Petition Closed
Petitioning Controller, State of California John Chiang

Stop The Retroactive Tax on Small Business Owners in California

Small business owners and investors drive growth and job creation in the state of California. The recent cancellation of the Qualified Small Business tax program and the resulting retroactive tax on more than 2,500 entrepreneurs and investors wrongly punishes the very people who create opportunity for the citizens of the state. This policy decision sends a signal that new business development is not welcome or supported in California. We need your immediate support to rectify this wrong.

Letter to
Controller, State of California John Chiang
As entrepreneurs and innovators, we are writing to express our serious concern that recent changes to the tax laws in California will negatively impact continued investment in the start-ups and small business crucial to the economic success of our state. As leaders who push the edge of innovation in order to compete and survive in business, we know how important it is to have tax policy that promotes investment in and by entrepreneurs to fuel the economic engine of our state.

A recent ruling by the California Court of Appeals deemed the deferral provision of the state's Qualified Small Business (QSB) stock tax law unconstitutional. This harmful decision was compounded exponentially by the Franchise Tax Board’s administrative decision in December 2012 to cancel both the exclusion and deferral provision of the law and to seek a five-year retroactive clawback of taxes that had been previously excluded and deferred by entrepreneurs and investors throughout the state and to assess interest on those amounts

The economic impact to the 2,500+ affected investors, entrepreneurs, and business owners is devastating with many of them facing sudden tax bills in excess of $100,000. But the implications to the business community in the state of California may be even more serious.

This action wrongly punishes law-abiding, productive business owners who created tremendous employment opportunities, tax revenue, and long term growth for the California economy. Retroactively seeking taxes and interest from these individuals is bad policy and sends a signal that new business development is not welcome or supported in California. This action also sends a strong message to the business community that they cannot trust California tax law or its institutions of government to provide a stable environment to launch and grow new companies.

We urge the Franchise Tax Board to reverse its decision to retroactively apply the tax changes on the QSB stock exclusion. We urge you to reach out to legislative leaders to discuss ways to accurately reflect the intent of the original legislation. And we urge you to meet with affected taxpayers in various venues around the state to hear our concerns.

We stand ready to communicate with our state legislators to support you should you seek legislative or other solutions that can remedy this situation.