By George Runner
State of California is Returning Millions to Business Owners
This spring thousands of business owners throughout California are receiving a welcome surprise in their mailbox. Rather than a notice of a new tax, fee or audit, they’re getting a check from the State Board of Equalization.
No, we’re not talking about annual income tax refunds from the Franchise Tax Board. These checks are marked “SECURITY REFUND” and represent a dramatic shift in how California’s elected tax board welcomes new businesses to our state.
Previously new corporations and LLCs were forced by the BOE to turn over anywhere from $2000 to $50,000 of their own money as security before they could make a single legal taxable sale. This “security” was held just in case a business might default on its taxes during its first three years of operation.
It was a uniquely California-style shake down. Rather than encourage new business start-ups, the government robbed them of the capital they needed to be successful, only to sit on it for three years before returning it.
I took a close look at the program and found it didn’t make sense for taxpayers or the state. Security was rarely applied, and staff time and energy were needlessly being diverted from assignments that could yield real revenue for the state.
At my urging, the Board of Equalization voted in December to end its long-standing security policy. Going forward, the Board will require security only when a business has a history of non-payment or poses a high compliance risk.
So far, we’ve identified nearly 10,000 accounts with security totaling $95.4 million eligible for release. We are releasing this security back to its rightful owners. Nearly all non-cash refunds, like bonds, TCDs and guaranties, are already out the door. Cash refunds begin mailing this month.
A breakdown of cash deposits being released is available by city.
Small business owners, entrepreneurs and others who do business in our state are some of the bravest people I know. We owe them our gratitude for the jobs they create and the billions in tax revenue they generate. These dollars pay for shared priorities like schools, public safety and roads.
Although California continues to have some of the highest tax rates and most burdensome regulations in the nation, the Board’s vote sends a signal that California is not beyond hope. Elected officials can work together in a bipartisan manner to make commonsense changes that help small business owners and entrepreneurs be successful.
Gary Toebben, President and CEO of the Los Angeles Chamber of Commerce, writes: “On behalf of business owners throughout California, we thank the Board of Equalization for doing the right thing for California and our economy. We hope that this is just the start of smart legislation and regulatory reform by government at all levels during 2014 to seek out and eliminate unnecessary regulations that stand in the way of job creation.”
Gary’s right. If we want jobs and revenue, the best way to bring it about is by helping business owners be successful in our state. The Board’s new security deposit policy does just that. Let’s look for other opportunities to do the same. George Runner represents more than nine million Californians as a taxpayer advocate and elected member of the State Board of Equalization.
Government Theft – Illegal Taxes & Fees May Not Be Returned to You!
Did you know that if the State of California takes your money in the form of an illegal tax or fee, you might not be able to get it back?
I was outraged when I first learned if a taxpayer pays a tax or fee that is later found to be unconstitutional or illegal in court, the government does not necessarily have to refund their money.
Currently, taxpayers are only eligible to receive refunds if they have exhausted all of their “administrative appeals remedies,” even if the tax they paid is later declared illegal or unconstitutional.
In order for taxpayers to exhaust their “administrative appeals remedies” they must file a timely refund claim with the proper agency. The time period to file a refund claim is different for each tax and fee program, ranging anywhere from 30 days to several years.
That’s right; your state government will keep any and all money it illegally took from you, unless you have already jumped through several confusing administrative hoops – even hoops that you were never aware of.
That’s why this legislative session, I am proud to sponsor legislation to change this situation by extending important, common-sense protections to taxpayers. Two identical measures, AB 2510 (Wagner) and SB 1327 (Knight), would require the state to provide a full refund to all individuals who paid a tax later declared unconstitutional or illegal.
These bills would require the state to automatically issue refunds to taxpayers who were illegally taxed. It would also open up an additional appeals period of one year after a state tax is declared unconstitutional, giving taxpayers a chance to apply for the refunds they deserve.
Our legislation would apply to state taxes and fees paid by both businesses and individuals, and would affect people all across California.
For example, these bills would apply to the controversial Fire Prevention Fee, paid by nearly 800,000 rural homeowners every year. Even if the class action lawsuit currently challenging the fire fee is successful, only taxpayers who filed appeals within 30 days of the date on their bills would be eligible for refunds. Under SB 1327 and AB 2510, every fire fee payer would receive a refund.
Businesses and large taxpayers would also benefit from these bills becoming law. For example, a number of years ago the Board of Equalization (BOE) overstated the property values of a number of power plants. One of the plants, Elk Hills Power, sued the BOE and eventually won, resulting in a partial refund of the taxes it paid. However, several other plants were deemed ineligible to receive a refund because they did not protest the original assessment.
In my opinion, this is just wrong.
According to SB 1327 author state Sen. Steve Knight: “When government makes a mistake, they need to do the right thing. This bill would return illegally collected taxes to the taxpayers… it’s just common sense.”
Assemblyman Donald Wagner, author of AB 2510, adds: “When California taxpayers have been illegally forced to pay a tax, it should not be their responsibility to fill out paperwork that they may or may not know exists, in order to recoup this money. The State needs to reimburse the taxpayers as quickly and painlessly as possible – it is not our money.”
It is criminal that the State of California can keep money it illegally collects from its citizens. Anyone who in good faith pays what ends up being an illegal tax should get their money back. It’s as simple as that.
George Runner represents more than nine million Californians as a taxpayer advocate and elected member of the State Board of Equalization. For more information, visitboe.ca.gov/Runner or calfirefee.com.
For more information, visit boe.ca.gov/Runner.