FTB LIMITED LIABILITY CORPORATION TAX REFUND CASES

Welcome to the FTB Limited Liability Corporation Tax Refund Cases Settlement Website

If you are a member of the Class, your legal rights will be affected.
Please read the notice.

• A proposed settlement has been reached in a class action lawsuit against the California Franchise Tax Board (“FTB”) challenging the constitutionality of the LLC Fee imposed on limited liability companies (“LLCs”) for tax years 1994 through 2006 (“Proposed Settlement”). The “LLC Fee” or “Levy” means the tax that LLCs were required to pay under former Cal. Rev. & Tax. Code (“RTC”) § 17942. Prior to 2007, the statute required LLCs to pay an annual fee based on their worldwide total income, regardless of whether the income was derived from activities within or without California. The statute was found unconstitutional as applied to two taxpayers in two prior lawsuits. This lawsuit alleges that because of the constitutional defects in the statute, refunds are due to the Class Members. FTB denies that refunds are due. The Court has not decided who is right.
• The Court has allowed the lawsuit to proceed as a class action on behalf of the LLCs that are Class Members. “Class Members” include all LLCs that paid the LLC Fee and filed timely claims for a refund of the LLC Fee on the ground that the LLC Fee was based on their worldwide total income rather than income derived from California, and that had their claim denied or deemed denied.
• The Proposed Settlement will affect the rights of all Class Members. The Notice describes your legal rights and what steps you may take. The Notice is not an expression of any opinion by the Court as to the merits of the Proposed Settlement or any claims or defenses asserted by Plaintiffs on behalf of the Class or the FTB.
• Subject to Court approval, under the Proposed Settlement, FTB will pay $22 million to create a settlement fund (“Settlement Fund” or “Gross Settlement Fund”). The Settlement Fund will be used to pay attorneys’ fees (not to exceed 30%, or $6.6 million), litigation expenses (not to exceed $140,000), administration costs (estimated to be $250,000), and service awards to the named Class Representatives (not to exceed a total of $10,000), leaving an estimated amount of at least $15 million for distribution to Class Members with valid claims (“Net Settlement Fund”). Valid refund claims will be identified through a claims process. A claim will be considered only if the representative of the Class Member testifies under penalty of perjury that some or all of the LLC’s income was derived from activities outside of California and provides all of the information requested on the Claim Form. If this information shows that the LLC was entitled to a refund (and, in some cases, also contains documentary support), the claim will be deemed valid and entitled to payment. The amount that Class Members will receive depends on the number of valid claims received and other factors explained in the Notice.
• The Court will decide whether to approve the Proposed Settlement. Payments to Class Members with valid claims who do not exclude themselves from the Proposed Settlement will be made if the Court approves the Proposed Settlement. Please be patient and check this website to find out when the payments may be available.
• Your legal rights are affected whether you act or do not act. Read the Notice carefully. Your rights and options, and the deadlines to exercise them, are explained in the Notice.
• To ensure you receive the full benefits to which you may be entitled, you should fill out and return the Claim Form or submit the Claim Form electronically.