Robinson: Tax the San Francisco Giants

July 26, 2023July 25, 2023

The San Francisco Giants vs. the San Diego Padres at a game in 2008. Photo courtesy of Wikimedia Commons.

The San Francisco Giants have a taxable possessory interest over San Jose and Santa Clara County. It’s exclusive and valuable. They’ve never paid the tax that is due. County Assessor Larry Stone should step up to the plate and send them a property tax bill as required by the state tax laws.

Recently, four San Jose mayors sent a letter to Major League Baseball asking that the Giants territory be abolished, and San Jose be allowed a major league team. That request was summarily rebuffed. Why should the Giants give up exclusive territory? If that’s the way MLB and the Giants want to play, they must pay for the privilege.

Ron Chun, former San Francisco deputy assessor, assessment appeals board member and an attorney-CPA who once worked for the IRS, explained the law. It was Chun who successfully forced the California Board of Equalization to change Prop. 13 rules so gay families got the same benefits as everyone else in 2002.

Chun pointed out MLB and the Giants owe the tax based on current tax law. To start, he explains California’s Constitution provides that all property is taxable unless otherwise provided by the state constitution or federal law. California law has a tax on possessory interests. That tax is a form of property tax on the private use of public lands. California defines a taxable possessory interest as a “possession, or a claim or right to possession of land or improvements, that is a) independent, durable and exclusive of others and b) not coupled with ownership of land or improvements in the same person.”

That’s how Santa Clara County taxes concession stands on publicly owned property. Airlines, restaurants and car rental agencies pay a possessory interest tax for using public land for their private commercial businesses at San Jose Mineta International Airport.

Major League Baseball and the Giants have an exclusive exemption from federal antitrust laws. And the courts have upheld that right against San Jose. MLB and the Giants have a monopoly to exclude anyone from competing with them that prevents San Jose from getting a major league team.

Not even Bill Gates, Larry Ellison, Tim Cook, Elon Musk or Mark Zuckerberg can get a baseball team without the approval of MLB, even if they built their own stadium and hired their own players. MLB can lawfully bench anyone, including those billionaires, who may dare think they can own a baseball team in San Jose.

Yet, while the Giants have a lawful exemption from antitrust laws, that exclusive right is exactly the reason they can be taxed, as they have a government-given taxable possessory interest. California’s definition of a taxable possessory interest includes any “Claim or Right to Possession.”

MLB and the Giants have a claim or right to possession to and over San Jose and Santa Clara County by law.

In Scott Free River Expeditions Inc. v. County of El Dorado, the California Court of Appeals upheld a possessory interest tax on a commercial river rafting company that had a county permit to run an exclusive commercial business on the American River. The court said they were being taxed on “the use of that water for commercial purposes,” pointing out that it’s not the water being taxed, but its use. They added the right of using and enjoying the profits of a thing belonging to another, without impairing the substance, constitutes a species of property, and thus has a valuable interest. In layman’s terms, that is the definition of a taxable possessory interest.

So, the Giants are using San Jose and Santa Clara County as their exclusive territory, under their rights of a government-granted antitrust exemption, which includes excluding any potential competitors for their private commercial business. Their exclusive use of San Jose and Santa Clara County for commercial purposes and private profit is subject to California taxation.

The reason MLB and the Giants can bench San Jose’s interest in obtaining a professional baseball team is the city has no clout. If the county begins taxing the Giants for their possessory interest, the city will have a strong negotiating position.

How much is owed is a calculation to be determined by the assessor’s office. Chun estimates MLB and the Giants would owe Santa Clara County at least eight to nine figures in current and back taxes. The county could use that money.

So, batter up Mr. Assessor. Send the Giants a richly deserved and legally owed tax bill. Oh and before I forget, go Giants!

San José Spotlight columnist Rich Robinson is a political consultant, attorney and author of “The Shadow Candidate.” His columns appear every fourth Wednesday of the month.

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Comments (17)

Upson Downes Jul 26, 2023 at 12:44PM

What is “baseball”? Is it like cricket?

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Chris Stampolis Jul 26, 2023 at 3:47PM

Rich, I like your idea. Nothing to lose if Assessor Stone sends a property tax bill to the SF Giants, as this is a countywide issue.

One can acknowledge the legal validity of the federal antitrust exemption without concluding that the exemption conveys a tax waiver.

