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California's Surreal Retroactive Tax On Tech Startup Investors

timothy posted about a year ago | from the do-not-pass-go-remit-$200 dept.

Businesses 514

waderoush writes "Engineers and hackers don't think much about tax policy, but there's a bizarre development in California that they should know about, since it could reduce the pool of angel-investment money available for tech startups. Under a tax break available since the 1990s, startup founders and other investors in California were allowed to exclude or defer their gains when they sold stock in California-based small businesses. Last year, a California appeals court ruled that the tax break was unconstitutional, since it discriminated against investors in out-of-state companies. Now the Franchise Tax Board, California's version of the IRS, has issued a notice saying how it intends to implement the ruling — and it's a doozie. Not only is the tax break gone, but anyone who claimed an exclusion or deferral on the sale of small-business stock since 2008 is about to get a big retroactive tax bill. Investors, entrepreneurs, and even the plaintiffs in the original lawsuit are up in arms about the FTB's notice, saying that it goes beyond the court's intent and that it will drive investors out of the state. This Xconomy article takes an in-depth look at the history of the court case, the FTB's ruling, and the reaction in the technology and investing communities."

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514 comments

Obama effect (-1, Offtopic)

Anonymous Coward | about a year ago | (#42684791)

Well that happens when the government is more interested in gun control than with economy.

And you expected something else...? (2, Insightful)

SlideRuleGuy (987445) | about a year ago | (#42684821)

And you expected something else from a state run by "progressives"? They never have enough of other people's money!

Re:And you expected something else...? (0, Flamebait)

Anonymous Coward | about a year ago | (#42685009)

Yes, as opposed to conservatives who can fund their spending based upon sunshine and puppy farts.

It's astonishing to me how many conservatives seem to believe that you don't need taxes to pay for services. You can just keep lowering taxes on the rich and wind up with more money than you had before.

Re:And you expected something else...? (5, Insightful)

bhlowe (1803290) | about a year ago | (#42685069)

Compare taxes, infrastructure, business climate, and education of Texas vs. California. You tell me one metric, controlled by the government, that is better in California.

Re:And you expected something else...? (0)

Anonymous Coward | about a year ago | (#42685137)

Is this the same Texas whose capital of Austin (and thus the decision-making center of the state) is one hell of a progressive city? Or is this the stereotype Texas that Republicans think is a utopian example of a conservative theocracy and wonder why we can't all be like them?

Re:And you expected something else...? (3, Interesting)

sycodon (149926) | about a year ago | (#42685277)

Austin is afflicted wit the same disease as CA.

We have a 20 million dollar "commuter rail" that transports maybe a few hundred a day. Of course, it loses money.

They just decided to pay millions of dollars on a "bike sharing" program that involves bike shelters costing hundreds of thousands of dollars each. They charge people to participate, but the fees don't come close to paying for it.

The voters have twice turned down a Bond that would fund home shelters and other low income stuff, but the City Council has directed staff to prepare for another election. They'll get their Bond money (and go into debt) no matter how many times it takes.

The are also looking at Light Rail down town. No matter it doesn't make sense and costs Billions, they want to be like all the other "
grown up and enlightened cities".

The State Government, on the other hand is debating on how to spend surplus money or just save for the next session.

Re:And you expected something else...? (2, Informative)

Anonymous Coward | about a year ago | (#42685197)

Texas has textbooks with mandated Christianity in them, pretty sure teaching the bible as fact ruins your education argument. That's one. Business climate is a toss up as Texas really isn't good at innovation, but it's really good for companies looking to cut costs by lowering how much they pay their workers. Infrastructure is the same, Texas has been working for a while to tackle it's serious traffic problems in the cities, taxes are lower sure, but in Texas you're on your own if something bad happens, which isn't as true in California. Really, not a great comparison either since California has been top of the food chain far longer than Texas. texas really couldn't survive without the government money it receives from the military, no necesarrily true of California.

Re:And you expected something else...? (3, Insightful)

rmdingler (1955220) | about a year ago | (#42685229)

There's not a thing wrong with your math, and I live in one of these States, but the question of "better" should certainly be considered from every angle, as better, too, is in the eye of the beholder. If you're a Company looking to settle in an environment conducive to the corporate climate, Texas is your Huckleberry. If you'd prefer a place to raise your family that has the most stringent of environmental standards, California might well be your pick. Some times you feel like a nut, sometimes you don't. This is just me talking, but the coexistence of wide differences in opinion in one union is the very thing Country and marriage survive despite.

