Late last year, a California court declared unconstitutional a program to provide tax breaks to small business owners opening particular types of enterprises — and now the California Franchise Tax Board is seeking back taxes.
About 2,000 small businesses are affected, and tax revenues could reach beyond $100 million. Some individual businesses could see tax bills approaching a quarter of a million dollars.
“It sends a message that you can’t trust government,” Ken DeVore of the National Federation of Independent Businesses told CBS Sacramento. “If you comply in good faith with the rules, they can go back and penalize you.”
California small business owners aren’t without support, though, in the fight against paying back taxes. A bill to block the collection of such taxes has already been passed by a state Senate panel and is headed to the Senate Appropriations Committee for approval. Senator Ted Lieu, a Democrat from Redondo Beach, is behind the proposal.
Lieu is focused on the unfairness of the decision to go after small biz owners after they trusted the state and followed all the rules available to them at the time.
“They obviously can’t go backwards five years in time and change their investment or change what they did,” said Lieu to CBS Sacramento. “They are stuck with what they did and it’s unfair to penalize them.”
The California Franchise Tax Board has not commented on the pending legislation.
Are any of you in California affected by this action? What do you think of the Tax Board going after back taxes five years later?