BILL ANALYSIS Ó
AB 1500
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Date of Hearing: May 7, 2012
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
AB 1500 (John A. Pérez) - As Amended: February 9, 2012
2/3 vote. Urgency. Fiscal committee.
SUBJECT : Corporation taxes: single sales factor: Middle Class
Scholarship Fund.
SUMMARY : Makes the single sales factor (SSF) apportionment
formula mandatory, revises the rules for assignment of sales,
and requires that revenue derived from those changes be
deposited in the newly established Middle Class Scholarship Fund
(Fund). Specifically, this bill :
1)Revises the provisions of the Corporation Tax (CT) Law that
currently allow a corporation to make an annual election to
use either a SSF or a double-weighted sales factor formula in
apportioning its business income to California. Specifically:
a) Repeals the annual election and mandates that, for
taxable years beginning on or after January 1, 2012,
corporations use the SSF formula in apportioning business
income to California, except those that:
i) Derive more than 50% of their gross receipts from
conducting an agricultural, extractive, savings and loan,
or banking or financial business activity (a 'qualified
activity').
ii) Make an election to use the four-factor formula,
which is available only if it would result in a greater
amount of tax, before credits, than would the SSF
formula.
b) Requires all taxpayers, in assigning their sales of
other than tangible personal property
(i.e. services and intangible property) to the sales
factor, to use the following rules:
i) The "cost of performance" rule for assigning sales
for taxable years beginning before January 1, 2011.
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ii) The "market rule" for assigning sales for taxable
years beginning on or after January 1, 2011, and before
January 1, 2012, but only for those taxpayers that
elected the SSF apportionment formula. Taxpayers that
did not elect to use the SSF must use the "cost of
performance" (COP) rule.
iii) The "market rule" for assigning sales for all
taxpayers, including those businesses that are engaged in
a qualified activity, for taxable years beginning on or
after January 1, 2012.
c) Allows a cable or network services company that is a
"qualified taxpayer" to assign only 50% of their sales to
California of what would otherwise be assigned under the
"market rule."
d) Defines "qualified taxpayer" as a member of a combined
reporting group that is also a qualified group, which
satisfies both of the following conditions:
i) Has a minimum investment of $250,000 in California
for the taxable year.
ii) For the taxable year beginning in calendar year
2006, derived more than 50% of its United States (U.S.)
network gross business receipts from operations of one or
more cable systems.
e) Defines "minimum investment" as qualified expenditures
of not less than $250,000, i.e. expenditures for tangible
property, payroll, services, franchise fees, or any
intangible property distribution or other rights, by a
combined reporting group during the calendar year that
includes the beginning of the taxable year.
f) Defines the terms "qualified group", "cable system",
"network", "gross business receipts", "qualified
partnership", and "qualified sales".
2)Requires the Franchise Tax Board (FTB) to annually report to
the Department of Finance (DOF), pursuant to a time schedule
prescribed by the Director of Finance, the estimated and
actual increase or decrease in revenue resulting from changes
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in the SSF apportionment and assignment of sales rules made by
this bill.
3)Establishes the Fund and requires the money in the Fund to be
allocated, upon appropriation by the Legislature, for the
purpose of increasing the affordability of higher education.
4)Requires the Director of Finance to do all of the following:
a) Direct the State Controller to deposit in the Fund, on
or before September 1 of each fiscal year (FY), beginning
with the 2012-13 FY, an amount equal to the estimated
increase in revenues for the FY resulting from changes in
the SSF apportionment rules made by this bill.
b) Calculate, on or before September 1, 2016, and each
September 1 thereafter, the difference between the
estimated increase for the FY ending four years previously
and the actual increase in those revenues for that FY (the
'additional amount'), as provided.
c) Direct the State Controller to also deposit in the Fund,
on or before September 1, 2016, and each September 1
thereafter, the additional amount, as calculated by the
Director.
5)Specifies that this bill will become operative only if AB 1501
of the 2011-12 Regular Session, which establishes a
middle-class scholarship program, is chaptered.
6)Takes effect immediately as an urgency statute.
7)States that the urgency is necessary to provide needed
financial aid to California public postsecondary students in
time for the beginning of the 2012-13 academic year.
