Court Opinion

ID: 9721174
Source: CourtListenerOpinion
Date Created: 2023-08-26 08:50:19.676251+00
Date Added: 2024-06-11T13:05:17.564092
License: Public Domain

LUI, J., Concurring and Dissenting.
I reluctantly concur in the majority’s holding that binding precedent prevents Safeco’s challenge to the subpoena in a special proceeding brought pursuant to Revenue and Taxation Code *556sections 11187-11188 and that Safeco’s assertion that the subpoena seeks information in violation of its policyholder’s right of privacy is without merit. However, my agreement with the majority ends with these limited points. Entities in Safeco’s position must have the right to litigate the retroactive application of rulings they have obtained from the Franchise Tax Board (FTB).
Safeco has a cognizable property right in its investment annuity contracts which the majority view ignores. If the majority view is left standing, Safeco (and others similarly situated) will be deprived of the due process right to litigate such issues in future proceedings. In taking such position, the majority misreads and misinterprets the holdings of several key federal and state appellate decisions. I do not join in the majority opinion because it contains language which, in my view, offends notions of fairness and justice.
Since this petition addresses a substantial question of first impression which will have a profound and lasting impact on the citizens of this state and members of the bar, I will set forth my reasoning in detail.
I

Pertinent Background

The facts are not in dispute. Safeco is one of several insurance companies that sold the investment annuity contracts (contracts) which are in controversy. Beginning in 1965, the Internal Revenue Service (IRS) issued a series of private letter rulings declaring that the “income generated by the assets held in custodial accounts was taxable to the insurance company, not the policyholder. . . . Sales of the contracts, initially modest, mushroomed when business and financial publications heralded them as permitting taxpayers to avoid taxation on investment earnings while retaining control and liquidity. [Fn. omitted.]” (Investment Annuity Inc. v. Blumenthal (D.C.App. 1979) 609 F.2d 1 at p. 3 (Investment Annuity).)
The IRS eventually reconsidered its position and issued Revenue Ruling 77-85 (I.R.B. 1977-15) in which it reversed its earlier position. The IRS ruled that the policyholders of these contracts must include interest, dividends and other income deposited into the custodial accounts, established in conjunction with the contracts, in their current tax returns as gross income rather than deferred income. Under the authority granted the IRS pursuant to section 7805(b) of the Internal Revenue Code,1 Revenue Ruling *55777-85 provided that “in view of policyholders’ reliance on IRS’s earlier determinations, . . . IRS ‘grandfathered’ existing contracts, applying its ruling [77-85] only to new accounts or existing accounts to which a contribution was made after March 9, 1977.” (Id.)
Prior to the issuance of Revenue Ruling 77-85, Safeco had sought rulings from both the IRS and the FTB to confirm the position that the income from the investments generated by the contracts would be deferred for tax purposes. It sought these rulings on its own behalf and for its client Earl Fauser with whom Safeco intended to consummate such a contract. Under IRS procedures,2 Safeco was entitled to obtain a ruling even though it proposed a contractual arrangement in which it would not be the payor of tax on the interest, dividend and other income accumulated in the custodial accounts. Safeco obtained such a ruling from the IRS.
FTB regulations effective during this period provided that in the absence of its own regulations, the Internal Revenue Code and regulations issued thereunder would, insofar as possible, govern the interpretation of conforming state statutes. (See Cal. Admin. Code, tit. 18, § 19253.)3 Also, the FTB had announced in April 1978 that it would issue revenue rulings using guidelines patterned after those issued by the IRS. (See 2 Peterson et al., Cal. Taxation (1983) § 27.01[2], pp. 27-8 to 27-9.) As most prudent taxpayers would do, Safeco also sought and obtained a similar ruling from the FTB as to the state income tax consequences of these contracts.
Following the IRS’s issuance of Revenue Ruling 77-85, the FTB informed Safeco that it agreed with that ruling and that it was going to revoke its prior ruling retroactively and tax the income accumulated and credited to the custodial accounts currently.
Subsequently, the FTB wrote Safeco indicating that the FTB was prohibited by law from applying Revenue Ruling 77-85 prospectively to contracts entered into after March 1977 since a prospective application would constitute an unlawful gift of public funds in violation of the California Consti*558tution. The FTB then served Safeco with an administrative subpoena, presumably as a first step in assessing taxes against the policyholders. Following Safeco’s refusal to comply with the subpoena, the FTB informed Safeco that it would hold Safeco accountable for any tax lost by reason of the expiration of the statute of limitations before assessments against the individual policyholders could be made.
n

