The University of New Hampshire Law Review


[Excerpt] “Taxpayers in California recently found themselves the target of a retroactive grab for revenue by the Franchise Tax Board (FTB) in what has called an act of “lawless taxation” by the state of California. The source of the conflict was the Qualified Small Business Stock credit that had been in place in California since 1993. The tax credit, which was designed to encourage innovation and investment in California-based enterprises, allowed business owners who had at least eighty percent of their assets and employees in California to take a credit of fifty percent of the capital gain realized on a sale of their stock. In August 2012, the California Court of Appeals ruled that the credit was discriminatory against out-of-state taxpayers in violation of the Commerce Clause. As a result of this ruling, the FTB made an announcement in December 2012 that it would soon be sending tax bills to all business owners who had claimed the tax credit since 2008, seeking the taxes that would have been due plus corresponding interest. The move was expected to bring an additional $120 million in revenue to the state straight from the pockets of taxpayers who had lawfully relied on a credit that had been in place for twenty years.”

Repository Citation

Mystica M. Alexander, California – Land of “Lawless Taxation” and the “Midnight Special”: Outlier or Leader in a Growing Trend?, 12 U.N.H. L. REV. 219 (2014), available at http://scholars.unh.edu/unh_lr/vol12/iss2/5