EXISTING STATE LAW :
1)The CT Law imposes an annual tax on corporations measured by
income sourced to California, unless otherwise exempted.
Generally, for corporations operating both in and outside of
the state, income sourced to California is determined on a
worldwide basis applying the unitary method of taxation. The
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unitary method combines the income of affiliated corporations
that are members of a unitary business and apportions the
combined income to California based upon the average of four
factors (the property factor, the payroll factor, and two
sales factors). Each of these factors is a fraction the
numerator of which is the value of the item in California and
the denominator of which is the value of the item elsewhere.
This four-factor formula identifies the relative levels of
business activity in the state and apportions the combined
income to California using the determined share of California
business activity.
2)For taxable years beginning on or after January 1, 2011,
certain corporate taxpayers may make an annual election to
apportion its income to California using an SSF apportionment
formula. The election must be made on a timely filed original
return in the manner and form prescribed by the FTB. However,
taxpayers that derive more than 50% of gross business receipts
from conducting a "qualified business activity" are required
to use a three-factor, single-weighted sales apportionment
formula. A "qualified business activity" is defined as an
agricultural, extractive, savings and loan, and banking or
financial business activity. Thus, those taxpayers are
prohibited from electing the SSF apportionment formula.
3)Requires corporations that use the SSF apportionment formula
to assign sales of services and intangibles to California
based on where the benefits of the service were received or
the property was used or accepted (the 'market rule). In
contrast, corporations that do not elect, or are ineligible to
elect, the SSF apportionment formula must assign sales of
services and intangibles based on "COP."
4)The CT includes the franchise tax, the corporate income tax,
and the bank tax. The regular CT rate is 8.84%, and the bank
tax rate is 10.84%. In addition, an "S" corporation, which is
a "pass-through" entity, is subject to a reduced rate of tax
at 1.5%.
FISCAL EFFECT : The FTB staff estimates that this bill will
result in an annual gain of $1.2 billion in fiscal year (FY)
2012-13, $950 million in FY 2013-14, and $950 million in FY
2014-15.
COMMENTS :
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1)Author's Statement . The author states that, " Since the
2003-2004 school year, student fees at the California State
University have increased by 191 percent, from $2,046 to
$5,970, and fees at the University of California have
increased by 145 percent since 2003-04, from $4,984 to
$12,192. Fees at our community colleges have also increased
substantially. Financial aid programs have expanded to
mitigate the impacts of fee increases for lower-income
families, but families who can't pay for college out of pocket
or who earn too much for financial aid grants are forced to
take on a significant financial burden, with many students
assuming a staggering level of debt.
"The Middle Class Scholarship will apply to any student in a
CSU or UC whose family earns under $150,000 and does not
already have fees covered by financial aid. A typical UC
student, or their parents, will save approximately $8,200 per
year, and a typical CSU student or their parents will save
approximately $4,000 per year. The Middle Class Scholarship
Act also provides $150 million for Community Colleges to
increase affordability there. Community college students
planning to transfer to UC or CSU will of course also benefit
from the reduced fees at those institutions.
"The Middle Class Scholarship is funded by closing
California's "elective" single sales factor loophole. Right
now out-of-state corporations get to choose their own formula
for the taxes they owe in California. And the fewer jobs they
have in California, the bigger their tax break.
"Closing the "elective" single sales factor loophole would put
California in line with the tax policies of a mix of 15 red
and blue states, including Michigan, Texas, New Jersey, New
York, South Carolina, Georgia, Wisconsin, Indiana, Illinois,
Iowa, Nebraska, Colorado, Oregon, Minnesota, and Maine. In
fact, only three other states allow out-of-state corporations
to choose which tax formula they prefer.
"In 2009, changes to corporate tax law were made that,
beginning in 2011, shifted from the "three factor formula"
(which considers location of sales, property, and payroll) to
the "single sales factor" (which considers only location of
sales). Governor Schwarzenegger used budget negotiations to
insist that the change be optional, so that out-of-state
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corporations with little California property and small
California payrolls but high sales could take advantage of
this "elective" loophole and use the three factor formula and
avoid California taxes.
