Posts Tagged ‘GilbertHyatt’

Gilbert Hyatt Wins Again But…

Thursday, January 17th, 2019

The California Office of Tax Appeals upheld the California Board of Equalization’s ruling that Gilbert Hyatt mostly doesn’t owe California income tax in 1991 or 1992. Yes, you’re reading that correctly: This is a case that is 27 years in the making.

This is the same case that reached the US Supreme Court for the third time this month. The Supreme Court will decide whether or not states have sovereign immunity in other state’s court systems. (Mr. Hyatt sued the Franchise Tax Board in Nevada over various torts committed by the FTB.)

Unlike Bloomberg Tax which noted that the “[case] appears to be over,” I strongly suspect that the Franchise Tax Board (California’s income tax agency) will appeal the ruling into the court system. The FTB’s normal strategy is to exhaust litigation opponents. Thus, I believe that an appeal into the court system is likely.

Gilbert Hyatt and the Franchise Tax Board Head Back to the Supreme Court…Again

Sunday, January 6th, 2019

Back in 1993 (that is not a typographical error), California’s Franchise Tax Board (FTB) initiated a residency audit of Gilbert Hyatt. Mr. Hyatt invented some technology relating to microprocessors in 1990. In 1991 he realized he was going to receive some large royalty payments; he moved from high-tax California to low-tax Nevada. The question was when did he move–was it in April 1992 or October 1991?

The auditors for the FTB committed various torts (for example, they rummaged through Mr. Hyatt’s garbage and did not obey privacy rules). The FTB ruled against Mr. Hyatt; Mr. Hyatt sued the FTB in Nevada state courts. That lawsuit is now heading to the US Supreme Court for the third time. This case will be heard on Wednesday (January 9th). SCOTUSBlog has an excellent preview of the arguments in this case.

Dan Walters is reporting that the FTB has also asked for a rehearing of the decision which went against the FTB at the Board of Equalization. The request for a rehearing is at the new California Office of Tax Appeals. If the rehearing isn’t granted (or if the FTB loses of the Office of Tax Appeals), expect the FTB to appeal the decision into the California court system. It’s likely this case will still be going on when I retire (which is many years away).

There are several points that the average person should realize regarding this case. First, if you’re going to move from a high-tax state to a low-tax state, really move. Make sure you have a clean break from the state.

Second, if you have a high income be aware that your old state may conduct a residency audit. Like almost everything in tax, you’re guilty until proven innocent. In a residency audit, the tax agency will look at your bank and credit card statements to see where you really were. If you said you relocated on July 1, and your credit card statement shows charges from your old state through September 30, you’re going to have a problem.

Finally, California tries to exhaust litigation opponents. The phrase “Pyrrhic Victory” absolutely comes to mind when you deal with the Franchise Tax Board. Additionally, the FTB believes that the whole world owes California tax. Their institutional mentality is definitely not pro-taxpayer.

As for Mr. Hyatt, if he wins this case at the Supreme Court he will eventually be collecting his reduced judgment (in the case in Nevada). If he loses, it’s probable he will be out a ton in legal fees and 15 years of his life and get nothing out of it.

Reason Magazine on Gilbert Hyatt vs. California’s Franchise Tax Board

Thursday, October 26th, 2017

Reason magazine has a superb presentation on Gilbert Hyatt’s battle with California’s Franchise Tax Board. I cannot recommend it highly enough:

Gilbert Hyatt (Mostly) Wins at Board of Equalization; What This Teaches Us About Moving from California

Thursday, August 31st, 2017

Remember Gilbert Hyatt? He’s the microprocessor inventor who made a fortune and then moved to no-tax Nevada from high-tax California, but California’s Franchise Tax Board (FTB) said didn’t move. The case has gotten to the US Supreme Court twice, and there’s still a related civil case at the 9th Circuit Court of Appeals. The underlying tax audit–an audit that began in 1993–was (mostly) resolved in Mr. Hyatt’s favor yesterday at California’s Board of Equalization.

