Judge to Decide If LA Owes You Money for Unlawful Phone Tax

Los Angeles could pay up to $92.5 million to taxpayers and attorneys to settle a long-running lawsuit over a city telephone tax under a tentative settlement proposal that has been vetted by the City Council, it was reported today.

The $92.5 million figure is a cap. The ultimate amount that L.A. would pay depends on how many people seek and obtain refunds from the settlement fund, according to the proposal, the Los Angeles Times reported in article posted on its website this morning. Any money not claimed would revert back to the city.

The proposed settlement, discussed by city lawmakers behind closed doors Wednesday, still must be approved in court. A hearing is scheduled for this morning.

Nearly nine years ago, taxpayer Estuardo Ardon filed a lawsuit against the city arguing its telephone users tax was illegally collected because it had been levied on services not subject to a federal tax, according to The Times. Ardon demanded a refund for himself and other taxpayers.

The California Supreme Court ruled four years ago that the lawsuit could proceed.

City officials have estimated that if the case went to trial, the possible liability for Los Angeles -- once believed to be as high as $750 million -- would not exceed $300 million, according to Assistant City Administrative Officer Benjamin Ceja, The Times reported.

L.A. leaders set aside $50 million this year as a reserve for legal liabilities tied to tax cases.

Refunds would be offered only to people who paid such taxes during a window of time before the telephone users tax targeted in the lawsuit was replaced with a slightly lower tax approved by Los Angeles voters seven years ago.

City News Service