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Supreme Court Schedules Hyatt Microchip Case for January

Nov. 28, 2018, 8:27 PM

Oral arguments in a U.S. Supreme Court case centering on the ability of taxpayers to sue one state in another state’s court will be held Jan. 9., the court said.

The court in Franchise Tax Board of California v. Hyatt is tasked with deciding whether to overrule its prior decision in Nevada v. Hall, which permits a sovereign state to be haled into another state’s courts.

The case revolves around microchip inventor Gilbert P. Hyatt, who moved from California to Nevada in September 1991. After an audit, the Franchise Tax Board claimed that Hyatt had moved during April 1992 after licensing a lucrative microprocessor patent and thus owed over $10 million in taxes, penalties, and interest.

While California’s sovereign immunity law shields California state agencies from lawsuits based on actions taken during the course of collecting taxes, Hyatt sued the board in Nevada state court, seeking damages for abusive audit and investigative procedures. Hyatt alleged that audit agents had sifted through his personal mail and garbage and had examined his personal activities at his place of worship.

The board is asking the court to end the ability of taxpayers to sue one state in another court, arguing that such lawsuits threaten state tax enforcement.

This is the third time the case will be heard by the high court.

The case is Cal. Franchise Tax Bd. v. Hyatt, U.S., No. 17-1299, arguments scheduled 11/28/18.

—With assistance from Mina Capouet.

To contact the reporter on this story: Emma Beyer in Washington at ebeyer@bloombergtax.com

To contact the editors responsible for this story: Rachael Daigle at rdaigle@bloombergtax.com; Megan Pannone at mpannone@bloombergtax.com

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