Let me first start with the basic history of the case. Gilbert Hyatt invented (and patented) items related to microprocessors in 1990. He realized he would owe 10% of his very large upcoming income to California if he remained in the state, so in October 1991 he moved to Nevada. In 1993, the FTB audited Mr. Hyatt (the FTB is California’s income tax agency), alleging he didn’t move from California until April 1992. The FTB alleged he owed taxes on $5.4 million plus fraud penalties of another $5.4 million.

The FTB, as part of its investigation, skirted the law in Nevada. They rummaged through Mr. Hyatt’s garbage, and (as found by a jury here in Nevada) committed fraud. The first Supreme Court decision, in 2003, allowed Mr. Hyatt to sue the FTB in court in Nevada alleging that the FTB committed a wide range of torts. The FTB argued because the FTB is immune from lawsuits in California it could not be sued in Nevada; the FTB lost that argument.

The case went to trial, and Mr. Hyatt was awarded $400 million (including punitive damages). The FTB appealed, and the Nevada Supreme Court lowered the damages. The FTB appealed again to the US Supreme Court; the Supreme Court ruled that damages are limited to what could be awarded against a Nevada agency (something less than $100,000).

Meanwhile, Mr. Hyatt’s audit results were appealed to the Board of Equalization in the mid 1990s. Yesterday, some twenty years later, the BOE finally heard the case. (The BOE hears appeals from the FTB. However, beginning January 1, 2018 the BOE will no longer hear such appeals.) After a 13-hour hearing, the BOE ruled 4-1 that there was no fraud; the BOE ruled 3-2 that Mr. Hyatt moved to Nevada in October 1991 (as he had said). However, the BOE also ruled that Mr. Hyatt conducted his business primarily out of California after his move to Nevada in 1991. It’s likely Mr. Hyatt owes taxes on somewhere between $1 and $2 million (plus interest and penalties). This decision could be appealed into the California court system by either side.

More interestingly to blog readers, what does this teach us about changing your domicile from one state to another?

1. Really Move. This sounds basic, but tax agencies don’t like it when you say you move from their high-tax jurisdiction to a low-tax one. If you suddenly come into income, you’re far more likely to be audited, and if the tax agency discovers you’re using your friend’s house in your old hometown to conduct business they won’t be happy. If possible, don’t keep an address in your old state; simply have forwarding orders with the post office.

2. Do the Little Things. There are a lot of things involved when you move, but if you may be a subject of a residency audit it pays to do them. Register to vote in your new city. Make sure you register your car(s), and get a new driver’s license. Yes, the DMV isn’t fun but you need to do this. Change your address with your financial institutions. Have utility bills in your name. Find a new house of worship in your new home. The list is lengthy, but the more you do the easier a residency audit will be.

3. Document, Document, Document. One of my favorite sayings is that if you keep good records an audit is an annoyance; if you don’t keep good records an audit is a painful annoyance. You need to double or triple that for a residency audit.

The last residency audit I was involved with was for a couple that moved from New York to Las Vegas. They really moved and had all their documents. New York alleged that because they didn’t buy a new home for six months after they moved to Las Vegas they were still New York residents. However, the couple (and their children) really did move: There was a lease for their rental home, private school receipts from here, voter registration cards, etc. The couple won the residency audit.

4. Stay Around. You need to stay in your new tax home for four months (minimum)–six months or longer is far better–or your old home could say you haven’t changed your domicile (the place you intend to return to). Indeed, if you can avoid your old home for a year that’s far better.

5. California Tries to Exhaust Litigation Opponents. If you end up in a fight with California one component of the state’s strategy is to financially exhaust opponents. Mr. Hyatt’s dispute began in 1993. It is now 2017. I wouldn’t be surprised if there’s still litigation involved with the dispute into the next decade. Most individuals in fights with the FTB don’t have the resources that Gilbert Hyatt has. It’s very easy to have a Pyrrhic victory in a fight with a tax agency.

There’s a lot more involved when you change your residency. Realize if you’re a high-income individual and you move from California to Nevada you’ve painted a target on your back. If you really do move, do the little things and keep good records.

