In this episode of Greenberg Traurig’s GeTtin’ SALTy podcast, host Nikki Dobay is joined by Peter Blocker, vice president of policy at the California Taxpayers Association, and Alan Pasetsky, owner and founder of Tax Policy LLC, for an in-depth discussion of California Assembly Bill 1790 — a measure that, if passed, would repeal California’s Water’s Edge election for corporate income tax purposes.
The conversation covers the fiscal and political backdrop driving the bill, including California’s projected multibillion dollar budget shortfall and pressure from the State Employee Union (SEIU) to identify new revenue sources.
The guests discuss the characterization of the Water’s Edge election as a “loophole,” explaining its long-standing role in state tax policy, its use in the majority of states with combined reporting regimes, and the risks of double taxation and compliance burdens that worldwide combined reporting would create.
They also examine the international dimension of the proposal, including a letter signed by eight foreign governments expressing concern about potential double taxation and the prospect of retaliatory trade measures against California businesses.
Peter and Alan outline the opposition coalition being led by CalTax, the legislative path forward through the Assembly Appropriations Committee and the May 14 suspense hearing, the two-thirds vote requirement, and the possibility that the measure could be folded into the budget process.
The episode closes with a look at the longer-term landscape, including the governor’s stated opposition to tax increases and the implications for California’s upcoming gubernatorial race.