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California's Surreal Retroactive Tax On Tech Startup Investors
waderoush writes "Engineers and hackers don't think much about tax policy, but there's a bizarre development in California that they should know about, since it could reduce the pool of angel-investment money available for tech startups. Under a tax break available since the 1990s, startup founders and other investors in California were allowed to exclude or defer their gains when they sold stock in California-based small businesses. Last year, a California appeals court ruled that the tax break was unconstitutional, since it discriminated against investors in out-of-state companies. Now the Franchise Tax Board, California's version of the IRS, has issued a notice saying how it intends to implement the ruling — and it's a doozie. Not only is the tax break gone, but anyone who claimed an exclusion or deferral on the sale of small-business stock since 2008 is about to get a big retroactive tax bill. Investors, entrepreneurs, and even the plaintiffs in the original lawsuit are up in arms about the FTB's notice, saying that it goes beyond the court's intent and that it will drive investors out of the state. This Xconomy article takes an in-depth look at the history of the court case, the FTB's ruling, and the reaction in the technology and investing communities."
Retroactive taxes aren't particularly surreal. An example of surreal taxes would be if you had to submit your check to a giant who was growing out of the floor in a building that's melting.
So let's use the word correctly, please.
There's no -1 for "I don't get it."
People have been up in arms over ex post facto law, so why do they think they can get away with taxes? Granted, not all retroactive laws are unconstitutional. The tax law shouldn't have been in the books in the first place if it was unconstitutional, but we're not talking slavery here. Repeal the law, if you must, and call it even.
This is just a sad attempt at increasing state revenue
If computers were people, I'd be a misanthrope.
So. Does this make a crime of not paying taxes out of a situation where it was not a crime?
If so, it would seem to be ex post facto:
Seems to me they should just not pay, because there's no legal way to punish them for not paying.
Not that the supreme court has actually paid that much attention to ex post facto violations on either the federal or state level... real bunch of pants-shittingly stupid people in SCOTUS lately...
I've fallen off your lawn, and I can't get up.
This isn't a retroactive law. This is invalidation of a law by a court. California basically created a tarrif to promote local buisnesses. States are not allow to create terrifs. California had two options. They could send money to every out of state buisness that was damage by the tarrif. Or they could undo the benifit the in state buisnesses recieved. California is broke so they did the second thing.
Compare taxes, infrastructure, business climate, and education of Texas vs. California. You tell me one metric, controlled by the government, that is better in California.
Californians pay more in federal taxes than they recieve from the federal goverment. The following map shows Federal Taxes minus spending on a state by state basis. http://www.economist.com/blogs/dailychart/2011/08/americas-fiscal-union
Texas and Minnesota both pay more taxes than they recieve. The biggest debtor state in the union is Virginia.
Ironically in this case it was a tax break created by progressives that was ruled unconstitutional. So your joke/stupid remark falls flat. Really this is a situation where large investors are taking it on the nose. As a progressive liberal I'm actually not OK with charging them retroactively unless this was acknowledged as up for debate previously and even then it should be executed without penalties.
Cash grab or otherwise this is more or less an administrative issue to be rectified amongst the elite.
California (and New York) are hemorrhaging population and business. Often (but not only) heading to Texas according to numerous articles and analysis over the past year as well as the last census.
Texas appears to be the largest recipient of the migrations but so are Arizona and Florida. Coincidentally Texas was also named the 2012 Top State for business. Every few weeks I see more and more business headlines of companies (namely tech) moving to or starting a branch in Texas such as Apple, Facebook, PayPal, Catepillar and so on
There had been, however, some controversy over the years of TX Gov Perry's use of the Texas Enterprise Fund to woo companies to relocate. While the deal-landing results appear to be evident, some worry about the taxpayer cost, total incentive packages, and net gain of these deals. The fund seems to be perfectly suited to situations like this, where California tax laws cause some turmoil thereby increasing the opportunity to woo away industry. Recently Texas AG Greg Abbott has also been advertising to New Yorkers to move to Texas on account of gun control issues.
I wonder how long Texas can remain "Texas" if it becomes stuffed with people who are accustomed to living like Californians and New Yorkers.
Elections have consequences.
NO NO! We hate it here! It's terrible! Don't move to California, the weather isn't nearly as nice as you think! And there are all these liberals everywhere! And the GAYS!
By all means move to the East Coast; or Texas! Anywhere else but here.
(wink wink).
signed,
lifelong Californian
Yes, as opposed to conservatives who can fund their spending based upon sunshine and puppy farts.
It's astonishing to me how many conservatives seem to believe that you don't need taxes to pay for services. You can just keep lowering taxes on the rich and wind up with more money than you had before.
I'm neither, but in all fairness I think the idea is to spend less on services, or have fewer services.
Oliver's law of assumed responsibility: If you're seen fixing it, you will be blamed for breaking it.
