After 26 years, the case from the residency audit of Gilbert Hyatt, wealthy computer chip inventor, was finally put to rest on August 29th.
In 1991, Hyatt moved from California to Nevada. Sounds simple, right? However, the board of residency accused Hyatt of lying about his residency to evade California taxes. Hyatt claimed he moved before he began cashing in revenue from his microprocessor patent, yet the Franchise Tax Board questioned the authenticity of this new residency, claiming he neglected to report income earned in California.
Now, here’s where it gets interesting… The case reached the U.S. Supreme Court twice, and at one point, a Nevada court ruled that the state of California owed Hyatt millions in damages for fraud and invasion of privacy. The state was accused with intentionally scaring off Mr. Hyatt’s potential business partners, destroying documentation, sending investigators to peer into his windows and rummage through his trash, and even of being anti-semantic. The Supreme Court later reduced this to just $50,000, yet also ruled that the civil lawsuit would continue.
After over two and a half decades, the Board of Appeals ruled that Hyatt did, in fact, become a resident of Nevada in 1991 and is therefore not liable for fraud penalties. However, the ruling wasn’t entirely in his favor. The Board found that Hyatt operated his business in California for the first several months after he moved, so he still owes the state taxes from 1991, charges that, with interest, come out to $1.9 million. Still, this number is significantly less than the whopping $13.3 million he was originally charged with, a number that could have easily grown to $55 million with penalties and interest.
So, if you thought packing up everything you own and moving to another state wasn’t enough of a headache, think again! Whenever you move, it’s important to let us at Quantax know so we can provide you with the best possible services, even if you don’t have a number of microprocessor patents to your name.