California Superior Court Strikes Down Ban on Performance-Based Fees in Tax Credit Program

Invalidates Rule Restricting Taxpayer Contracts for Professional Services

Jan 11, 2016, 15:19 ET from Ryan

DALLAS, Jan. 11, 2016 /PRNewswire/ -- California Superior Court Judge Timothy M. Frawley has ruled in favor of Ryan, a leading global tax services firm, in its suit challenging the legality of an emergency rule promulgated by the California Governor's Office of Business and Economic Development ("GO-Biz") attempting to control the fees companies can pay to professionals who assist them in securing certain state tax incentives. In his ruling rendered January 7, 2016, Judge Frawley stated that the "cost of a consultant's services is a matter between the taxpayer and the consultant" and invalidated the emergency rule restricting performance-based fee arrangements for companies applying for the California Competes Tax Credit.

Ryan filed suit in August 2014 challenging the provisions of the regulation governing consultant fee arrangements, especially the limitation on contingent fee arrangements. Ryan contended that in defiance of the Administrative Procedures Act, GO-Biz took a list of factors that the agency is required to review when allocating the tax credit and capriciously inserted a requirement purporting to regulate the fee arrangements between taxpayers and the tax professionals assisting them. Ryan asserted that the fee provisions would limit the availability of the tax credit by allowing GO-Biz to deny the tax credit to taxpayers who qualify under the statutory regime put in place by the California Legislature. 

"The California Governor's Office of Business and Economic Development exceeded its statutory authority by imposing a de facto ban on performance-based fees companies could pay when securing tax credits that drive economic growth and job creation," said G. Brint Ryan, Chairman and CEO of Ryan. "We are pleased with the Court's decision, proud to lead the charge against government overreach, and committed to aggressively defending the rights of our clients—as well as taxpayers everywhere—from unlawful and burdensome tax regulations."

In a similar 2014 case against government restrictions on performance-based fees, Ryan Executive Vice President and Vice Chairman Gerry L. Ridgely, Jr. won a suit against the United States Secretary of the Treasury and the Commissioner of the Internal Revenue Service (IRS), invalidating and permanently enjoining the IRS from enforcing the Circular 230 restrictions prohibiting the use of contingent fee arrangements for ordinary refund claims and amended returns.

About Ryan
Ryan is an award-winning global tax services firm, with the largest indirect and property tax practices in North America and the seventh largest corporate tax practice in the United States. With global headquarters in Dallas, Texas, the Firm provides a comprehensive range of state, local, federal, and international tax advisory and consulting services on a multi-jurisdictional basis, including audit defense, tax recovery, credits and incentives, tax process improvement and automation, tax appeals, tax compliance, and strategic planning. Ryan is a three-time recipient of the International Service Excellence Award from the Customer Service Institute of America (CSIA) for its commitment to world-class client service. Empowered by the dynamic myRyan work environment, which is widely recognized as the most innovative in the tax services industry, Ryan's multi-disciplinary team of more than 2,100 professionals and associates serves over 12,000 clients in more than 40 countries, including many of the world's most prominent Global 5000 companies. More information about Ryan can be found at

Logo -


Carol Vieira
Senior Manager, Public Relations and Communications