Judge Blocks Keyshawn Johnson’s California Income Tax Claim

April 17, 2021, 12:14 AM

Former National Football League wide receiver Keyshawn Johnson was a California resident in his rookie year and owes at least $905,000 in state income tax, penalties, and interest, a trial court judge said in an initial ruling.

Johnson lost his attempt to overturn a 2017 California administrative ruling that he was a state resident in 1996, the year he graduated from the University of Southern California and was drafted by the New York Jets in the first round. Johnson, who is now a sports analyst on ESPN, took his dispute to Los Angeles County Superior Court in January.

Judge Mark V. Mooney backed the Franchise Tax Board in a ruling Wednesday, saying that Johnson owes state tax on $4.9 million in income for 1996 rather than the $35,564 in income he reported on his part-year resident return. It will become final in 15 days unless Johnson objects to details of the ruling.

An attorney for Johnson declined to comment saying the ruling isn’t final.

Interest has continued to accrue for the 1996 tax year since the 2017 hearing, when the tax board said Johnson owed $218,857 in income tax, plus $602,194 in interest and $84,799 in penalties.

Mooney rejected Johnson’s argument that he was in California only for temporary and transitory purposes and was a New York resident when he began practicing and playing for the Jets in August 1996. He had previously claimed he was a resident of Nevada, where he rented a room in an apartment for $300 a month. Johnson was also renting an apartment in Los Angeles with his girlfriend and baby.

Mooney noted Johnson also claimed the mortgage interest deduction on his 1996 federal return, which is limited to a principal residence, for a home he purchased in a Los Angeles suburb, and filed a New York nonresident return that year.

Johnson’s evidence shows in 1996 he signed a multiyear contract to play professional football in New Jersey and lived in an extended stay hotel in New York for four months, Mooney said. “The court finds this evidence insufficient to establish New York residency for 1996,” the ruling said.

The judge also rejected Johnson’s request to abate interest, saying even if he had the authority to do so he would not be inclined to because Johnson could have stopped the accrual of interest at any time by paying the tax while continuing with his dispute.

Johnson is represented by Becky S. James and Lisa M. Burnett with James & Associates in Calabasas, Calif. California Supervising Deputy Attorney General Brian D. Wesley and Deputy Attorney General Matthew C. Heyn representedthe FTB.

Current Internal Revenue Service Commissioner Charles P. Rettig, then an attorney in Beverly Hills, represented Johnson in the matter from 2000 until about 2014, according to trial exhibits and testimony.

The case is Johnson v. Franchise Tax Bd., Cal. Super. Ct., 19STCV15515, ruling 4/14/21.

To contact the reporter on this story: Laura Mahoney in Sacramento, Calif. at lmahoney@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergindustry.com; Kathy Larsen at klarsen@bloombergtax.com

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