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NATIONAL TAXPAYERS UNION v.CALIFORNIA FRANCHISE TAX BOARD

NTU filed a new case in California to protect California taxpayers from a retroactive apportionment scheme which would significantly increase their taxes. 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.

California Revenue and Taxation Code section 25128.9 (Section 25128.9) was signed into law by California Governor Gavin Newsom on June 27, 2024. Essentially, 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 Section 25128.9 prior to its enactment.

NTU, by and through its counsel Greenberg Traurig, filed suit to challenge Section 25128.9, seeking declaratory and injunctive relief. In the Complaint, NTU raised three causes of action: 1) Section 25128.9 is vague and violates the Due Process Clause of the U.S. Constitution; 2) the retroactive application of Section 25128.9 violates the Due Process Clause of the U.S. Constitution, and 3) the retroactive application of Section 25128.9 violates the Due Process Clause of the California Constitution.

Read about the timeline in this Taxpayer Defense Center case here:

August 14, 2024: Complaint Filed