"In 2010, the non-partisan Legislative Analyst's Office (LAO)
recommended closing the "elective" single sales factor
loophole stating it would generate revenue from out-of-state
corporations while allowing California-based firms to continue
their reduced their tax bills. The report recommended that
"the state require all firms to use the single sales factor,
which would help the state's competitiveness while limiting
the cost to the budget.
"The LAO report went on to state that "California has been
criticized at times for having high costs of doing business.
The single sales factor would reduce those costs for mobile
firms who sell into national or world markets and are more of
a flight risk than firms who sell only into the California
market.
"On a bipartisan two-thirds basis, the California State
Assembly voted in 2011 to close the single sales factor
loophole. Given the targeted nature of Middle Class
Scholarship Act and the substantial benefit it provides to
California families, it should also garner support as the
appropriate use of the $1 billion in revenue generated from
closing the "elective" single sales factor loophole.
"In 2011, Governor Brown stated that closing the "elective"
single sales loophole is "a critical step in making sure the
state does everything it can to support local job creation."
Writing in the Los Angeles Times, veteran columnist George
Skelton stated, "here's a no-brainer opportunity to encourage
job-creation and collect a pile of money" and noted closing
the "elective" single sales factor loophole would remove a
disincentive for business expansion in California."
2)Arguments in Support . The proponents of this bill argue that
"the ability to elect each year how to apportion income to
California is the weakest and least justifiable loophole in
the tax code" since the election "allows corporations to
allocate more income to California when they takes losses and
less income when they make profits." The proponents assert
that the repeal of the "elective" component of the SSF "would
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remove the competitive advantage that out-of-state
corporations have over California employers," would "end the
practice of rewarding companies that have minimal jobs in
California from collecting a larger tax break," and would be
"a significant improvement in the tax system." Finally, the
proponents state that savings from "closing this tax break for
out-of-state corporations will fund the Middle Class
Scholarship Fund to make higher education affordable and
accessible for middle-class families in California," will
"assure that financial challenges do not prevent qualified
students from attending universities, and will reverse the
devastating impact of a decade of fee increases."
3)Arguments in Opposition . The opponents of this bill state
that "Ŭt]he bi-partisan agreement in February 2009 allowed use
of SSF to help stimulate investment and hiring in the state
for companies who might otherwise invest elsewhere." They
argue that the repeal of the elective single sales factor
would punish "taxpayers who neither supported SSF nor ever
planned to use it," thus adding "new uncertainty and
unpredictability to the tax climate in the state." The
opponents are concerned that "in many situations, a mandatory
single sales factor approach does not accurately estimate the
level of business income to be apportioned to California, and
could lead to double taxation of business income that is
earned in other states." The elective nature of a SSF
formula, on the other hand, ensures that different types of
businesses would be able "to more accurately report their
portion of taxable income in California, rather than using a
one-size-fits-all approach." The proponents conclude that
"requiring the new apportionment methodology to be mandatory
is nothing short of a massive tax increase on an existing
group of taxpayers already contributing to the California
economy through one of the highest corporate tax rates in the
nation and are struggling to maintain operations in the
state." Finally, while opponents recognize that tuition at
California universities "has more than doubled over the prior
decade," they believe that "increasing taxes on businesses
only ensures that these new graduates will not have jobs in
exchange for slightly smaller tuition rates."
4)Background: Apportionment Formulas . Under California's CT
Law, multistate or multinational businesses must apportion
their income among the jurisdictions in which they do
business. California may only tax a portion of the income
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earned by businesses that operate in other states (or
nations), in addition to California. That amount is
determined by an apportionment formula. Prior to January 1,
1993, California used a three-factor formula that was based on
the proportion of a company's sales, payroll, and property
that were located in California. For example, if one-third of
a company's sales, one-third of its payroll, and one-third of
its property are located in California, then one-third of its
total earnings are subject to California tax under CT Law.
a) Double-Weighted Sales Factor . After January 1, 1993,
California adopted a formula in which the sales factor is
double-weighted - given twice the importance of the other
two factors. For example, if a company has 75% of its
property and of its payroll in California, but only 10% of
its sales in this state, then 53.3% of its income would be
subject to California tax under equal weighting of the
three factors. The double-weighted sales factor would
reduce the apportionment percentage to 42.5%.