Safeco Has a Vested Right Which Is Entitled to Due Process Protection

Safeco makes a convincing argument that its constitutional due process rights will be violated if it is unable to assert its challenges to the administrative subpoena in these proceedings because it is not a taxpayer who can seek a review of the FTB actions by way of a refund suit.
A. Safeco Has a Vested Right in Its Contracts and Therefore Has Standing to Challenge the Impairment of Such Contracts by Retroactive Revocation of the FTB’s Ruling
The majority’s conclusion that Safeco has no cognizable property interest subject to due process protection is simply erroneous.
It cannot be seriously disputed that the original rulings by the IRS and the FTB were the essential, if not the key, motivating factors in Safeco’s decision to sell these contracts and the policyholder’s decision to acquire them. (See Investment Annuity, supra, 609 F.2d 1, 3.) Once these rulings were issued and clearance from the California Insurance Commissioner was obtained, Safeco and the other insurance companies sold these contracts in reliance on such rulings. Undoubtedly, Safeco paid commissions, made contractual commitment for the custodial accounts and investment of funds received from the policyholders. If the FTB is successful in revoking its ruling retroactively, Safeco may be faced with the potential liability to rescind the contracts and to restore the consideration it received from the policyholders and the concomitant loss of customer goodwill. Given these circumstances, it is clear that the loss of the tax deferral treatment on the existing contracts will impair the value of such contracts to the policyholders and to Safeco.
As stated by our Supreme Court in Miller v. McKenna (1944) 23 Cal.2d 774, 783 [147 P.2d 531], “. . . a vested right, as that term is used in relation to constitutional guaranties, implies an interest which it is proper for the state to recognize and protect, and of which the individual may not *559be deprived arbitrarily without injustice. The question of what constitutes such a right is confided to the courts.”
In Estate of Gill (1971) 19 Cal.App.3d 496, 501 [96 Cal.Rptr. 786], the Court of Appeal stated that “[t]he retrospective application of a statute is unconstitutional only if it deprives a person of a vested right, or impairs the obligation of a contract. [Citations.] If it does neither of these things, it is not objectionable on the ground that it applies to past transactions. (Pignaz v. Burnett (1897) 119 Cal. 157, 160 [51 P. 48].)” The appellate court rejected the controller’s attempt to retroactively apply Revenue and Taxation Code section 13644 so as to tax decedent’s estate for decedent’s lifetime gift to her daughter as being made without full and adequate consideration.
In Union Oil Co. v. Moesch (1979) 88 Cal.App.3d 72 [151 Cal.Rptr. 517], this court considered Union Oil’s challenge that the application of Business and Professions Code section 20999.1 (which generally prohibits the termination of franchise agreements between petroleum distributors and gasoline station operators except for cause) impaired its leases with the operators. We concluded that Union Oil’s contract rights were not impaired because the original leases had terminated automatically by their own terms and the tenancy had continued on a month-to-month basis subsequent to the effective date of section 20999.1. Addressing Union Oil’s claims, this court stated, “[i]t is a fundamental principle of constitutional law that a statute may not, in general, be applied retroactively so as to impair an existing contractual obligation or deprive a person of a vested property right. (See Estate of Gill (1971) 19 Cal.App.3d 496, 501 [96 Cal.Rptr. 786].) Both the United States and California Constitutions specifically incorporate clauses prohibiting impairment of contracts (U.S. Const., art. I, § 10; Cal. Const., art. I, § 9; see 5 Witkin, Summary of Cal. Law (8th ed. 1974) Constitutional Law, § 619, p. 3918) and the cases are legion which recognize this precept (see Bradley v. Superior Court (1957) 48 Cal.2d 509, 519 [310 P.2d 634], and cases cited therein), [t] Were Moesch [a gas station operator] attempting to apply section 20999.1 to the original lease which was executed some two and one-half years prior to the effective date of the statute, we would be compelled, in accord with the decision in Mobil Oil Corp. v. Handley, supra, 76 Cal.App.3d 956 [143 Cal.Rptr. 321], to hold any such attempted application unconstitutional. In the cited case, Division Two of this court held that an unconstitutional impairment of contractual rights would result if section 20999.1 were applied retroactively to a lease which had been executed (and, in that case, terminated without renewal) prior to the statute’s effective date. (Id., at pp. 964-965; see also Globe Liquor Co. v. Four Roses Distillers Company (Del. 1971) 281 A.2d 19, 21.)” (Id., at p. 77.)
