Bills Aim to Reinstate Small-Business Tax Break

Print this Article | Send to Colleague

The San Jose Mercury News reported on September 9 that lawmakers had approved legislation intended to undo a court decision that left 2,500 California small-business owners with unexpected tax bills at the end of last year. Two separate bills that moved through the Legislature are aimed at retroactively reinstating a tax break for small businesses on capital gains from the sale of stocks. It was overturned by a court ruling last year, leading the Franchise Tax Board to send tax notices totaling $120 million for the years 2008 to 2012.

Sen. Ted Lieu, D-Torrance, said it was unfair to change the rules for small businesses that were complying with California law. His SB209 would reimburse the small business owners 75 percent of the tax they were charged. He said it was reduced from 100 percent over his objections.

"The first principle we need to adhere to is the rule of law, and Californians need to have confidence that when they follow California law that they will not be retroactively punished," Lieu said.

Separate legislation, AB1412 by Assemblymen Raul Bocanegra and Mike Gatto, who are both Los Angeles Democrats, would reimburse the small business owners for 100 percent of the retroactive tax bills.

"A deal is a deal, and businesses that rely on these rules need to understand them and make sure they can follow them," Gatto said.

He said the original law was poorly drafted, leading the court to overturn it.

SB209 passed the Assembly on a 68-0 vote Thursday and was approved by the Senate hours later on a 35-2 vote. AB1412 also passed the Assembly, 75-0, and will go to Gov. Jerry Brown. Brown will decide which one to sign.