Double-weighting of the sales factor does not apply to
businesses that derive more than 50% of their gross
receipts from agricultural, extractive (e.g., oil and gas
producers), or banking or other financial activities. Those
companies must still use the equally weighted three-factor
formula to apportion their worldwide income.
b) SSF . In 2009, a component of the 2009-10 budget package
gave multistate and multinational corporations an
additional option for apportioning their business income to
California ŬAB x3 15 (Krekorian), Chapter 10, Statutes of
2009, and SB x3 15 (Calderon), Chapter 17, Statutes of
2009]. The legislation authorized multi-state businesses
to apportion their business income to California using only
their percentage of sales in California, as an alternative
to using the traditional four-factor apportionment
methodology. Starting with the 2011 taxable year,
corporations are allowed to make an annual election to
choose between the SSF and a four-factor formula.
Businesses that derive more than 50% of their gross
receipts from agriculture, extractive business, savings and
loans, or banks and financial activities are still limited
to a single-weighted sales factor and are required to use
the same three-factor apportionment formula.
c) The Reason for Change . For a long time, businesses with
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substantial employment and facilities in California that
primarily sell their products nationally or internationally
argued that the three- or four-factor apportionment method
penalizes them for expanding in California. They pointed
out that any increase in their payroll and/or property in
California would result in an increase of their tax
liability in California under the three- or four- factor
apportionment formula. Conversely, any decrease in their
California property and/or payroll factors, without any
change to their sales factor, would result in a reduction
of their California tax liability. Many California
high-tech and biotech companies made the argument that the
three-factor formula rewarded businesses for expanding
outside the state.
The enactment of the SSF provision was welcomed by companies
that have significant payroll and facilities in California,
but make the bulk of their sales outside the state because
the election of the SSF apportionment formula would, most
likely, reduce their California taxes. Companies doing
business only in California will see no change in their
taxes. On the other hand, companies that have few
employees or facilities in California, but make substantial
sales here, may pay more tax under the SSF apportionment
formula. To alleviate the tax burden on those companies
and to avoid creating "winners and losers," the Legislature
included a provision that allows taxpayers to make an
annual election to choose between the SSF and a
double-weighted formula for the apportionment of their
business income to California. As a result, taxpayers that
have a relatively high amount of sales in California, most
likely, will elect the four-factor formula as long as they
have property and payroll in California and elsewhere.
When the elective SSF provision was enacted, its overall
impact was estimated to be a revenue loss to the General
Fund. The anticipated annual revenue loss was
approximately $700 million, eventually growing to $1.5
billion. Over time, proponents argued, this loss will be
offset by additional revenue from employment and property
due to improved business retention, expansion and location
in the state.
5)An Overview of the SSF Apportionment Regime in Other States .
In the last few years, several states have changed their
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apportionment formulas to an SSF, eliminating the property and
payroll factors entirely. In addition to California, 24
states have implemented, or are in the process of phasing-in,
the SSF apportionment formula. However, most states will only
allow manufacturers or other identified industries to use the
SSF formula, or require taxpayers to invest in the state
(e.g., Kansas) or file an annual information report with the
tax agency (e.g., Maryland) in order to utilize the SSF
formula. Finally, according to the FTB staff, Missouri and
California are the only states that allow corporations to
elect between the SSF and a traditional three-factor
apportionment formula on an annual basis.
6)Elective SSF and Missouri's Experience . By the end of 1995,
five states had enacted a SSF formula but the State of
Missouri was the only one that allowed businesses to choose
between the SSF formula and the traditional three-factor
formula on an annual basis. If the theory behind the economic
benefits of elective SSF were correct, then "a state like
Missouri should perform especially well since no corporation
pays more income tax when Ŭsingle sales factor] is an election
rather than a requirement." (Michael Cassidy and Sara Okos,
Single-Sales Factor: An Economic Development Tool That Isn't,
The Commonwealth Institute, September 2008). But the
available data shows that Missouri was one of the 27 corporate
income tax states that lost 63,000 manufacturing jobs from
1979 to 2000, even though it has had a SSF in place for
decades. (M. Mazerov, The "Single Sales Factor" Formula for
State Corporate Taxes: A Boon to Economic Development or a
Costly Giveaway? September 1, 2005, p. 7). Furthermore,
Missouri's manufacturing job performance since 2001 "has
actually been below the median for the nation, with over
35,000 lost jobs." (See, e.g., M. Cassidy and S. Okos).
