Gold Tax Exemption Increased to $2,000 in California
We explore the new regulations affecting the Gold Tax in this article.
It was never the intent to include Gold tax in the expression, better late than never. The Franchise Tax Board took their time abiding by the law. And eventually, three months after their due time, fancied themselves to act on the laws.
Costing many companies and people money due to detrimental reliance on complying with existing gold tax laws. And made specific investment decisions according to existing gold tax laws. As an example, take one client of ours that two days before this law passed purchased an American Buffalo gold coin for $1985. Would he eagerly overpay an additional $15 if he knew in 2 days, a new regulation will declare he owes $158.80 as a gold tax for not paying $15?
Here we have the state disregarding the law, while the citizens and businesses are abiding by the law. It seems down right un-American to punish the citizens for the state’s laziness and cavalier attitude about following the law.
GOLD TAX EXEMPTION
We generally like this gold tax law because it provides, Cal. Rev. & Tax. Code, § 6355(a) (“There are exempted from the taxes imposed by this part the gross receipts from the sale in bulk of monetized bullion, nonmonetized gold or silver bullion, and numismatic coins”.) (All references to Rev. & Tax Code are to the California Code, unless we indicate otherwise.)
Rev. & Tax. Code, § 6355 (“(c) ‘Monetized bullion,’ for purposes of this section, means coins or other forms of money manufactured of gold, silver, or other metal and heretofore, now, or hereafter used as a medium of exchange under the laws of this state, the United States, or any foreign nation. ‘Monetized bullion,’ for purposes of this section, also means gold medallions struck under authority of the American Arts Gold Medallion Act ( Title IV of Public Law 95-630).”)
WHEN GOLD IS EXCLUDED FROM GOLD TAX EXEMPTION
But we were referring to Rev. & Tax. Code, § 6355(b)(2)(A) (“on or before each October 1 of each year thereafter, the board shall multiply the amount applicable for the current calendar year by the inflation factor adjustment determined by the Franchise Tax Board pursuant to subdivision (h) of Section 17041, the resulting amount to be the applicable amount for the succeeding calendar year.”)
Which also notes the rather large jumps in the threshold as per id. (b)(2)(B) “the resulting applicable amount, rounded to the nearest multiple of five hundred dollars ($500), shall be operative for purposes of paragraph (1) beginning January 1 of the succeeding calendar year.”
RETROACTIVE GOLD TAX
The law mandates must occur “on or before October 1”. Three months later, the board eventually would perform their job. Therefore as “Amended and effective February 6, 2023”:
Cal. Code Regs., tit. 18, § 1599 (“For sales occurring on or after January 1, 2023, a sale in bulk occurs if the total market value of the monetized bullion, nonmonetized gold or silver bullion, and numismatic coins sold in a single transaction is $2,000 or more, or is equal to or exceeds the adjusted amount as computed by Revenue and Taxation Code Section 6355.”)
You know, that way the citizens can enjoy this concept of notice.
So we have a tax law that was effective Feb. 6, and taxes that are now effective before that event. But only after it. (It’s a Back-to-the-Future thing.) You may be thinking, aren’t retroactive laws illegal? The answer is yes and no. The federal constitution prohibits retroactive laws, Article I, Section 9, Clause 3: “No Bill of Attainder or ex post facto Law shall be passed.” Equally so does the California Constitution, Article I, Section 9, “A bill of attainder, ex post facto law, or law impairing the obligation of contracts may not be passed.”
As to the federal prohibition: “The Court has construed both clauses to ban legislatures from enacting laws that impose criminal liability or increase criminal punishment retroactively.(fn.3)” Constitution Annotated
Fn.3 “See, e.g., Calder, 3 U.S. at 389; Peugh, 569 U.S. at 532–33; Baltimore and Susquehanna R.R. v. Nesbit, 51 U.S. 395, 401 (1850) (a state can enact a retroactive law that is not punitive and does not impair the obligation of contracts). See also Fletcher v. Peck, 10 U.S. 87, 138 (1810) (An ex post facto law is one which renders an act punishable in a manner in which it was not punishable when it was committed.); Locke v. New Orleans, 71 U.S. 172, 173 (1867); Orr v. Gilman, 183 U.S. 278, 285 (1902).”
