Taxable Talk

Dan Meyer of the TickMarks blog made a request of me: “Present or past entertainers O. J. Simpson, Sinbad (Adkins) and Dionne Warwick are part of California’s Delinquent Taxpayers List. Each owes over $1,000,000 in income taxes and each have had tax liens initiated prior to 2000…Meanwhile, Russ Fox of Taxable Tax is likely to have more on this story.”

We covered this list a week ago, but we didn’t highlight all the names. So here are some more famous names:

Dionne Warwick, S. Orange, NJ; $2.655 million
Sinbad Adkins, Oak Park, IL; $2.139 million
Orenthal Simpson, Miami, FL; $1.435 million
Brian Holland, Las Vegas, NV; $984,000

It’s difficult for the FTB to impose judgments against out-of-state taxpayers. True, the rulings are on the books, and interest (and penalties) can continue to accrue. Dionne Warwick, though, lives in New Jersey. If she doesn’t set foot in California, the FTB would have to fight in New Jersey courts to get any money. Luckily for the FTB, Dionne Warwick is “working with the FTB to resolve her tax problems,” according to this article. She blames the problems on negligent business managers.

Similar situations exist for entertainer Sinbad, and composer Brian Holland. Nevada is an especially tough jurisdiction for California–because of various actions of the FTB, including the Hyatt case.

And then there’s O.J. Yes, Mr. Simpson, who has his own current legal problems, probably doesn’t care too much about the FTB. In any case, if he ever raises money–or finds the real killer–that money will be heading to the Goldman family.

I do think that listing these names is a good strategy. Some people will pay because they will be ‘shamed’ into it. Some, perhaps like Dionne Warwick, are shielded and had no idea that they owe money. Of course, some are scofflaws and no amount of posting names will have an impact. In a few months, I’ll inquire with the FTB and see how much of an impact this listing has made.

California’s Legislature approved AB198, and the Governor recently signed the legislation into law. The bill changes how California’s LLC fee is calculated.

This legislation changes the LLC fee so that it is apportioned, in the same manner as the income tax is apportioned. This should make the fee constitutional for 2007 and onwards.

However, according to Spidell Publishing, the Franchise Tax Board is asserting that this legislation is retroactive to prior years. Two companies have successfully sued the FTB; courts ruled that the fee was unconstitutional. What the FTB will try to do in appeals court is to only have to refund the non-apportioned portions of the LLC fee.

I doubt this argument will hold up. This law was not in place in the years in question, and I don’t believe any legislature can go back into the past and change the law for prior years. I expect the FTB will lose this argument, and the state will have to refund the fees sometime in the future.

By the way, AB1546, another bill that would have fixed the LLC fee, was moved into the inactive file at the end of this past year’s term. This bill would have had many other deleterious impacts to California taxpayers, so I’m glad it’s dead.

The Franchise Tax Board (California’s Income Tax Agency) has published its list of the top 250 debtors to the FTB. You can find the list here.

Rapid America Corporation heads the list, with a debt of $26.8 Million. The largest individual debtor is Waheed U Begum who owes $10.6 Million. Some famous individuals are on the list; for example, Dionne Warwick owes $2.7 Million.

The list will be updated semi-annually. The goal is to shame people into paying their taxes. It will be interesting to see if it works.