Finally, according to Site Selection Magazine, 71 facilities,
valued at $700 million or more were placed in states with
corporation income taxes from 1995 through 2004. Arguably,
because out-of-state corporations may elect whether or not to
use the SSF formula in Missouri to their benefit, those
corporations are in a better position to invest in that state
than they would have been under the mandatory SSF formula.
However, the State of Missouri failed to capture a single one
of these major plant locations or expansions, even though it
is a relatively low-tax state compared to other states. In
2005, Missouri's corporate income tax ranked 46th in the
nation (four states do not levy a corporation income tax)
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(Morgan Quitno, "2007 State Rankings Book," page 325) but the
State of Missouri does not have a particularly impressive
long-term record for attracting or creating jobs, which is an
indication that an elective SSF is "unlikely to live up to its
billing as a potent economic development incentive." (M.
Mazerov, p. 7).
It appears, judging by the Missouri's experience, that the
elective nature of the SSF does not act as an economic
development tool, even though it removes many impediments for
out-of-state corporations to invest in-state. Although
corporations accept tax breaks gladly if states offer them,
they ultimately locate their investments and employees where
fundamental business considerations demand.
7)Is Elective SSF Justified on Policy Grounds ? Even if one
assumes that an elective SSF is an effective economic
development tool, the question still remains as to whether
allowing a taxpayer to choose how much tax it wants to pay
each year is sound tax policy. Under the elective system,
businesses will naturally choose, on an annual basis,
whichever method reduces their tax liability. An elective SSF
formula is a tax expenditure that contains no requirement to
invest or to create jobs in the state, no accountability
measures, no paper trail for the state to review, and no
records about outcomes at any specific company or industry.
Furthermore, an elective SSF regime provides a fertile soil
for creative tax planning, especially in light of other recent
legislation that allows corporate taxpayers to carryforward
California's net operating loss (NOL) to 20 years with a
phased in two-year carryback and to share business tax credits
with the members of a combined reporting group. For example,
for a company with sales outside of California, but property
and payroll located in the state, electing the SSF
apportionment formula should, generally, result in a reduction
of the California apportionment factor and, consequently,
California taxable income. However, if the same company, in a
particular year, generates losses instead of profits, it would
elect the double-weighted formula in order to apportion a
greater amount of losses to California for purposes of
offsetting its California tax liabilities in the future or
claiming a refund for the last two taxable years. In other
words, an elective SSF provides multistate and multinational
corporate taxpayers with an opportunity, i.e. an "election,"
to choose how much tax they like to pay to the state in a
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particular tax year. This election is one of a kind. The
only other election allowed to corporate taxpayers is an
election between two reporting methods: worldwide combined
reporting and a reporting on a "water's-edge" basis. However,
the "water's-edge" election is binding for a seven-year
period.
When the three-factor apportionment formula was first developed
between 1955 and 1957 and later adopted by various states, it
was considered the only reasonable and fair system to ensure
that multinational companies are not taxed unduly by the
states in which they do business. At the same time, if
adopted by all the states, the three-factor formula would,
arguably, guarantee that 100% of corporate income is taxed.
In contrast, if all states were to enact legislation to allow
an elective SSF formula, corporations would elect the SSF
formula in states where they have relatively large portions of
their payroll and property, while choosing the alternative
formula in states where they have a relatively large portion
of their sales. As a result, the total amount of income
apportioned to all states will be less than the amount of
income the corporation earned nationally. (FTB, California
Income Tax Expenditures, Report, December 2009, p. 28).
The California's elective SSF regime represents an attempt to
accomplish a public policy objective - alleviate the tax
burden on out-of-state companies - that would be more
efficiently addressed through direct outlay of state funds or
through more targeted tax incentives that include certain
accountability measures.
8)Legislative Analyst's Office (LAO) Recommendations . In its
publication, "Reconsidering the Elective Single Sales Factor"
published in May 2010, the LAO recommends that the Legislature
require sales factor-only apportionment. The LAO states that
optional formulas benefit firms without a clear rationale, and
allow taxpayers to switch formulas annually to either minimize
tax or generate significant NOLs to apply against future tax
liabilities. The LAO states that mandatory SSF raises needed
revenue, puts California into conformity with other large
states that currently use mandatory single sales, thereby
preventing California firms from being put at a disadvantage
to its out-of-state competitors.
