San Francisco Business Journal Quotes Manatt Partner on FTB's Retro Tax Demand
"California's Retro Tax Smacks Business Backers"
San Francisco Business Journal
January 25, 2013 - The San Francisco Business Journal quoted Manatt's David Herbst, a partner in the firm's Tax, Employee Benefits & Global Compensation Practice, on the California Franchise Tax Board's decision to apply retroactive state taxes with interest after deeming a tax break invalid.
The journal reports that the Franchise Tax Board has invalidated a tax break on small-business investments, after an appeals court ruled in August that the tax break unfairly favored investment in California. In addition to invalidating the tax break, the FTB is also applying retroactive state taxes with interest on roughly 2,000 investors and 500 taxpayers who claimed the break for 2008 to 2011. Industry experts told the publication that they think the FTB is taking too aggressive of an approach and will be unfairly punishing those people who relied on state law in good faith.
Herbst, who is head of business and transactions in Manatt's Silicon Valley office, said that the Franchise Tax Board could have waited for the trial court to finish with the case before demanding retroactive taxes, or asked the State Legislature to come up with a remedy that would have been less drastic.
"It's seemingly an unfair result for those people who in many cases reinvested or spent the money and may not have the cash," Herbst said.
Read the article here.