$250,000. Plus interest.
That's how much I suddenly owe the state of California in retroactive tax.
In 2012, I sold my company Sagient Research. At that time, I qualified for a 50 percent tax exclusion through California's Qualified Small Business ("QSB") incentive.
Established in 1993, the QSB program encouraged small-business owners to start, grow, and, most importantly, keep their businesses in the state. Then in August 2012, the California appellate court ruled one of the QSB's provisions unconstitutional. The Franchise Tax Board responded in December by cancelling the incentive and revoking it retroactively back to 2008.
Suddenly, 2,500 California start-up founders were on the hook for more than $120 million in taxes, plus interest.
In January, I wrote about this issue on the website Xconomy. It incited a whirlwind of activity as the story gathered state-wide traction and national attention. Other affected small-business owners contacted me, and we collectively formed a coalition to fight this unfair, retroactive tax.
Coalition: California Business Defense
Since February, our coalition, the California Business Defense, has accomplished much. The FTB agreed to delay collection pending legislation, and we've worked with legislators on both sides of the aisle to craft a lasting fix. Senator Ted Lieu (D-Torrance) and Assembly members Jeff Gorrell (R-Ventura) and Bob Wieckowski (D-Fremont) spearheaded a package of bills (SB 209, AB 901, and AB1203), which would nullify the retroactive tax and provide a framework to reinstate this critical business incentive.
I was honored to stand beside Senator Lieu and Assembly members Gorrell and Wieckowski, when they publicly announced their efforts on April 30 and to testify before two Senate committees in support of SB 209. We won our first committee vote 6-1. But that victory is only the first step in a long, arduous process, and our success is not guaranteed.
The Senate Appropriations committee is scheduled to vote on SB 209 this Thursday.
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