Northwest Energetic Services, LLC v. California Franchise Tax Board (159 Cal. App. 4th 841, 2008)

Opinion

NEEDHAM, J.

In these consolidated appeals, the California Franchise Tax Board (FTB) challenges a judgment awarding respondent Northwest Energetic Services, LLC (Northwest) a refund of amounts paid under Revenue and Taxation Code section 17942 and an order awarding attorney fees. In awarding the refund, the trial court concluded that former section 17942—a levy on limited liability companies registered to do business in California—is unconstitutional because the levy is measured by the limited liability company’s total income, regardless of whether the income derived from or is attributable to business within the state. FTB contends this ruling was erroneous. As to the award of attorney fees, FTB urges that section 19717 is the exclusive means of obtaining attorney fees in a tax refund action; Northwest failed to establish entitlement to a recovery of attorney fees under Code of Civil Procedure section 1021.5 and the common fund doctrine; and the court erred in awarding fees in an amount several times greater than the lodestar.

We hold that former section 17942, as applied to Northwest in the years in question, violated the commerce clause of the United States Constitution (Commerce Clause), and that Northwest is entitled to a refund. We further hold, however, that the trial court’s order does not support an award of attorney fees greater than the lodestar. We therefore reverse the attorney fees order and remand for further consideration of the attorney fees award consistent with this opinion.

I. FACTS AND PROCEDURAL HISTORY

At all times relevant to this appeal, Northwest was a limited liability company (LLC) organized under the laws of the State of Washington, with business locations in Washington and Oregon. It engaged in the business of distributing explosives and explosives-related services to customers in Washington, Montana, Oregon, and Idaho. Northwest had no operations, property, inventory, employees, agents, independent contractors or place of business in California. Nor did it solicit customers in California or make any deliveries to customers in California.

Northwest nonetheless registered as an LLC with the California Secretary of State pursuant to Corporations Code section 17451 in June 1997. In years following, it filed tax returns with the FTB and untimely paid an $800 minimum tax imposed under section 17941. It did not, however, pay an amount imposed under former section 17942, based on an LLC’s “total income from all sources reportable to this state for the taxable year.” (Former § 17942, subd. (a).) The parties agree that this amount (the Levy) is imposed on the EEC’s statutorily defined “total income,” wherever earned, without apportionment according to the percentage of business or income attributable to activities in California.

FTB subsequently notified Northwest that it owed $27,458.13 for amounts due under the Levy, along with late payment penalties and interest, for tax years 1997, 1999, 2000, and 2001 (years in issue). Northwest paid the $27,458.13 and cancelled its registration with the Secretary of State effective June 13, 2002.

Northwest filed a claim for refund, which FTB denied. Northwest thereafter exhausted its administrative remedies, including appealing the FTB’s decision to the State Board of Equalization, without success.

Northwest filed this lawsuit in January 2005, seeking a refund of the amounts it paid for the Levy, penalties, and interest. Among other things, Northwest alleged that the Levy was unconstitutional on its face and as applied, because former section 17942 contained no method for apportioning the Levy to the proportionate amount of income earned in California and, therefore, discriminated against interstate commerce and violated due process and equal protection rights.

A court trial was conducted based upon the parties’ joint stipulation of facts and their stipulation regarding documents that could be admitted into evidence without objection. After the parties submitted trial briefs and the court held oral argument, the court issued a proposed statement of decision. FTB filed objections, to which Northwest replied. In the statement of decision, filed April 13, 2006, the court found that the Levy violated both the Commerce Clause and due process clause (Due Process Clause) of the United States Constitution. Accordingly, the Levy could not be applied to Northwest and Northwest was entitled to a refund of all amounts paid. In May 2006, the court entered judgment ordering a refund of $27,458.13 to Northwest, plus interest and costs to be determined.

FTB filed a notice of appeal from the judgment in July 2006. (Appeal No. A114805.)

Northwest thereafter filed a motion for attorney fees and costs, seeking $5 million in attorney fees. As explained further post, Northwest contended that it was entitled to attorney fees under the private attorney general doctrine, codified in Code of Civil Procedure section 1021.5, and the common fund doctrine, that its reasonable attorney fees amounted to $214,287.50, and that this lodestar amount should be adjusted upward due to numerous factors as well as the significance of the benefit counsel obtained for LLC’s. After briefing and oral argument, in August 2006 the court awarded Northwest $3.5 million in attorney fees under Code of Civil Procedure section 1021.5 and the common fund doctrine.

FTB filed notices of appeal from the attorney fees order in October 2006 (appeal Nos. A115841 & A115950).

On December 13, 2006, we granted FTB’s motion to consolidate appeal Nos. A114805, A115841, and A115950, pursuant to the parties’ stipulation.

H. DISCUSSION

The parties raise the following issues: (1) whether the Levy set forth in former section 17942 is a tax or a fee; (2) whether the Levy violates the Due Process or Commerce Clauses of the United States Constitution; and (3) whether the trial court erred in its award of attorney fees to Northwest.

A. Is the Section 17942 Levy a Tax or a Fee?

At the outset, the parties strenuously debate whether the Levy constitutes a tax or a fee. We first address the context of the Levy and then, based on its legislative history, conclude that it more closely resembles a tax.

1. LLC’s, Former Section 17942, and the Statutory Scheme

The Levy was enacted in 1994 as part of the Beverly-Killea Limited Liability Company Act (LLC Act). Codified as new title 2.5 to the Corporations Code (Corp. Code, § 17000 et seq.) with conforming amendments to other codes such as the Revenue and Taxation Code, the LLC Act authorized for the first time the formation, operation, and regulation of LLC’s within California. Before the enactment, a business entity could form in California only as a corporation, partnership, or sole proprietorship.

An LLC is a hybrid entity that offers certain advantages over corporations and partnerships by combining aspects of each. Like a corporation, an LLC is a distinct legal entity and its members (owners) have limited liability for the entity’s debts and obligations; LLC’s thereby provide an advantage over certain partnerships and sole proprietorships. (Corp. Code, §§ 17001, subds. (t), (x), (z), 17101.) Like a partnership, an LLC’s members may participate actively in the management of the organization, thus offering an advantage over certain corporations. (See Corp. Code, § 17150; see 9 Witkin, Summary of Cal. Law (2001 supp.) Corporations, § 43A, p. 346 (Witkin).) Moreover, unless it elects otherwise, an LLC is a pass-through entity for tax purposes, akin to a partnership or S corporation (but without certain other limits placed on S corporations). Profits are not taxed at the entity level but are instead passed through to members and taxed on an individual basis, thus avoiding the double-taxation aspect of a C corporation.