Gilbert Hyatt Goes to Washington…Again

Sunday, October 11th, 2015

The Franchise Tax Board sent out a release on Friday noting that oral arguments in California Franchise Tax Board v. Hyatt will take place on December 7th. This is the second time this case has reached the US Supreme Court. Back in 2002, the Supreme Court ruled that Gilbert Hyatt could sue the Franchise Tax Board in Nevada. That was after the FTB rummaged through his trash. The FTB was then hit with over $400 million in damages. However, the Nevada Supreme Court threw out much of the decision, though the court upheld that the FTB committed fraud against Mr. Hyatt.

The ever-wonderful SCOTUSBLOG has links to the amicus curiea briefs that have been filed (and the FTB’s brief). Mr. Hyatt’s counsel was granted an extension until October 23rd to file his brief.

It will be interesting if this case–decided unanimously in its first Supreme Court iteration–is decided differently on the second iteration. In any case, a decision should come as early as March.

Mr. Hyatt Goes to Washington…Again

Tuesday, June 30th, 2015

The saga of Gilbert Hyatt and the Franchise Tax Board, California’s income tax agency, continues. As you may remember, the Nevada Supreme Court ruled last September that the FTB committed fraud against Mr. Hyatt (false representation and intentional infliction of emotional distress), but threw out most of the Mr. Hyatt’s other claims. The FTB filed a Petition for Certiorari in March; it was granted today.

From Chris Smith of the Franchise Tax Board I learned that the Supreme Court will look at two issues: “Whether Nevada may refuse to extend to sister States haled into Nevada courts the same immunities Nevada enjoys in those courts.” As Mr. Smith notes, this relates to monetary damages that Mr. Hyatt received. Second, “Whether Nevada v. Hall, 440 U.S. 410 (1979), which permits a sovereign State to be haled into the courts of another State without its consent, should be overruled.”

The latter will be the key issue for me. In the Nevada trial, the FTB was found to have committed fraud. If Mr. Hyatt had resided in California (instead of Nevada), he would have been powerless to sue the FTB for damages (California law does not allow this). Consider if the FTB were to repeat the same actions against you where you reside; wouldn’t you like to have some recourse against them? Remember what Bill Leonard wrote about this case:

Tax agents rummaged through his trash without warrants, visited business partners and doctors, and shared his Social Security Number and other personal information with the media. This is outrageous behavior and I call on the FTB to rein in their agents. What really galled me is the FTB testified in open court that this level of harassment was only a typical audit. If true, then the stormtroopers are alive and well at the FTB.

Remember, those actions occurred not in California but in Nevada.

This is the second time that the Hyatt case has been to the US Supreme Court. Back in 2003, the Supreme Court ruled 9-0 that Mr. Hyatt could sue, and that Nevada v. Hall should not be overturned. It will be interesting to see what happens this time. The case will likely be heard this Fall with a decision probably coming in early 2016.

Gilbert Hyatt Loses in Federal Court

Sunday, March 15th, 2015

A federal court in Sacramento ruled against inventor Gilbert Hyatt last week. Mr. Hyatt is involved in a 22-year old battle with California’s Franchise Tax Board (the state’s income tax agency). This all stems over when Mr. Hyatt moved to Las Vegas, and that seven month difference has resulted in a case that has already made it once to the US Supreme Court.

The underlying issue is a residency audit of Mr. Hyatt to discover when he moved to Nevada. Did he move at the end of September 1991 or April 1992? At audit, the FTB ruled it was April (leading to an additional $7.4 million of income tax owed to California). Mr. Hyatt appealed to the California Board of Equalization. That appeal remains unresolved and that got Mr. Hyatt upset.

He filed a federal court case in Sacramento demanding that the appeal be heard. The Court dismissed the case; Mr. Hyatt will appeal. Meanwhile, later this year I expect the retrial of Mr. Hyatt’s intentional infliction of emotional distress damage award against the FTB for committing fraud against him. Last year, the Nevada Supreme Court threw out most of a $500 million verdict for Mr. Hyatt, but did leave $1.4 million of damages (based on the FTB committing fraud) and ordered a retrial on the IIED damages related to the fraud.

