In what is likely the last step before officially declaring insolvency, California has halted the processing of state tax refunds. Per California State Controller John Chiang's office, "Unfortunately, we have asked the California Franchise Tax Board not to send over tax refund claims beginning today because we will not be able to process them and have them out the door by Feb. 1 when a 30-day delay in tax refunds goes into effect." Can taxpayers ask the IRS not to have to pay taxes?
2.74 million individuals and businesses will have a tax refund delayed and the delay in their processing should free up $1.99 billion over the next month to pay for "education, debt service, and other payments that legally have first claims to state funds." As this money is essentially a debt to its residents, some could interpret this action as a forced 30 day grace period before Cali has to retain Lazard and some overpaid bankruptcy lawyers.
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