Since 1993, the state of California has provided California’s small business owners and investors the ability to defer or exclude 50% of their taxes upon the sale of their businesses.
Late in 2012, the Francise Tax Board cancelled this program and began to retroactively tax those Californians who had supported those small businesses since 2008.
This 5-year retroactive tax serves as a punitive disincentive for California’s small business entrepreneurs and investors. It violates legislative intent, is unreasonable and unfair to law-abiding taxpayers, and undermines the spirit of entrepreneurship that has long defined California.
SB209 has been introduced to overturn the retroactive tax. The California Business Defense supports SB209 and its authors Senator Ted Lieu and Assemblyman Jeff Gorrell. The April 30th press conference to roll out SB209 featured members of the California Business Defense and be be viewed below:
IMPORTANT UPDATE 5/17/2013: SB 209 was heard by the Senate Appropriations Committee on 5/13/13. Nine members of California Business Defense testified on behalf of the bill at the committee hearing.
IMPORTANT UPDATE 5/1/2013: The Senate’s Finance and Governance Committee approved SB 209 in a 6-1 vote and have passed the bill onto the Appropriations Committee. Members of California Business Defense testified on behalf of the bill at the committee hearing. For more information, click here. You can view the SB209 press conference featuring members of California Business Defense by clicking here.
IMPORTANT UPDATE 4/4/2013: Senator Ted Lieu (D-Torrance) has introduced amended language to Senate Bill 209 which proposes to fix the retroactive tax. Co-authored by Assemblymembers Gorrell and Perea, SB209 will eliminate the part of the original QSBS provisions ruled unconstitutional and retain the balance of the original legislation. If passed, this will wipe out the retroactive tax and will enable a form of the QSBS to remain on a go-forward basis starting in 2016. For the current language proposed, please click here.
IMPORTANT UPDATE 2/28/2013: The FTB announced this afternoon that they are delaying the mailing of the tax bills (the Notices of Proposed Assessments) for 2008 tax-year until April and that they will hold off on mailing the NPAs entirely if taxpayers sign a waiver of the statute of limitations. This is a vitally important win for small business owners as it gives us the time to craft a lasting solution without the immediate threat of devastating tax bills. Please review the details on the FTB’s FAQ page (see items marked “new”) and consult with your tax preparer as soon as possible about requesting a waiver if you are affected.
Despite these positive first steps, the issue is far from resolved. We are here to fight this retroactive tax and ensure that California continues to encourage small businesses and remains a bastion of business and job creation for years to come.
We urge you to review the following media stories on this issue:
Xconomy – the blog post that sounded the alarm
See Brian Overstreet’s interview with Tech Crunch from January 2013 discussing these issues below.