Hyatt Decision a Win for FTB as Far as Damages, but Decision Upheld that FTB Committed Fraud

Thursday, September 18th, 2014

The Nevada Supreme Court released its decision today in Franchise Tax Board of California v. Hyatt. The decision is definitely a win for the FTB as far as damages; however, the Court upheld that the FTB committed fraud against Mr. Hyatt and the damage award for fraud. Overall, some portions of the District Court decision were reversed, other portions were upheld, and still other portions were remanded for more proceedings.

First, for those who want to read more than the summary I’m going to present, I strongly recommend reading the opinion. It’s quite readable though long (it runs 68 pages). That it runs this long for a unanimous decision just goes to show how lengthy this litigation has been.

As for the decision:
1. The Court upheld that the FTB is not immune to lawsuits for intentional torts and bad-faith conduct. Thus, Mr. Hyatt’s lawsuit has basis in law.

2. Most of Mr. Hyatt’s claims fail, though, as a matter of law. There are two exceptions: fraud and intentional infliction of emotional distress (IIED). Those claims are valid as far as law per the Nevada Supreme Court.

3. The Court upheld the jury’s finding that the FTB made false representation to Mr. Hyatt, and upholds the award of $1,085,281.56 of damages.

4. The Court upheld the jury’s finding that the FTB committed IIED. However, the damages were not upheld. This has been remanded back to the District Court for a new trial on the amount of damages committed against Mr. Hyatt.

5. The Court ruled that “Because punitive damages would not be available against a Nevada government entity, we hold, under comity principles, that FTB is immune from punitive damages.” This is a huge win for the FTB, as $250 million of punitive damages were awarded at trial.

6. The FTB should look at this result and realize the egg on their face…but probably won’t.

1. The Court gives an excellent history of the case, and its winding road to the US Supreme Court and back to the District Court for trial. There are still more trials to come besides the remand proceedings. Mr. Hyatt’s appeal of the FTB’s rulings against him has still not been heard in California. Additionally, Mr. Hyatt sued the FTB in federal district court in Sacramento alleging that the FTB has deprived him of his constitutional rights.

The FTB first again challenged whether or not Mr. Hyatt could sue the FTB. There is a legal principle called “comity.” Generally, under comity, “…[A] forum state may give effect to the laws and judicial decisions of another state based in part on deference and respect for the other state, but only so long as the other state’s laws are not contrary to the policies of the forum state.” The FTB loses here:

Because we conclude that discretionary-function immunity under NRS 41.032 does not include intentional torts and bad-faith conduct, a Nevada government agency would not receIve immunity under these circumstances, and thus, we do not extend such immunity to FTB under comity principles, as to do so would be contrary to the policy of this state.

2. The Court then looked at the torts that Mr. Hyatt alleged the FTB committed. “Hyatt brought three invasion of privacy causes of action-intrusion upon seclusion, publicity of private facts, and false light-and additional causes of action for breach of confidential relationship, abuse of process, fraud, and intentional infliction of emotional distress.”

Mr. Hyatt loses the intrusion upon seclusion and publicity of private facts because the facts that the FTB released (his personal confidential information including his social security number) were in the public domain previously.

The FTB next challenges whether there is a “false light” tort. The Nevada Supreme Court says that there is such a tort. The FTB also appeals arguing that Mr. Hyatt did not present any evidence that anyone thought he was a ‘tax cheat’ based on the litigation list published by the FTB or the FTB’s third-party contacts.

The record before us reveals that no evidence presented by Hyatt in the underlying suit supported the jury’s conclusion that FTB portrayed Hyatt in a false light. Because Hyatt has failed to establish a false light claim, we reverse the district court’s judgment on this claim. [citation omitted]

The FTB argues that there cannot be a breach of a confidential relationship because there was no such relationship. The Court looked at what causes a confidential relationship as far as a tort.