Re:And you expected something else...? (-1)

Anonymous Coward | about a year ago | (#42685245)

How can you even compare education when Texas is a state that teaches creationism, and would happily eliminate evolution from the curriculum completely if they could.

Re:And you expected something else...? (0, Offtopic)

Sarius64 (880298) | about a year ago | (#42685387)

Don't worry, in California they let teachers sexually assault your children with sperm cookies and give said teachers retirement packages of money when they get caught. Heck, the California Teachers Association threaten state congress members that tried to make sexual assault against children a mandatory firing event.

Re:And you expected something else...? (0)

Anonymous Coward | about a year ago | (#42685263)

Are you serious? The Texas public education system is a horrible joke. Their infrastructure is also garbage.. terrible city planning and terrible public transportation.

How did this get recced?

Re:And you expected something else...? (0)

Anonymous Coward | about a year ago | (#42685307)

Income, well being of minorities and the poor.
Execution of the mentally ill.
Number of governors (literally) praying for rain.

Due to immigration Texas is well on it's way to becoming a blue state anyway (Less than a decade, by some estimates). Sounds silly to you "Texans" but like the recent election, the numbers don't lie.

Re:And you expected something else...? (4, Insightful)

roc97007 (608802) | about a year ago | (#42685153)

Yes, as opposed to conservatives who can fund their spending based upon sunshine and puppy farts.

It's astonishing to me how many conservatives seem to believe that you don't need taxes to pay for services. You can just keep lowering taxes on the rich and wind up with more money than you had before.

I'm neither, but in all fairness I think the idea is to spend less on services, or have fewer services.

Re:And you expected something else...? (0)

Anonymous Coward | about a year ago | (#42685419)

Wow, finally someone who can think rationally. On Slashdot too... Amazing!

Re: And you expected something else...? (4, Insightful)

Xeranar (2029624) | about a year ago | (#42685093)

Ironically in this case it was a tax break created by progressives that was ruled unconstitutional. So your joke/stupid remark falls flat. Really this is a situation where large investors are taking it on the nose. As a progressive liberal I'm actually not OK with charging them retroactively unless this was acknowledged as up for debate previously and even then it should be executed without penalties.

Cash grab or otherwise this is more or less an administrative issue to be rectified amongst the elite.

Re: And you expected something else...? (0)

cshark (673578) | about a year ago | (#42685287)

And who exactly is the elite in this case? You don't have to be all that wealthy to make investments.

"Surreal"? (5, Insightful)

MrEricSir (398214) | about a year ago | (#42684827)

Retroactive taxes aren't particularly surreal. An example of surreal taxes would be if you had to submit your check to a giant who was growing out of the floor in a building that's melting.

So let's use the word correctly, please.

Re:"Surreal"? (1)

zyamada (2090752) | about a year ago | (#42684943)

C'mon, really?

Surreal: Adjective
Having the qualities of surrealism; bizarre: "a surreal mix of fact and fantasy".

The second definition fits perfectly.

Re:"Surreal"? (1)

Anonymous Coward | about a year ago | (#42684995)

Surreal is as close as I've got. It probably seems like a bad dream. These startup founders often go on to the next startup. So, if you're at start-up N+2 and you might have learned today that one of your primary backers is going to get an $800k tax bill, that could end your company.

I guess the s***** part is that it can ruin your company when everyone involved played by the rules and acted in good faith.

What word would you choose for waking up this morning to find this out?

Don't like retroactive laws. Taxes no different (5, Insightful)

eksith (2776419) | about a year ago | (#42684833)

People have been up in arms over ex post facto law, so why do they think they can get away with taxes? Granted, not all retroactive laws are unconstitutional. The tax law shouldn't have been in the books in the first place if it was unconstitutional, but we're not talking slavery here. Repeal the law, if you must, and call it even.

This is just a sad attempt at increasing state revenue

Re:Don't like retroactive laws. Taxes no different (1)

DragonWriter (970822) | about a year ago | (#42684939)

People have been up in arms over ex post facto law, so why do they think they can get away with taxes? Granted, not all retroactive laws are unconstitutional.

And this isn't a retroactive law, its the implementation of the decision that an existing statute providing a tax break, to quote the court decision, "can not stand under the commerce clause".

Re:Don't like retroactive laws. Taxes no different (4, Insightful)

sjames (1099) | about a year ago | (#42685173)

But it DOES create a tax liability that people had no reson to expect at the time it was (retroactively) incurred. So it is an ex post facto tax and it is unfair for the same reason an ex post facto law is.

