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California Small Businesses Forced to Pay Millions of Dollars in “Retroactive” Taxes

Roughly 2,000 small businesses across the state are being forced to pay up to $120 million in taxes they were, at one point, exempt from paying. CBS Sacramento estimates that some individual businesses face a bill up to $200,000.

Five years ago, these smalls businesses were assured of certain tax breaks by the state. However, in December a state Court overruled the taxbreaks as unconstitutional and the California Franchise Tax Board is looking to collect.

Many small businesses decry what may be considered false advertising on behalf of the state government.

However, some lawmakers are fighting to keep their promise.

“When we make a promise, we have to uphold it,” said Sen. Ted Lieu, a Democrat from Redondo Beach. “They relied on California law as it was written, that they would get a tax break if they invested in certain kinds of businesses.”

Ken DeVore, with the National Federation of Independent Businesses argues the retroactive tax is killing small businesses. “A lot of them don’t have that money anymore,” DeVore points out. “Its been reinvested.” Many small businesses have not spoken publicly about the tax so as not to gain the ire of the Franchise Tax Board.

Both DeVore and Sen. Lieu argue that the retroactive tax acts like a penalization on small businesses simply for following the rules. Proponents of the court decision, however, argue that the retroactive tax is not a penalization because small businesses were never guaranteed a tax break that the court finds unconstitutional.

Ultimately, $120 million is no jackpot for the state’s massive coffers but it may be make or break for thousands of small businesses.

Sources: CBS News, Fox News


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