Cotton Farming

For the fifth consecutive year, individuals who hold permits and licenses for California water rights are being invoiced annual fees that the California Farm Bureau Federation has challenged in court as illegal taxes.

In mid-October, the California Board of Equalization sent bills for fiscal year 2007-08 to an estimated 6,000 to 7,000 water rights holders who possess some 13,500 permits and licenses. Meanwhile, litigation over the legality of these “fees” is now before the California Supreme Court.

Farm Bureau contends that the water rights fees are really unconstitutional taxes because there is little connection between the amount charged and the benefits received by those who foot the bill.

“It doesn’t matter whether you’ve drawn a drop of water from your water rights permit or license. The fee is based on your right to do that,” says Carl Borden, CFBF associate counsel. “You have to pay it no matter how much water you take or whether you take any water at all.”

The fees were initially imposed as a result of Senate Bill 1049, which went into effect in 2003. The California legislature passed the new law on a simple majority vote, directing the State Water Resources Control Board to collect fees from water rights permittees and licensees to pay for the operations of its Division of Water Rights.

Millions Of Dollars Collected

Borden says that over the five years the legislation has been in effect, tens of millions of dollars were collected by the board. Most rights holders are charged the minimum annual fee of $100 while others are hit with bills for thousands of dollars.

Farm Bureau filed suit claiming that the fees are imposed in violation of Proposition 13, which requires legislation that results in new or increased taxes be approved by a two-thirds vote of the legislature. Farm Bureau’s lawsuit seeks refunds of all fees that water rights holders have been paying. In April 2005, the Sacramento County Superior Court ruled against Farm Bureau and other groups that had joined in the legal dispute. The challengers then appealed to the court of appeal, which handed down a mixed decision in January.

“The court struck down the SWRCB’s regulation setting the fee schedule for fiscal year 2003-04 but upheld the statute itself,” Borden explains. “So, the appellate court did not stop the SWRCB from mailing fee bills for later years to holders of water rights permits and licenses.”

The California Supreme Court agreed to review the court of appeal’s opinion. Farm Bureau legal experts once again recommend that bill payers file protests to improve their chance of getting a refund if CFBF’s suit ultimately proves successful.

The California Farm Bureau provided information for this article.

- CALIFORNIA REPORT - Water Rights Invoices Called ‘Illegal Taxes’

For the fifth consecutive year, individuals who hold permits and licenses for California water rights are being invoiced annual fees that the California Farm Bureau Federation has challenged in court as illegal taxes. In mid-October, the California Board of Equalization sent bills for fiscal year 2007-08 to an estimated 6,000 to 7,000 water rights holders who possess some 13,500 permits and licenses. Meanwhile, litigation over the legality of these “fees” is now before the California Supreme Court. Farm Bureau contends that the water rights fees are really unconstitutional taxes because there is little connection between the amount charged and the benefits received by those who foot the bill. “It doesn’t matter whether you’ve drawn a drop of water from your water rights permit or license. The fee is based on your right to do that,” says Carl Borden, CFBF associate counsel. “You have to pay it no matter how much water you take or whether you take any water at all.” The fees were initially imposed as a result of Senate Bill 1049, which went into effect in 2003. The California legislature passed the new law on a simple majority vote, directing the State Water Resources Control Board to collect fees from water rights permittees and licensees to pay for the operations of its Division of Water Rights. Millions Of Dollars Collected Borden says that over the five years the legislation has been in effect, tens of millions of dollars were collected by the board. Most rights holders are charged the minimum annual fee of $100 while others are hit with bills for thousands of dollars. Farm Bureau filed suit claiming that the fees are imposed in violation of Proposition 13, which requires legislation that results in new or increased taxes be approved by a two-thirds vote of the legislature. Farm Bureau’s lawsuit seeks refunds of all fees that water rights holders have been paying. In April 2005, the Sacramento County Superior Court ruled against Farm Bureau and other groups that had joined in the legal dispute. The challengers then appealed to the court of appeal, which handed down a mixed decision in January. “The court struck down the SWRCB’s regulation setting the fee schedule for fiscal year 2003-04 but upheld the statute itself,” Borden explains. “So, the appellate court did not stop the SWRCB from mailing fee bills for later years to holders of water rights permits and licenses.” The California Supreme Court agreed to review the court of appeal’s opinion. Farm Bureau legal experts once again recommend that bill payers file protests to improve their chance of getting a refund if CFBF’s suit ultimately proves successful. The California Farm Bureau provided information for this article.

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