Politics & Government

Gov. Sam Brownback, pizza magnate collide in tax bill controversy

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A multimillion dollar tax dispute involving a pizza magnate could influence whether Gov. Sam Brownback signs a bill meant to help taxpayers challenge rulings of the Board of Tax Appeals.

The Legislature passed SB 280 on the final night of the legislative session earlier this month.

The bill would enable any taxpayer appealing a decision by the Board of Tax Appeals to have a new trial in district court, where new evidence could be presented. The board is a special panel appointed by the governor to settle tax disputes.

The Legislature enabled taxpayers to appeal tax decisions in district court in 2014. The new legislation is meant to ensure new evidence can be presented in such cases.

The governor’s office pushed unsuccessfully to restrict such trials to property tax appeals and to require people appealing income or other taxes to go to the Kansas Court of Appeals, where no new evidence could be presented.

Property tax appeals primarily affect revenue for local governments, while income and excise tax cases affect state revenue.

Pizza magnate Gene Bicknell says that effort is connected to his $42 million income tax dispute with the state, a claim that seemed to be confirmed by Brownback’s office in a statement late Friday.

“We have expressed our concern that the language removed from this bill provides an unfair exemption for one individual who has tried, and lost, a case,” said Eileen Hawley, the governor’s spokeswoman in an e-mail.

Bicknell paid the state the $42 million in 2013 after an unfavorable ruling by what was then called the Court of Tax Appeals. He continues to appeal and won a new review of his case late last year.

If the state eventually loses to Bicknell, it would have to repay the $42 million. That amount is more than half the $81 million the state is estimated to have in the bank at the end of the next fiscal year.

Hawley emphasized that the governor has not yet decided whether to sign the bill. “The Governor will carefully review all aspects of this bill before taking action on it,” she said.

The version of the bill that would have allowed new trials only for property tax appeals was scuttled after Senate President Susan Wagle, R-Wichita, objected to it on the Senate floor. It then was returned to its original version.

“Whoever put that in the bill didn’t think we’d notice it late at night in the final hours of the session,” Wagle said, without naming a specific lawmaker or official.

Hawley’s statement came after Bicknell distributed essays bashing the governor to media outlets around the state. Bicknell accused Brownback of trying to thwart his efforts to win his $42 million case.

“The Governor’s brazen and clandestine late night efforts…to take away my right and the right of all Kansas income taxpayers to a fair trial in a court of law was just too much for me to stay silent any longer,” Bicknell said in an e-mail to The Eagle. “Why would Sam Brownback want to take away a taxpayer’s due process rights and a right to fair trial in a court of law?”

Decade-long battle

Bicknell, a multimillionaire who grew up in Pittsburg and now lives in Florida, once owned the largest number of Pizza Hut franchises in the nation.

He sold his company, NPC International, in 2006, setting off a decade-long battle with the Kansas Department of Revenue.

The agency says that Bicknell was a resident of Kansas at the time of the sale. He says he had already made Florida his primary residence.

“In fact, at a time when I thought Sam Brownback was a good public servant, I had dinner with him and his family in Florida and he called our Florida home,” Bicknell said.

The Kansas Court of Appeals ruled in September that the Court of Tax Appeals – now the Board of Tax Appeals – had “expressly ignored or disregarded” relevant regulations when it decided Bicknell lived in Kansas when he sold his company. It ordered a new review of the case by the Board of Tax Appeals.

The state appealed, and the Kansas Supreme Court is weighing whether to take up the case.

If the high court does not hear the case, it will head to the Board of Tax Appeals. If Brownback signs SB 280, Bicknell potentially would be able to present new evidence before a district court after that.

“Relying on the facts, I did not lose my case,” Bicknell said in a statement Saturday. “The Court of Appeals ruled that I did not get a fair trial and reversed COTA. The bill the Governor sponsored would have affected not just me, but every Kansas income and sales tax payer, all of whom would have been deprived a real trial after a BOTA decision.

“The Legislature did the right thing in refusing to take those rights away from Kansas taxpayers," he said.

The bill’s purpose

The language that would have restricted a trial with new evidence to income tax cases was added to the bill in a conference committee late in the session.

“The purpose of the bill was to provide an aggrieved taxpayer with the choice of getting a new trial in the district court,” said Luke Bell, a lobbyist for the Kansas Association of Realtors, which pushed for the legislation.

Bell said that he had not spoken directly to the governor about the issue and was never explicitly told there was the threat of a veto. He said members of the governor’s staff presented general objections to the idea of a trial with new evidence in district court, called a de novo trial.

“We heard it through the grapevine that they had a problem with the bill as written, and we reached out to a couple people and said, ‘Hey, what’s the problem? What can we do to fix it?’ And the message we got from committee chairs was that we either needed to take out the de novo review provisions or try to refine it to just ... property tax,” Bell said.

Bell said he told the tax committee chairs, Rep. Marvin Kleeb, R-Overland Park, and Sen. Les Donovan, R-Wichita, his organization cared only about the property tax cases, which account for 90 percent of tax appeal cases.

Kleeb said he was “urged by the administration” to make the bill focus solely on property tax appeal cases, adding that the governor’s office felt that “was the original intent of the bill.”

He said he didn’t think the administration’s position had anything to do with the Bicknell case, but noted that Brownback inherited that dispute from Democratic Gov. Kathleen Sebelius’ administration.

Asked if the governor would veto the broader version of the bill, he replied, “I don’t know. I think the governor’s going to go ahead and sign it. There certainly was no veto threat to me.”

‘I want that right’

Wagle said the disputed provision “was just a one-liner” in the 20-page bill that could have been easily missed. She objected to the language, prompting a huddle of Republican leaders and legislative staffers that Sunday evening.

“They told me I was wrong, and I was interpreting that language wrong, and I said, ‘No, I’m right,’ ” she said.

She said her objections to the provision were unrelated to Bicknell.

“It wasn’t for any one individual,” she said. “I believe the right to appeal a case in any court so desired should be offered to any taxpayer. I want that right. I want my neighbors to have that right. I want my friends to have that right. I want businesses in Kansas to have that right and to sneak that through in a conference committee report without having a debate about it was unacceptable.”

Bryan Lowry: 785-296-3006, @BryanLowry3