*560Unlike Union Oil Co. v. Moesch, a finding of contractual impairment cannot be avoided in this case. If the tax deferral is lost, the continuing vitality of the existing contracts is lost as well.
In Associated Cal. Loggers, Inc. v. Kinder (1978) 79 Cal.App.3d 34 [144 Cal.Rptr. 786], the appellate court considered the claim of two business associations that the Insurance Commissioner was impairing their contracts with workers’ compensation carriers by challenging the association’s service agreements with the carriers. The Insurance Commissioner contended that the service agreements violated Insurance Code section 755 because that section prohibited payments of commissions or other consideration to a nonlicensed person and the service agreements provided for such illegal payments to the associations. The appellate court sustained the trial court’s determination of the associations’ standing to challenge the Insurance Commissioner’s threatened action since they were an affected third party with an economic interest. The court affirmed the preliminary injunction against the Commissioner stating: “In short, the commissioner, by invalidating these service contracts, is promulgating a rule which in effect prohibits providers of workers’ compensation insurance from contracting to have administrative services performed by the insured. Declaratory relief would seem to be the accepted and statutorily authorized method of testing the legality of such a policy, [f] Further, while all contracts of insurance in California are necessarily written with cognizance of the Insurance Code provisions and in contemplation of the state’s exercise of its inherent police power (Roach v. Hostetter [1941] 48 Cal.App.2d 375, 379 [119 P.2d 749]; Mott v. Cline [1927] 200 Cal. 434 [253 P. 718]) the constitutional prohibition against impairment of contractual obligation implicitly requires the availability of judicial review of any order of cancellation issued by the commissioner. The unilateral decision or interpretation of the commissioner must be subject to judicial scrutiny. Declaratory relief is the traditional method by which parties to a contract can have their rights in the contract determined. (Code Civ. Proc., § 1060.) [f] We hold that [the associations] have standing and are entitled to obtain judicial review of the commissioner’s order and [the carriers] acquiescence thereto.” (Ibid., 79 Cal.App.3d at pp. 42-43.)
While Associated Cal. Loggers, Inc. v. Kinder is distinguishable on grounds that it deals with insurance matters in which there is no statutory or constitutional impairment against injunctive or declaratory relief, the opinion is authority on the issue of standing of interested third parties to assert a constitutional challenge to an impairment of their contracts.
Finally, in Trans-Oceanic Oil Corp. v. Santa Barbara (1948) 85 Cal.App.2d 776 [194 P.2d 148], this court held that the owner of an oil *561lease which acquired a permit from the City of Santa Barbara to drill an oil well and in reliance thereon, properly expended substantial sums in preparation for drilling, acquired a vested property right to proceed under the permit. We reversed the trial court’s judgment denying Trans-Oceanic’s writ of mandate seeking to reinstate the permit stating: “A permit may not be revoked arbitrarily ‘without cause.’ (53 C.J.S. § 44, p. 651.) It is conceded that in revoking the permit granted to appellant, the City Council of Santa Barbara did so without prior notice to appellant, without a hearing, and without evidence. In determining that a permit, validly issued, should be revoked, the governing body of a municipality acts in a quasi-judicial capacity. In revoking a permit lawfully granted, due process requires that it act only upon notice to the permittee, upon a hearing, and upon evidence substantially supporting a finding of revocation.” (Id., at p. 795.) (See also Cooper v. County of Los Angeles (1975) 49 Cal.App.3d 34, 42-43 [122 Cal.Rptr. 464]; Court House Plaza Co. v. City of Palo Alto (1981) 117 Cal.App.3d 871, 884-885 [173 Cal.Rptr. 161]; and City of San Marino v. Roman Catholic Archbishop (1960) 180 Cal.App.2d 657, 669 [4 Cal.Rptr. 547].)
Based upon the foregoing, I conclude that Safeco has demonstrated a vested right in its contracts sufficient to justify standing to challenge the FTB’s retroactive revocation of its ruling.
B. Investment Annuity Is Inapposite to the Facts Presented in This Petition
In concluding Safeco has no standing in any proceeding concerning the FTB’s change of position, the majority relies heavily on Investment Annuity and erroneously concludes that that decision presented a factual situation substantially equivalent to the case at bench.