In light of the growing popularity of LLC’s, the California Legislature enacted the LLC Act with the aim of expanding California’s competitive business environment. (9 Witkin, supra, at p. 346.) A Senate Rules Committee report for Senate Bill No. 469 (1993-1994 Reg. Sess.) (Senate Bill 469), the bill from which the LLC Act derived, stated in part: “The bill is intended to conform with the trend in other states to provide a new organizational vehicle for small and medium sized businesses, which would grant their owners limited liability, but at the same time allow them to be treated as partnerships for federal purposes (at considerable tax savings) and to receive preferential tax treatment by the state in comparison with corporate tax treatment. Sponsors argue that the availability of LLC status will improve California’s business climate by facilitating formation of new businesses in California. Sponsors are further concerned that for lack of LLC legislation, the status of activities conducted by foreign LLCs will not be clear, which may reduce their enthusiasm for doing business in California.” (Sen. Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of Sen. Bill No. 469 (1993-1994 Reg. Sess.) as amended Jan. 26, 1994, p. 3.)

The LLC Act, among other things, sets forth: requirements for the formation of LLC’s; regulations concerning the allocation of profits and losses, distributions of money and property, withdrawal of membership, assignment of interests, and dissolution of LLC’s; requirements for the registration of foreign LLC’s with the Secretary of State and penalties for violating the prohibition against transacting business without registration; and filing and tax requirements for LLC’s, with conforming changes to existing law.

Under the LLC Act, an LLC forms in California by the filing of articles of incorporation with the Secretary of State. (Corp. Code, § 17050, subd. (a).) An LLC organized outside of California (like Northwest), must register with the Secretary of State before transacting intrastate business in California. (Corp. Code, § 17451, subd. (a).)

As the result of registering with the Secretary of State, the LLC Act requires LLC’s to pay the annual minimum tax set forth in section 17941. (See Corp. Code, § 17050, subd. (d) [domestic LLC’s]; Corp. Code, § 17451, subd. (d) [foreign LLC’s].) Similarly, section 17941 provides that the annual minimum tax must be paid by LLC’s doing business in the state or having had its articles of incorporation accepted or certificate of registration issued by the Secretary of State. (§ 17941, subds. (a), (b).)

An LLC thus subject to the tax imposed by section 17941 is also required to pay the Levy pursuant to former section 17942. Subdivision (a) of former section 17942 read: “In addition to the tax imposed under Section 17941, every limited liability company subject to tax under Section 17941 shall pay annually to this state a fee equal to” specified amounts dependent upon the amount of “the total income from all sources reportable to this state for the taxable year.” “Total income” is defined as “gross income, as defined in [s]ection 24271, plus the cost of goods sold that are paid or incurred in connection with the trade or business of the taxpayer.” (See former § 17942, subd. (b)(1).) As mentioned, the parties agree that this definition refers to the LLC’s statutorily defined “total income,” wherever earned, and without apportionment according to the percentage of business or income attributable to activities within California. (See FTB’s 1997 form 568 booklet [LLC’s “ ‘Total Income from all sources reportable to California . . . means income . . . before taking into account [any] apportionment and allocation.’ ”].) Proceeds from the Levy are deposited into the state’s general fund.

2. The Tax-Fee Distinction

The distinction between a tax and a fee has been well discussed in Proposition 13 cases. The essence of a tax is that it raises revenue for general governmental purposes and is “compulsory rather than imposed in response to a voluntary decision ... to seek . . . benefits.” (Sinclair Paint, supra, 15 Cal.4th at p. 874; see Professional Scientists, supra, 79 Cal.App.4th at p. 944 [“Ordinarily, ‘taxes are imposed for revenue purposes, rather than in return for a specific benefit conferred or privilege granted’ and ‘[m]ost taxes are compulsory rather than imposed in response to a voluntary decision to develop or to seek other government benefits or privileges.’ ”].) A fee, on the other hand, funds a regulatory program or compensates for services or benefits provided by the government. (Sinclair Paint, supra, at pp. 874-875.)

The question, therefore, is whether the Levy is a compulsory payment imposed for the purpose of raising revenues for general governmental purposes, or whether it funds a regulatory program or compensates for government services or benefits voluntarily sought by the LLC. Whether the Levy is a tax or a fee is a question of law that we decide de novo upon an independent review of the record. (Sinclair Paint, supra, 15 Cal.4th at p. 874.)

3. Statutory Language

We begin by looking at the words of the statute, giving them their usual and ordinary meaning. (Lennane v. Franchise Tax Bd. (1994) 9 Cal.4th 263, 268 [36 Cal.Rptr.2d 563, 885 P.2d 976].) Former section 17942, subdivision (a) read: “In addition to the tax imposed under Section 17941, every limited liability company subject to tax under Section 17941 shall pay annually to this state a fee equal to” specified amounts dependent upon the amount of “the total income from all sources reportable to this state for the taxable year.” (Italics added.) Although the Legislature plainly labeled the Levy as a “fee,” the statutory language does not indicate whether the Levy is imposed for purposes of raising general governmental revenue, for funding benefits and services, or for funding a regulatory provision. (Cf. Sinclair Paint, supra, 15 Cal.4th at pp. 871-872; Professional Scientists, supra, 79 Cal.App.4th at p. 940.) Labeling the Levy a fee is not determinative of its nature. (Weekes v. City of Oakland (1978) 21 Cal.3d 386, 392-394 [146 Cal.Rptr. 558, 579 P.2d 449] [employee license “fee” measured by employee’s gross receipts constituted an occupation tax notwithstanding its label as a fee].)

As for the broader statutory scheme, the LLC Act reflects to some extent an effort to regulate LLC’s in California. (See, e.g., Corp. Code, § 17000 et seq.) The statutory language does not, however, identify any connection between the Levy and this regulatory activity or its costs or benefits. (See United Business Com. v. City of San Diego (1979) 91 Cal.App.3d 156, 165 [154 Cal.Rptr. 263] [“ ‘ “If revenue is the primary purpose and regulation is merely incidental the imposition is a tax; [but if] regulation is the primary purpose the mere fact that . . . revenue is also obtained does not make the imposition a tax.” ’ ”].) To determine whether the Levy is a tax or a fee, we must turn to its legislative history.

