A team of Pillsbury lawyers led by San Francisco Tax partners Jeffrey M. Vesely and Kerne H. O. Matsubara helped the Archdiocese of San Francisco prevail in a high-profile, $22 million tax dispute with the City and County of San Francisco reaffirming that internal transfers of property between affiliated corporations are exempt from documentary transfer taxes.  The office of San Francisco’s Assessor-Recorder sought to collect millions in documentary transfer taxes from the Archdiocese following the Catholic Church’s internal reorganization of more than 200 parish and school properties, setting off a dispute drawing attention from city halls and other religious denominations nationwide.

The Archdiocese and Pillsbury argued the city’s tax claims were unwarranted, noting that internal transfers of property are not sales of realty and are specifically exempted from the city’s documentary transfer tax.  The San Francisco Superior Court sided with the Archdiocese and Pillsbury on November 18, in a tentative ruling rejecting the claim of the city assessor’s office, which insisted the church’s reorganized properties were “sold” in San Francisco.

“This is an unprecedented local tax case given the millions at stake and the city’s determination to treat a religious organization’s internal reorganization of property – with no money changing hands – as taxable sales transactions,” said Vesely, who leads Pillsbury’s State & Local Tax Practice.  “We are very pleased with the court’s decision vindicating the Archdiocese and concluding the city overreached in this case by ignoring existing tax law and practice.”

Vesely and Matsubara’s teammates in the matter also included partner Craig A. Becker (Silicon Valley), counsel Richard E. Nielsen and senior associate Michael J. Cataldo from Pillsbury’s Tax practice, and Environment, Land Use & Natural Resources partner Scott A. Sommer, all from Pillsbury’s San Francisco office.

Pillsbury’s tax practice brings a full-service, interdisciplinary approach to the resolution of diverse tax-related issues.  Pillsbury’s Tax attorneys serve as trusted advisors to a broad client base in a wide range of domestic, international, state and local tax matters.  Attorneys assist in all aspects of tax planning to enhance the tax efficiency of clients’ activities and transactions, to limit their exposure to controversy, and to help them comply with applicable federal, state and local tax laws wherever they might do business.  When disputes with the Internal Revenue Service or state taxing authorities do arise, Pillsbury is well equipped to handle all stages of tax controversy matters at both the administrative and judicial levels.

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