Northwest wins LLC fee case

LLCs that filed protective claims for refund based on the unconstitutionality of California’s LLC fee are one step closer to obtaining refunds. The First Appellate District of the Court of Appeals has affirmed the trial court’s decision and decided in favor of Northwest Energetic, in one of three LLC fee constitutionality cases moving through the court system. (Northwest Energetic Services, LLC v. FTB (January 31, 2008) Case Nos. A114805/A115841/A115950) The FTB has not stated whether they will now petition the California Supreme Court.

The court held that the fee is essentially a tax, and that the calculation of the fee is unconstitutional. The court has made it clear that the fee is unconstitutional because it is not apportioned, but did not address the issue of how the fee applies to LLCs operating within California.