4. Legislative History Demonstrates the Levy’s Purpose Was to Raise Revenue

The legislative history of the LLC Act demonstrates unequivocally that the Levy’s purpose was to raise revenue in order to make up for the loss of income tax proceeds that would result if entities were formed and operated as LLC’s instead of corporations. To reach this conclusion, one need look no further than the FTB’s own analyses of Senate Bill No. 930 (1993-1994 Reg. Sess.) (Senate Bill 930) and Senate Bill 469, which led to the enactment of the LLC Act.

Due to the favorable tax treatment of LLC’s, it was believed that fewer businesses would choose to operate as corporations. This would decrease the state’s revenue from corporate income taxes: a C corporation at the time was taxed at a rate of 9.3 percent on net income, an S corporation was taxed at a 1.5 percent rate, but an LLC would have no entity tax on net income. FTB thus projected that if the LLC Act included no new sources of revenue, state tax revenues would decrease “in the $690 million range” over a five-year period. As confirmed in the FTB’s analysis of Senate Bill 930 on August 11, 1993, these revenue losses would result from “avoidance of the entity-level tax (both measured and minimum tax) and operating loss deductions that would be available to members of LLCs.”

The Legislature therefore added two revenue-raising provisions—an $800 minimum tax (see § 17941) and the Levy (see former § 17942) to the legislation, expressly intending to render it “revenue neutral”—that is, to replace the projected lost income tax revenues. A letter from the author of Senate Bill 469, Senator Beverly, to Governor Wilson, dated August 31, 1994, states: “The tax provisions [of Senate Bill 469] have been carefully crafted to ensure the measure is revenue neutral. It accomplishes this in two ways: a) by imposing an annual $800 minimum tax (equal to the corporate minimum franchise tax), and b) by imposing a fee based upon the entity’s gross income.” (Sen. Robert G. Beverly, letter to Governor Pete Wilson, Aug. 31, 1994.) Similarly, a Senate Rules Committee report on Senate Bill 469 quoted the California Chamber of Commerce as follows: “ ‘As proposed by this bill, there is no revenue loss to the State of California. LLCs would pay the regular $800 corporate or franchise fee and a second LLC fee based on gross receipts. In addition, the investors in the LLC pay taxes at the investor level. The Franchise Tax Board estimates that the measure is revenue neutral.’ ” (Sen. Rules Com., Off. of Sen. Floor Analyses, Rep. on Sen. Bill No. 469 (1993-1994 Reg. Sess.) as amended Jan. 26, 1994, p. 3.) In fact, the FTB’s analysis of Senate Bill 469 in February 1994, factoring in the $800 minimum tax and fee, projected a revenue gain of $14 million over the period 1994-1995 through 1997-1998.

To ensure that the Levy and $800 minimum tax would make up for revenue losses, Senate Bill 469 also required FTB to analyze annually the revenue impact of the LLC Act and to adjust the amount of the Levy to maintain revenue neutrality. (See Franchise Tax Bd., Methodology for the Limited Liability Company Fee Adjustment Calculation (Aug. 9, 1994).) As stated in Senator Beverly’s letter to Governor Wilson: “In addition, the measure contains intent language calling for a review by the Franchise Tax Board after the first two years of operation to determine if the initial assumptions used in computing the fees are correct. If, in the out years, revenues drop off and the bill is no longer revenue neutral, the Franchise Tax Board would be authorized to adjust the fees to eliminate any fiscal impact on the state.” (Sen. Robert G. Beverly, letter to Governor Pete Wilson, Aug. 31, 1994.) The FTB’s bill analysis for Senate Bill 469 read: “For taxable years beginning on or after January 1, 1999, the Franchise Tax Board would be required to conduct a study focusing on the tax revenue impact, if any, of recognizing LLCs. The purpose of the study would be to determine if the recognition of LLCs results in an increase or decrease in state tax revenues.” (FTB, Analysis of Sen. Bill No. 469 (1993-1994 Reg. Sess.) Feb. 17, 1994.) To this end, the FTB would “[c]ompare the state tax revenue that would have been generated by business entities (e.g., S corporations, general corporations, limited partnerships, etc.) that convert to LLCs had they not reorganized as LLCs with the revenue generated by the minimum tax [§ 17941] and schedule of fees [former § 17942] which the entities would be subject to as LLCs”, and “adjust the schedule of fees to offset any increase or decrease in state income tax revenues discovered as a result of the study.”

Aside from the Legislature’s plain intent to impose the Levy in order to make up for lost income tax revenues, there are other indications that the Levy constitutes a tax rather than a fee. As with state income tax proceeds, proceeds from the Levy are deposited in the state’s general fund for general governmental purposes. In addition, the Legislature chose for the Levy to be administered by the FTB according to the state’s provisions for administering California income taxes, rather than to the State Board of Equalization or to California’s Fee Collection Procedures Law (§ 55001 et seq.; former § 17942, subd. (c) [the Levy “shall be collected and refunded in the same manner as the taxes imposed by this part [pt. 10, personal income tax], and shall be subject to interest and applicable penalties”].)

5. FTB’s Argument That the Levy Is a Fee Is Unpersuasive

The FTB’s primary argument is that the Levy constitutes a “regulatory fee” because it was enacted as part of the LLC Act, which allowed for the formation, registration and regulation of LLC’s. (See Professional Scientists, supra, 79 Cal.App.4th at p. 950.) In particular, FTB contends, the Legislature enacted former section 17942 pursuant to its police power (Cal. Const., art. IV, § 8) to impose a regulatory fee on entities seeking the benefits of the LLC business form and limited liability protection for their members. The FTB further notes that the LLC Act was enacted as an urgency measure “[i]n order to help stem the flow of business and jobs from California, protect the rights of Californians dealing with limited liability companies, and improve California’s business climate and tax base . . . .”

The FTB’s argument has no merit. A “regulatory fee” is an imposition that funds a regulatory program. (Professional Scientists, supra, 79 Cal.App.4th at p. 950.) In the matter before us, there is no indication that the Levy funds any regulatory program; to the contrary, the legislative history demonstrates that the Levy was intended to make up for lost income tax revenues, and funds generated by the Levy are placed in the state’s general fund. Nor is any regulatory program even mentioned in the legislative history or the LLC Act itself. While the LLC Act may set forth rules as to how LLC’s may operate in California, it does not include the type of regulatory program described in the cases on which the FTB relies. (See, e.g., Sinclair Paint, supra, 15 Cal.4th at pp. 871-872 [program of evaluation, screening and followup for lead contamination supported by fees paid by certain manufacturers]; Professional Scientists, supra, at pp. 939-940 [filing fee imposed to defray costs of managing and protecting fish and wildlife trust resources].)

