California Franchise Tax Board (FTB) LLC fees $22M class action settlement

Update:

• The claim form deadline has been extended to Aug. 19, 2022.

The California Franchise Tax Board (FTB) has agreed to pay $22 million as part of a settlement to resolve claims it charged LLC companies unconstitutional tax fees.

The FTB settlement benefits LLCs that paid an LLC tax fee based on their worldwide total income previously required under Cal. Rev. & Tax. Code § 17942. Eligible LLCs must have submitted a refund request that was either denied or denied with the opportunity to file a lawsuit under California tax code by Feb. 4, 2010.

The California Franchise Tax Board is responsible for California taxes by both individuals and businesses. Cal. Rev. & Tax. Code § 17942 determines the taxes limited liability corporations (LLCs) have to pay. 

Although the tax code was amended in 2008, previous versions of the statute required LLCs to pay taxes based on their worldwide income. Taxpayers took action against the California FTB, arguing these taxes were unconstitutional. According to the lawsuits against the tax authority, LLCs in the state should only need to pay taxes based on income derived in California.

In two lawsuits, the tax statute was found to be unconstitutional, though the court hasn’t decided if the plaintiffs in the consolidated FTB LLC fees lawsuit were correct. Instead of litigating this issue through a trial, the California FTB agreed to pay $22 million to resolve the allegations.

California Franchise Tax Board LLC fees settlement benefits

Under the terms of the settlement, class members can collect payments for the LLC fees they previously paid to the California FTB. 

Payment amounts will vary based on the amount each LLC paid in tax fees, how much of those payments were for non-California income and other factors. Depending on the number of claims filed with the settlement, some class members could receive full refunds of their allegedly unconstitutional tax payments.

However, since the FTB has held onto the paid tax fees for over 15 years, LLCs may not have records proving where they generated income that was later taxed. Although class members with documentation may be eligible for higher payments, proof of income isn’t required to receive a refund.

The deadline for exclusion and objection is July 5, 2022. 

The final approval hearing for the FTB LLC fees settlement is scheduled for Aug. 2, 2022.

In order to receive benefits from the settlement, class members must submit a valid claim form by Aug. 19, 2022.

Who’s Eligible

The FTB settlement benefits LLCs that paid an LLC tax fee based on their worldwide total income previously required under Cal. Rev. & Tax. Code § 17942. Eligible LLCs must have submitted a refund request that was either denied or denied with the opportunity to file a lawsuit under California tax code by Feb. 4, 2010.

Potential Award

Varies

Proof of Purchase

Class members with documentation may be eligible for higher payments, proof of income isn’t required to receive a refund.

Claim Form

NOTE: If you do not qualify for this settlement do NOT file a claim.

Remember: you are submitting your claim under penalty of perjury. You are also harming other eligible Class Members by submitting a fraudulent claim. If you’re unsure if you qualify, please read the FAQ section of the Settlement Administrator’s website to ensure you meet all standards (Top Class Actions is not a Settlement Administrator). If you don’t qualify for this settlement, check out our database of other open class action settlements you may be eligible for.

Claim Form Deadline

08/19/2022

Case Name

Franchise Tax Board Limited Liability Corporation Tax Refund Cases, Case No. CJC-12-004742, in the Superior Court of the State of California, City and County of San Francisco

Final Hearing

08/02/2022

Settlement Website

FTBLLCTaxSettlement.com

Claims Administrator

FTB LLC Tax Settlement Administrator
1650 Arch Street, Suite 2210
Philadelphia, PA 19103
info@FTBLLCTaxSettlement.com
888-874-5887

Class Counsel

Amy Silverstein
SILVERSTEIN & POMERANTZ LLP

Kathleen V. Fisher
Rodney J. Jacob
Alex M. Freeman
CALVO FISHER & JACOB LLP

Defense Counsel

Laura E. Robbins
DEPUTY ATTORNEY GENERAL
CALIFORNIA DEPARTMENT OF JUSTICE