Hi - I apologize for taking a while to circle back to this as I think you guys are raising some very important points. But I still contend that your interpretation is incorrect and I certainly content that I did not post "factual inaccuracies" in my piece. Listen, I'm not a consitutional or tax lawyer, I'm a business owner who's upset at what's happened here. That said, I spoke to professionals (legal and tax) with a lot more knowledge and experience than I have who advised me on the facts and implications of the underlying case before I wrote that essay. I'd like to direct you to a piece by Deloitte that was issued after the Appelate case was handed down (link below) - and well before the FTB action. The section toward the end titled Undecided Issues makes clear what the court ruling definitely said, what it definitely did not say, and what was handed back to the lower court to decide. It's certainly possible that the action taken by the FTB was their only possible course of action, but the legal and tax professionals I've spoken to or read online don't agree with your position on that.

Thanks for your interest in this matter, -Brian

Here's that link: http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Ass...

And here's the specific section I'm referring to:

Undecided Issues As noted previously,16 the same definitional provisions upon which the property and payroll requirement is derived for purposes of gain deferral under Section 18038.5 apply also with respect to qualification for gain exclusion under Section 18152.5(a). However, the Court of Appeal’s decision addressed the constitutionality of the gain deferral provision under Section 18038.5 only, and the facts before the court did not involve the gain exclusion provision under Section 18152.5(a). Thus, the court’s decision did not address whether the property and payroll requirement would cause the gain exclusion provision under Section 18152.5(a) to also be deemed unconstitutional. The court’s decision in Cutler also did not address whether the unconstitutional definitional language in Section 18152.5 (and the Section 18038.5(b)(1) crossreference to that language), upon which the property and payroll requirement is based, could be excised from the statutes or whether the decision would operate to invalidate both statutes in their entirety. Finally, as discussed above, the Court of Appeal declined to decide whether the taxpayer should be afforded the refund requested or whether some other appropriate remedy, if any, should apply and instead remanded the case to the trial court for further proceedings to address the remaining factual dispute and, if appropriate, the remedy.