Katie wrote:

- quote -

The FTB has now issued instructions on filing a protective
claim for refund of the LLC fee. There is a link to it on
the front page of the FTB web site, www.ftb.ca.gov.

Katie in San Diego

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"Katie" <katiej_1958[at]yahoo.com> wrote:
- quote -

I'd appreciate that. I'm at stu at lexregia dot com

Stu

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Stuart A. Bronstein wrote:
- quote -

I got it from Tax Analysts via Lexis. If you don't have
access, I can e-mail it to you in Word format.

Katie

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finniganps wrote:

- quote -

Thanks for the update on Ventas. I haven't talked to
anybody, so all I knew was what was in the FTB's litigation
roster.

I wouldn't take any bets on the remedy that will be
established when all is said and done. All I know for sure
is that anybody who hasn't filed a timely claim for refund
won't get a refund for any closed years. Of course, in the
end NOBODY may get a refund for ANY year. But who knows?

Katie

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"Katie" <katiej_1958[at]yahoo.com> wrote:

- quote -

Do you have a link to the proposed ruling? I checked the
court's website and it's not up there yet.

Stu

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The next case, Ventas Finance I, LLC v. California Franchise
Tax Board, is set for trial on May 8, 2006 in Superior
Court. This is an LLC with activity in CA and other states.
The remedy on this should be interesting. I think there's
an issue with respect to the Northwest case which said that
the LLC fee is a tax. If this holds (it's a tax, not a
fee), I think an argument could be made that the tax was
illegally adopted (didn't have the required 2/3 vote of
legislature, or a vote by the people). If it doesn't, it
will be interesting to see what the remedy will be in terms
of refunds.

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Gil Faver wrote:
- quote -

Well, those were the facts in the case at issue. But if
it's unconstitutional as applied to that corporation, surely
it is also unconstitutional as applied to any corporation
that is taxable within and without California, because it
clearly violates the internal consistency test.

It isn't at all clear from this decision what the remedy
will be for other taxpayers if the fee is ultimately struck
down. Can they bifurcate it, e.g., keep it for
100%-California LLCs but refund it for multistate ones? Can
the courts create an apportionment formula? When all is
said and done, it may be all or nothing -- it's
unconstitutional for everybody or for nobody.

There is another case following along on this issue, in the
same court and filed by the same attorneys (Amy Silverstein
and Ed Antolin). Trial on that one was set for March 6. I
don't know if the facts in that one are any different from
Northwest Energies. It's Ventas Finance I v. FTB, SF
Superior Court No. 450001.

I wouldn't let a statute on a $6,000 or $12,000 fee expire
without discussing it with the client. The FTB says it will
hold claims pending resolution of the lawsuits. Of course,
it's possible that someone else will have to litigate the
within-and-without issue.

Katie in San Diego

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"Katie" <katiej_1958[at]yahoo.com> wrote:

- quote -

this decision also seems to offer very limited relief:

The proposed decision would grant a refund of all LLC fees
paid by an out-of-state LLC whose sole contact with the
state of California was that it had registered
as an LLC with the California Secretary of State's office.

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A Superior Court judge in San Francisco has issued a
proposed statement of decision holding that the California
LLC fee, which is based on total (unapportioned) revenue,
violates the Due Process and Commerce clauses of the U.S.
Constitution. Northwest Energetic Services, LLC v.
California Franchise Tax Board, California Superior Court
County of San Francisco, Dkt. No. CGC-05-437721, 03/02/2006.

Many commentators (including me!) have believed from the
beginning that the fee was unconstitutional. The proposed
decision finds that the "fee" is in reality a tax, and that
it fails both the internal and external consistency tests
established by the U.S. Supreme Court. I think it's
unconstitutional even if it isn't a tax, but really a fee.

Obviously this is going onward and upward. Assuming the
proposed decision becomes final, it is still only a trial
court decision. However, protective claims for refund of the
fee should be filed before statutes expire. It is not clear
what the remedy will be if the fee is finally determined to
be unconstitutional; therefore, it would make sense to claim
a refund of the total amount paid. BTW, this decision does
not affect the $800 minimum tax, only the revenue-based
"fee."

Katie in San Diego

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