• California LLC Fee Unconstitutional; Filing Protective Claim for Refund
  • April 27, 2006 | Authors: John R. Bonn; D. Matthew Richardson
  • Law Firm: Sheppard, Mullin, Richter & Hampton LLP - Los Angeles Office
  • The limited liability company fee imposed under California law recently was held to be unconstitutional according to the court in Northwest Energetic Services, LLC v. California Franchise Tax Board (Super. Ct. San Francisco County, 2006, No. CGC-05-437721). The decision states that the graduated fee imposed on the "total income" of an LLC (meaning gross income plus the cost of goods sold) under Section 17942 of the California Revenue and Taxation Code is illegal for violating the Commerce Clause and the Due Process Clause of the U.S. Constitution.