On April 19, 2021, the California Assembly Committee on Revenue and Taxation approved AB 71. The bill now goes to the Assembly Housing and Community Development Committee. This legislation would require corporations that make a water’s-edge election to include 50% of their global intangible low-taxed income (GILTI) and 40% of their repatriated foreign income in their California gross income, effectively eliminating much of the benefit of the election. Any taxpayer required to include this new income as gross income would also be prohibited from utilizing tax credits to offset more than $5 million of the new liability.
The purpose of the legislation is to set up an ongoing source of funding to provide for the homeless situation. However, it is interesting that a tax increase is being proposed at this time, as California has a significant surplus of revenue. In fact, under an old 1970s law, the state may be required to rebate billions of tax dollars over the coming years. In 1979, voters approved a limit to state spending. Revenue in excess of the spending limit is split between rebates and education spending. The projections are that the state will have more than $100 million in excess revenue for the 2021–2022 fiscal year.
To voice your opinion, contact the members of the Assembly Housing and Community Development Committee.1 The legislation is set for hearing in the Assembly House Committee at 2:00 p.m. on April 29. Ryan will continue to monitor and report on AB 71.
1 https://ahcd.assembly.ca.gov/membersstaff
TECHNICAL INFORMATION CONTACTS:
Susan Bittick
Principal
Ryan
512.960.1142
susan.bittick@ryan.com
Mark L. Nachbar
Principal
Ryan
213.627.1719
mark.nachbar@ryan.com
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