I often regard California with some bemusement. Other times I regard Cali in a less favorable light.
Cali has become so hard up for government revenue, they’ve taken a very novel approach. They’re going to go back in time and raise taxes!
This is a rather lengthy story, so I’ll give you the highlights and let the reader go to the links to discover more.
Capital gains in Cali are 9%, “stock sales …(now nearly 13 percent due to Prop 30)” but, if you had a business which met certain criteria, you could sell the business and only pay the state 4.5%.
Well, some poor entrepreneur decided to sell, but, the state denied the QSB exclusion and “deny the benefits for the past five years.”
From Xconomy ……
[A} few years ago, someone sued the Franchise Tax Board over being denied the right to claim the QSB benefit [Cutler v. Franchise Tax Bd., 208 Cal. App. 4th 1247 (2012)]. The company at issue in that lawsuit did not meet one of the QSB requirements—that it maintain 80 percent of its employees and assets in California. In August of 2012, the California Court of Appeals sided with the plaintiff, ruling that denying him the QSB exclusion based on the “80 percent requirement” was an unconstitutional violation of the interstate commerce clause.
Since the FTB lost the case, you might think that they would strike the unconstitutional requirement and keep the rest of QSB statute intact. Not a chance.
What the FTB did instead was to take their ball and go home. They decided that since they could not impose the “80 percent requirement,” no one would be entitled to the QSB exclusion. They put out an announcement terminating the Qualified Small Business exclusion and retroactively disqualifying all exclusions and deferrals going all the way back to 2008.
I’m not sure how legal this is. It seems to me the ex post facto clause should apply, but I’m not an attorney and it is usually regarded through the lens of criminal prosecution. Still, whether or not its constitutional doesn’t mean it isn’t horribly absurd.
Cali is just one of those places which have all the advantages of resources, but refuse to use them for good economic purpose. I couldn’t imagine living in that land of lunatics. I do have sympathy for all the conservatives left there…….. both of them.
h/t Gary Meyers