Ervin Cohen & Jessup LLP Overturns $5.5 Million Tax Assessment For Surgery Center Client

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Oct 25, 2012, 08:07 ET

LOS ANGELES, Oct. 25, 2012 /PRNewswire/ -- Following a 4-hour hearing that ran past midnight, the Beverly Hills City Council voted to overturn its own Department of Finance Administration's $5.5 million business tax assessment on ECJ's client, a Beverly Hills ambulatory surgical center (ASC). The department made that assessment based on its determination that the ASC's primary purpose was to provide surgical space and, therefore, should be taxed as someone who rents out commercial property rather than as a profession.

Led by Allan Cooper, the head of ECJ's litigation department, ECJ's team of litigators and tax lawyers assaulted the department's determination as an attempt to use vague code provisions to reclassify the ASC's business so as to raise taxes, in violation of the California constitutional requirement of voter approval for tax increases. Mr. Cooper pointed out that the determination was contrary to both the law and common sense, because the ASC's business was clearly to provide services and care to patients and had no attributes of a landlord-tenant or other rental relationship.

"If you don't like the way professionals like my client are taxed, you need to change the tax law and get voter approval," Cooper told the Council. "You can't just call its business something it's not so you can put it into a different tax classification which has a higher tax rate. No matter how many times you try to call a camel a horse, it's not a horse." Mr. Cooper also stated that no other city taxes ASCs as commercial landlords—a statement with which the department's representative was forced to agree.

Many citizens of the community also spoke out in favor of the ASC's position, voicing outrage that the city would trivialize that the reason for surgery centers is to provide care to surgical and diagnostic patients and concerns that their jobs would be lost if the assessment were upheld. At the end of the evening, the Council voted 2-1 (two members had recused themselves) in favor of ECJ and its client. As one Council member put it, "The law is unclear, the process has been flawed, and in the end, this surgery center does not rent space."

"This was a particularly gratifying win," Cooper said. "To persuade a city council that its own staff has taken the wrong path is a daunting challenge, and one which does not often succeed. I am happy that the City Council was willing to recognize this and to put an end to the matter without the expensive litigation which otherwise would have followed."

Ervin Cohen & Jessup LLP is a full-service law firm that provides a broad range of business-related legal services including corporate law; litigation; real estate transactions and finance; tax planning and controversies; employment law; health care law; bankruptcy, receivership and reorganization; and estate planning. ECJ is also a charter member of the international Law Firm Alliance. The firm has been a primary fixture in the Beverly Hills community for the past 59 years.

SOURCE Ervin Cohen & Jessup LLP