In a sense, it is an ex post facto law because it creates a legal obligation for actions in the past that did not carry such an obligation at the time.

Otherwise, we accept that it is somehow Constitutionally OK to roll back a law that invalidated another law and so create a crime in the past where there was not one at the time (which is exactly when the prohibition on ex post facto laws is meant to prevent).

Re:Don't like retroactive laws. Taxes no different (5, Insightful)

Dahamma (304068) | about a year ago | (#42684949)

A law wasn't passed ex post facto and wasn't applied retroactively. A law passed years ago was declared unconstitutional, and the FTB is now making people re-file their taxes without its benefit.

I don't agree with the ruling, either, but if you are going to throw around all of those legal terms make sure they are used correctly...

Re:Don't like retroactive laws. Taxes no different (0)

Anonymous Coward | about a year ago | (#42685161)

Oh jeeze... so where are we now? "De facto ex post facto"?

Let's stop mucking around in the language and just appreciate that we all think this is retarded.

Re:Don't like retroactive laws. Taxes no different (1)

Crimey McBiggles (705157) | about a year ago | (#42685185)

I can't help but think about how insane it would be if we decided that federal income taxation was unconstitutional, and applied that ruling retroactively.

Re:Don't like retroactive laws. Taxes no different (1)

sjames (1099) | about a year ago | (#42685209)

The body of law was changed ex post facto by expanding a portion of it after the fact to cover a situation that was not covered at the time.

If I don't not kill someone, I have still committed murder.

Damages to out of state companies (5, Informative)

ZombieBraintrust (1685608) | about a year ago | (#42685019)

This isn't a retroactive law. This is invalidation of a law by a court. California basically created a tarrif to promote local buisnesses. States are not allow to create terrifs. California had two options. They could send money to every out of state buisness that was damage by the tarrif. Or they could undo the benifit the in state buisnesses recieved. California is broke so they did the second thing.

Re:Damages to out of state companies (0)

Anonymous Coward | about a year ago | (#42685313)

Just because the state can't afford it doesn't mean they aren't the responsible party.

Hey Cali, why stop at 2008 ... (1)

schwit1 (797399) | about a year ago | (#42684843)

How far back are they permitted to go? What stops them from going back 20 years or more? I would think there would be some ex post facto equivalent for civil issues.

Re:Hey Cali, why stop at 2008 ... (1)

Artraze (600366) | about a year ago | (#42684959)

My guess would be that it has to do with a statute of limitations...

Apparently California has a limit of four years from the filing date to collect any unpaid taxes. So I would conclude that the FTB's logic here is that, because the tax break was unconstitutional, these people should have known that(?) and their returns were all filed incorrectly. Thus, the FTB can collect the last four years of these back taxes because the deductions that were claimed weren't valid.

It's adorable the logic governments use to make ex post facto effects happen.

Re:Hey Cali, why stop at 2008 ... (1)

zyamada (2090752) | about a year ago | (#42684965)

Statue of Limitations for retroactive taxes in California may be 5 years? That's two more year's than the IRS' statue of limitations of retroactive taxing though.

Re:Hey Cali, why stop at 2008 ... (1)

DragonWriter (970822) | about a year ago | (#42684977)

How far back are they permitted to go? What stops them from going back 20 years or more?

They are going back exactly as far as they are allowed (and, in FTB's view, required) to go, applying the invalidation of the statute providing the tax break to all tax years for which the statute of limitations for tax collection has not expired.

I would think there would be some ex post facto equivalent for civil issues.

There isn't, really, because the reason for the prohibition of ex post facto laws -- which applies exclusively to criminal laws -- is because of the kind of consequences associated with criminal laws. That having been said, most laws (civil and criminal) in the US have limits to how far after the event recoveries can be pursued (statutes of limitations being common), outside of the prohibition of ex post facto laws.

Re:Hey Cali, why stop at 2008 ... (0)

Anonymous Coward | about a year ago | (#42685045)

I'd be for that! Lets go grab those businesses and shake the money out of them! Its like a pinata!

California (0, Flamebait)

girlintraining (1395911) | about a year ago | (#42684855)

In other news, much of the national deficit is due to this pathetically disorganized, in the red, severely overbudget, bloated state. Why do businesses continue to flock there? There's plenty of good homes along the east coast. Texas has a healthy tech sector. Even in the flyover state of Minnesota you can find plenty of talent. WHY CALIFORNIA PEOPLE? WHYYYyyyyy? Even Mexico didn't fight that hard for it -- they practically gave us the desolate, flood-prone, earthquake-prone, mudslide-prone, forest fire-prone state. How many hints does nature have to give a business before it takes the hint? :/

Re:California (1)

Anonymous Psychopath (18031) | about a year ago | (#42684945)

Well, this Californian was in Chicago last week and it was 12F. So, that's why.