Investment Annuity concerned an appeal of the federal district court’s order granting various insurance companies a judgment declaring Revenue Ruling 77-85 erroneous and enjoining the IRS from applying it to prospective purchasers of investment annuities after March 9, 1977. Because Revenue Ruling 77-85 “grandfathered” all existing annuities issued pursuant to former IRS’s rulings, there was no reason for the circuit court in Investment Annuity to address the substantive issue of a retroactive application of Revenue Ruling 77-85—the issue with which we are squarely confronted. The majority’s reliance on Investment Annuity is misplaced.4
*562C. South Carolina v. Regan Recognizes the Standing of a Nontaxpayer Who Lacks the Remedy of a Tax Refund Suit to Seek Declaratory Relief
The United States Supreme Court expressed its concern in South Carolina v. Regan (1984) 465 U.S. 367 [79 L.Ed.2d 372, 104 S.Ct. 1107], about providing a remedy to a nontaxpayer whose property interests are affected by a change in the administration of tax laws. The government objected to South Carolina’s petition to file an original action for injunctive relief in the Supreme Court on grounds that the Anti-Injunction Act barred such an action. The government did not address the merits of South Carolina’s constitutional claims and argued that Enochs v. Williams Packing Co. (1962) 370 U.S. 1 [8 L.Ed.2d 292, 82 S.Ct. 1125], established the single judicially created exception to the Anti-Injunction Act, viz., that injunctive actions will only be allowed if, under the most liberal view of the law and the facts, the United States cannot establish its claim.
The Supreme Court stated that “[i]n each of this Court’s subsequent cases that have applied the Williams Packing rule, the plaintiff had the option of paying the tax and bringing a suit for a refund. Moreover, these cases make clear that the Court in Williams Packing and its progeny did not intend to decide whether the [Anti-Injunction] Act would apply to an aggrieved party who could not bring a suit for a refund. [1] For example, in Bob Jones [v. Simon (1974) 416 U.S. 725 (40 L.Ed.2d 496, 94 S.Ct. 2038)], . . . [The Court rejected] the taxpayer’s challenge to the Act on due process grounds, however, the court relied on the availability of a refund suit, noting that *563‘our conclusion might well be different’ if the aggrieved party had no access to judicial review. [Citations.] Similarly, the Court left open the question of whether the Due Process Clause would be satisfied if an organization had to rely on a ‘friendly donor’ to obtain judicial review of the Service’s revocation of its tax-exemption. [Citations.] [Fn. omitted.]” (Italics added.) (South Carolina v. Regan, supra, 465 U.S. at p. 375 [79 L.Ed.2d at p. 379].)
The government also urged that South Carolina may obtain judicial review by issuing bearer bonds and urging the purchaser of those bonds to bring a suit contesting the legality of the TEFRA provision. The Supreme Court stated: “First, instances in which a third party may raise the constitutional rights of another are the exception rather than the rule. [Citations.] More important, to make use of this remedy, the State ‘must first be able to find [an individual] willing to subject himself to the rigors of litigation against the Service, and then must rely on [him] to present the relevant arguments on [its] behalf. ’ Bob Jones, supra, at 747 n. 21, 40 L.Ed.2d 496, 94 S.Ct. 2038. Because it is by no means certain that the State would be able to convince a taxpayer to raise its claims [fn. omitted], reliance on the remedy suggested by the [government] would create the risk that the Anti-Injunction Act would entirely deprive the State of any opportunity to obtain review of its claims. For these reasons, we should not lightly attribute to Congress an intent to require plaintiff to find a third party to contest its claims.” (South Carolina v. Regan, supra, 465 U.S. at pp. 380-381 [79 L.Ed.2d at p. 383].)
In my view, South Carolina v. Regan is square authority for the proposition that a nontaxpayer has standing to assert a due process claim and challenge the retroactive revocation of a tax statute or ruling.
The majority’s reliance on Pacific Gas & Electric Co. v. State Bd. of Equalization (1980) 27 Cal.3d 277 [165 Cal.Rptr. 122, 611 P.2d 463], is equally misplaced. That decision is not inconsistent with the views expressed in this separate opinion and is factually distinguishable from South Carolina v. Regan. Pacific Gas & Electric is premised on the fact that Pacific Gas & Electric Co. had an adequate remedy of law in a refund suit. Pacific Gas & Electric Co. cannot be read to apply the instant case because Safeco is not a taxpayer and has no remedy at law.
The standing of a nontaxpayer to challenge the retroactive revocation of a tax statute or ruling which impairs their contractual rights is a question of first impression in this state. In my view South Carolina v. Regan is on point and provides authority for Safeco’s standing herein.
*564HI

