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Committee moves repeal of 'water's edge' corporate tax election to appropriations after heated testimony
Summary
AB 17 90 would eliminate California's water's-edge corporate tax election and restore worldwide combined reporting; supporters say it could raise $3–$4 billion annually for schools and services, while business groups and several consulates warned of double taxation, compliance burdens and potential retaliation; the committee forwarded the bill to appropriations with technical amendments (recorded 4–2).
The committee debated AB 17 90 at length after the author described it as an effort to end the water's-edge tax election and return California to a worldwide combined reporting framework for multinational corporations.
Author (speaker 22) said the provision costs California taxpayers "roughly 3 to $4,000,000,000 annually" and framed the bill as a way to protect schools and health programs from budget cuts. Academic witnesses argued worldwide combined reporting is manageable and used internationally; "The double taxation concern is similarly specious," one academic witness said.
Opponents, including trade groups and representatives of foreign governments, warned that shifting to worldwide taxation could create compliance burdens and invite retaliation. Kelsey Johnson (speaker 9) of the Global Business Alliance said the measure "is an assault on long-standing international tax norms" and urged the committee not to pass the bill.
Industry witnesses, business associations and consulates described potential volatility in state revenue and audit challenges. Supporters rebutted that many jurisdictions now use forms of global reporting and that the state could piggyback on international information-sharing to limit compliance burdens.
After questions, debate and the acceptance of technical amendments, the committee voted to submit AB 17 90 to the Appropriations Committee; the recorded committee vote on the motion in the transcript was 4–2.
