A California technology company that has been a financial and tax burden for the state for years has been cleared to receive a $1.5 billion infusion from a California-based hedge fund, clearing billions of federal and state tax debts that the state has been forced to shoulder for decades.
The California General Fund was notified Friday that Clearance Financial Services LLC had been approved for a $100 million loan, the first such transaction approved by the California Department of Finance, a spokesman said.
The company had $3.3 billion in assets, including $1 billion in cash and $1 million in investments.
The state had been pursuing the loan for months, seeking repayment of about $400 million in delinquent taxes and other liabilities, the spokesman said, declining to elaborate.
The new infusion of money will pay off debt the state owed Clearance before it was bought by private equity firm Golden Gate Capital Partners.
The debt was a drag on the state’s finances, causing it to delay spending or cut jobs and public services.
The California General Financing Authority said the state expects to receive $250 million in new revenue from the infusion, which will be matched by a loan from Golden Gate.
The new infusion from Golden Gates is the largest private-equity investment in California history, the agency said in a statement.
The $1,100 per share payment is the first payment of any kind to a California company since the state took over the company from Golden Bay Capital Partners, a private equity group in 2014.
The company, which has operations in six states, including the San Francisco Bay Area, was bought in 2015 for about $5 billion by private investors.
Golden Gate invested in the company and is working to secure other investors.
Golden Gate Capital’s chairman, Tom Gores, said in an interview with ABC News that the new infusion is a “major, major positive for the company.”
Gores, a former top official in President Donald Trump’s administration, said that the company has been working on tax-reform legislation that will help pay off its debt and that the funds would help pay for tax relief for the people of California.
Gores said the funds will not pay for any additional government debt, nor would it contribute to any new spending.
The state Department of Justice declined to comment.
The Federal Reserve said the infusion will provide financial stability for the industry.
The money will help the state pay down a $7.7 billion debt, said Gores.
The money will not help pay down any new taxes or any additional debt, Gores said.
Gives California some relief, says former Gov.
Scott BrownThe $1-billion in loans and grants for Clearance came from a $2 billion infusion in 2018 from a Chinese private equity fund.
Golden Gates has pledged to contribute the same amount to a state bond measure approved by voters in 2016.
The State Treasurer’s office said in September that Clearant had owed more than $4 billion in state taxes, interest and penalties.
California has a large number of corporate tax liabilities, totaling $9 billion.
But it is not the only state to be struggling with this issue.
Illinois is also in the midst of a tax crisis, with $4.5 trillion in liabilities and a shortfall of about 30 percent of its economy.
California is facing $3 billion a day in tax liens.
Jerry Brown has said the issue is a federal mandate and the state must follow it.
He said California’s tax burden is more than 10 times the national average and will grow as companies and states expand their businesses.
“California has done well to make this a priority,” Brown said last week.
“We have some of the highest taxes in the nation and a great deal of tax avoidance.
We’re going to work as hard as we can to pay down these debts.”
California’s largest business lobby, the California Chamber of Commerce, said it would appeal the decision to the state Supreme Court.
The governor’s office did not respond to requests for comment.
Jerry “Bones” Brown is among those who has expressed concerns about the state debt, but he said the governor has confidence in the state tax revenue agency.
Brown said he does not have any concerns about state revenue, but said the revenue has been stretched too thin.
California Treasurer Tom Ammiano, a Republican, said the new money will also be used to reduce the state budget deficit.
“The state’s fiscal health is very good,” Ammicky said in January.
“If the Legislature can’t pass a budget and balance the budget, we have no choice but to cut spending and reduce taxes.”
California also has a high level of tax evasion.
In the first three quarters of this year, the state collected about $6 billion in back taxes from businesses and individuals.
The amount of back taxes paid by California businesses increased from $8 billion in the fourth quarter of this fiscal year to $9.3 trillion in