Public Policy Dictates That Safeco Be Allowed to Pursue a Declaratory Action

A. A Declaratory Action Will Not Conflict With Article XIII, Section 32
Although settled law appears to compel Safeco to comply with the FTB’s administrative subpoena, Safeco may pursue a declaratory action.5 As long as Safeco does not seek to enjoin the FTB from assessing or collecting any taxes allegedly due from individual policyholders, a declaratory action would not violate article XIII, section 32, of the California Constitution. A declaratory action would give Safeco an opportunity to litigate its claims of estoppel and make other challenges.
As our Supreme Court said in U. S. Fid. & Guar. Co. v. State Bd. of Equal. (1956) 47 Cal.2d 384, 388-389 [303 P.2d 1034]: “ ‘[T]here are many instances in which an equitable estoppel in fact will run against the government where justice and right require it. [Citations.]’ [H] The government may be estopped in tax matters. [Citations.] However, it is the unusual case in which estoppel will be applied in tax cases; the case must be clear and the injustice great . . . .”6
During the last session, the Legislature passed Assembly Bill No. 3338 which, among other things, added a new section 6596 to the Revenue and Taxation Code.7 This section provides that if the State Board of Equalization “finds that a person’s failure to make a timely return or payment [of sales or use tax] is due to the person’s reasonable reliance on written advice from the board, the person may be relieved of the taxes imposed by Sections 6051 [sales tax] and 6201 [use tax] and any penalty or interest added thereto. ” Section 6596 sets forth criteria by which the board is to determine what is “reasonable reliance on written advice from the board.” This new statute in effect codifies an estoppel doctrine into the sales and use taxes law, and makes it applicable to taxes as well as interest and penalties.
In the court below and in this court, the only explanation offered by the FTB was that a prospective revocation of its ruling would result in a gift of *565public funds. I conclude that this sole assertion is incorrect as a matter of law. The essential tax feature of an annuity is to defer taxes. The taxes ultimately will be paid when the annuity payments commence to the policyholder as in the case of other tax deferral devices such as KEOGH plans, qualified employee pension and profit-sharing plans, individual retirement accounts (IRA’s) and deferred compensation plans.
However, since there was no real opportunity for both parties to present the estoppel question in the court below, a conclusive determination on this question is not possible.
B. The FTB Must Not Abuse Its Discretion Under Revenue and Taxation Code Section 19253
Furthermore, the FTB must demonstrate that the retroactive application of its ruling is not an abuse of its discretion. Revenue and Taxation Code section 19253 provides that “[t]he Franchise Tax Board shall prescribe all rules and regulations necessary for the enforcement of this part [the Personal Income Tax Law] and may prescribe the extent to which any ruling or regulation shall be applied without retroactive effect. ” (Italics added.)
The language in section 19253 is virtually identical to that contained in section 7805(b) of the Internal Revenue Code which the United States Supreme Court had occasion to review in Dixon v. United States, supra, 381 U.S. 68. Although the Supreme Court held in Dixon that the IRS did not abuse its discretion in changing its position retroactively to correct a mistake in law, it does not appear that the IRS may do so without some articulated justification.8
*566Since the IRS exercised its discretion to make Revenue Ruling 77-85 prospective only, and the FTB has not explained why it has not exercised a similar grant of discretion, the issue of the FTB’s abuse of discretion has not yet been litigated.
C. Public Policy Compels a Remedy for Safeco
Two reasons of public policy demand affording Safeco standing in a declaratory action in these circumstances. First, prudent taxpayers and their counsel must be given assurance in complex and uncertain tax situations that they may rely with a sense of security on the FTB rulings, absent mistake or misinterpretations of fact or law.9 A retroactive revocation of an FTB ruling can cause severe economic hardship to taxpayers in California. Therefore, the FTB must demonstrate, when challenged, that it has not abused the discretion given to it by the Legislature in Revenue Taxation Code section 19253. The FTB’s assertion that a gift of public funds prohibits a prospective revocation of their ruling is simply insufficient as a matter of law in these circumstances.
Secondly, public policy demands that Safeco and other similarly situated persons and business entities be allowed to challenge the FTB’s abuse of the discretion given it under Revenue and Taxation Code section 19253.
It is common knowledge that many citizens of this state invest in IRA accounts with banks, savings and loan institutions and other entities. In*567vestments in IRA accounts are generated through massive media campaigns by such entities. Individuals rely on representations that they will receive certain tax benefits if they invest in an IRA account. If, hypothetically, something were to go wrong and a technical deficiency were to cause the loss of a favorable tax ruling for a given IRA account retroactively, any of these entities should be allowed to challenge the FTB’s retroactive revocation absent a mistake of fact or law. Under the majority view, such entities would be shut out of court leaving the average citizen to fend for himself or herself to make the difficult economic decision whether to challenge the FTB alone. In such a situation, both the financial institution and the taxpayer are harmed.
The majority’s reasoning violates the maxim of jurisprudence that “for every wrong there is a remedy.” (Civ. Code, § 3523.)
IV

