Senate’s government-policy panel OKs helping ‘job creators’ by rescinding state’s retroactive tax

May 01, 2013
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 Sen. Ted W. Lieu measure would help small businesses 
SACRAMENTO – A Senate panel charged with reviewing government and finance today approved a bipartisan plan to repeal a recent Franchise Tax Board decision imposing massive retroactive taxes on thousands of California taxpayers.

“SB 209 is about the rule of law,” Sen. Ted W. Lieu, D-Torrance, told members of the Senate Governance and Finance Committee before members approved Senate Bill 209. “You simply cannot punish people for following what we told them to do.”

Senate Bill 209, authored jointly by Sen. Lieu and Asm. Gorell would bring relief to thousands of taxpayers who were recently notified that the FTB would retroactively assess those who claimed California’s QSBS tax benefits. 

The issue stems from a decision by the California Court of Appeal, in the Cutler v. Franchise Tax Board case, wherein the Court ruled that the California QSBS deferral and exclusion was unconstitutional and the Franchise Tax Board administratively implemented the Court’s decision.  The QSBS tax credit law, passed in 1993, was intended to spur investment in California startups and small businesses.  The incentive allowed for the exclusion of 50 percent of capital gains earned from investments in businesses valued less than $50 million that have at least 80 percent of their staff and assets in California.
Faced with a court ruling that found several aspects of the tax provisions to be in violation of the U.S. Constitution’s Commerce Clause, the Tax Board asserted that their only option was to enforce the Court of Appeals decision, ending the 20-year-old capital gains tax incentive. This resulted in the retroactive taxation of thousands of investors going back to 2008.

As a result, entrepreneurs throughout the state are now facing exceptionally large tax bills – as high as tens of thousands to hundreds of thousands each.  It is estimated that the FTB is looking to recoup as much as $120 million in retroactive taxes.

Supporting Lieu on SB 209, jointly authored by Asm. Jeff Gorell, R-Camarillo, are numerous businesses, including representatives for California Business Defense, the California Chamber of Commerce, the Bay Area Council and the California Coalition of Qualified Small Business Investors.

SB 209 now faces fiscal review by the Senate Appropriations Committee; no date has yet been set but it will likely face a hearing within the next month.  

For more, including Lieu’s Fact Sheet on SB 209, visit Lieu’s Web site at the address below.

Ted W. Lieu represents the more than 1 million residents of Senate District 28, which includes the cities of Beverly Hills, Carson, El Segundo, Hermosa Beach, Lomita, Manhattan Beach, Redondo Beach, Santa Monica, Torrance, West Hollywood and the Palos Verdes Peninsula as well as portions of Long Beach and Los Angeles including, Beverly Glenn, Brentwood, Cheviot Hills, Harbor City, Hollywood Hills, Marina del Rey, Mar Vista, Pacific Palisades, Playa del Rey, San Pedro, Venice, Westwood and Wilmington. See a district map HERE: For more, visit



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