January 26, 2022

Volume XII, Number 26

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January 25, 2022

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January 24, 2022

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California State Senate Passes Measure Providing Partial Relief From Cutler Decision (re: Qualified Small Business Stock (QSBS))

The California State Senate yesterday approved a measure providing relief (albeit only partial relief) to those taxpayers facing retroactive tax assessments by reason of the Cutler decision. In Cutler v. Franchise Tax Board the California Court of Appeal held that the California tax incentives relating to the sale of qualified small business stock discriminated against interstate commerce and were therefore unconstitutional.

The measure provides the affected taxpayers with only 75% relief (38% of the gain, instead of 50%, would be excluded from income). For the remaining 25%, the measure would allow taxpayers to enter into 5-year installment payment agreements with the FTB. All penalties and interest would be waived. The retained 25% of the assessed tax is to help the State pay refunds to those out-of-state taxpayers who are now retroactively eligible to claim the incentives.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume III, Number 152
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About this Author

D. Matthew Richardson, Tax and Estate Lawyer, Sheppard Mullin
Partner

D. Matthew Richardson is a partner in the Orange County and Los Angeles offices, a member of the Tax and Estate Planning Practice Group. 

Areas of Practice

Mr. Richardson specializes in mergers and acquisitions, corporate reorganizations, liquidations and spin-offs, complex financing, debt restructuring, real estate taxation, joint ventures, partnerships and limited liability companies. He regularly counsels early-stage technology and other businesses with respect to various formation, operation and taxation issues.

Mr. Richardson also specializes in...

213-617-4222
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