Court Sides With Anaheim on Hotel Tax

In a case that could have far-reaching implications, the U.S. Supreme Court on Monday sided with Anaheim in its battle to impose a hotel occupancy tax on guests who are federal credit union employees.

The case was brought by the California Credit Union League after 1,500 to 2,000 members attended a convention at the Disneyland Hotel in 1993. The league argued that the Federal Credit Union Act of 1934 exempts federal credit unions from any sales or usage tax in any jurisdiction.

The league won the case in both the lower court and the 9th Circuit Court of Appeals. The city then went to the high court.

A defeat there could have meant a loss of city revenue whenever federal credit union employees held business meetings at hotels.

“Obviously, we’re somewhat pleased,” said Moses W. Johnson IV, Anaheim’s deputy city attorney. “All we’ve been trying to do is protect our taxing authority.”

The Supreme Court cited its ruling last week that restricts the power of federal courts, including the Circuit Court, in considering claims involving federal immunity from state and local taxes. The justices said state judges, and not federal courts, should generally make decisions about the scope of a state’s taxing power.

Although the city is pleased, the victory may be temporary, said an attorney for the league, a Pomona-based organization that represents all federal credit unions in California and Nevada.

“The Supreme Court decided to bring this case back on a technicality, not on the merits,” noted Joseph A. McDonald, the league’s vice president and general counsel.

Both sides interpreted Monday’s ruling as giving the league the option of refiling the case in state court or seeking to add the United States as a plaintiff to the federal case to bolster its side.

McDonald said adding the federal government to the case might not be difficult, because it did file a legal brief in support of the league’s argument.

Anaheim, Orange County’s second largest city and home to Disneyland and other major tourist attractions, had estimated it could lose $100,000 a year if it lost the case, Johnson said.

Johnson said the case could apply not only to federal credit union employees, but to all federal employees. The question, he said, was whether they should remain exempt when they brought their families and stayed extra days to vacation in the city.

Anaheim has 18,016 rooms and charges a 15% bed tax. The projected tax revenue for the city this year is $44.9 million, a city official said.

McDonald said the league already has been contacted by the U.S. Department of the Army and the Federal Deposit Insurance Corp. looking to cite the case as a possible tax exemption for their employees.

Also contributing to this article was staff writer Lisa Richardson.