In addition, the FTB fails to demonstrate any nexus between the Levy and the expense of any regulatory program. “ ‘[T]o show a fee is a regulatory fee and not a special tax, the government should prove (1) the estimated costs of the service or regulatory activity, and (2) the basis for determining the manner in which the costs are apportioned, so that charges allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on or benefits from the regulatory activity.’ ” (Collier v. City and County of San Francisco (2007) 151 Cal.App.4th 1326, 1346 [60 Cal.Rptr.3d 698].) Here, FTB has established neither requirement. It offered no evidence as to the estimated cost of any service or regulatory activity attributable to Northwest or LLC’s in general. Although FTB claims the Legislature, in setting the amount of the Levy, made “determinations” regarding the value of the benefits of the LLC Act and evaluated the impact or burden of allowing LLC’s to operate in California, FTB has not supported its claims by citations to the record. Nor has FTB shown that charges allocated to an LLC bear a fair or reasonable relationship to the LLC’s burdens on or benefits from the regulatory activity. It argues that the four tiers of former section 17942, imposing a different tax depending on the amount of the LLC’s total worldwide income, reflects the Legislature’s decision to apportion the Levy according to the amount of the LLC’s business. But there is no indication of such legislative intent in the legislative history, or any indication why a tax based on the worldwide income of the LLC would reflect a fair apportionment among LLC’s for the funding of a California regulatory program.

Professional Scientists, on which FTB relies for its regulatory fee argument, confirms that the Levy is not a valid regulatory fee. The court in Professional Scientists stated: “ ‘A regulatory fee may be imposed under the police power when the fee constitutes an amount necessary to carry out the purposes and provisions of the regulation.’’ ” (Professional Scientists, supra, 79 Cal.App.4th at p. 945, italics added.) In the matter before us, there is no indication that the fee constitutes an amount necessary to carry out whatever regulation is afforded by the LLC Act. To the contrary, the revenue generated by the Levy appears to far exceed any reasonable cost of regulating or providing services to LLC’s. Based on evidence provided by Northwest, comparing the LLC fees collected in each of the calendar years 1997-2002 with the fiscal year budgets of the Secretary of State for fiscal years 1996-1997 through 2001-2002, the Levy’s proceeds were more than half of or exceeded the entire budget of the Secretary of State. The Secretary of State, of course, does more than regulate LLC’s. (See Gov. Code, § 12159 et seq. [describing duties of the Secretary of State].) Indeed, under the heading “FISCAL IMPACT,” the FTB’s analysis of Senate Bill 469 indicated that “[t]he costs associated with implementing and administering this bill are not expected to be substantial.” Under Professional Scientists, even if the Levy did constitute a regulatory fee, it would be invalid because it surpasses the costs of the regulatory program it purportedly supports.

In a related but conceptually different argument, the FTB contends that the Levy constitutes a fee because it is imposed in exchange for benefits LLC’s obtain upon voluntarily registering in California. (See Professional Scientists, supra, 79 Cal.App.4th at p. 944 [noting distinction between regulatory fees and fees imposed in exchange for benefits].) For example, the FTB argues: “The Legislature determined that the value of the above benefits [what an LLC can do in California] to a business entity, and the LLC fee the entity would pay for these benefits, would be measured by the size of the business as expressed by the amount of its ‘total income.’ . . . Similarly, the Legislature determined that the benefits to LLCs and their members would increase proportionally with the size of the business, and the resulting fee was apportioned among LLCs based on the size of the business.” Again, however, there is no indication in the legislative history, or anything else in the record, suggesting that the LLC fees are necessary for the state to be able to provide services or benefits to LLC’s in California.

FTB attempts to explain away the fact that the proceeds of the Levy are deposited into the general fund, arguing that the existence of a special fund is not dispositive of whether the Levy constitutes a tax or a fee. (Citing Professional Scientists, supra, 79 Cal.App.4th at p. 942 [“The fact that Fish and Game does not operate an independent regulatory program with a correlative accounting system does not detract from its regulatory role”].) FTB’s reliance on Professional Scientists in this regard is misplaced. The proceeds in that case were deposited in the Department of Fish and Game’s “preservation fund” to defray a portion of that department’s costs incurred for its environmental review required by state law. (Professional Scientists, supra, at p. 951.) The fees were set to cover the department’s costs and were annually reviewed and adjusted to ensure the costs were fully covered. (Id. at p. 941.)

The FTB also argues that the Levy goes into the general fund rather than a special fund because the benefits provided to LLC’s under the LLC Act are public services and facilities that are paid from the general fund and administered by several different government agencies. In addition to regulation by the Secretary of State, the FTB posits, services are provided by the FTB (processing an LLC’s form 568 income tax return, auditing form 568, sending notices indicating when an assessment is not paid and taking collection actions, and providing reports to the Legislature as required) and agencies involved in refund lawsuits (the State Board of Equalization (SBE), the attorney general’s office, and the superior court).

FTB’s argument is unconvincing. It provides no evidence of the costs of these activities or how the costs relate to the amount of the Levy. Furthermore, agencies cited by the FTB, such as the Attorney General and the superior court, do not confer benefits directly upon Northwest or incur costs specific to LLC’s. Instead, the costs they incur are part of their provision of services to the general public. There is no indication that these services or costs will increase due to the formation of LLC’s under the LLC Act.

In any event, the Legislature provided sources other than the Levy to compensate the FTB and the Secretary of State for the costs of implementing the LLC Act. The Legislature appropriated $350,000 to the FTB for the first year of the LLC Act’s implementation. (See Stats. 1994, ch. 1200, § 94, p. 7411 [“For purposes of implementing and administering this act in the 1994—1995 fiscal year, the sum of three hundred fifty thousand dollars ($350,000) is hereby appropriated from the General Fund to the Franchise Tax Board, in augmentation of Item 1730-001-001 of the Budget Act of 1994. It is the intent of the Legislature that the funds required to administer this act for the 1995-1996 fiscal year and each fiscal year thereafter, shall be provided for in the annual Budget Act.”].) The Legislature appropriated an additional $234,000 to the Secretary of State. (Stats. 1994, ch. 1200, § 27, p. 7296 [enacting Corp. Code, former § 17705, providing an appropriation of $234,000 to the Secretary of State from the Secretary of State’s Business Fees Fund for expenditure in the 1994-1995 year, to be expended on the initial program costs and to initiate the development of an automated system to support the program].) The legislation also included a separate schedule of filing fees to reimburse the Secretary of State for ongoing costs associated with processing LLC filings. (Stats. 1994, ch. 1200, § 27, p. 7296 [enacting Corp. Code, former §§ 17700-17704, providing for LLC filing fees].) These filing fees are deposited into the Secretary of State’s Business Fees Fund, which is intended to cover the cost of the program it supports. (Gov. Code, § 12176, subd. (b) [“It is the intent of the Legislature that moneys deposited into the Secretary of State’s Business Fees Fund shall be used to support the programs from which fees are collected [and] that fees shall be sufficient to cover the costs of these programs . . . .”].)

