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It's got nothing to do with increasing tax revenue - it's petty overreaction on behalf of the responsible state body - the FTB. I quote liberally from the artic

by rplacd 14y ago

It's got nothing to do with increasing tax revenue - it's petty overreaction on behalf of the responsible state body - the FTB. I quote liberally from the article: > It turns out that a few years ago, someone sued the Franchise Tax Board over being denied the right to claim the QSB benefit [Cutler v. Franchise Tax Bd., 208 Cal. App. 4th 1247 (2012)]. The company at issue in that lawsuit did not meet one of the QSB requirements—that it maintain 80 percent of its employees and assets in California. In August of 2012, the California Court of Appeals sided with the plaintiff, ruling that denying him the QSB exclusion based on the “80 percent requirement” was an unconstitutional violation of the interstate commerce clause. > Since the FTB lost the case, you might think that they would strike the unconstitutional requirement and keep the rest of QSB statute intact. Not a chance. > What the FTB did instead was to take their ball and go home. They decided that since they could not impose the “80 percent requirement,” no one would be entitled to the QSB exclusion. They put out an announcement terminating the Qualified Small Business exclusion and retroactively disqualifying all exclusions and deferrals going all the way back to 2008.

_delirium 14y ago
That's actually fairly common in decisions striking down agency interpretations. Sometimes a court will order a specific remedy, but other times they only rule that the existing regulation was illegal but leave open multiple ways of curing it. In the case where the problem was that a regulation impermissibly distinguished between groups that the law didn't allow distinguishing between, there are two ways to fix it: put everyone into bucket A, or put everyone into bucket B. And in fact in either case you have to do it retroactively, to fix the ruled-invalid error of treating the two groups differently.
- dragonwriter 14y ago
  This is not a decision striking down an agency interpretation. The decision explicitly found that the statute supplying QSB benefits in California "is discriminatory on its face and cannot stand under the commerce clause". Had an agency interpretation been struck down, it would be fair to say that (within the bounds of the court decision and the governing statute) the FTB was free to come up with a new interpretation. But when a statute is struck down, it can only be fixed by the legislature. An administrative agency can't fix constitutional defects in statute: they have no authority to do so. (The court could have severed the unconstitutional provision and preserved the rest of the statute, and there is some indication in the decision that they probably would have done so rather than ruling the statute facially invalid if they had been reasoning clearly and consistently. But they didn't, and the FTB isn't really free to apply what the court should have ruled instead of what the court actually ruled.)
dragonwriter 14y ago
Its true that its not about increasing tax revenues, but it doesn't seem to be a "petty overreaction" either, its the FTB applying the Court of Appeals determination that California's QSB benefit statute violated the Constitution (the exact words from the holding regarding the statue are that "The statute is discriminatory on its face and cannot stand under the commerce clause.") The FTB doesn't have the power to arbitrarily rewrite unconstitutional laws to remove the parts that have been found to make them unconsitutional -- either the court (by explicitly severing the unconstitutional provision) or the legislature would have to do that. The court of appeals case is at http://www.leagle.com/xmlresult.aspx?xmldoc=In%20CACO%2020120828024.xml&docbase=CSLWAR3-2007-CURR http://www.leagle.com/xmlresult.aspx?xmldoc=In%20CACO%202012... and the FTB's description of its application of the decision is at https://www.ftb.ca.gov/law/notices/2012/2012_03.pdf https://www.ftb.ca.gov/law/notices/2012/2012_03.pdf and the FTB's FAQ on its action is at https://www.ftb.ca.gov/law/Qualified_Small_Business_Stock_and_Cutler_Decision.shtml https://www.ftb.ca.gov/law/Qualified_Small_Business_Stock_an...

by rplacd 14y ago

_delirium 14y ago

That's actually fairly common in decisions striking down agency interpretations. Sometimes a court will order a specific remedy, but other times they only rule that the existing regulation was illegal but leave open multiple ways of curing it. In the case where the problem was that a regulation impermissibly distinguished between groups that the law didn't allow distinguishing between, there are two ways to fix it: put everyone into bucket A, or put everyone into bucket B. And in fact in either case you have to do it retroactively, to fix the ruled-invalid error of treating the two groups differently.

dragonwriter 14y ago
This is not a decision striking down an agency interpretation. The decision explicitly found that the statute supplying QSB benefits in California "is discriminatory on its face and cannot stand under the commerce clause". Had an agency interpretation been struck down, it would be fair to say that (within the bounds of the court decision and the governing statute) the FTB was free to come up with a new interpretation. But when a statute is struck down, it can only be fixed by the legislature. An administrative agency can't fix constitutional defects in statute: they have no authority to do so. (The court could have severed the unconstitutional provision and preserved the rest of the statute, and there is some indication in the decision that they probably would have done so rather than ruling the statute facially invalid if they had been reasoning clearly and consistently. But they didn't, and the FTB isn't really free to apply what the court should have ruled instead of what the court actually ruled.)

dragonwriter 14y ago

Its true that its not about increasing tax revenues, but it doesn't seem to be a "petty overreaction" either, its the FTB applying the Court of Appeals determination that California's QSB benefit statute violated the Constitution (the exact words from the holding regarding the statue are that "The statute is discriminatory on its face and cannot stand under the commerce clause.") The FTB doesn't have the power to arbitrarily rewrite unconstitutional laws to remove the parts that have been found to make them unconsitutional -- either the court (by explicitly severing the unconstitutional provision) or the legislature would have to do that. The court of appeals case is at http://www.leagle.com/xmlresult.aspx?xmldoc=In%20CACO%2020120828024.xml&docbase=CSLWAR3-2007-CURR http://www.leagle.com/xmlresult.aspx?xmldoc=In%20CACO%202012... and the FTB's description of its application of the decision is at https://www.ftb.ca.gov/law/notices/2012/2012_03.pdf https://www.ftb.ca.gov/law/notices/2012/2012_03.pdf and the FTB's FAQ on its action is at https://www.ftb.ca.gov/law/Qualified_Small_Business_Stock_and_Cutler_Decision.shtml https://www.ftb.ca.gov/law/Qualified_Small_Business_Stock_an...