I believe that Santa Clara City is in better position to host an MLB stadium, as Santa Clara has the infrastructure and the locations already developed, but whether one prefers San Jose or Santa Clara, Assessor Stone represents all of us. Losing the A’s to Vegas, rather than a relocation to Santa Clara County is a monetary loss for many local communities.

Chris Stampolis
Santa Clara

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- James Rowen Jul 26, 2023 at 6:20PM
  
  Wow, tear down Oracle Park.
  
  Must be full moon up
  
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Rich Robinson Jul 26, 2023 at 5:23PM

Chris,

I would prefer new baseball stadium in Diridon planning area. But could live with a stadium in Santa Clara.

But I don’t believe any sports team will consider the idea while the current Mayor is in office.

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Wayne Prescott Jul 27, 2023 at 10:42AM

It’s time to remove MLBs antitrust status. Why is major league baseball special enough to receive this special treatment?

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Matthew Burke Jul 28, 2023 at 8:59PM

The MLB and the Giants don’t have any exposure here for property taxes on their rights because their legal status is not an interest in “real property”. A taxable PI is a leasehold, franchise, license or other right to possess physical real property (land, improvements, fixtures, water) which is exempt from property tax because the real property is government-owned (by the feds, the State of California, or by local governments if the property falls within their own jurisdictions, exemptions which are granted in the US and California Constitutions). Taxable PIs include leases of space within airport by airlines, car rental companies, and concessions, leases at ports, mining rights, convention center leases, boat slips, ownership of cabins and permits on federal forest land, the leasehold of federal forest land to ski resort operators, concessions and shops on municipal golf courses, and any lease or sublease of space in a government-owned building.

The PI “exclusivity” requirement means that the possessor can prohibit others, including the government owner, from interfering with their use of the real property by legal means, even if they have concurrent use with others (think the airlines check-in counters). In other words, they don’t use the property along with the government at the same time – like a tenant vs. a landlord. The “exclusivity” requirement does not have anything to do with having a monopolistic contract right as against competitors, and does not invoke antitrust rules. The requirement means the PI holder has the right through legal means to exclude other or prevent others from interfering with their use of the property.

Whatever right the MLB and the Giants have would be characterized as intangible property, which is not subject to property taxation in California. The state only taxes real property and tangible personal property.

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- Rich Robinson Jul 31, 2023 at 10:02AM
  
  This argument by Matthew Burke has already been rejected in the Scott Free River decision by the California Court of Appeals.
  
  Their ruling that the exclusive right to run a
  commercial rafting company on the American River (to the exclusion of other rafting.companies) was subject to the possessory interest tax BECAUSE Plaintiffs were
  taxed on their exclusive use of that water for commercial purposes. Not ownership of the water or land.
  
  The Appeals Court cited Section 103 of the Revenue and Taxation Code defines property as including “all matters and things, real, personal, and mixed, capable of
  private ownership.”
  
  Then the court points out Board of Equalization has Rule 21 which defines possessory interest as…any other LEGAL, OR EQUITABLE INTEREST LESS THAN A FEE, provided only the instrument which confers the right of possession or exclusive use is ‘independent, durable and exclusive of rights held by others in the property (Cal. AdminCode, tit. 18 Section 21.)
  
  MLB holds an anti-trust exemption (hence a monopoly and an exclusive use of San Jose, Santa Clara County and the State of California) for its business of Major League Baseball – that allows them to bench anyone except those in their favor. That anti-trust exemption is “independent, durable and exclusive of rights held by others in the property”.
  
  Further, Santa Clara County is nothing but Real Property.
  
  Oh, somewhere in this favoured land, the sun is shining bright,
  The band is playing somewhere, and somewhere hearts are light;
  And somewhere men are laughing, and somewhere children cheer,
  But there is no joy for MLB —they owe a mighty tax come due next year!
  
  Log in to Reply
  - Matthew Burke Aug 01, 2023 at 2:29PM
    
    Rich,
    
    I wasn’t making an argument, just telling you what the law is from someone who works in this area and has for 17 years … If you’d like to learn more about possessory interests, take a look at the Board ofEqualization Handbook here: https://www.boe.ca.gov/proptaxes/pdf/ah510.pdf
    
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    - Rich Robinson Aug 02, 2023 at 11:20AM
      
      I do appreciate the comment, even if it was wrong.
      
