National Taxpayers Union v. California Franchise Tax Board
California Bill Enables Retroactive Taxation
California Governor Gavin Newsom signed California Revenue and Taxation Code section 25128.9 into law on June 27, 2024. The law is a retroactive apportionment scheme that would significantly increase taxes paid by Californians.
Section 25128.9 seems to exclude from the apportionment formula any receipts that are not included in net income (such as exclusions, deductions, exemptions, and etc.). This overly broad statement is confusing to taxpayers because the statement “not included in net income” makes it nearly impossible for taxpayers to comply, as they are unsure what income is supposed to be declared and what income is supposed to be excluded. Additionally, Section 25128.9 appears to reach back into eternity, as there is no set time limit as to how far back this section reaches. This can cause millions of dollars to be on the line from taxpayers who rightfully failed to comply with the law prior to its enactment.
Taxpayer Defense Center Takes Action
NTU, through its counsel Greenberg Traurig, filed suit to challenge Section 25128.9. In the complaint, NTU raised three causes of action:
- The law is vague and violates the Due Process Clause of the U.S. Constitution
- The retroactive application of the law violates the Due Process Clause of the U.S. Constitution
- The retroactive application of the law violates the Due Process Clause of the California Constitution
The Case Is Ongoing
NTUF’s Taxpayer Defense Center will continue to protect taxpayers from retroactive taxation. The case is National Taxpayers Union v. California Franchise Tax Board, et al. and is in the Superior Court of California in the County of Sacramento. Stay tuned for further developments.