As we previously reported, a California superior court has certified a class action suit that will provide relief to out-of-state LLCs, LPs, and corporations that were passive investors in an LLC doing business in California (see “Class action suit certified on behalf of out-of-state passive LLC investors” in the March 2024 issue of Spidell’s California Taxletter®).
The FTB has begun sending notices out to potential class members informing them that they will be part of the class unless they opt out by August 20, 2024. The notice is available on the FTB’s website at:
www.ftb.ca.gov/tax-pros/law/Bahl-Media-vs-FTB-Minimum-Tax-GateMarks-Duplex.pdf
Prior to the OTA’s precedential decision in Appeal of Jali (2019-OTA-204P), the FTB was erroneously imposing the $800 annual/minimum tax and penalties and interest against many of these taxpayers even though these entities were not considered to be “doing business” in California and were not subject to the tax.
It’s important to note that the class certified by the court only includes taxpayers that paid the tax and filed timely claims for refund. This is true even though in FTB Notice 2017-01 FTB told taxpayers that they were ineligible for refunds if they had more than a 0.2% interest in the LLC doing business in California.
The attorneys representing taxpayers in the class action suit, Amy Silverstein of Silverstein & Pomerants, LLP, and Alexandar Freeman of Calvo Fisher & Jabos, are encouraging any other taxpayers negatively impacted by the FTB’s treatment of passive activities as “doing business” to contact them. This may include taxpayers that paid the tax for any year but did not file a claim for refund, and taxpayers that did not pay the tax and have received notices from the FTB stating they owe the tax.
They can be reached at asilverstein@sptaxlaw.com and afreeman@calvojacob.com.
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