Business & Tech
Healdsburg Businessman Leads the Charge Against “Unconstitutional” Business Taxes
A 20-year tax incentive for small businesses was ruled unconstitutional in August, and now the state wants back taxes business owners did not know they were liable for.
A 20-year tax incentive that cut the state capital-gains tax rate in half was ruled unconstitutional last summer by the California Court of Appeals –putting start-up businesses at fault for five years of back taxes, as far back as the state can collect due to statute of limitations.
One of the affected investors is Brian Overstreet of Healdsburg, the largest individual shareholder of a San Diego publisher of specialized research that sold for more than $20 million.
The Wall Street Journal online reported last Friday,
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To combat the latest retroactive tax, Brian Overstreet, a small-business owner in Healdsburg, in Sonoma County, who said he owes $250,000 in back taxes and interest, has assembled a group called the California Business Defense. Because the window has closed to further appeal the court ruling, the group has turned to working with state lawmakers on two bills that have broad bipartisan support.
The basis of the California Business defense, as outlined by their attorney Eric Miethke, is that state law “prohibits an administrative agency from declaring a statute unconstitutional, or from enforcing a statute on the basis of a belief the statute was unconstitutional.”
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Miethke, and Overstreet, thus believe the tax board may have overstepped its bounds.
A spokesman for Democratic Gov. Jerry Brown's Office of Business and Economic Development, called the court's ruling on the tax benefit "unfortunate," and he said the office is "reviewing the situation to determine how best to help these business owners."
Chuck Meyer, a 54-year-old Nevada City resident who sold his electronics company in 2008 and received a six-figure tax bill for the transaction this year, said he might have timed the deal differently or moved his company elsewhere had he known the law was invalid.
"We don't have pensions—this is our retirement," Mr. Meyer said. "It's just crushing."
Subscribers to the Wall Street Journal can read the entire article online.
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