, or any other form of improper caging of chickens,” the justice noted.
Justices James R. Lambden and James A. Richman concurred in the opinion.
Humane Society attorney Peter A. Brandt told the MetNews his organization was considering a possible appeal.
Contrary to the court’s suggestion, he pointed out, the society’s lawsuit was not targeting farm practices.
“We’re well aware that a cause of action under 526a hinges on identifying the government’s activity or failure to take action,” he said. “What we alleged repeatedly is that the State Board of Equalization has no authority to fail to collect this tax revenue.”
The lawyer added:
“This is an unusual decision because the court acknowledged that animal abuse on factory farms is occurring in California, but went on to say that the state just doesn’t have to do anything about it.”
The Attorney General’s Office declined to comment on the ruling.
The case is Humane Society of the United States v. State Board of Equalization, 07 S.O.S. 3334.
Copyright 2007, Metropolitan News Company