9)Assignment of Sales of Intangibles and Services: "COP" and
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the "Market Rule ." When a company, which is subject to tax in
California, sells products or services in several states, it
must determine how much of those sales should be assigned to
California. Unlike sales of tangible property, which are
generally sourced based on the destination of the property,
sales of non-tangible items are sourced based on a more
complicated formula. There are two basic rules for assigning
sales of intangibles and other services: a so-called "COP"
rule and the "market" rule.
a) "COP." Under the COP rule, sales receipts from
intangibles and all other services are assigned to
California if the income-producing activity that gave rise
to the receipts is performed wholly in California. If,
however, the income-producing activity is performed in
several states, the sales are assigned to the state in
which the greatest portion of costs of the income-producing
activity are performed. Thus, the "COP" rule allows
corporations to apportion no revenue from the sales of
intangibles or services in California if a firm incurs a
greater amount of costs associated with developing those
intangibles or services outside of California. For
example, let's assume that a company has incurred direct
costs (salaries, equipment cost, etc.) of $100,000 to
provide non-personal services in Oregon and California, of
which $40,000 was incurred in Oregon and $60,000 in
California. The company's costs of performance are split
between two states at a ratio of 60/40, which means that
all of the company's receipts for the service provided in
California are assigned to California, i.e. the state with
the greater COP.
b) Market Sourcing Rule . As an alternative to COP, under
the "market rule," a company would assign its sales of
intangibles and services to the state in which the product
or service is ultimately used. The theory behind
market-based sourcing is to look at where the benefit of a
service is received to determine the location of the
"market."
c) Current Rules . As part of the budget agreement of 2010
ŬSB 858 (Committee on Budget & Fiscal Review), Chapter 721,
Statutes of 2010], taxpayers electing the three-factor,
double-weighted sales formula, must use the COP method to
source sales of intangible items and services, starting
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with the 2011 taxable year. In contrast, taxpayers
electing a SSF formula must source the sales of intangibles
and services to California using the market rule.
d) The Proposed Rule for Assigning Sales of Intangibles and
Services . AB 1500 would establish that all taxpayers,
including those businesses in qualified activity, use the
market rule for the assignment of receipts received from
sales of services or intangibles for tax years beginning on
or after January 1, 2012. However, it would allow cable
and network services companies, under the SSF, and with a
minimum investment of at least $250 million, to assign only
50% of their sales to California of what would otherwise be
assigned under the market rule.
In addition, AB 1500 would clarify that all taxpayers must
assign sales of intangibles and services using the COP
rule, for taxable years beginning before January 1, 2011.
It would also provide that those taxpayers that elected the
SSF formula for the 2011 taxable year must use the "market
rule" for that year, and those taxpayers that did not elect
the SSF must use the COP rule.
10)An Election to Pay More Tax ? This bill allows only one group
of corporations to make an election to choose between the SSF
formula and the four-factor formula: those businesses that
would pay at least as much tax, before applying any credits,
under the four-factor formula as they would under the SSF
method. It is unclear to the Committee staff what
corporations would want to choose to pay more tax to
California, but, according to some tax experts, an SSF formula
may reduce the company's book value of certain tax benefits
for financial accounting purposes. The Senate Governance and
Finance Committee's analysis of SB 116 (de Leon), (2011) noted
that some companies may need this option in order to fully
utilize their available credits, which will allow them to
reduce the amount of deferred tax assets on their financial
statements. It appears that those companies would pay less
tax under the four-factor formula since the tax liability
under both formulas would be calculated without taking into
account the available credits.
11)This bill is a companion measure to AB 1501 (John A. Perez),
pending in the Assembly Appropriations Committee, which would
establish the Middle Class Scholarship Program to
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provide grants, as specified, for students at the University
of California and the California State University with family
incomes below $160,000.
12)Related Legislation .