Applying the distinction between fees and taxes set forth in Sinclair Paint and Professional Scientists, we conclude that the Levy more closely resembles a tax.

B. Is the Levy Unconstitutional?

We next determine whether the Levy is constitutional. Because we conclude that imposition of the Levy as to Northwest during the years in issue violated the Commerce Clause, we need not, and do not, decide whether former section 17942 is unconstitutional on its face or whether it violates due process.

Article I, section 8, clause 3 of the United States Constitution states in pertinent part that the powers granted to Congress include the power “[t]o regulate commerce . . . among the several States.” By implication, the Commerce Clause prohibits state taxation or regulation “that discriminates against or unduly burdens interstate commerce and thereby ‘imped[es] free private trade in the national marketplace.’ ” (General Motors Corp. v. Tracy (1997) 519 U.S. 278, 287 [136 L.Ed.2d 761, 117 S.Ct. 811] (GMC).) This is often referred to as the dormant Commerce Clause. (GMC, at p. 287; see Oklahoma Tax Comm’n v. Jefferson Lines, Inc. (1995) 514 U.S. 175, 179 [131 L.Ed.2d 261, 115 S.Ct. 1331] (Jefferson Lines).)

For decades, state statutes that impose taxes on income earned outside the state’s jurisdiction, or that fail to apportion total income in accordance with the income earned within the jurisdiction, have been held to violate the Commerce Clause. (See, e.g., Gwin, Etc., Inc. v. Henneford (1939) 305 U.S. 434, 439-440 [83 L.Ed. 272, 59 S.Ct. 325] [Washington tax “measured by the entire volume of the interstate commerce in which appellant participates,” and “not apportioned to its activities within the state,” violates Commerce Clause]; Greyhound Lines v. Mealey (1948) 334 U.S. 653, 662-664 [92 L.Ed. 1633, 68 S.Ct. 1260] [New York tax on gross receipts from transportation of passengers violates Commerce Clause to extent receipts were attributable to portion of mileage outside the state].) More recent cases confirm that the Levy is inconsistent with the Commerce Clause.

1. The Complete Auto Test and Internal and External Consistency

In Complete Auto Transit, Inc. v. Brady (1977) 430 U.S. 274 [51 L.Ed.2d 326, 97 S.Ct. 1076] (Complete Auto), the United States Supreme Court acknowledged that a state tax may not violate the Commerce Clause if it (1) is “applied to an activity with a substantial nexus with the taxing State,” (2) is “fairly apportioned,” (3) does “not discriminate against interstate commerce,” and (4) is “fairly related to the services provided by the State.” (Complete Auto, supra, at p. 279; see Jefferson Lines, supra, 514 U.S. at p. 189 [applying Complete Auto test in upholding Oklahoma sales tax on full price of a bus ticket from Oklahoma to another state].) Northwest does not contend that the Levy (former § 17942) fails the first, third or fourth prongs of the Complete Auto test. The question is whether the Levy meets the second requirement, that it be fairly apportioned. (Jefferson Lines, supra, at p. 189.)

Fair apportionment requires both “internal consistency” and “external consistency.” (Jefferson Lines, supra, 514 U.S. at p. 185.) “Internal consistency is preserved when the imposition of a tax identical to the one in question by every other State would add no burden to interstate commerce that intrastate commerce would not also bear.” {Ibid.) Here, if the Levy were replicated in every state, an LLC engaging in business in multiple states with the same total income as Northwest would pay the maximum levy in every state in which it did business or registered to do business. An LLC operating only in one state would pay the maximum levy only once. Thus, the Levy places a greater burden on interstate commerce than intrastate commerce.

FTB contends that the internal consistency test is inapplicable and Northwest must by some other means demonstrate that the Levy burdens interstate commerce. For this proposition, FTB relies on American Trucking Assns., Inc. v. Michigan Pub. Serv. Comm’n (2005) 545 U.S. 429 [162 L.Ed.2d 407, 125 S.Ct. 2419] (American Trucking). FTB is incorrect.

In American Trucking, Michigan imposed a flat $100 annual fee upon trucks engaging in intrastate commercial hauling (undertaking point-to-point hauls between Michigan cities). (American Trucking, supra, 545 U.S. at p. 431.) The petitioners challenged the fee on the ground that it discriminated against interstate carriers and unconstitutionally burdened interstate trade, because the fee was flat but trucks carrying both interstate and intrastate loads engaged in less intrastate business than trucks carrying only intrastate loads. {Id. at pp. 431^-32.) The United States Supreme Court held that the fee did not violate the dormant Commerce Clause, because it was imposed upon only activities taking place exclusively within the state’s borders, did not facially discriminate against interstate or out-of-state activities or enterprises, and applied evenhandedly to all carriers making domestic journeys. (545 U.S. at p. 434.) In addition, there was little if any evidence that the fee imposed any significant practical burden upon interstate trade or unfairly discriminated against interstate truckers. {Id. at pp. 434-435.) In response to the petitioners’ argument that the fee failed the internal consistency test, the court conceded that if every state imposed such a fee, an interstate trucker doing local business in multiple states would have had to pay hundreds or thousands of dollars in fees if it supplemented its interstate business by carrying local loads in many other states. The court nonetheless found no Commerce Clause violation, because it would have to incur such fees only because it engaged in local business in all those states. (545 U.S. at p. 438.) “An interstate firm with local outlets normally expects to pay local fees that are uniformly assessed upon all those who engage in local business, interstate and domestic firms alike.” {Ibid.)