Re:California (3, Funny)

Hartree (191324) | about a year ago | (#42685239)

"Well, this Californian was in Chicago last week and it was 12F. So, that's why."

Yeah, that can get old even for us Illinoisans.

But, on the other hand, it does help persuade the Californians to go back home after visiting. ;)

Re:California (0)

Anonymous Coward | about a year ago | (#42684957)

i ask myself the same question every time i write a check to FTB... but then i look outside at the beautiful weather, the gorgeous ocean line, the lovely Sierra Nevada's, the wonderful food and wine, the laid back culture, the tolerant populace... then i sign the check.

not a fan of FTB... if you thought IRS was bad...

Re:California (1, Informative)

Shaterri (253660) | about a year ago | (#42684987)

I'm not going to argue with 'severely over budget' (thank you, Prop 13) but the last information available for California suggests that federal spending in the state was substantially less (by roughly 25%) than federal revenues from the state; California is, on a per-capita basis and certainly on an overall basis, one of the largest net givers to the federal budget, not a taker. Do you have any specific reason to believe that that's changed in the last few years?

Re:California (3, Informative)

DragonWriter (970822) | about a year ago | (#42685003)

In other news, much of the national deficit is due to this pathetically disorganized, in the red, severely overbudget, bloated state.

California is net contributor to the federal budget, so a negative percentage of the federal budget deficit is due to California. Leaving aside the other inaccuracies in that sentence.

Re:California (2, Informative)

hguorbray (967940) | about a year ago | (#42685077)

nice try -thanks to Governor Moonbeam, er Brown, the state is projected to break even this year after years of deficits.
http://news.yahoo.com/california-budget-plan-surprise-surplus-012349478.html

and like most Blue States, we pay more $ to the Feds than we get back in Benefits

http://thepoliticalcarnival.net/2012/11/11/chart-ruh-roh-red-state-socialism-alert/

as does Minnesota.

You don't have to live here, but we like it quite a bit.

-I'm just sayin'

Re:California (5, Funny)

nobodyknowsimageek (218815) | about a year ago | (#42685143)

NO NO! We hate it here! It's terrible! Don't move to California, the weather isn't nearly as nice as you think! And there are all these liberals everywhere! And the GAYS!

By all means move to the East Coast; or Texas! Anywhere else but here.

(wink wink).

signed,
lifelong Californian

Re:California (1)

roc97007 (608802) | about a year ago | (#42685195)

NO NO! We hate it here! It's terrible! Don't move to California, the weather isn't nearly as nice as you think! And there are all these liberals everywhere! And the GAYS!

By all means move to the East Coast; or Texas! Anywhere else but here.

(wink wink).

signed,
lifelong Californian

I grew up in California, but when it became time to buy a house in an area where I could be gainfully employed, I had to move out of state. Just sayin'.

Re:California (0)

Anonymous Coward | about a year ago | (#42685151)

Blue states like paying taxes, so you can't complain if you pay more than you get back.

Re:California (0)

Anonymous Coward | about a year ago | (#42685397)

"projected" is the key word. Do you *really* believe California's state budget will break even? Please be honest.

You either believe in a progressive tax code or you don't. If you believe in progressive taxes, then states with citizens that earn more than average will pay more taxes. Quit complaining.

Re:California (3, Interesting)

jtownatpunk.net (245670) | about a year ago | (#42685099)

It's all about the weather.

Seriously. I've lived on the central coast most of my life and 5 years or so in the OC. When I visit other places, the weather often seems extreme. I visit family in the northwest and they've got this crazy stuff called snow that's like everywhere. It's where people live. In central and southern CA, we keep that shit up in the mountains where it belongs for ski weekends. I go to Vegas and it's ball-scorching hot. I don't care if it's a dry heat. An oven is dry heat, too. Don't even get me started on those New England summers and their 112% humidity. Just sit on the porch and sweat. Same in the south but they throw in thunderstorms and hurricanes.

Having said all that, I plan to be out of CA forever this year. I can take my equity from CA and be a semi-retired land baron in just about any other part of the country, living a comfortable life of leisure. Gonna load up the RV and head east until I find a nice place to settle down.

Re:California (0)

Anonymous Coward | about a year ago | (#42685141)

I live in Texas, and definitely want California to do well.

