Retroactive Taxes Have CA Lawmakers Scrambling

Pushing businesses toward the exit

Twenty years ago, state lawmakers passed a tax break aimed at helping California entrepreneurs launch their own businesses.

But last year, after a state court of appeal decided the small-business tax incentives were unconstitutional, the state Franchise Tax Board figured it had only one option: retroactively collect an estimated $120 million from hundreds of Californians who took advantage of the tax breaks.

In some cases, the surprise tax notices mean back taxes of $60,000 to $100,000, or more.