How Entrepreneurs Overturned California's Retroactive Tax On Startup Founders

waderoush writes "Startup founders in California can breathe a little easier today — they won't be getting bills from the state for up to $120 million in back taxes. On Friday California Governor Jerry Brown signed a bill prohibiting the state from levying retroactive taxes on founders and other small-business investors who took advantage of a tax break invalidated last year by a state appeals court. California Business Defense, a coalition of entrepreneurs, spent most of 2013 trying to reverse the California Franchise Tax Board's interpretation of the court ruling, under which it planned to hit Californians with new tax bills on the sale of small-business stock going back to 2008 (a story that Slashdot picked up in January). Two bills on the matter reached Governor Brown's desk in September, one fully restoring the investment incentive through 2016, the other partially restoring it. Brown signed AB1412, the bill granting full relief. 'For a bunch of political greenhorns operating in an environment where political partisanship is at an all-time high, we did all right,' writes Brian Overstreet, one of the co-founders of California Business Defense. 'But it should never have been this hard.'"

Comments

Rich People Find Loophole....

[MatthiasF]

Courts close loophole...... paid off politician gives amnesty to everyone who used loophole..... and rich people always win.

Government fails the 99% yet again.

Re:Rich People Find Loophole....

[Anonymous Coward]

The concept of "Ex Post Facto" is not a loophole, it's a foundational principle of justice. This same "loophole" prevents the government from declaring whatever you did yesterday a crime and throwing you in the slammer for it.

Re:Rich People Find Loophole....

[tdelaney]

No - courts close loophole, loophole can't be used anymore.

Laws that take away freedoms (e.g. making something a crime) or property (e.g. taxes) must not be retroactive. This includes loopholes - if use of the loophole was determined to be legal under the law as it was at the time anything gained from it cannot be taken away.

I dislike people using loopholes to advance themselves as much as anyone, but not setting precedents of making retroactive legislation is more important.

Re:Rich People Find Loophole....

[yurtinus]

Exactly - you wouldn't want something like the earned income tax credit or mortgage interest deduction to be invalidated and suddenly make you liable for thousands in back taxes.

As we always clamor: streamline the tax code and get rid of this myriad of deductions and loopholes

Looked At Another Way...

[hondo77]

A few rich guys who don't want to pay their taxes get together to do something about them. They have the resources to lobby a bill almost full time for nine months. In the end, they get their bill passed but whine that democracy is broken because they had to work really, really hard at it.

Must be nice. Some of us have day jobs.

Re:Looked At Another Way...

[Gavagai80]

This is all true -- but in this one case I'm okay with the rich people having their way because retroactive taxes create too much uncertainty, potentially preventing businesses from reinvesting their profits into new projects for fear of needing that money for unexpected retroactive tax.

not retroactively taking away a paycheck is subsid

[raymorris]

What?!?! The tax RETROACTIVELY took money that people had earned years ago. You work 80 hours a week for several years, then sell the business, finally reaping the rewards of your hard work. With the money, you pay off the credit cards or other debts you incurred while getting the business going. Two years later, the state comes along and says they want that money.

How is ceasing that nastiness a "state subsidy to people who don't need it"? Are you high?