That way the CA people bringing their CA problems, their failure to be able to head basic rules of the road, and their CA real-estate prices can turn around and go home. It may be hip to take a screwdriver to a pickup's tires in LA because it isn't "eco" enough, but not so in other places.

Re:California (2)

undeadbill (2490070) | about a year ago | (#42685377)

No, much of the national deficit actually cannot be laid at CA's doorstep. Those decisions get made in Washington, DC. California has always been a net contributor, being still the eighth largest world economy in spite of the recession. You must be thinking of those red states... http://www.economist.com/blogs/dailychart/2011/08/americas-fiscal-union [economist.com]

*Certain* businesses flock to CA because the laws, business environment, and climate support their businesses well. Tech companies can find plenty of highly qualified staff because there are three public college systems, the local governments also help support the private ones, and employment/IP law favors job-hopping and entrepreneurship (making it possible for employees to leave disgruntled employers without fear of retribution). Ag companies like it here because you can farm year round, and CA ports are on the Pacific Rim. Manufacturers like it as well, but those who can't or won't avoid dumping pollutants into the water table (see ag) don't like CA, so they go to places like Louisiana instead.

Mexico couldn't keep CA. They were run by the Spanish at the time, and nobody wanted to deal with trying to maintain garrisons during a time of tall ships with months long voyages. That is why, when the US took over, they built the trans-continental railroad. Problem solved.

Retroactive Tax Hikes (1)

i_ate_god (899684) | about a year ago | (#42684871)

I can't believe how any freedom-loving country can permit retroactive anything.

How can anyone plan anything when the threat of a retroactive change takes place?

Re:Retroactive Tax Hikes (1)

CannonballHead (842625) | about a year ago | (#42684921)

country can permit retroactive anything.

You buy a slave legally. Country decides that is unconstitutional and decides all slaves must be free - retroactively.

Maybe some retroactive decisions are good.

Re:Retroactive Tax Hikes (2)

gl4ss (559668) | about a year ago | (#42684999)

country can permit retroactive anything.

You buy a slave legally. Country decides that is unconstitutional and decides all slaves must be free - retroactively.

Maybe some retroactive decisions are good.

that's not really retroactive. it's not like slave owners were forced to retroactively pay proper working mans wages to the slaves when they were freed...
there's nothing retroactive about ending someones contract at a certain point in time. it just ends there and then.

now, punishing concentration camp guards.. that's sort of retroactive, deciding their job was illegal after they had been at it for years.

this retroactive tax sort of assumes that rich are still rich, though it might be true in most cases who are affected by this.

Re:Retroactive Tax Hikes (0)

Anonymous Coward | about a year ago | (#42685371)

That I want to see. How are you going to free the slaves retroactively? Please think before you post.

As Abraham Lincoln said " Better to remain silent and be thought a fool than to speak out and remove all doubt."

duh (0)

Anonymous Coward | about a year ago | (#42684929)

retroactive plan, dubass.

+m

Re:Retroactive Tax Hikes (0)

Anonymous Coward | about a year ago | (#42684935)

A freedom-loving country that disallows homosexual marriage, abortions, personal drug use, and gun ownership really has no issue with a retroactive punishment for an offence that was unconstitutional at the moment it was perpetrated.

Re:Retroactive Tax Hikes (0)

Anonymous Coward | about a year ago | (#42684955)

Why obey the law today? It might change next year. This sets up a really bad precedent...

(The Parti Quebecois tried the same retroactive tax crap here in Quebec just after being elected last year, and they backed down 24hr later because they were about to be lynched politically.)

Dunning-Krueger in action (0)

Anonymous Coward | about a year ago | (#42684885)

Place your bets on how many people will comment on "ex post facto [wikipedia.org] " laws without actually knowing the slightest thing about them.

An interesting snippet from the above link:

Retroactive taxes are not ex post facto laws.[18] Substantive due-process challenges to retroactive tax laws are given rational-basis review per the decision in the case of United States v. Carlton.

Re:Dunning-Krueger in action (0)

Anonymous Coward | about a year ago | (#42685117)

It's still ex post facto, just because the courts have an astonishing ability to deliberately misuse and misunderstand reality, does not change the fact that this is a change made after people made their decisions. You can't change the rules after people have acting on them and claim that it's not ex post facto.

"Deferred"? (2, Interesting)

14erCleaner (745600) | about a year ago | (#42684905)

If the tax is truly just deferred, then it's not "retroactive".