As an employee, why would I want to work in states like Texas or Arizona that provide much less in the way of protections for workers? One of the reasons I like working in California is the laws that give me some leverage when dealing with employers, and protections and safety nets when said employer folds due to dumb decisions by management.
And as an employer, why would I want to set up business in a state where my pool of workers is limited to the kind who all they have to offer is their willingness to accept that lack of protection? One of the reasons tech companies locate in California is that that's where the people they need/want to hire are. If I set up business in Texas or Arizona, I do so knowing that the best employees, the ones I'd most want to have, aren't going to be willing to relocate there. I can't see that being a winning strategy long-term.
Here is the relevant part from the Appeal Court opinion:
Plaintiff asks us to hold that a refund is the only proper remedy in this case, under the authority of McKesson Corp. v. Florida Alcohol & Tobacco Div. (1990) 496 U.S. 18 [110 L. Ed. 2d 17, 110 S. Ct. 2238] (McKesson). In McKesson, the high court held that “[i]f a State places a taxpayer under duress promptly to pay a tax when due and relegates him to a postpayment refund action in which he can challenge the tax's legality, the Due Process Clause of the Fourteenth Amendment obligates the State to provide meaningful backward-looking relief to rectify any unconstitutional deprivation.” (McKesson, supra, 496 U.S. at p. 31, fn. omitted.) McKesson identified three ways to provide the “‘clear and certain remedy’” required for an unlawful tax collection. (Id. at p. 39.) These were (1) “refunding to petitioner the difference between the tax it paid and the tax it would have been assessed were it extended the same rate reductions that its competitors actually received”; (2) “assess[ing] and collect[ing] back taxes from petitioner's competitors who benefited from the rate reductions during the contested tax period”; and (3) “a combination of a partial refund to petitioner and a partial retroactive assessment of tax increases on favored competitors, so long as the resultant tax actually assessed during the contested tax period reflects a scheme that does not discriminate against interstate commerce .” (Id. at pp. 40–41.) In this case the statute of limitations prevents the state from collecting additional taxes from other taxpayers who benefited from the unconstitutional deferral provision.
Under this portion of the opinion the Franchise Tax Board can not do nothing. They are required by this opinion to level the playing field. The Franchise Tax Board has three options;
1. Refund the tax to him and every other other person that was denied or didn't file because they did not qualify.
2. Retroactively tax everyone
3. A combination of partial refunds and partial taxes opening up even more litigation.
Option 1 is bad because the state could loose a lot of revenue. Option 3 is bad because the state loses revenue and spends more on litigation. Option 2 is viable as it already falls under the process of filing and adjusted tax return. By requiring the Board to level the playing field the court threw a wrench in the works.
Owning a firearm is a right guaranteed under the Second Amendment. Call them "nuts" if it makes you feel better but the second you say it's OK to restrict one's gun rights they'll be restricting all your rights. I know this is a repost, but it's very relevant to my point (feel free to replace who "they're" coming for with items from our Bill of Rights):
When the Nazis came for the communists,I remained silent;I was not a communist.
When they locked up the social democrats,I remained silent;I was not a social democrat.
When they came for the trade unionists,I did not speak out;I was not a trade unionist.
When they came for the Jews,I remained silent;I wasn't a Jew.
When they came for me, there was no one left to speak out.
If it doesn't work for Austin, then that is an Austin problem, not a Californian or progressive one.
The philosophy that is opposed to central planning is not rooted in the belief that central planning always fails, but instead in the moral argument that when it does fail that some of the people that suffer could not opt out of that suffrage (tyranny of the majority), and now continue their suffering with no recourse (the momentum of the resulting bureaucracy.)
Look no further than things like the TSA as prime examples of how the failures of central planning do not get corrected, that the suffrage of society continues in spite of the complete obviousness of the failure. Now consider failures that arent quite so obvious, and you get an idea of why some people hold a very strong philosophy against all central planning, even when sometimes the act of central planning seems like a great success.
"His name was James Damore."
Since extra taxes never seem to go toward the national debt, but rather to new pet projects (aka money sinks), I can't blame people for wanting lower taxes. I'm conservative, but I would vote for a tax increase if it were guaranteed to go exclusively toward curbing the national debt. Note also that I think we need to reduce our spending.
If you can't convince them, convict them.
Define "assault weapon". There is not a single "assault weapon" available on the civilian market. You're yet another victim of liberal hype. Talk to a veteran. Talk to almost any veteran, from any service. Some sailors never handled an assault rifle, and maybe some airedales. All marines have handled them, and I think all army soldiers have.
My own assault weapon was an M14. There is a little lever on the side that makes it what it is. That little lever switches the piece from semi-automatic to full automatic. That is the one determining characteristic of an "assault weapon". The bayonet lugs? I'll grant that it is probably unnecessary for civilians. Oversize magazines? Again, I'll grant that is probably unnecessary. But, those two features do not determine that the weapon is an "assault weapon".
