Coalition fights surprise tax for California small business investors

Exactly, I'm in the process of starting a new business and I'm incorporating out-of-state for this exact reason. There are a lot of advantages to having some presence in California (more talent and exit options), but if you can maintain your residence out-of-state prior to a sale then you can save a ton of money. North Lake Tahoe is 200 miles from the Bay Area and has no income tax.

This is the second retroactive tax hit this year in CA, if you count Prop-30 which passed in Nov 2012 but applied to all income since Jan 2012. That was "only" 10 months of retroactivity versus QSBS which is ~5 years - but the pattern makes it really hard to trust CA on anything at this point.