Only in California!

If that sounds like a declaration of war on entrepreneurs in the Golden State, you wouldn’t be far off as far as Brian Overstreet is concerned.

Overstreet is the tech entrepreneur widely credited with having broken the story on a holiday season decision by the California Franchise Tax Board (FTB) to retroactively rescind a tax program that had incentivized companies to stay and grow in the state. The FTB about face was driven by a court decision that said the tax incentive was inappropriately granted only to companies with 80% of their assets in California.

So, the FTB dumped the whole program retroactively back to 2008.

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“On December 27th of last year, I got an email from our law firm saying the Qualified Small Business tax incentive program had been retroactively canceled,” Overstreet recalls in the accompanying video. “I assumed our counsel was wrong because it just seemed insane. But the lawyers were correct, the state was retroactively canceling the program and we, along with thousands of other entrepreneurs and investors would now owe a lot more money in taxes.”

Overstreet continues: “I tried to make calls, but it was the holidays. I expected to hear anuproar after the first of the year, but there was silence. So, I started calling reporters I knew, and one of them asked me to submit a blog post on the situation”

That blog appeared in the widely read Xconomy news service and website, and lit a firestorm of media and business interest in the topic.  Among the outlets covering the year-end tax announcement: the San Diego Union Tribune, San Francisco Business Times, Reason, Xconomy (again), and major service firms such as Manatt Phelps and Deloitte.

“If you followed the law, did nothing wrong, and created jobs in California, you received a legal reduction in the state tax on capital gains you paid when you sold your company.” Overstreet explained to me. “Now, five years later, you get a bill for new taxes plus interest for up to five years.”

Here’s his story as he explained in his original blog: