A few weeks ago we discussed a very serious and controversial tax issue that was slated to hit California investors. In particular, people who invested in small businesses within the last five years. In 2008, the California government gave a tax break to people who chose to invest in a small business. Last winter, however, a court called the tax break partially unconstitutional.
It didn’t take long for the Franchise Tax Board to jump on that ruling, claiming that anyone who benefited from the tax break had to pay back that money, which amounted to approximately $120 million. Thankfully, California lawmakers from both the House and the Senate have passed a bill that would free them of this responsibility.
Although the investors have already received notices informing them of their responsibility to pay retroactive taxes on any stocks sold between 2008 and 2012, the bill would make it illegal for the state to collect these taxes from them.
Right now, the only thing standing in the way is Gov. Jerry Brown. If he signs the law, 2,000 people will not have to pay these taxes. As of right now, however, he has not given any indication on which way he is leaning. If does not sign or veto the bills, it will become law on Oct. 13.
It is great to see lawmakers protecting investors in our state. As one senator said, it would be wrong to punish people for something the state asked them to do. It will be interesting to see what action the governor decides to take.
Source: Los Angeles Times, “California Legislature votes to end retroactive tax on investors,” Marc Lifsher, Sept. 16, 2013