California: Tax break for startups, small businesses advances

Christopher Arns for the Sac Business Journal writes: A bill that would affect small businesses in California marched closer to becoming reality after a committee hearing earlier this week.

Senate Bill 209 would retroactively allow taxpayers to deduct 38 percent or defer all of the profits made from selling qualified small business stock, which are shares issued by “C” corporations with gross assets of less than $50 million. Those firms must do at least 80 percent of their business in specific industries.

The Assembly’s Committee on Revenue and Taxation approved the bill Monday. Next stop for the proposal is the Appropriations Committee, which hasn't set a date for a hearing. The committee already had a list of nearly other 100 bills to review at Wednesday’s meeting, which could push back consideration of SB 209.

Some business owners are worried if the bill doesn’t pass, they will retroactively pay higher taxes as far back as 2008. According to the most recent legislative analysis, some opponents of the proposal think the bill will create tax refunds for out-of-state firms with no incentive to invest in California.

California used to allow investors to deduct 50 percent of income made from selling qualified small business stock from state taxes, but the Franchise Tax Board abandoned this policy in December after a court decision found the tax deduction discriminated against certain types of investments.