American Trucking is distinguishable from the matter at hand. The Michigan fee in American Trucking was a flat fee, “which does not seek to tax a share of interstate transactions, which focuses upon local activity, and which is assessed evenhandedly.” (American Trucking, supra, 545 U.S. at p. 438, italics added.) Here, by contrast, the Levy is not a flat fee imposed on all LLC’s for the privilege of doing business locally in California, but a percentage of the LLC’s total worldwide income, which therefore does tax a share of interstate transactions. Moreover, the court in American Trucking did not reject the internal consistency requirement altogether. Instead, it found no Commerce Clause violation notwithstanding the absence of internal consistency, because the petitioners would incur intrastate {local) fees in multiple states only by engaging in local business in those states. Here, by contrast, an LLC incurs the Levy based on its total worldwide income merely by registering with the state, even if it does no business there.

In any event, the Levy does not meet the requirement of external consistency. “External consistency . . . looks ... to the economic justification for the State’s claim upon the value taxed, to discover whether a State’s tax reaches beyond that portion of value that is fairly attributable to economic activity within the taxing State.” (Jefferson Lines, supra, 514 U.S. at p. 185.)

Here, the economic justification for the Levy is either the revenue necessary to make up for the decrease in corporate taxes or, according to FTB, the funds necessary to provide certain benefits to LLC’s in California. Because the Levy is measured by the LLC’s total income wherever earned, and not just what is earned in California, the Levy “reaches beyond that portion of value that is fairly attributable to economic activity within the taxing State.” (Jefferson Lines, supra, 514 U.S. at p. 185.) The fact that the Levy is based on non-California income, not attributable to activities in California, amounts to extraterritorial taxation. FTB has not addressed the issue of external consistency in this appeal. Failing to meet the internal consistency and external consistency requirements, the Levy as applied to Northwest violated the Commerce Clause.

2. Levy Linder Former Section 17942 Would Be Unconstitutional Under Pike

The FTB argues that, as a fee, the Levy would be valid under a balancing test articulated in Pike v. Bruce Church, Inc. (1970) 397 U.S. 137 [25 L.Ed.2d 174, 90 S.Ct. 844] (Pike). We disagree.

In Pike, a regulation dictated the manner of packing cantaloupes grown in Arizona. Its practical effect would have compelled the appellee company to build packing facilities in Arizona at a cost of approximately $200,000. The United States Supreme Court described the Commerce Clause standard as follows: “Although the criteria for determining the validity of state statutes affecting interstate commerce have been variously stated, the general rule that emerges can be phrased as follows: Where the statute regulates evenhandedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits. [Citation.] If a legitimate local purpose is found, then the question becomes one of degree. And the extent of the burden that will be tolerated will of course depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activities.” (Pike, supra, 397 U.S. at p. 142.) The court found that although the law was supported by a legitimate state interest, the interest did not justify the requirement that the appellee build and operate an unneeded $200,000 packing plant in the state. One state may not require business operations to be performed within the state if they could be performed more efficiently elsewhere. (Id. at p. 145.)

FTB’s reliance on Pike is misplaced. First of all, Pike is distinguishable factually, since it pertained not to a monetary imposition like the Levy but to a regulation dictating the manner of packing cantaloupes grown in Arizona. Indeed, contrary to FTB’s argument, Pike did not even involve a “fee.”

In any event, the Levy would not pass the Pike test, which requires the following: (1) the statute regulates evenhandedly to effectuate a legitimate local public interest; (2) its effects on interstate commerce are only incidental; and (3) the burden imposed on such commerce is not clearly excessive in relation to the putative local benefits. (Pike, supra, 397 U.S. at p. 142.)

As to the first requirement, we will assume that the Levy supports a legitimate state interest in allowing LLC’s to form in California while rendering state income tax revenues neutral, but we question whether this interest is effectuated evenhandedly: it is evenhanded in the sense that interstate and intrastate LLC’s are charged on the same basis, but it is not evenhanded to the extent that those who do no California business are effectively paying for benefits they do not receive.

As to the second requirement, the impact on interstate commerce is not merely incidental. Although FTB argues that the Levy amounted to less than 0.2 percent of Northwest’s total income, FTB provides no authority that a charge of 0.2 percent of an entity’s total income is a constitutionally permissible increase in the cost of interstate commerce.

Moreover, even if the Levy met the first two Pike requirements, it could not be upheld under Pike because the burden it imposes on interstate commerce is clearly excessive in relation to local benefits. In this regard, FTB argues that Northwest received many benefits—related to its ability to do business in California and its members enjoying limited liability—which are extremely valuable compared to a fee of less than 0.2 percent of total income. In fact, however, Northwest received no benefits, since it did not transact any business in California. Nor is there any indication that the Levy actually funds the benefits provided by the LLC Act.

We note as well that the LLC Act authorized the formation of new LLC’s under California law at a time when the FTB was already taxing foreign LLC’s on a pass-through basis as partnerships. Thus, the revenue loss anticipated by the LLC Act was due primarily to the prospect of California entities forming as LLC’s rather than as corporations—in other words, the Levy was set up to combat revenue loss stemming not from foreign business entities, but domestic business entities. Saddling a non-California entity with a levy based on non-California business to recoup amounts lost from California entities certainly does not promote interstate commerce. Because of the Levy’s burden on interstate commerce, it would not pass muster under Pike, even if the Pike test applied.

In sum, whether the Levy is called a tax or a fee, and whether we apply the internal consistency test, the external consistency test, or the Pike balancing test, the application of the Levy to Northwest in the years in issue violated the Commerce Clause.

3. FTB’s Voluntary Choice Argument Is Meritless

FTB argues that the Levy did not violate the Commerce Clause, and in fact Northwest cannot even bring a Commerce Clause challenge, because Northwest voluntarily registered as a foreign LLC and did not elect to be taxed as a corporation, which would have avoided the imposition of the Levy. (See § 18633.5, subd. (h) [requiring LLC’s that are classified as corporations to pay tax as a corporation].) Thus, FTB argues, the Levy was imposed solely as a result of Northwest’s election as between two options: (1) to be taxed under a scheme which involves income apportionment; or (2) to forgo the apportioned tax and be subject to the Levy under former section 17942. Because of this voluntary election, FTB maintains, the Levy does not place a burden on the flow of commerce across California’s borders that commerce wholly within those borders would not bear.