      I was just updating you on current law under Scott Free River v. El Dorado County (250 Cal.Rptr. 504 ,203 Cal.App.3d 896) Cert. denied.) , as it appears to be your specialty.
      
      I’m very familiar with the BOE definition. But I will defer to another attorney, Ron Chun, who served as Assistant Assessor-Recorder in SF and has been practicing in this area far longer than either you or I..
      
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- Ronald Chun Aug 02, 2023 at 10:32AM
  
  With all due respect to Mr. Burke, he recites his profound knowledge of Possessory Interest and attempts to tell the reader ‘there’s nothing to see here’.
  
  What he fails to discuss is the law, the court’s reasoning and holdings in Scott Free River Expeditions v. El Dorado County.
  
  1. Burke is wrong when he says “It’s not a Possessory Interest”
  
  Scott Free River decision points out that California State Board of Equalization adopted EXTENSIVE RULES defining possessory interest – beyond what Mr. Burke simplifies and cites. Rule 21 first defines a possessory interest in the language of Revenue and Taxation Code section 107 and further states the definition includes a leasehold interest, an easement, a profit a prende, or any other legal, or equitable interest less than a fee, provided only the instrument which confers a right of possession or exclusive use is “ independent, durable and exclusive of rights held by others in the property.” (Cal.Admin.Code, tit. 18, § 21.)
  
  So let’s go through it together: The definition under CA Board of Equalization Rule 21 requires:
  
  A. Legal or equitable interest less than a fee –
  
  MLB and the Giant have a legal interest in Santa Clara County property by way of a federal anti-trust exemption as part of their “Market”. Thus, they can operate their business in Santa Clara County and the State of California without competition. MLB doesn’t have to allow any team to play. And – they don’t own any land (less than a fee interest) – but can control the territory of San Jose and Santa Clara County and the surrounding counties as to the baseball business.
  
  CHECK.
  
  B. Independent-
  
  MLB’s independent control over the land in Santa Clara County is absolute – (that’s what an anti-trust exemption is all about) as to who or what can play in the MLP without fear of government intervention or challenge by any newcomer to the baseball business. Santa Clara or the surrounding Counties cannot dictate to MLB how they run their business.
  
  CHECK.
  
  C. Durable –
  
  MLB’s anti-trust exemption was challenged in federal court – San Jose v. Office of Commissioner of Baseball. 766 F. 3d 686 (2016) for being outdated – MLB is a billion dollar business and their a business, not a sports league and therefore the reason they were granted the exemption no longer exists. San Jose loses. The court dismissed San Jose’s anti-trust claims based upon the baseball’s historical exemption from anti-trust laws.
  
  CHECK.
  
  D. Exclusive of Rights held by others
  
  MLB’s right to exclude others (anti-trust exemption) is absolute, exclusive and separate from rights held the County of Santa Clara and its citizens. No one can tell MLB they have to play nice and let non-MLB teams enter and to play with them. Not the county, the citizens, the courts, nor any government agency.
  
  CHECK.
  
  Added together – MLB and the Giants have a valuable possessory interest over Santa Clara County and the surrounding Bay Area counties that are subject to California’s Possessory Interest Tax.
  
  2. “Whatever right the MLB and the Giants have would be characterized as intangible property, which is not subject to property taxation in California. The state only taxes real property and tangible personal property.”
  
  That’s not how the California Courts of Appeals sees it. Scott Free River- “It’s the Possession and Valuable Uses of Land”.
  
  Scott Free River held that an exclusive use of the American River for commercial river rafting company is subject to the Possessory Interest tax. That exclusive “use” the court found taxable wasn’t any real property, tangible personal property, or a ‘legal status’ that Mr. Burke asserts is required.
  
  The court cites People v Shearer (1866) 30 Cal. 645, that :
  
  “The possession itself of the public lands and the improvements thereon, whether by naked trespassers, or those who claim in addition a right of pre-emption, as to everybody except the United States, have always in California, and in most, if not all of the new States, been regarded as valuable property interests,
  
  These possessions, then, are recognized as a species of property subsisting in the hands of the citizen. It is not the land itself, nor the title to the land, nor is it the identical estate held by the United States.
  
  It is not the pre-emption right, but is the possession and valuable use of the land subsisting in the citizen. ” (Emphasis added; supra, 30 Cal. at pp. 655, 657.)
  
