California Tax Agents Hounded Inventor for 25 Years to “Get That Jew Bastard”

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You will want to know about Gilbert Hyatt’s tax case which will soon be decided by the Supreme Court of the United States. If he fails there, anyone who began to make money in California and moved will pay taxes to California for a very long time.

California demanded taxes on the profits from his invention, claiming he hadn’t moved to Nevada when he said he did because he hadn’t bought his home in Nevada until years later.

The Board of Equalization found in Hyatt’s favor and it went to the Supreme Court after Justice Scalia died and before Justice Gorsuch was appointed. The decision was evenly split and the prior decision in Hyatt’s favor was left in place.

It is now going back to the Supreme Court.  Hyatt, now a septuagenarian, has been fighting California tax department for 25 years.

THE STORY

Former Southern California inventor Gilbert Hyatt was a La Palma resident when he started cashing in on the proceeds from a lucrative microprocessor patent he received in 1990. Hyatt maintains he had moved to Las Vegas by the time most of the money started rolling in; state tax collectors contend he was a California resident for longer than he admits.

If Hyatt wins at the Supreme Court, the State of California will owe him tens of millions of dollars in legal fees. If he loses, he will owe Cali 13.3 million, but the state wants interest and says he owes them $55 million.

TaxableTalk explains:

Gilbert Hyatt invented (and patented) items related to microprocessors in 1990. He realized he would owe 10% of his very large upcoming income to California if he remained in the state, so in October 1991 he moved to Nevada. In 1993, the FTB audited Mr. Hyatt (the FTB is California’s income tax agency), alleging he didn’t move from California until April 1992. The FTB alleged he owed taxes on $5.4 million plus fraud penalties of another $5.4 million.

The FTB [Franchise Tax Board], as part of its investigation, skirted the law in Nevada. They rummaged through Mr. Hyatt’s garbage, and (as found by a jury in Nevada) committed fraud. The first Supreme Court decision, in 2003, allowed Mr. Hyatt to sue the FTB in court in Nevada alleging that the FTB committed a wide range of torts. The FTB argued because the FTB is immune from lawsuits in California it could not be sued in Nevada; the FTB lost that argument.

“GET THE JEW BASTARD”

After suits back-and-forth, the BOE, which hears appeals from the FTB, found in 2017, more than twenty years after the case began, that there was no fraud and Mr. Hyatt moved to Nevada in October 1991 as he said. However, they ruled Mr. Hyatt continued to conduct his business primarily out of California for six months after his move to Nevada in 1991 and owed $1.9 million to California.

Hyatt sued the California franchise tax board for harassment and violation of privacy. He won $400 million but the board was only obliged to pay $50,000 on appeal, despite the fact that the harassment was egregious. All of his privacy was violated and he was made to appear to be a criminal to his friends, family, and even his rabbi. One of the agents said she was going to “get that Jew bastard.” [see video]

The reason this case went on for so long is California counts on people ceding to the state because few have the resources to fight them. They exhaust lawsuits and appeals, cost the target a great deal of money until the victims surrender. Mr. Hyatt refused to give in.

WATCH:


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