Lawmakers pledge to fix retroactive tax collection
SACRAMENTO -- A bipartisan trio of lawmakers and a tax official have unveiled bills they say they’ll use to save some California investors from getting hit with a collective $120 million in retroactive taxes.
One bill would reverse plans by the California Franchise Tax Board to force about 2,000 filers to return the tax breaks they received between 2008 and 2011 on the sale of stock in qualified small businesses.
The two-decade-old incentive was aimed at encouraging investment and job creation in California. In August, a state appeals court threw out the tax break, calling it unconstitutionally discriminatory and a violation of the right to free interstate commerce.
The second bill would prohibit state agencies from asking for retroactive taxes and penalties in order to comply with court decisions.
“Our goal is to fix this problem,” Sen. Ted Lieu (D-torrance) said. “Since it can’t be done administratively, we’ll fix it legislatively.
“Californians planned and based their actions on the language of the law as it existed. Going backward in time and changing the rules innocent taxpayers relied upon violates the very essence of the rule of law.”
The move against the retroactive tax increases also is supported by Assemblyman Jeff Gorell (R-Camarillo) and Jerome E. Horton, chairman of the state Franchise Tax Board, the agency that collects the income tax. In December, board staff sent out notices to affected taxpayers, telling them that they were now liable to pay back the tax breaks.
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