  The court then clearly concludes:
  
  “Plaintiffs are not being taxed on the flow of the water in the river, but rather on their use of that water for commercial purposes. Water is unquestionably a species of real property and the right to use such water, whether that right be riparian, appropriative, or any other such right, is a valuable property right upon which a possessory interest tax may be levied. (San Francisco v. County of Alameda (1936) 5 Cal.2d 243, 245–247, 54 P.2d 462; County of Amador v. State Board of Equalization (1966) 240 Cal.App.2d 205, 209, 49 Cal.Rptr. 448; County of Tuolumne v. State Board of Equalization (1962) 206 Cal.App.2d 352, 360–364, 24 Cal.Rptr. 113.)”
  
  MLB is using Santa Clara County (including the City of San Jose and the surrounding counties) as it’s market for the baseball business. They control their fans/clients, the teams that play and any competition in other teams can be benched with absolute discretion. California’s Possessory Interest Tax is specifically for what the MLB and the Giants have – a valuable property right which meets the legal and statutory definitions for possessory interest tax.
  
  CHECK.
  
  3. Bottom of the 9th!
  
  The Appeals court in Scott Free River Expedition, points out –
  
  “In light of the decisional law which more than a century ago recognized the concept of a possessory interest tax, coupled with the broad statutory language defining possessory interests, a valuable and taxable possessory interest may be found in virtually any situation where a private citizen is allowed to use public property for personal gain. “There are almost no limits to which the possessory interest concept can be pushed [ ] and the general trend has been toward the expansion of taxable interests.” (Fn. omitted; Ehrman, op. cit. supra, pp. 96, 99.)”
  
  They point this out while citing People v. Shearer, (1866) 30 Cal. 645, 656–658.) which states:
  
  “These possessions, then, are recognized as a species of property subsisting in the hands of the citizen. It is not the land itself, nor the title to the land, nor is it the identical estate held by the United States. It is not the pre-emption right, but is the possession and valuable use of the land subsisting in the citizen. Why should it not contribute its proper share, according to the value of the interest, whatever it may be, of the taxes necessary to sustain the Government which recognizes and protects it?” (Emphasis added; supra, 30 Cal. at pp. 655, 657.)”
  
  Important Footnote: In Scott Free River Expedition v. El Dorado, the River Rafting company sought an appeal to the California Supreme Court. Certiori (appeal) was denied without hearing.
  
  Even the proverbial “blind” umpire would see there’s no question that the MLB and the Giants are using Santa Clara County and the State of California’s public property for personal gain. And that same umpire would cry ‘Ya outta here’ for defenders of the MLB and Giants that
  they don’t owe a tax for their possessory interest over Santa Clara.
  
  So the real question is this –
  
  MLB and the Giants are allowed to use public property for personal gains (they have a monopoly for which they can exclude any competition that upsets their business model – or their business markets throughout the entire state and US).
  
  For that privilege, as the Court has asked in Shearer, Why isn’t MLB and the SF Giants contributing the value of their interest (anti-trust exemption) to sustain the Government (the City of San Jose, Santa Clara County, the State of California ) which recognizes it and protects it?
  
  ….especially when you see what they charge for a hot dog and beer!
  
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  - Matthew Burke Aug 02, 2023 at 10:48AM
    
    That’s hysterical, haha.
    
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  - Ronald Chun Aug 02, 2023 at 12:01PM
    
    Extra Innings –
    
    Note 1: To the pinch hitters and defenders of the status quo who look up California R & T Rule 21 and find that it says nothing of that sort as to the definition of Possessory Interest, old Rule 21 cited by the court in Scott Free River v. El Dorado decision is now California R&T Rule 20.
    
    Note 2: Interestingly, R & T Rule 20 (c)(7) Definitions – “Exclusive of Rights held by others in the real property” – means the enjoyment of an exclusive use of real property, or a right or claim to the enjoyment of an exclusive use together with the ability to exclude from possession by means of legal process others who may interfere with that enjoyment.
    
    Rule 20(c)(7) is followed by Example 1 which starts with ” …a Commercial rafting outfitters with a county use permit to commercially operate on a river.”
    (see the Scott Free River Expedition v. County of El Dorado)
    
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Myth Dispulsion Jul 28, 2023 at 9:28PM

This smells so very strongly of another “let’s try to tax it if we can” money grab. Assuming there’s something to it, though, what then?

