The Blog Peoria Project

Should Illinois try to poach tech start ups from California?

What say you, Illinoisans? Should be be trying to lure spurned start ups from California?

Many startup entrepreneurs and investors in the state of California are now starting to receive big bills in the mail for back taxes that they never expected to owe.

That’s because in late December, when many of us were heading out for the holiday break, the state’s Franchise Tax Board eliminated a deduction that had been available since 1993. This tax break was available to people who made money from selling stock they’d held in California-based small businesses for at least five years, as long as they reinvested their gains in other small businesses in the state. Essentially, it encouraged many people to repeatedly invest in small businesses — potentially a big deal for entrepreneurs and angel investors.

Perhaps the most shocking thing about this is that the FTB is implementing the change retroactively, so it doesn’t just eliminate the break going forward: Anyone who used the tax break on the sale of startup stock from 2008 to today is now required to pay that money back, plus interest.