Conclusion

I would hold that Safeco has standing to assert its constitutional challenges in a proper declaratory action. If successful, I would expect the FTB to respect any final declaratory judgment as binding on any litigation for administrative action concerning an assessment or refund suit by an affected policyholder. (See California v. Grace Brethren Church (1982) 457 U.S. 393 [73 L.Ed.2d 93, 102 S.Ct. 2498].)10
A petition for a rehearing was denied March 6, 1985, and the petition of real party in interest for a hearing by the Supreme Court was denied April 25, 1985. Bird, C. J., was of the opinion that the petition should be granted.

Under Internal Revenue Code section 7805(b), the Secretary of the Treasury or his delegate (usually the Commissioner of IRS) may prescribe the extent, if any, to which any ruling will be applied without retroactive effect.

WhiIe the record is silent on the exact IRS procedure Safeco utilized in obtaining the IRS ruling, Rev. Proc. 80-29 (I.R.B. 1980-26) is instructive. This IRS administrative procedure authorizes the issuance of a ruling by the IRS to a sponsor organization concerning the acceptability of master or prototype pension, annuity, and profit-sharing plans and the status of related trust or custodial accounts. Rev. Proc. 80-29 superseded earlier IRS procedural pronouncements.
The IRS and FTB issuance of rulings to Safeco is evidence that Safeco was entitled to seek and obtain such a ruling in the first instance.

See Revenue and Taxation Code section 17024.5, effective July 28, 1983, which essentially provides for the same reliance on federal tax statutes and regulations.

It is patently clear from the language in Investment Annuity that the circuit court was faced only with a challenge to the prospective application of the ruling when the court stated *562that “[h]ere, the injury caused by the shift in IRS’s interpretation of the pertinent statute— a detrimental impact on appellees’ business—does not invade any property interest cognizable under the due process clause. The challenged government action concerned the tax liability of investment annuity purchasers; it did not require appellees to pay taxes and hence there was no government action that directly deprived them of property. Deprivation of property underlies the long-recognized right of taxpayer to judicial review of the assessment of taxes. [Fn. omitted.] Nor did the earlier private letter rulings on which appellees relied in building their business create any ‘legitimate claim of entitlement. ’24 Such rulings express the Commissioners’ interpretation of the law at the time they are given, and may be taken into account subsequently, but they do not have the force of law and do not bind the Commissioner to adhere to the same position in the future.25" (Italics added.) The court’s footnote 24 provides: “Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972); see also Bishop v. Wood, 426 U.S. 341, 96 S.Ct. 2074, 48 L.Ed.2d 684 (1976); Arnett v. Kennedy, 416 U.S. 134, 94 S.Ct. 1633, 40 L.Ed.2d 15 (1974).)” Footnote 25 provides: “See Dixon v. United States, 381 U.S. 68, 85 S.Ct. 1301, 14 L.Ed.2d 223 (1965); [other citations omitted].” (609 F.2d at p. 7.)
The circuit court’s citations in footnote 24 indicate that the court focused on the prospective application of the ruling. Board of Regents v. Roth, supra, held no due process deprivation of property interest in continued employment as a teacher; Bishop v. Woods, supra, held no protected property interest in continued employment as a policeman; and Arnett v. Kennedy, supra, held that a nonprobationary federal employee’s right not to be discharged except for cause only after appropriate procedural protections, did not create an expectation of job retention.

