Jibilian v. Franchise Tax Bd., B175952.

Citation136 Cal.App.4th 862,39 Cal.Rptr.3d 123
Decision Date09 February 2006
Docket NumberNo. B175952.,B175952.
PartiesTony JIBILIAN, et al., Plaintiffs and Appellants, v. FRANCHISE TAX BOARD, Defendant and Respondent.
CourtCalifornia Court of Appeals
39 Cal.Rptr.3d 123
136 Cal.App.4th 862
Tony JIBILIAN, et al., Plaintiffs and Appellants,
FRANCHISE TAX BOARD, Defendant and Respondent.
No. B175952.
Court of Appeal, Second District, Division 1.
February 9, 2006.

[39 Cal.Rptr.3d 124]

Law Offices of Tabone and Derek L. Tabone for Plaintiffs and Appellants.

Bill Lockyer, Attorney General, W. Dean Freeman, Lead Supervising Deputy Attorney General, and Elisa B. Wolfe-Donato, Deputy Attorney General, for Defendant and Respondent.

MALLANO, Acting P.J.

136 Cal.App.4th 864

Tony and Dorothy Jibilian appeal from a judgment dismissing their second amended complaint for a tax refund after the trial court sustained the demurrer of defendant Franchise Tax Board (FTB). We affirm the judgment because the Jibilians' wages are taxable and FTB was not required to follow deficiency assessment procedures in order to deny a refund of taxes paid.


The Jibilians, who describe themselves as "citizens" of the state of California, filed state income tax returns for the years 1999, 2000, and 2001 and paid taxes for those years of $61,542, $56,730, and $90,470, respectively. Notwithstanding their payment of estimated taxes of $75,000 for 2002, they filed a state income tax return for 2002 claiming that the tax owed for that year was zero. The Jibilians asserted that the 2002 return was "a reflection of the Federal [income tax] return filed for the same year, which resulted in a full federal refund of $315,000." FTB deemed the 2002 return to be frivolous and requested a valid return. The Jibilians then filed an amended return, "which was slightly modified with the same amount of tax owed shown to be $0.00." The Jibilians considered the return to constitute a request for a refund for the alleged overpayment of $75,000. FTB did not pay the refund. The Jibilians filed amended state income tax returns for the years 1999, 2000, and 2001. The amended returns requested refunds for all taxes paid for those

39 Cal.Rptr.3d 125

years, but FTB did not pay the requested refunds.

After two demurrers to their complaints were sustained, the Jibilians filed a second amended complaint asserting the following grounds for the claim that

136 Cal.App.4th 865

they had no tax liability for the years 1999 through 2002:(1) Whether or not they earned any income, they are not "within the class of people" required to pay income tax under federal or state law. (2) They are not "taxpayers" within the meaning of the Internal Revenue Code, title 26 of the United States Code, or the California Revenue and Taxation Code and have no obligation to file returns or pay a tax based on income. (3) They had no taxable income for federal or state purposes because their earnings were not "gain from capital, labor or both." (4) Their earnings were not includable as gross income under section 861 of the Internal Revenue Code (section 861) and regulations thereunder. (5) No tax is owed because FTB has not made any assessment against them. (6) Because they have no taxable income for federal purposes, they also have no taxable income under the California statutory scheme.

The Jibilians did not attach their returns or amended returns as exhibits to the complaint. But they attached two five-page letters FTB sent to the Jibilians in March 2003 and their reply letter. The letters from FTB stated that FTB was denying the refund requests for the years 1999 through 2001 because it deemed the amended tax returns to be "frivolous and/or invalid." FTB explained that a return may be deemed frivolous if it indicates on its face that the tax self-assessment is substantially incorrect and is due to a position that is frivolous or a desire to impede or delay the administration of the income tax laws.

FTB's letters also stated that "[a]ttempts to portray oneself as a `nontaxpayer,' `sovereign citizen,' or `freeborn and natural individual' with immunity from taxation lack legal support, and are ineffective claims against the proper assessment and collection of taxes." FTB further asserted that "[s]ection 861 and its implementing regulations do not apply to the determination of taxable income under California law. California is not concerned with whether the income of a California resident is from a source within or without the United States — it is all subject to California personal income tax. (See Rev. & Tax.Code, § 17041.)[¶] The attempts to use [section] 861 and its implementing regulations to exclude income of an individual while living and working within the United States, or attempts to apply [section] 861 and its implementing regulations to income for California personal income tax purposes are `groundless and frivolous contentions of the kind being sold by charlatans to both unsuspecting taxpayers and those willing to be duped.'"

In the Jibilians' April 2003 reply letter to FTB, they admitted that their amended returns for 1999, 2000, and 2001 contained all zeros, but "[i]f the law says we have zero income then how would we go about filing without it being deemed frivolous? Zero is a valid number and 0 + 0 = 0 .... These are valid calculations. For us to provide any other numbers based on the current

136 Cal.App.4th 866

income tax laws would be a fabrication. A zero return is a legal return .... Our return cannot therefore be considered frivolous or invalid using this position."

FTB demurred to the complaint on the ground that it failed to state facts establishing any viable ground for the requested tax refunds, a necessary element of the Jibilians' cause of action. FTB maintained that none of the six grounds set forth in the complaint constituted a valid, legally recognized ground for a tax refund. In opposition to the demurrer, the Jibilians

39 Cal.Rptr.3d 126

argued that the pleading was sufficient to justify relief and that their entitlement to a refund should be determined by trial and not by demurrer.

In its reply memorandum, FTB pointed out that the opposition to the demurrer specifically addressed only grounds (3), (4), and (5). FTB deemed the Jibilians to have abandoned grounds (1), (2), and (6).

At the hearing on the demurrer, the Jibilians' attorney stated that "in a nutshell" the section 861 argument is that "wages [of United States citizens] from private employment inside the U.S. [are] not [taxable]." After the hearing, the court sustained the demurrer without leave to amend the complaint. The Jibilians appeal from the order of dismissal.2


The Jibilians contend that they have pleaded an adequate legal basis for their refund claims.

Notwithstanding their assertion that they do not intend to abandon or waive any of the six grounds for a refund set forth in the complaint,3 the Jibilians nevertheless failed to provide pertinent authority supporting grounds (1), (2),

136 Cal.App.4th 867

and (6) in the trial court, and fail to do so here. Accordingly, we deem the Jibilians to have abandoned these three grounds. (Smith v. County of Kern (1993) 20 Cal.App.4th 1826, 1829, 25 Cal.Rptr.2d 716 [appellant's burden is to demonstrate the trial court erred in sustaining the demurrer]; Brown v. Professional Community Management, Inc. (2005) 127 Cal.App.4th 532, 537, 25 Cal.Rptr.3d 617 [when an issue is unsupported by pertinent or...

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