FTB bases its argument on United States Borax & Chemical Corp. v. Carpentier (1958) 14 Ill.2d 111 [150 N.E.2d 818, 824] (Carpentier). In Carpentier, a Nevada corporation challenged franchise taxes and license fees it paid under protest pursuant to the Illinois Business Corporation Act. (Carpentier, supra, 150 N.E.2d at p. 820.) At the time Illinois authorized the plaintiff to conduct business in Illinois, the plaintiff filed an annual report electing to pay Illinois franchise tax on its entire stated capital and paid-in surplus, rather than on the basis of its property and business within the state. {Ibid.) In the next several months, however, the plaintiff increased its capital stock and paid-in surplus so that only about 2 percent of its property and business was in Illinois. {Id. at pp. 820-821.) The plaintiff also merged with a New Mexico corporation, which further increased its stated capital and paid-in surplus. {Ibid.) The plaintiff submitted to the state its computation of franchise taxes, license fees, and related amounts computed under the apportionment formula. {Id. at p. 821.) The state refused this offer and instead computed the amount due based on the entire increase in the stated capital and paid-in surplus, because the plaintiff had not timely filed an amended report changing to the apportionment formula. {Ibid.) Indeed, a provision in the state’s Business Corporation Act specifically stated that a corporation electing to pay its tax upon the entire capital and paid-in surplus must be assessed on that basis unless the corporation timely changed its election. (Carpentier, supra, at p. 823.)

On appeal to the Illinois Supreme Court, the plaintiff in Carpentier nonetheless contended that the tax it was assessed violated the Commerce Clause, because the tax was measured by property and transactions outside of Illinois. (Carpentier, supra, 150 N.E.2d at p. 822.) The court held that there was no Commerce Clause violation, or the plaintiff had waived its right to complain of one, because the plaintiff was given but failed to avail itself of statutory choices to avoid the tax by, inter alia, timely electing a different method for calculating the tax. (150 N.E.2d at pp. 825-826.) The plaintiff “made its voluntary election, stood by and confirmed it, and neglected or refused to take any step afforded by our statute until too late to better its position.” {Id. at pp. 826-827.)

Aside from the fact that we are not bound by a 1958 decision from an Illinois state court in deciding the propriety of a 1994 California statute, Carpentier is readily distinguishable from the matter at hand. In the first place, the act constituting waiver in Carpentier was the failure to comply with a statute to amend a report to change the method of calculating a tax after acquiring additional assets; there is no corresponding or equivalent statute in the LLC Act. Moreover, as discussed below, the election in Carpentier was vastly different from the type of election the FTB would force Northwest and other LLC’s to make here.

The basis for the decision in Carpentier was that the plaintiff failed to timely file an amendment to change the method with which its tax would be calculated in Illinois. Here, an election by Northwest to be taxed as a corporation rather than as a pass-through LLC would have more dramatic consequences. Among other things, such an election would require Northwest to make the same election with the Internal Revenue Service, thus changing the manner in which Northwest and its members would be taxed at the federal level, with likely similar changes in all the other states in which Northwest did business. Avoiding the double-taxation aspect of a corporation (by which the entity is taxed on profits and its members on distributions) is one of the hallmark benefits of an LLC. Indeed, in passing the LLC Act, our Legislature recognized this facet of LLC’s as one of the major reasons for such interest in LLC’s in the first place. The FTB now would have LLC’s surrender this advantage not only in California, but in all other states in which the LLC pays taxes and on its federal tax returns as well, simply so California can impose a tax based on income generated outside of California. The idea that this could somehow ameliorate the burdens on interstate commerce, or insulate the Levy from scrutiny under the Commerce Clause altogether, is simply untenable. Nor do we think that LLC’s—which our Legislature wanted to attract to California in passing the LLC Act—should be forced to endure an unconstitutional assessment merely because they proceeded under the auspices of a California statute (former § 17942).

Indeed, the FTB’s argument is difficult to accept, because its implication is that the Levy could never be challenged: only an LLC that was subject to the Levy would have standing to bring a challenge; but under the FTB’s theory an LLC that was subject to the Levy would be precluded from bringing such a challenge, since it never elected not to be subject to it.

In the final analysis, the Levy as applied to Northwest violated the Commerce Clause. Northwest, which conducted no business in California, is entitled to a refund of the amounts it paid under former section 17942. The FTB agrees that the amount of a refund in this case would be the entire amount of the LLC fees at issue in the action below.

C. Award of Attorney Fees

In its motion for costs under Code of Civil Procedure section 1032, subdivision (b), Northwest sought $5 million in attorney fees under Code of Civil Procedure section 1021.5 and the common fund doctrine, as the prevailing party in the litigation. Counsel had pursued the lawsuit on Northwest’s behalf on a contingency fee basis, except for $24,000 received from other EEC’s interested in the litigation’s outcome. In support of its request for attorney fees, counsel contended that fees through trial would have totaled $214,287.50 if Northwest had been billed at the firm’s standard billing rates, and that this lodestar should be adjusted upward due to the nature of the issues and the benefits obtained in the litigation.

The trial court awarded Northwest its attorney fees under both Code of Civil Procedure section 1021.5 and the common fund doctrine. The court found reasonable the hourly rates charged by Northwest’s attorneys and legal assistant ($350 and $100, respectively), as well as the expenditure of 631 hours through trial, and validated a corresponding lodestar amount of $214,287.50. The court adjusted the lodestar upward to $3.5 million in light of numerous circumstances, discussed post.

FTB challenges the attorney fee award on three grounds: (1) the court erred by awarding attorney fees under Code of Civil Procedure section 1021.5 and the common fund doctrine, because the only means by which Northwest could recover for its attorney fees resides in section 19717; (2) Northwest did not meet the requirements of Code of Civil Procedure section 1021.5 and the common fund doctrine; and (3) the court erred in adjusting the lodestar computation upward.

1. Revenue and Taxation Code Section 19717

Code of Civil Procedure section 1032, subdivision (b) provides that “[e]xcept as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.” (Italics added.) “Costs” include attorney fees provided by contract, statute, or law. (Code Civ. Proc., § 1033.5, subd. (a)(10).) Northwest pursued attorney fees as provided by statute (Code Civ. Proc., § 1021.5) and law (the common fund doctrine).

FTB contends, however, that section 19717 is the exclusive statute by which a party may recover for its attorney fees and costs in a tax refund action. Section 19717, subdivision (a) states: “The prevailing party may be awarded a judgment for reasonable litigation costs incurred, in the case of any civil proceeding brought by or against the State of California in a court of record of this state in connection with the determination, collection, or refund of any tax, interest, or penalty under this part.” (Italics added.) Northwest’s complaint sought a refund under section 19382, which is in the same statutory part (pt. 10.2 of div. 2 of the Rev. & Tax. Code) as section 19717.