ABX1 40 (Fuentes & Fletcher), introduced in the 2011 1st
Extraordinary Session, would have mandated the use of the SSF
formula for all companies except for certain qualified
business activities (extractive, agricultural, banks and
financials, and savings and loan) and would have allowed
qualified cable industry companies to assign 50% of their
mandatory sales to California. This bill failed to pass out
of the Assembly by the constitutional deadline.
SB 116 (De Leon), introduced in the 2011 Legislative Session,
would have mandated the use of the SSF formula for all
companies except for certain qualified business activities
(extractive, agricultural, banks and financials, and savings
and loan) and would have allowed qualified cable industry
companies to assign 50% of their mandatory sales to
California. This bill failed to pass out of the Senate by the
constitutional deadline.
AB 1935 (de Leon), introduced in the 2010 Legislature Session,
would have mandated the use of the SSF for all companies
except for financial institutions and oil companies, which, as
under current law, would continue to use the three-factor
formula. This bill was held under submission in the Assembly
Appropriations Committee.
SB 858 (Committee on Budget and Fiscal Review), Chapter 721,
Statutes of 2010, among other things, reinstated the "cost of
performance" rules for assigning the sales of intangibles and
services for non-electors of the SSF formula.
SBX3 15 (Calderon), Chapter 17, Statutes of 2009, allowed
specific entities to elect to utilize a sales-only formula to
apportion its income subject to franchise or income tax and
modified the rules for assigning certain receipts for
inclusion in the sales factor.
SB x6 18 (Steinberg), introduced in the 2010 6th Extraordinary
Session, among other things, would have repealed the elective
nature of the SSF, requiring each apportioning trade or
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business, except certain businesses, to apportion business
income by using the SSF formula. This bill was returned to
the Desk without further action.
REGISTERED SUPPORT / OPPOSITION :
Support
Equality California (co-sponsor)
AFT Guild, Local 1931
Richard Alarcon, Councilmember, City of Los Angeles
Alhambra Unified School District Board of Education
American Federation of State, County and Municipal Employees,
AFL-CIO
Associated Students, Sacramento State
Associated Students, University of California, San Diego
Joe Buscaino, Councilmember, City of Los Angeles
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Communities United Institute
California Community Colleges Chancellor's office
California Faculty Association
California Federation of Teachers
California Hospital Association
California Labor Federation
California Professional Firefighters
California Public Defenders Association
California School Employees Association, AFL-CIO
California State Pipe Trades Council
California State Student Association
California State University
California Tax Reform Association
California Teamsters Public Affairs Council
California Youthbuild Coalition
Tony Cardenas, Councilmember, City of Los Angeles
City of Los Angeles
Community College League of California
Engineers and Scientsts of California, JFPTE Local 20
Eric Garcetti, Councilmember, City of Los Angeles
Graduate Student Association
Joe Huizar, Councilmember, City of Los Angeles
International Longshore and Warehouse Union
Jockeys' Guild
Paul Koretz, Councilmember, City of Los Angeles
Laborers' Locals 777 and 792
AB 1500
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Los Angeles City Controller
Los Angeles County Democratic Party
Los Angeles County Federation of Labor, AFL-CIO
Los Angeles County Sheriff's Department
Los Angeles Unified School District
Los Rios Community college District Board of Trustees
Nury Martinez, Board of Education Member, Los Angeles Unified
School District
Montebello Unified School District Board of Education
Professional and Technical Engineers, JFPE Local 21
Professional Engineers of California Government
Bill Rosendahl, Councilmember, City of Los Angeles
Sacramento City Council
San Diego County Court employees Association
San Francisco Youth Commission
Santa Monica-Malibu Unified School District Board of Education
Shasta College Student Senate
Student Senate for California Community Colleges
UAW Local 2865 - The UC Student Workers Union
UFCW Western States Council
UNITE-HERE, AFL-CIO
University of California
University of California Student Association
Herb J. Wesson, Jr. Councilmember, City of Los Angeles
Western Association for College Admission Counseling
Dennis P. Zine, Councilmember, City of Los Angeles
Opposition
Alliance of Automobile Manufacturers
California Asian Pacific Chamber
California Chamber of Commerce
California Manufacturers & Technology Association
California Taxpayers Association
Chrysler
General Motors
Howard Jarvis Taxpayers Association
International Paper
Kimberly-Clark Corporation
Procter & Gamble
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098
AB 1500
Page 18