HISTORY OF RETROACTIVE TAXATION
The short citation above was to the most famous of all ex post facto cases, written back in a time when reading case law was like reading legal poetry. Professing the import of a limited government and expounding upon individual liberty as paramount. The Supreme Court wrote in Calder v. Bull (1798) 3 U.S. 386, 388-89:
An ACT of the Legislature (for I cannot call it a law) contrary to the great first principles of the social compact, cannot be considered a rightful exercise of legislative authority. The obligation of a law in governments established on express compact, and on republican principles, must be determined by the nature of the power, on which it is founded…. they may declare new crimes; and establish rules of conduct for all its citizens in future cases; they may command what is right, and prohibit what is wrong; but they cannot change innocence into guilt; or punish innocence as a crime; or violate the right of an antecedent lawful private contract; or the right of private property. To maintain that our Federal, or State, Legislature possesses such powers, if they had not been expressly restrained; would, in my opinion, be a political heresy, altogether inadmissible in our free republican governments.
Written by men that lived under the boot and knew oppression, not in theory but by surviving it. Modernly, of course, the government all knowing and meaning well, rules with an iron fist, for our own good.
Calder, of course, went on and continued with holding that laws effecting only civil law were not covered by the ex post facto clause.
FEDERAL APPROVAL OF RETROACTIVE TAXATION
Which is why our courts view the retroactive application of tax law as no moment of import.
The courts have consistently upheld against constitutional challenges new taxes and tax increases which operated retrospectively. ( Milliken v. United States (1931) 283 U.S. 15 [retroactively increased tax rates on gifts in contemplation of death]; United States v. Hudson (1937) 299 U.S. 498 [upheld new tax including transfers which had occurred 35 days before enactment of the tax]; Sunset Nut Shelling Co. v. Johnson (1942) 49 Cal.App.2d 354 [amendment to the Franchise Tax Act retroactively raising rate upheld even for those who had paid tax at earlier rate]; 9 Witkin Summary of Cal. Law (9th ed. 1989) Taxation, § 27, and cases cited therein.)
West Hollywood Concerned v. City of W. Hollywood (1991) 232 Cal.App.3d 486, 494
CALIFORNIA EXPRESSLY CONDONES RETROACTIVE TAXATION
Specifically under California law, the imposition of retroactive taxation is encouraged.
Although county assessors in some cases reassess property in the same assessment year that a triggering event occurred, in other cases there is a delay between the triggering event and reassessment. In that circumstance, “the county assessor has the authority—and a constitutional duty—to levy retroactive assessments to recapture any under-taxation in the prior years that would otherwise escape taxation due to the delay between the triggering event and the reassessment. ( Rev. & Tax. Code, §§ 51.5, subd. (d), 531, 531.2 ; Trailer Train Co. v. State Bd. of Equalization (1986) 180 Cal.App.3d 565, 580 .)” ( Prang , supra , 54 Cal.App.5th at p. 8, 268 Cal.Rptr.3d 376.)
“If … reassessment is appropriate, then the assessor has ‘a constitutional [and a statutory] duty to levy retroactive assessments’ ‘if [he or she] discovers property has “escaped assessment.” ’ [Citations.] The duty to levy escape assessments springs from our Constitution’s mandate that ‘[a]ll property … be taxed in proportion to its full value’ ( Cal. Const., art. XIII, § 1, subd. (b), italics added), and this mandate obligates assessors ‘(1) to assess all property in [their] jurisdiction and (2) to do so on a uniform basis.’ [Citation.] ‘If any property subject to taxation should escape assessment in any year,’ … ‘the taxation for that year would not be equal and uniform, nor would all property in this State be taxed in proportion to its value, and the behest of the Constitution would not be obeyed.’ [Citation.]” (Prang , supra , 54 Cal.App.5th at p. 14, 268 Cal.Rptr.3d 376, italics omitted.)
LA Live Props., LLC v. Cnty. of L.A. (2021) 61 Cal.App.5th 363, 370-71
Ironically, all gold tax was uniform. Because not until there was a new law, was it even possible for it to not be uniform.
You will see our founding father Ben Franklin appear many times on our site. Not due to a particular favoritism, but it just so happens that the man was often right.
“Our new Constitution is now established, everything seems to promise it will be durable; but, in this world, nothing is certain except death and taxes,” (Ben Franklin letter to Jean-Baptiste Le Roy, 1789)
When we combine the certainty of death and taxes expression with, if you can’t beat ‘em, join ‘em; we find an inescapable conclusion. Paying taxes sure beats joining the other team. We alas surrender to eventuality.
After all, we can’t all be lucky enough to live in places like Delaware. Del. Code tit. 9 § 8341 (“In no case shall the supplemental assessment procedure be employed to impose taxes retroactively.”)