However - if you're able to pass a background check, and you're willing to pay the licensing fee, you can purchase a Thompson submachine gun, perfectly legal.
Having spent most of an hour staring down the muzzles of several Thompsons while holding onto my M14, I'm here to tell you that it is a much more effective "assault weapon" than the M14 - or an M15 or an M16.
I don't know how many Thompsons are currently held by private citizens in the United States. Funny thing, you don't hear of them being stolen, and used in criminal activity. Seems that the people who own them, keep them properly secured, and that common criminals just can't get to them.
Maybe THAT is where legislation needs to be aimed. Make the owners of ALL weapons responsible for securing those weapons that they own.
Nuts? There are plenty of nuts on both sides of the issue. None of the nuts want to address the real issues. Those issues include identifying whackos, kooks, and nuts who are likely to commit a mass shooting. Almost always, people step forward after a shooting, to inform the media that the shooter was some kind of mental case. Family and acquaintances are generally unable to "connect" with the guy. He's strange, weird, or whatever - often a "loner".
The real issue here, is identifying such people, and getting help for them - OR, institutionalizing them, so that they most definitely CANNOT access weapons.
But, boo-hoo-hoo - it violates some kind of "rights" if we start institutionalizing mental cases.
Meanwhile, we continue to incarcerate people for possession of natural substances like marijuana. It's alright for corporations to profit from incarcerating perfectly safe people, but we don't want to violate any civil rights of genuinely dangerous people.
This whole controversy borders on insanity.
"Windows is like the faint smell of piss in a subway: it's there, and there's nothing you can do about it." - Charlie Br
The Bill of Rights was a compromise to shut up the anti-federalists. The Founders felt it was obvious that if the Constitution hadn't explicitly granted a power to the Federal Government, they didn't have it. The anti-federalists voiced concerns that it wasn't clear.
The Founder's view seems evidenced in the level of detail in the Constitution listing exactly what the Federal Government can do, esp. in Article 1, Section 8.
I don't know the history of Prohibition well, but now it seems rather quaint that as recently as 1919, folks thought it was necessary to actually amend the Constitution (the Eighteenth Amendment) to ban the "manufacture, sale, or transportation of intoxicating liquors". Now, we seem to accept that if the Federal Government wants to ban a substance nationwide, they can just do it with, at most, Congressional and Executive approval. How far we have fallen in less than 100 years.
The Ninth and Tenth Amendments were meant to eliminate any possibility that people in the future would interpret the Bill of Rights as a complete list of rights held by the people and the states. As it turns out, these Amendments were obviously insufficient.
Subsequent Amendments and SCOTUS interpretations/decisions (perhaps most notably the Incorporation Doctrine) have altered the landscape of course by imposing restrictions on states as to what rights they can abridge.
Why is there an "insightful" mod and why isn't it "-1"? If I wanted insight, I wouldn't be reading
As an outsider reading it, I would say that the second amendment reads pretty clearly that the right to keep and carry weapons cannot be restricted.
Any law in the USA that purports to control weapons should be unconstitutional.
Arguing ethics, morals, need, danger or anything else in regards to weapons is (or should be) irrelevent.
If you don't like that situation you should work to get the second amendment changed, not work to undermine the constitution.
America has, in the past, been an example of freedom and rule of law that has inspired many people. It would be a tragedy if you were to undermine your rule of law and slide into becoming a police state by subverting your constitution.
If you truly believe that the situation and weapons have evolved to the point where that amendment is no longer needed, or needs to be changed, then the constitution contains methods for amending itself.
Please don't throw away the rule of law.
I'm guessing that wasn't on their radar screen...
In California, you use the entire village to raise an idiot, and all you've got to show for it is - an idiot.
What would you rather happen? Would you prefer that the idiot was put down, or allowed to starve homeless on the street?
Real men and women can indeed stand on their own.
That's complete and utter bullshit. There is evidence[*] that even pre-human homonids cared for those incapable of looking after themselves.
What would happen to you if you were struck down by a degenerative disease? What would happen if it happened in your 20's before you'd had the opportunity to save much money? What about your teens when you'd had no opportunity.
All your bombastic talk about real men/women/small furry creatures from alpha centauri is just so much talk to make you feel superior about yourself simply because you happened to be lucky.
"on your own", you say? And, you say that like it's a bad thing!
Yes it it. Without society, life is short, nasty and brutal. Just look at the life expectancy of wild versus captive animals. You like to pretend you are self sufficient and superior, but the reality is you depend a lot on what society has to offer. You are not even remotely on your own but apparently you'r rather the less fortunate than you suffer in order for you to keep feeling superior.
And your talk about personal freedom and drugs is a complete red herring.
[*]Citation hard to find, but the original article was, IIRC about a homonid with an advanced case of degenerative bone disease. Basically the disease is not survivable in that state without external assistance because it makes the afflicted person unable to hunt or gather. This implies that other homonids fed and cared for the diseased one.
SJW n. One who posts facts.