The ruling, issued Monday, stems from a disagreement between Carson and Tesoro, a Marathon subsidiary, over how much the company owes under the city’s business license tax on petroleum operations. Marathon, based in Ohio, acquired the Carson refinery in 2018 and now operates it jointly with a facility in Wilmington as a single complex known as the Los Angeles Refinery. Together, the two sites account for roughly 27% of California’s crude oil processing capacity.

Marathon did not respond to questions about the court’s decision, which arrives as California drivers continue to pay the highest gas prices in the nation amid a global spike in crude oil costs tied to the conflict with Iran.

Carson, located just south of downtown Los Angeles, is also home to one of two Southern California refineries that have shut down in recent years — a Phillips 66 facility that spanned operations in both Carson and neighboring Wilmington. A spokesperson for Carson did not respond to requests for comment.

Monday’s ruling does not settle the underlying dispute, which centers on Marathon’s claim that Carson overstated how much of the refinery’s business activity occurred within city limits, effectively taxing operations that actually took place in Wilmington and elsewhere. Still, just hours after the court’s decision, the Carson City Council took a significant step toward finalizing a $370 million settlement with the company by pulling back a proposed refinery tax measure that had gone before the council for a vote the previous week.

The state’s high court addressed a narrower legal question: whether Marathon was required to pursue a refund exclusively through Carson’s own administrative process, or whether it could instead file a claim directly under state law.

Cities and counties across California had sided with Carson, arguing that taxpayers should be required to complete local appeals before heading to court, and warning that allowing companies to bypass that process could weaken local governments’ ability to manage tax disputes.

Marathon, meanwhile, had the backing of the Western States Petroleum Association — the state’s largest oil industry lobbying group — along with two other business organizations. Those groups argued that the Government Claims Act was intended to spare companies from having to navigate what they described as a “labyrinthine claims system” made up of overlapping state statutes and local ordinances.

At the heart of the refund dispute is a local tax on refineries that Carson voters approved in November 2017, which imposes a 0.25% tax on business activity conducted within city limits. According to Marathon’s filings with the state Supreme Court, Tesoro calculated its tax payments based on what it believed was the actual business activity occurring in Carson.

Years later, the city audited those payments and told the company it owed additional taxes. Marathon disputed the assessment but paid the amount in question before seeking a refund under state law.

A Los Angeles County judge initially sided with Carson, ruling that the company should have followed the city’s own refund procedure — a decision later upheld by a state appellate court. The California Supreme Court, however, overturned both rulings.

At a city council meeting last week, Carson approved an additional tax measure that would allow the city to charge refineries up to $1 for every barrel of oil processed within city limits. Marathon spokesperson Jamal T. Kheiry said such a tax would carry “significant implications for the plant” and could prompt the company to reconsider its operations in California, which he described as one of the most costly business environments in the world.

On Monday, the council conditionally rescinded that tax measure, with the repeal contingent on finalizing the settlement agreement with Tesoro.

Original source: CalMatters

The post California Supreme Court Rules Cities Cannot Add Hurdles to Tax Refund Claims appeared first on The Hemet & San Jacinto Chronicle.

The decision stems from a long-simmering fight between Marathon and the city of Carson, home to one of the largest refinery complexes in the state. In 2022, Carson officials told Marathon subsidiary Tesoro that it owed more money under the city’s business license tax targeting the oil industry. Marathon, based in Ohio, took over the Carson refinery in 2018 as part of its acquisition of Andeavor.

Together with its Wilmington operations, the Carson refinery functions as a single facility known as the Los Angeles Refinery, which accounts for roughly 27% of California’s crude oil processing capacity. Marathon declined to comment on the ruling, which lands as California drivers continue to pay the highest gas prices in the nation amid a spike in global crude prices tied to the conflict in Iran.

Carson, just south of downtown Los Angeles, has already seen one refinery shut its doors in recent years — a Phillips 66 facility that spanned both Carson and Wilmington. City officials did not respond to requests for comment on the court’s decision.

Monday’s ruling doesn’t settle the underlying disagreement between the two sides. Marathon contends that Carson overstated how much of the refinery’s business activity happens within city limits, effectively taxing revenue tied to operations in Wilmington and other locations. That larger question remains unresolved. Still, hours after the court issued its opinion, the Carson City Council moved to advance a $370 million settlement with the company, rescinding a separate ballot measure that would have imposed a new refinery tax.

The high court’s ruling was narrower than the underlying tax fight — it addressed only whether Marathon was required to pursue a refund through Carson’s internal appeals process or whether it could instead rely on a claim filed under state law.

A coalition of California cities and counties had backed Carson’s position, warning that allowing companies to bypass local review procedures could weaken municipal authority over tax disputes and create inconsistency across jurisdictions.

Marathon, meanwhile, drew support from the Western States Petroleum Association and two other business organizations. They argued that the state’s Government Claims Act exists precisely to spare companies from navigating a tangle of overlapping city ordinances and state statutes.

At the center of the case is a local tax approved by Carson voters in November 2017, which imposes a 0.25% levy on refinery business conducted within city limits. According to court filings, Tesoro calculated its payments based on what it determined was the actual share of business happening in Carson. Years later, a city audit concluded the company owed more. Marathon disputed the finding but paid the disputed amount before seeking a refund under state law.

Both a Los Angeles County trial court and a state appellate panel had previously sided with Carson, ruling that the company needed to exhaust the city’s own refund procedure first. The California Supreme Court reversed those rulings.

The legal fight unfolded against the backdrop of a broader clash between Carson and Marathon over refinery taxation. Last week, the City Council approved a ballot measure that would have allowed the city to charge refineries up to $1 per barrel of oil processed within Carson. A Marathon spokesperson, Jamal T. Kheiry, warned that such a tax could force the company to reconsider its operations in California, which he described as one of the most expensive places in the world to do business.

Then, on Monday, following the Supreme Court’s ruling, the council voted to conditionally withdraw that barrel-tax proposal — a move tied directly to finalizing the pending settlement with Tesoro.

Original source: CalMatters

The post California Supreme Court Rules Cities Cannot Impose Added Barriers to Tax Refund Claims appeared first on The Hemet & San Jacinto Chronicle.