But in conducting the audits, FTB was not required to act with Hyatt’s interests in mind; rather, it had a duty to proceed on behalf of the state of California’s interest. Moreover, the parties’ relationship was not akin to a family or business relationship. Hyatt argues for a broad range of relationships that can meet the requirement under Perry, but we reject this contention. Perry does not provide for so expansive a relationship as Hyatt asks us to recognize as sufficient to establish a claim for a breach of confidential relationship. Thus, FTB and Hyatt’s relationship cannot form the basis for a breach of a confidential relationship cause of action, and this cause of action fails as a matter of law. The district court judgment in Hyatt’s favor on this claim is reversed. [citations and footnotes omitted]

The FTB then challenges the abuse of process tort. The FTB asserted that there can’t be abuse of process as the FTB did not use the judicial process. The Court agreed:

Because FTB did not use any legal enforcement process, such as filing a court action, in relation to its demands for information or otherwise during the audits, Hyatt cannot meet the requirements for establishing an abuse of process claim.

3. The next tort was fraud. “To prove a fraud claim, the plaintiff must show that the defendant made a false representation that the defendant knew or believed was false, that the defendant intended to persuade the plaintiff to act or not act based on the representation, and that the plaintiff had reason to rely on the representation and suffered damages.”

The FTB argued that its statements to Mr. Hyatt that it would provide him with “courteous treatment” and keep his information confidential weren’t sufficient basis for a fraud claim, and even if that was sufficient there wasn’t any evidence that such representations were false when made. On the other hand, Mr. Hyatt claims that the FTB misrepresented their promises.

Here, the Court ruled in favor of Mr. Hyatt.

The record before us shows that a reasonable mind could conclude that FTB made specific representations to Hyatt that it intended for Hyatt to rely on, but which it did not intend to fully meet. FTB represented to Hyatt that it would protect his confidential information and treat him courteously. At trial, Hyatt presented evidence that FTB disclosed his social security number and home address to numerous people and entities and that FTB revealed to third parties that Hyatt was being audited.

There’s more here, and I’ll get to this in my views (below, in #6).

The FTB then argued that there should be a limit on the damages based on fraud (based on the FTB being immune from fraud in California and there being certain limits in Nevada), while Mr. Hyatt argues that the FTB isn’t entitled to any caps on damages. The Court agreed with Mr. Hyatt:

This state’s policy interest in providing adequate redress to Nevada citizens is paramount to providing FTB a statutory cap on damages under comity. Therefore, as we conclude that allowing FTB a statutory cap would violate this state’s public policy in this area, comity does not require this court to grant FTB such relief. As this is the only argument FTB raised in regard to the special damages awarded under the fraud cause of action, we affirm the amount of damages awarded for fraud. [citation omitted]

4. The court then looked at intentional infliction of emotional distress (IIED). The FTB argued that because Mr. Hyatt didn’t provide any medical evidence, he can’t claim IIED. Mr. Hyatt disagreed, and that given that he was severely harmed that the proof level can be less than medical records. The Court agreed with Mr. Hyatt, and that this case was on the more extreme end of the scale:

As explained above in discussing the fraud claim, FTB disclosed personal information that it promised to keep confidential and delayed resolution of Hyatt’s protests for 11 years, resulting in a daily interest charge of $8,000. Further, Hyatt presented testimony that the auditor who conducted the majority of his two audits made disparaging remarks about Hyatt and his religion, was determined to impose tax assessments against him, and that FTB fostered an environment in which the imposition of tax assessments was the objective whenever an audit was undertaken…

In support of his lIED claim, Hyatt presented testimony from three different people as to the how the treatment from FTB caused Hyatt emotional distress and physically affected him. This included testimony of how Hyatt’s mood changed dramatically, that he became distant and much less involved in various activities, started drinking heavily, suffered severe migraines and had stomach problems, and became obsessed with the legal issues involving FTB. We conclude that this evidence, in connection with the severe treatment experienced by Hyatt, provided sufficient evidence from which a jury could reasonably determine that Hyatt suffered severe emotional distress.