It may matter a great deal whether section 19717 is the exclusive means of recovering attorney fees, because a “prevailing party” under section 19717 is different from a “prevailing party” under Code of Civil Procedure section 1032, subdivision (b). There is no dispute that, under the latter statute, a prevailing party includes one who obtains a net monetary recovery in the litigation, and Northwest meets this definition. (See Code Civ. Proc., § 1032, subd. (a)(4).) Under section 19717, by contrast, “[a] party shall not be treated as the prevailing party ... if the State of California establishes that its position in the proceeding was substantially justified.” (§ 19717, subd. (c)(2)(B)(i), italics added.) The term “ ‘[substantially justified’ is construed to mean ‘not necessarily a prevailing position’ but one which is ‘justified to a degree that would satisfy a reasonable person’ or . . . has a ‘ “reasonable basis both in law and in fact.” ’ [Citations.]” (Lennane v. Franchise Tax Bd. (1996) 51 Cal.App.4th 1180, 1188-1189 [59 Cal.Rptr.2d 602].) Indeed, where “reasonable minds could . . . differ . . . ,” the FTB’s position has been deemed to be substantially justified. (Id. at p. 1189; see also Tetra Pak, Inc. v. State Bd. of Equalization (1991) 234 Cal.App.3d 1751, 1763 [286 Cal.Rptr. 529] [“substantial justification” equated to good faith dispute or nonfrivolous claim].) FTB contends that Northwest is not a prevailing party under section 19717, because FTB’s position in the case was substantially justified.

The purported exclusivity of section 19717 could also be significant because it provides a different basis for determining the entitlement and amount of fees than do Code of Civil Procedure section 1021.5 and the common fund doctrine. Under section 19717, the “[Reasonable litigation costs” recoverable under subdivision (a) includes attorney fees at market rates, potentially subject to a statutory cap on the hourly rate. (§ 19717, subd. (c)(l)(B)(iii).) Code of Civil Procedure section 1021.5, however, permits an award of attorney fees that are reasonable without regard to a statutory cap, but only if the successful party enforced “an important right affecting the public interest,” conferring a “significant benefit ... on the general public or a large class of persons.” (Code Civ. Proc.,. § 1021.5.) Under the common fund doctrine, reasonable attorney fees may be awarded where the litigation created a fund from which, in equity, the successful plaintiff’s attorney should be paid.

By its terms, section 19717 plainly applies to a tax refund case brought, as Northwest’s was, under section 19382. FTB’s argument that only section 19717 applies is more complicated, and actually begins with section 18401.

Section 18401 reads: “Each provision of this part [pt. 10.2 of div. 2] shall apply to Part 10 (commencing with Section 17001) [the Personal Income Tax Law] . . . unless otherwise provided.” (Italics added.) Section 19717 is a provision contained in part 10.2 of division 2. Therefore, section 18401 mandates that section 19717 “shall apply” to part 10, which includes section 17942 (authorizing the Levy). In addition, subdivision (c) of former section 17942 provided that the “fee assessed under this section ... shall be collected and refunded in the same manner as the taxes imposed by [part 10].” Thus, FTB urges, section 18401 makes section 19717 the exclusive authority for obtaining attorney fees awards in suits for refunds of LLC fees.

FTB further points out that section 19717 was enacted by the Legislature pursuant to its authority in article XIII, section 32 of the California Constitution, which provides that refund actions must be brought in the manner mandated by the Legislature. (See Woosley, supra, 3 Cal.4th at p. 792 [Cal. Const., art. XIII, § 32 precludes court from expanding methods for seeking refunds expressly provided by the Legislature].) The California Constitution imposes exclusive legislative control over the manner in which tax refunds may be sought so that governmental entities may engage in fiscal planning based on expected tax revenues. (Woosley, supra, at p. 789.) In addition, FTB argues, section 19717 prevails because a specific statute prevails over a general statute on the same subject, especially where the specific statute was adopted after the more general statute. (Citing Canteen Corp. v. State Bd. of Equalization (1985) 174 Cal.App.3d 952, 960-961 [220 Cal.Rptr. 306]; see also Miller v. Superior Court (1999) 21 Cal.4th 883, 895-896 [89 Cal.Rptr.2d 834, 986 P.2d 170].)

Instructive on the exclusivity of section 19717 is Agnew v. State Bd. of Equalization (2005) 134 Cal.App.4th 899 [36 Cal.Rptr.3d 464] (Agnew). There, the SBE contended that section 7156 barred the application of Code of Civil Procedure section 1032 for an award of attorney fees and costs. (Agnew, supra, at pp. 911-912.) Section 7156, applicable to sales and use tax controversies, is akin to section 19717 in that it permits an award of costs such as attorney fees, subject to specified limitations, where the state’s litigation position was not “substantially justified.” (See § 7156, subd. (c)(2)(A)(i).) The court rejected the SBE’s contention that section 7156 was the exclusive remedy, finding that Woosley, and other cases holding that refund actions must be brought in the manner prescribed by the Legislature, addressed procedures for filing and maintaining tax refund suits, not motions for costs. (Agnew, supra, at p. 912, fn. 21.) In addition, the Agnew court noted, although Code of Civil Procedure section 1032, subdivision (b) may be invoked “[e]xcept as otherwise expressly provided by statute,” “Revenue and Taxation Code section 7156 contains no ‘express’ exception to the general rule permitting a taxpayer as a prevailing party to recover his costs under Code of Civil Procedure section 1032, subdivision (b).” (Agnew, supra, at p. 913, italics added.) The court in Agnew further observed that section 7156 and Code of Civil Procedure section 1032, subdivision (b) complement each other, containing different eligibility requirements and permitting different types of compensation. (Agnew, supra, at pp. 913-915; see Murillo v. Fleetwood Enterprises, Inc. (1998) 17 Cal.4th 985, 991 [73 Cal.Rptr.2d 682, 953 P.2d 858] [seller could recover attorney fees under Code Civ. Proc., § 1032, subd. (b), where Civ. Code, § 1794, subd. (d) provided that buyer could recover attorney fees but was silent as to seller].)

We conclude that section 19717 is not the only provision by which a party in a tax refund action may recover its attorney fees. As the Agnew court noted, Woosley is not on point, because it did not involve an attorney fee claim. Moreover, section 19717 contains no express prohibition against a ta