Besides, it's only $150 million. A drop in the bucket, relative to the tech industry as a whole.

Re:"Deferred"? (1)

Anonymous Coward | about a year ago | (#42684983)

Besides, it's only $150 million. A drop in the bucket, relative to the tech industry as a whole.

Would you say the same thing if it applied to you?

It does apply to me - us (1)

Anonymous Coward | about a year ago | (#42685037)

Besides, it's only $150 million. A drop in the bucket, relative to the tech industry as a whole.

Would you say the same thing if it applied to you?

Yes it applies to us because they'll just pass the cost on to all of us. And since I'll never notice it, I don't give a rat's ass either.

Re:"Deferred"? (-1)

Anonymous Coward | about a year ago | (#42685061)

If I was a fatcat member of the millionaire's club, I'd keep my mouth shut lest the working people get angry enough to implement real tax reform and prevent me from giving my offspring winning tickets to the genetic lottery.

Re:"Deferred"? (1)

sycodon (149926) | about a year ago | (#42685349)

So you're just going to pitch your kids out onto the porch at 18 and say Good Luck?

What a parent.

Re:"Deferred"? (0)

Anonymous Coward | about a year ago | (#42685115)

Is the $150M coming from a single person? If not it would depend on what the tax bill amount was. Not sure if you are a non-driver or not .. but there are a couple of large pot holes in the southbound lanes of 101 near SFO. If this type of thing means those 4" deep by 2' wide holes get fixed so they are a road hazard for us folks on motorcycles .. so be it.

I'm really sick of folks whining about paying taxes. I don't whine about. I WANT someone to go and do that dirty work of maintaining the roads so I don't die just riding home from work. Just is what it is.

Re:"Deferred"? (0)

Anonymous Coward | about a year ago | (#42685223)

I'm really sick of folks whining about paying taxes. I don't whine about. I WANT someone to go and do that dirty work of maintaining the roads so I don't die just riding home from work. Just is what it is.

But that's the thing, a large portion of the taxes collected are not used to repair roads or do other socially useful stuff, they're wasted. Literally -- a committee to study this, a bureaucrat to file the form in triplicate, a third pension for the well-connected police chief who knows how to game the pension system... Not a lot of money each time, but it's death by a thousand cuts. And each of these people will scream bloody murder if you upset their individual rice bowl.

So yes, there's some whining about taxes. And I think it's plenty justified.

Ex post facto? (4, Interesting)

fyngyrz (762201) | about a year ago | (#42684907)

So. Does this make a crime of not paying taxes out of a situation where it was not a crime?

If so, it would seem to be ex post facto:

1st. Every law that makes an action done before the passing of the law, and which was innocent when done, criminal; and punishes such action.

2d. Every law that aggravates a crime, or makes it greater than it was, when committed.

3d. Every law that changes the punishment, and inflicts a greater punishment, than the law annexed to the crime, when committed.

4th. Every law that alters the legal rules of evidence, and receives less, or different, testimony, than the law required at the time of the commission of the offense, in order to convict the offender.

Seems to me they should just not pay, because there's no legal way to punish them for not paying.

Not that the supreme court has actually paid that much attention to ex post facto violations on either the federal or state level... real bunch of pants-shittingly stupid people in SCOTUS lately...

Re:Ex post facto? (0)

Anonymous Coward | about a year ago | (#42685127)

I don't think they make your old tax fileing criminal. They make it invalid and demand you to do a new one. I imagine refusing to re-file would be criminal as the change for the tax code was done (afew days ago) before your coming refusal.

Plantiffs thought process (1)

BigSlowTarget (325940) | about a year ago | (#42685001)

Hey let's push the state into exempting out of state companies so we can get the exemption too. Oh crap, we just screwed it up for everyone and wasted millions in legal fees for a ruling that will get us nothing. Who could have ever guessed California would take the money grab option?

WAIT A MINUTE! (2)

mmell (832646) | about a year ago | (#42685027)

I was taught (wa-a-a-y back in high school) that US laws couldn't be made retroactive. The case I heard about as an example was a guy who pissed in an unattended police vehicle. Turns out there wasn't a law against public urination and somehow this guy's lawyer convinced a judge that an unattended police car in an alley represented public property. The town this happened in passed a law PDQ, but couldn't apply that law to the fellow who triggered its inception.

Oh, wait. This is TAX law. The IRS can do pretty much anything they want; even the state IRS.

