Healdsburg entrepreneur fights retroactive tax

  • Healdsburg businessman Brian Overstreet is facing a retroactive tax bill from the state for $250,000. His office in Healdsburg was the former home of the Sonoma County Taxpayers' Association. (John Burgess/The Press Democrat)

Brian Overstreet is more familiar with starting a business than lobbying the Legislature, but a retroactive state tax bill has him crying foul and calling for relief.

Overstreet, 41, a Healdsburg business owner, has emerged as a leader in a statewide effort to stop California from presenting small business owners with retroactive tax bills totaling up to $150 million.

The entrepreneurs, some of whom expect to individually be billed for more than a half-million dollars in back taxes, maintain they already paid what they legally owed as long as five years ago.

Officials for the state Franchise Tax Board insist they had no choice but to seek the extra money from roughly 2,500 taxpayers.

The regulators settled on that path after an appellate court last year struck down parts of a law offering tax incentives linked to the creation of new businesses in California. After the defeat, tax officials maintained they must go as far back as allowed by the statute of limitations and collect the full amount owed without the disputed tax break.

The business owners respond that it's wrong for the state to adopt new rules after the fact. Doing so, they said, sends a chilling message to entrepreneurs thinking of starting a business in the Golden State.

"This is just patently unfair," said Overstreet, CEO and a majority owner of AdverseEvents, a health care information company based in Healdsburg.

Overstreet faces more than $100,000 in retroactive taxes and interest as a result of the decision.

The state Senate this week will hold its first hearing on legislation that would negate the extra taxes and eventually renew the tax incentive for people who start or invest in small businesses. Already 38 legislators from both parties have shown support by signing a letter calling on the state Franchise Tax Board to drop its efforts to collect the extra taxes.

Sen. Ted Lieu, D-Torrance, the author of the proposed law, said the tax board's approach could discourage new business in California because entrepreneurs may conclude they can't trust the state's tax law.

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