A bill introduced in the California State Assembly by Bob Wieckowski, AB 901, would remedy the recent controversy over the State’s former qualified small business stock incentives program. The program permitted a deferral of income and credits for investments in startups, but favored California-owned startups over out of state businesses.

A California Appellate Court, in Cutler v. Franchise Tax Board, 208 Cal. App. 4th 1247 (2012) found the incentive unconstitutional for discriminating against non-California corporations. In response to Cutler, California Franchise Tax Board issued a Notice announcing that they would retroactively assess taxpayers who had benefitted from the program, causing significant outcry in the business and legal community.

The bill would amend the qualified small business stock incentives statute to remove the discriminatory language, and making the change retroactive to January 1, 2008; this would prevent the Franchise Tax Board from making assessments for prior benefits received, and maintain the incentive for startups going forward.

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