The FTB had two choices: allow the deduction for every QSBS that didn't qualify due to the 80% rule, or retroactively impose the tax on all who claimed it. I'm

The FTB had two choices: allow the deduction for every QSBS that didn't qualify due to the 80% rule, or retroactively impose the tax on all who claimed it. I'm sure somebody did the math, and found a huge liability for the state if all the previously non-qualified QSBS' were given the deduction. Keep in mind the FTB can't allow the status quo: if they allow the previous claimants keep the deduction, they must grant the same ability to the previously non-qualified. They chose then to disqualify the previous claimants and fight with them on a case-by-case basis, rather than pay.