California Court Invalidates Ban on Performance-Based Fees in Tax Credit Program

Global tax services firm Ryan has won a lawsuit challenging the provisions of a regulation governing consultant fee arrangements, especially the limitation on contingent fee arrangements.

Ryan filed a petition for a peremptory writ of mandate challenging a portion of the regulation adopted by the California Governor’s Office of Business and Economic Development (GO-BIZ) to implement the “California Competes” tax credit program. The rule attempted to control the fees that companies can pay to professionals who assist them in securing state tax incentives under the program.

In Ryan U.S. Tax Services, LLC v. State of California, California Superior Court Judge Timothy M. Frawley granted Ryan’s petition, stating that the “cost of a consultant’s services is a matter between the taxpayer and the consultant.” 

The decision invalidated an emergency rule restricting performance-based fee arrangements for companies applying for the California Competes Tax Credit.

“The California Governor’s Office of Business and Economic Development exceeded its statutory authority by imposing a de facto ban on performance-based fees companies pay when securing tax credits that drive economic growth and job creation,” said Ryan chairman and CEO G. Brint Ryan. “We are pleased with the court’s decision, proud to lead the charge against government overreach, and committed to aggressively defending the rights of our clients—as well as taxpayers everywhere—from unlawful and burdensome tax regulations.”