UPDATE: The hearing on final approval of the Proposed Settlement is now November 15, 2022 at 10:00 a.m.
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.
|YOUR LEGAL RIGHTS AND OPTIONS IN THIS PROPOSED SETTLEMENT:|
SUBMIT A CLAIM
|If you are a Class Member, you can submit a Claim Form online or by mail to the address provided in FAQ 11. All Class Members will be bound by the Class Members’ release of the claims in this lawsuit, whether or not they submit a claim or receive a payment from the Settlement Fund. The deadline to submit a Claim Form is August 19, 2022. See FAQ 11 for more details.|
EXCLUDE YOURSELF FROM THE PROPOSED SETTLEMENT
|You will not be part of the Proposed Settlement or receive any benefits from it if you exclude yourself from the Proposed Settlement. This is the only option that allows you to retain your right to bring another lawsuit against the FTB about the claims in this lawsuit. The postmark or email deadline to exclude yourself is August 19, 2022. See FAQ 19 for more details.|
OBJECT TO THE PROPOSED SETTLEMENT
|Write to the Settlement Administrator if you do not like the Proposed Settlement. You may object to the Proposed Settlement and also submit a claim for payment under the Proposed Settlement. Objectors to the Proposed Settlement will be bound by the Class Members’ release of the claims in this lawsuit if the Proposed Settlement is approved. The postmark or email deadline to send an objection is August 19, 2022. See FAQs 20 & 21.|
ATTEND THE HEARING
|The Court has set a hearing on November 15, 2022 at 10:00 a.m. regarding the fairness of the Proposed Settlement. You may appear at the hearing, but you do not have to. You may hire your own attorney to appear for you. See FAQs 23-24.|
|If the Proposed Settlement is approved and you do nothing, you will not receive any benefits from it (to receive any benefits you must file a Claim Form). You will be bound by the Proposed Settlement terms and Judgment and will not be able to later sue FTB about the claims in this lawsuit. See FAQ 18 for more details.|