Re:WAIT A MINUTE! (0)

Anonymous Coward | about a year ago | (#42685139)

The US Spreme Court ruled that tax laws can be allied retroactive [latimes.com]

In 1993, I think August, Bill Clinton passed a retroactive estate tax back to Janurary 1993 and it was ruled as perfectly acceptable. The rules are not there to protect you, they are there to submit you to the government's will. David Gregory can break a firearms law in DC, Holder can ignore Congress and cover up mass killings, Hillary can lie about Lybia and say "What difference does it make?", but if you don't pay retroactive taxes you will eventually end up in jail. Its become a two-tiered system where they can kill anyone at anytime and not even have to answer questions or act indiginet when asked questions, but if you j-walk they can jail you.

Re:WAIT A MINUTE! (1)

CrimsonAvenger (580665) | about a year ago | (#42685305)

I was taught (wa-a-a-y back in high school) that US laws couldn't be made retroactive.

No low is being made retroactive.

An old law is being declared unconstitutional, and therefore all the benefits and penalties under the old law were invalid in the first place.

A good start (0)

Anonymous Coward | about a year ago | (#42685033)

So some rich investors use some illegal tax break to make even more money for themselves and now that it's declared illegal they have to pay a more fair share of taxes. Who gives a shit? It's just more whining from the rich.

But why stop there? Let's retroactively declare more bullshit tax breaks illegal... so the rich have to pay their fair share on their "grandson of BOSS" investments instead of the laissez-faire share they've been paying? Good. Make it so.

Re:A good start (1)

cshark (673578) | about a year ago | (#42685389)

I hear the media saying that a lot these days.
 
It's an absolutely ignorant and contemptible argument that it's just the rich that are affected by things like this. Venture capital outfits are funded by every day people, many of whom have their retirements locked up in pension funds that are tied to vc firms. So my big question to you, or anyone that makes this argument is... why do you hate pensioners so much? Why do you hate the guy who works hard, and puts money in his 401k to get a six percent or a twelve percent return? Why do you hate America and the free market?

The other question I have that comes to mind is this: You're quick to talk about giving their "fair share." But to date, I have yet to hear anyone explain what the logic is behind the "fair share" number. In fact, I have yet to hear a "fair share" number to begin with. Was hoping you, or someone who agrees with you can let me in what exactly "paying their fair share" actually means.

Ex post facto laws are illegal (2, Informative)

Marble68 (746305) | about a year ago | (#42685047)

Ex post facto laws are expressly forbidden by the United States Constitution in Article 1, Section 9, Clause 3.

People will sue - and this will go to federal courts... The question is will it make it to SCOTUS.

Re:Ex post facto laws are illegal (1)

gander666 (723553) | about a year ago | (#42685155)

That seems to be a limit on congress. Does that apply to states? (just asking, my civic class was more than 30 years ago)

Re:Ex post facto laws are illegal (0)

Anonymous Coward | about a year ago | (#42685177)

Until they retroactively amend the constitution—then it will no longer have been illegal now.

Re:Ex post facto laws are illegal (1)

CrimsonAvenger (580665) | about a year ago | (#42685323)

Ex post facto laws are expressly forbidden by the United States Constitution in Article 1, Section 9, Clause 3.

So, where's the ex post facto law in this case?

While I consider CA's behaviour slightly sleazy (though predictable), I can't see anything unconstitutional here.

As a Californian (1, Interesting)

Spy Handler (822350) | about a year ago | (#42685079)

I am ashamed of my state government and the populace that elected it. As soon as I have enough money to be worthy of Franchise Tax Board's notice, I'm fleeing to a free state.

Re:As a Californian (1)

Nimey (114278) | about a year ago | (#42685409)

Just like all those people who threaten to flee to Canada if an election doesn't go their way, right?

Pfft.

Exodus floodgates open just a little wider (4, Interesting)

AlienSexist (686923) | about a year ago | (#42685095)

California (and New York) are hemorrhaging population and business. Often (but not only) heading to Texas according to numerous articles and analysis [manhattan-institute.org] over the past year as well as the last census.

Texas appears to be the largest recipient of the migrations but so are Arizona and Florida. Coincidentally Texas was also named the 2012 Top State [yahoo.com] for business. Every few weeks I see more and more business headlines of companies (namely tech) moving to or starting a branch in Texas such as Apple [wired.com] , Facebook [statesman.com] , PayPal [austinnovation.com] , Catepillar [msn.com] and so on

There had been, however, some controversy over the years of TX Gov Perry's use of the Texas Enterprise Fund to woo companies to relocate. While the deal-landing results appear to be evident, some worry about the taxpayer cost, total incentive packages, and net gain of these deals. The fund seems to be perfectly suited to situations like this, where California tax laws cause some turmoil thereby increasing the opportunity to woo away industry. Recently Texas AG Greg Abbott has also been advertising to New Yorkers to move to Texas on account of gun control issues.

