Taxable Talk

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.

Hat Tip: FlashReport Blog

Last year, a law was passed by the California Legislature requiring past due taxpayers' names to be posted on the Internet. Earlier this year, the Board of Equalization listed their biggest debtors. Next month, 250 lucky taxpayers may find their names on the Franchise Tax Board's list.

According to this news report, the FTB is finally about to release their list. If you owe at least $185,000, your name may soon be in lights! The FTB is sending out one final request for payment to those lucky individuals giving them a chance to pay within the next 30 days. The largest amount owed to the FTB is $26 million.

When the list is published, I'll let you know.

As I mentioned previously, the Supreme Court will hear Department of Revenue v. Davis this Fall. If the Supreme Court rules for the Kentucky Department of Revenue (overturning the Kentucky Court of Appeals), then nothing will change, and states will be able to continue discriminate in favor of their own municipal bond interest for tax deductions. However, if the Court upholds the decision, then states will have to choose between taxing no municipal bond interest and taxing all municipal bond interest.

California allows taxpayers to file protective claims on issues that have not been decided. This is one such issue. I hadn't advised clients to file such claims yet because the Franchise Tax Board wasn't ready. Indeed, the FTB denied such claims. If you filed such a claim, and it was denied and the status is final, you must appeal to the State Board of Equalization or you will lose your claim.

The FTB is no longer denying such claims, and is now accepting protective claims. If you are impacted by this issue, and wish to file such a protective claim, you can do so by mailing such claims to:

FRANCHISE TAX BOARD
PO BOX 942867
SACRAMENTO CA 94267-2222

Make sure you note that you are filing a protective claim on the "Department of Revenue v. Davis" decision. Any client who feels that they are impacted by this should contact our office so we can advise them on this issue.