The California Legislature is currently looking at AB1546. The initial goal of this legislation was to make the LLC “fee” (tax) legal. This fee is based on gross receipts.
As I wrote last year, courts ruled twice last year that the LLC fee is unconstitutional. The legislature, desperate for money, decided to change the way that the LLC fee, er, tax, is calculated so that it is only based on California income. That’s reasonable.
However, a recent amendment in the State Senate will drastically impact California taxpayer rights. AB1546 was amended so that no interest will be paid on any tax or fee that you pay that’s ruled unconstitutional.
So let’s assume that California enacts a tax on Enrolled Agents income. I sue, claiming it’s discriminatory and unconstitutional. I win. All I’ll get back is the tax—California will have the free use of my money for years. AB1546 is an invitation for California to enact dubious taxes as the state would keep the interest earned.
Needless to say, I hope this legislation—at least, the amendment that impacts all taxpayer’s rights—doesn’t pass the legislature. More likely, it will pass and we’ll have to hope that the Governor takes out his veto pen.