Since this petition presents a question of substantial public concern and since the majority opinion discusses issues beyond the scope of a special proceeding, I will express my views on a declaratory action even though it is not essential to the disposition of the petition. (See Collier v. Lindley (1928) 203 Cal. 641, 645 [266 P. 526], and California Water & Telephone Co. v. County of Los Angeles (1967) 253 Cal.App.2d 16, 26 [61 Cal.Rptr. 618].)

The court’s decision (47 Cal.2d at pp. 388-389) contains numerous cases involving the question of estoppel. It is not necessary to repeat those citations here.

See Statutes of 1984, chapter 1728.

 “Although the Dixon case appears to give the Commissioner broad authority to correct erroneous interpretations of the law, the Commissioner has imposed certain limitations in applying this authority. [Fn. omitted.] [1] ‘Except in rare or unusual circumstances, the revocation or modification of a ruling will not be applied retroactively with respect to the taxpayer to whom the ruling was originally issued or to a taxpayer whose tax liability was directly involved in such ruling if (1) there has been no misstatement or omission of material fact, (2) the facts subsequently developed are not materially different from the facts on which the ruling was based, (3) there has been no change in the applicable law, (4) the ruling was originally issued with respect to a prospective or proposed transaction, and (5) the taxpayer directly involved in the ruling acted in good faith in reliance upon the ruling and the retroactive revocation would be to his detriment.’127” (Italics added.) The court’s footnote 127 provides: “Ibid., section 17.05.” (IRSNational Office Procedures—Rulings, Closing Agreements, The Bureau of National Affairs, Inc., 104-6th (US), pp. A-15 to 16.)
“The purpose behind the granting to the Commissioner of discretion to apply rulings and regulations without retroactive effect is stated in the legislative history accompanying the Revenue Act of 1934: [1] ‘Regulations, Treasury Decisions, and rulings which are merely interpretive of the statute, will normally have a universal application, but in some cases the application of regulations, Treasury Decisions, and rulings to past transactions, which have *566been closed by taxpayer in reliance upon existing practice, will work such inequitable results that it is believed desirable to lodge in the Treasury Department the power to avoid these results by applying certain regulations, Treasury Decisions, and rulings with prospective effect only.’118” Footnote 118 provides: “H.R. Rep. No. 704, 73rd Cong., 2d Sess. (1934) page 38.” (Id., at p. A-15.)

“A lawyer must recognize tax consequences and ways of minimizing them before advising a client about a transaction. Sometimes even the most careful tax planning and research wUl not resolve all of the problems or questions concerning a particular transaction. The applicability of statutes and regulations is often uncertain, and precedents will frequently differ materially in their facts from the transaction at hand. In such a situation, the lawyer may want to seek the views of the IRS about a particular transaction, [fl Guidance may be sought by questioning National Office personnel as to matters within their particular jurisdiction. The responsibility for issuing rulings has largely been delegated to the Directors of the Corporation Tax Division and the Individual Tax Division. [1] The main reason for requesting a ruling is usually to ensure that a particular favorable tax consequence will result from a proposed transaction. In some cases the reason for confirming the tax result is due to uncertainties in the tax laws, especially as applied to a particular set of facts. In other cases, although the tax result is reasonably certain, the magnitude of possible adverse tax consequences is great enough to make the additional cost, time, and effort of obtaining a ruling worthwhile. [1] The procedures for obtaining private rulings from the California tax authorities are much more informal than the IRS procedures. The Franchise Tax Board has indicated that the IRS guidelines for rulings can be used as a general guide. (Givner & Fried, Tax Practice in Cal. (Cont.Ed.Bar 1984) Obtaining Tax Rulings and Determinations §§ 3.5, 3.13 and 3.94.)

At 457 U.S. pages 414-415 [73 L.Ed.2d at page 110], the court stated: “assuming that the appellees’ constitutional claims are meritorious, an issue on which we express no view, there is every reason to believe that once a state appellate court has declared the tax unconstitutional the appropriate state agencies will respect that declaration. See Pacific Motor Transport Co. v. State Bd. of Equalization, 28 Cal.App.3d 230, 236, 104 Cal.Rptr. 558, 562 (1972) (noting that while the ‘relief afforded may not “prevent or enjoin” or otherwise hamper present or future tax assessment or collection effort . . . [fit will be presumed that the governmental agency will respect a judicial declaration concerning a regulation’s validity’).”