Senate Bill 167 could end up giving the state the power to do something that seemed impossible: Force corporate entities to pay a tax levied retroactively — long past the tax the bill being settled fair and square.

SB 167 came secretly in a state budget trailer back in June, changing the rules for apportioning corporate global income to determine what portion is taxable in California.

The change will lead to higher taxes for many businesses for periods that ended decades ago.

As explained by CalMatters columnist Dan Walters, the issue centers on whether “corporations should report their global incomes to California and have a calculated percentage subjected to state taxes, or could confine their taxable income reports to actual activities within the state.”

Corporations filing in California have either option available, but after a tax dispute with Microsoft over how dividends from foreign subsidiaries should be treated, a three-member appellate panel of the Office of Tax Appeals found in favor of Microsoft. The result could have put the state on the line to refund $1.3 billion to the corporation.

Hence AB 167 was born, declaring that the Franchise Tax Board’s position is the law.

A legal challenge was brought by the California Taxpayers Association and filed in Fresno County Superior Court on Aug. 15. Another organization, the National Taxpayers Union, filed suit in Sacramento.

“This egregious violation of taxpayers’ right cannot go unchallenged,” Cal Tax President Robert Gutierrez said.