Law Summary - Equitable Estoppel - Page 1
Revised 3/22/2002
LAW SUMMARY
EQUITABLE ESTOPPEL
The Franchise Tax Board (FTB) and taxpayers
are required to determine tax liability based
upon applicable law.
The doctrine of equitable estoppel provides that
in certain cases, the FTB may be “estopped”
from asserting a tax liability against taxpayers,
based upon actions taken by the FTB which
lead to reliance by the taxpayers to their harm or
“detriment.”
However, the law provides that the doctrine of
equitable estoppel will be applied against a
governmental agency, such as the FTB, only
when all of the elements of estoppel are
conclusively present, and when application of
estoppel is necessary to prevent manifest
injustice. (Heckler v. Community Health
Services (1984) 467 U.S. 51, 81 L.Ed.2d 42;
United States Fidelity and Guaranty Company v.
State Board of Equalization (1956) 47 Cal.2d
384, 303 P.2d 1034.)
1. Elements Of Equitable Estoppel
Four conditions must be satisfied before
equitable estoppel can be asserted against the
FTB:
(1) The party to be estopped [the FTB] must be
advised of the facts;
(2) That party [the FTB] must intend that its
conduct be acted upon by the taxpayer, or it [the
FTB] must act in such a way that the party
claiming estoppel [the taxpayer] had a right to
believe it was so intended;
(3) The party claiming estoppel [the taxpayer]
must be ignorant of the true facts;
and
(4) The party claiming estoppel [the taxpayer]
must show detrimental reliance. (Strong v.
County of Santa Cruz (1975) 15 Cal.3d 720,
725; Appeal of Priscilla L. Campbell, 79-SBE-
035, February 8, 1979; Appeal of Arden K. and
Dorothy S. Smith, 74-SBE-045, October 7,
1974.)
2. Burden Of Proof
The taxpayer, as the party claiming that estoppel
applies, has the burden of proving that all of the
elements of estoppel are present. (Appeal of
Western Colorprints, 78-SBE-071, August 15,
1978; Appeal of U.S. Blockboard Corporation,
67-SBE-0