**ALERT** Late Session Assault on Taxpayer Rights **ALERT**
The end of session is a good opportunity to amend into bills controversial issues that authors hope will go unnoticed in the hustle and bustle of hundreds of bills. A perfect example is AB 1546 (Calderon).
This is legislation that started off trying to resolve a situation where the state found itself on the losing end of a billion dollar court decision. The court found unconstitutional the LLC "fee" which taxed income from both inside and outside the state. The bill had problems from the start. While it correctly addressed the commerce clause violation by limiting income determination to in-state revenues, it also limited the LLC’s ability to be reimbursed from the state.
Late last week, however, AB 1546 was quietly expanded to limit the ability of all taxpayers — business and personal — to recover fees or taxes that are declared unconstitutional. What this bill means is that if the government of California unjustly taxes your income and it takes five years to have a judge agree that the state violated the constitution, you can only be reimbursed for the amount that was taken. No earned interest, and a closing of other remedies for recovery. Plus, the bill applies retroactively to cases currently before the courts.
The new amendments set a dangerous precedent for legislative interference in taxpayer recovery in all challenges of unconstitutionally enacted taxes and fees. When a tax law is unconstitutional, taxpayers should have the right to seek court reversal of the entire law and full refunds of the unconstitutional tax imposed upon them. When the Legislature passes unconstitutional laws, it should accept the consequences, including respecting the right of taxpayers to seek all of the remedies available to them in court.
This late assault on taxpayer rights is unsurprising given the other abuses Democrats have piled onto taxpayers this year. Should Democrats play to form, the bill will pass and we will have to hope that Governor Schwarzenegger cares more about taxpayers than do the Democrats.
The final days of the legislature are always a tricky time – we must remain dilegent – or California taxpayers will be the poorer for it.