I wonder how long Texas can remain "Texas" if it becomes stuffed with people who are accustomed to living like Californians and New Yorkers.

Re:Exodus floodgates open just a little wider (1, Informative)

Darkness404 (1287218) | about a year ago | (#42685181)

And once the federal government starts making the entire country more business-unfriendly than it already is, expect to see massive off-shoring. Indeed if you were to start up a new online company and could base it anywhere in the world, the US and western Europe would be the last place where I'd host it.

Re:Exodus floodgates open just a little wider (1)

Maudib (223520) | about a year ago | (#42685347)

NYC has been gaining in population and business formation. Upstate is in decline, but whatever.

Re:Exodus floodgates open just a little wider (0)

Anonymous Coward | about a year ago | (#42685391)

Just as long as it takes the Texans to get fed up with their uppity ways and decide to have a necktie party.

Re:Exodus floodgates open just a little wider (0)

Anonymous Coward | about a year ago | (#42685395)

Considering that "business" is the center and cause of our economic crisis, who give a flying fuck who attracts the leeches with offers of free money. The same managers that uproot and move their company because of incentives are the same that think that outsourcing is a good idea, and that firing your staff to please wall street is another great idea.

You move your business to where it's got resources. Employees, shipping capacity, infrastructure. If the govt makes to to many concessions to business the public infrastructure dries up due to lack of funds. People move away because the roads are shit, the schools are shit, and there are no cops to keep their homes from being robbed. Shipping gets expensive. You find your plant in a county that can't sustain it because nobody wants to build that extra power line, water main, or shipping road.

Commerce Clause (1)

Leuf (918654) | about a year ago | (#42685145)

What is unconstitutional about a state providing state tax incentives for its residents to invest in companies within that state? There is no interstate commerce going on there. I know the federal government thinks absolutely everything is interstate commerce, but it doesn't make it true. It's allowing the federal government to regulate the tax policy of a state.

Re:Commerce Clause (1)

BradleyUffner (103496) | about a year ago | (#42685225)

What is unconstitutional about a state providing state tax incentives for its residents to invest in companies within that state? There is no interstate commerce going on there. I know the federal government thinks absolutely everything is interstate commerce, but it doesn't make it true. It's allowing the federal government to regulate the tax policy of a state.

How is someone from out-of-state investing in an in-state business NOT interstate commerce?

Just retroactively move (0)

Anonymous Coward | about a year ago | (#42685157)

Just retroactively move out of state. Maybe file for a refund for the taxes you DID pay.

This is why... (1)

Darkness404 (1287218) | about a year ago | (#42685159)

This is why most of the West is doomed. Why the hell would anyone start up a business in California if they pull stunts like this? Indeed, if you've got an online business with no geographical boundaries, why even host it in the US/Europe? Why not host it in a country that actually -wants- productive citizens?

In economic terms, a tax is basically a government's way of saying, "we don't want you to do that". An income tax is basically saying, we don't want you to work. A payroll tax is basically saying, we don't want you to hire people, etc.

Stuff like this will only hasten the demise of the US.

Re:This is why... (0)

Anonymous Coward | about a year ago | (#42685381)

California didn't do anything. They are complying with a federal court decision. You should direct your anger at the federal court

Does anyone actually read the article? or even the summary?

Evacuate (0)

Anonymous Coward | about a year ago | (#42685165)

GTFO of that hell hole.

When the US debt bomb finally detonates it will be la-la land that breaks off first. Then you'll be living in Mexico 2, the new kleptocracy.

Alas, Poor Pyrrhus (1)

Ear Phantom (250084) | about a year ago | (#42685199)

"One more victory like that and we're really finished."

Maybe he should have sued California for allowing ANY exemptions or deductions at all...

FSB are Fascists (0)

Anonymous Coward | about a year ago | (#42685213)

When I read about this I was furious. I thought I'd get hit; luckily I was off by a year so I'm safe. I was so ready to take a gun to Sacramento. It seems almost every year the Franchise Tax Board tries to screw me with some denial of whatever that takes me and my accountant time and money to protest. I swear the FSB is staffed with Fascists.

Well-deserved (0)

Anonymous Coward | about a year ago | (#42685361)

The Obama-loving pigs in Silicon Valley should be stripped of their last dollar by the govt.

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