The reason MLB and the Giants can bench San Jose’s interest in obtaining a professional baseball team is the city has no clout. If the county begins taxing the Giants for their possessory interest, the city will have a strong negotiating position.

The Giants or MLB could simply excise San Jose or more of the county from the team’s territory and the South Bay claim ends. Meanwhile, MLB is under no obligation whatsoever to admit any new team anywhere that is formed into its organization, the major leagues.

As if San Jose would gain or win or achieve clout if it formed a team…

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Rich Robinson Jul 31, 2023 at 10:10AM

MLB territory doesn’t begin and end with SC County. And if SC County is not the territory of the Giants there is no reason not to let San Jose or Santa Clara have a ball club.

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- Myth Dispulsion Jul 31, 2023 at 6:28PM
  
  Your first sentence may be due to misunderstanding. It’s commonly accepted that the Giants’ (San Francisco team) territorial interest includes San Jose and other parts of Santa Clara County, and I wrote that something that Major League Baseball or the Giants could do is simply divest itself of the Santa Clara County or San Jose city portion of its territorial interest; then you have no more object of taxation interest.
  
  San Jose, Santa Clara, or any city could form and equip a baseball team that the city even called professional (might get in trouble if calling it “major league” or even capitalized without being part of the organization, “Major League,” Tesla-style). There is no obligation of Major League Baseball to expand and admit such a team into it simply because it now exists.
  
  Now of additional, related interest might be the following:
  
  Does uncovered MLB document suggest Giants shouldn’t have kept South Bay territorial rights?
  
  (If the territory were extended, shouldn’t the team have moved there?)
  
  Gould said no matter how the language in the minutes are perceived, challenging the territorial rights issue in court can be a lost cause because of baseball’s antitrust exemption — which allows MLB to oversee the location of teams — and precedent established in several court cases that ruled in favor of baseball.
  
  “What the courts are saying under federal baseball is it doesn’t matter, that the courts have no jurisdiction to intervene,” Gould said.
  
  https://www.sfchronicle.com/sports/giants/article/mlb-doc-south-bay-18087162.php
  
  At least it’s of interest to the Yes or No, could it have happened gang.
  
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Bob Richards Jul 31, 2023 at 10:40PM

MLB and the Giants have a monopoly to exclude anyone from competing with them that prevents San Jose from getting a major league team.

Not even Bill Gates, Larry Ellison, Tim Cook, Elon Musk or Mark Zuckerberg can get a baseball team without the approval of MLB, even if they built their own stadium and hired their own players. MLB can lawfully bench anyone, including those billionaires, who may dare think they can own a baseball team in San Jose.

Is this really true? If Gates starts his own Gates Baseball League (GBL) and decides that GBL will have a team in Santa Clara, can MLB really stop him?

If so, can MLB stop any baseball game/league that people pay to watch or participate in or that accepts money from sponsors? What about municipal leagues? What about college leagues?

If not, how is the refusal of MLB to allow an MLB team in Santa Clara and therefore allow Santa Clara to tax MLB any different from a Costco to decide not to open a store in a particular county because there are already Costcos on the borders of surrounding counties? Would such an “excluded county/city” also be able to tax Costco under this theory?

And the comparison to vendors in the airport seem ridiculous. Those vendors EXIST in the airport and USE municipal facilities for their financial gain. MLB isn’t using any land or facilities in Santa Clara to play MLB games.

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- Rich Robinson Aug 01, 2023 at 11:57AM
  
  Bob,
  
  Your arguments are specias. Costco doesn’t have a federal antitrust exemption, therefore no excusive right to territory or real property. Moreover, the example of vendors was an attempt to explain a type of possessory tax.
  
  A taxable possessory interest is defined as a possession,
  a right to the possession, or a claim to a right of
  the possession of publicly owned real property (MLB excusive right to government jurisdiction or territory–see Scott Free River v. El Dorado County (250 Cal.Rptr. 504 ,203 Cal.App.3d 896) Cert. denied.)
  
  that is independent, durable, and
  exclusive of rights held
  by others, (MLB Anti-trust exemption, Giants territorial rights)
  
  and that provides a private benefit to the possessor. (MLB and the Giants private profit)
  
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Robinson: Tax the San Francisco Giants

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