However, the damage award for this claim was not upheld, and the Court remanded the case back to the District Court for a new trial on the damages. The Court concluded that there was evidentiary and jury instruction errors.

5. The FTB appealed whether punitive damages are allowed. “FTB argues that it is entitled to immunity from punitive damages based on comity because, like Nevada, California law has expressly waived such damages against its government entities. California law provides full immunity from punitive damages for its government agencies.” The Court finds that comity warrants that the FTB be immune from punitive damages:

The broad allowance for punitive damages under NRS 42.005 does not authorize punitive damages against a government entity. Further, under comity principles, we afford FTB the protections of California immunity to the same degree as we would provide immunity to a Nevada government entity as outlined in NRS 41.035(1). Thus, Hyatt’s argument that Nevada law provides for the award of punitive damages against FTB is unpersuasive. Because punitive damages would not be available against a Nevada government entity, we hold that under comity principles FTB is immune from punitive damages. We therefore reverse the portion of the district court’s judgment awarding punitive damages against FTB.

6. My thoughts: If I as a tax professional were to conduct myself in the manner that the FTB did, I would almost certainly be liable for truckloads of damages and would lose my license. Consider that the Nevada Supreme Court called the conduct of the FTB “extreme.” Consider also that at trial the FTB called its conduct typical:

Tax agents rummaged through his trash without warrants, visited business partners and doctors, and shared his Social Security Number and other personal information with the media. This is outrageous behavior and I call on the FTB to rein in their agents. What really galled me is the FTB testified in open court that this level of harassment was only a typical audit. If true, then the stormtroopers are alive and well at the FTB.

The author of the above quote, Bill Leonard, knows what he’s talking about. He’s a former member of the California Board of Equalization, the California tax agency which hears appeals from the FTB. There really isn’t much to add to that description. But let me include the entire text of what the Nevada Supreme Court wrote in affirming that the FTB committed fraud:

The record before us shows that a reasonable mind could conclude that FTB made specific representations to Hyatt that it intended for Hyatt to rely on, but which it did not intend to fully meet. FTB represented to Hyatt that it would protect his confidential information and treat him courteously. At trial, Hyatt presented evidence that FTB disclosed his social security number and home address to numerous people and entities and that FTB revealed to third parties that Hyatt was being audited. In addition, FTB sent letters concerning the 1991 audit to several doctors with the same last name, based on its belief that one of those doctors provided Hyatt treatment, but without first determining which doctor actually treated Hyatt before sending the correspondence. Furthermore, Hyatt showed that FTB took 11 years to resolve Hyatt’s protests of the two audits. Hyatt alleged that this delay resulted in $8,000 in interest per day accruing against him for the outstanding taxes owed to California. Also at trial, Hyatt presented evidence through Candace Les, a former FTB auditor and friend of the main auditor on Hyatt’s audit, Sheila Cox, that Cox had made disparaging comments about Hyatt and his religion, that Cox essentially was intent on imposing an assessment against Hyatt, and that FTB promoted a culture in which tax assessments were the end goal whenever an audit was undertaken. Hyatt also testified that he would not have hired legal and accounting professionals to assist in the audits had he known how he would be treated. Moreover, Hyatt stated that he incurred substantial costs that he would not otherwise have incurred by paying for professional representatives to assist him during the audits.

The only solution to such behavior by tax agencies is the “what’s good for the goose is good for the gander rule.” If a tax agency (or its employees) commits fraud against a taxpayer, the tax agency should be held liable. I urge California voters to rescind the blanket liability protection that tax agencies have. The actions of the FTB show it’s not warranted.

For Mr. Hyatt, the case will head back to Las Vegas for another trial (most likely next year) followed by, almost certainly, another appeal.

Hyatt Decision Due Tomorrow (Thursday)

Wednesday, September 17th, 2014

The long running battle between Gilbert Hyatt and the Franchise Tax Board of California here in Nevada is likely nearing a conclusion. The Nevada Supreme Court listed the Hyatt case in their list of Forthcoming Opinions. Given that the FTB’s liability is up to $500,000,000 (if the lower court decision is upheld), this is a very important decision.

For those unfamiliar with the case, Gilbert Hyatt moved to Nevada from California. He moved in October 1991, but the FTB held that he didn’t move until April 1992, conveniently after Mr. Hyatt received significant income from patents he held. The FTB assessed tax, penalties, interest, and the civil fraud penalty.

In January 1998, Mr. Hyatt filed a lawsuit against the FTB, alleging that the FTB committed torts during the audit, including invasion of privacy, outrageous conduct, abuse of process, fraud, and negligent misrepresentation. The FTB challenged that Mr. Hyatt could sue the tax agency; California law immunizes the FTB from lawsuits. That portion of the case went to the US Supreme Court; the US Supreme Court ruled in 2003 that he could sue the tax agency.

The case was heard in 2008 here in Las Vegas. Mr. Hyatt won and was awarded $138.8 million of actual damages and $250 million in punitive damages. (Including interest, the amount that Mr. Hyatt is due is up to $500 million.) The FTB appealed; that appeal was heard in May 2012 by the Nevada Supreme Court. (Nevada does not have intermediate courts of appeal.) That’s the decision that will be released tomorrow. I will report on the decision tomorrow (Thursday) afternoon.

Gilbert Hyatt Sues FTB & BOE Over 20+ Year Wait

Sunday, April 27th, 2014

There are delays and there are delays. Gilbert Hyatt has been waiting two years to find out how the Nevada Supreme Court would rule on the (California) Franchise Tax Board’s appeal of his $500 million award. A decision in that case could come at any time (well, on any Thursday since that’s the day of the week that the Nevada Supreme Court releases decisions). But that two year delay is nothing compared to the delay in the original matter.

For those unfamiliar with Mr. Hyatt, he invented items related to microprocessors and semiconductors. (I’m sure my brother could give a much better description of this.) Back in 1991 (yes, this case goes that far back) he moved to Las Vegas; he knew he was soon going to get a large payment and Nevada’s state income tax rate–or better put, the lack thereof–appealed to him. The Franchise Tax Board (California’s income tax agency) said he didn’t move until sometime in 2012, conveniently after he received that payment. The FTB assessed tax and penalties. Mr. Hyatt appealed those.

Mr. Hyatt also argued that he had been subject to torts in Nevada and filed a lawsuit here in Las Vegas against the FTB in 1998. He alleged that the FTB had, among other things, rummaged through his garbage, visited business partners and doctors, and shared his social security number with the media. Bill Leonard (a former member of California’s Board of Equalization) said,

This is outrageous behavior and I call on the FTB to rein in their agents. What really galled me is the FTB testified in open court that this level of harassment was only a typical audit. If true, then the stormtroopers are alive and well at the FTB.

Mr. Hyatt’s case went up to the US Supreme Court. In 2003, the Supreme Court unanimously ruled that his case could go forward. In 2008, the trial was held and the FTB lost. That’s the appeal that the Nevada Supreme Court heard in 2012.

Meanwhile, Mr. Hyatt’s audit was decided against him in 1996. If you lose at the FTB, you can appeal a case to the Board of Equalization (BOE). That’s what Mr. Hyatt did. In 2008, Mr. Hyatt thought his BOE appeal would be heard within two years. It still hasn’t been heard. So he filed another lawsuit.

He has filed a lawsuit in federal court in Sacramento accusing the FTB and BOE of depriving him of his constitutional rights. As noted in Dan Walters’ column,

“Without this court’s grant of relief that Hyatt seeks,” his suit says, “the FTB’s 20-plus-year vendetta to ‘get’ Hyatt will continue indefinitely and unabated in violation of Hyatt’s equal protection rights.”

It’s been nearly 23 years since Mr. Hyatt did (or didn’t) move out of California. It’s been 18 years since the FTB rules on his appeal and the case has been in the hands of the BOE. Yes, I’m sure California’s tax agencies have been moving with all possible speed….

Mr. Hyatt is 76. My suspicion is that the litigation between him and California’s tax agencies will last beyond his lifetime.