BILL ANALYSIS
AB 2230
Page 1
Date of Hearing: May 28, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2230 (Calderon) - As Amended: May 11, 2010
Policy Committee: Revenue and
Taxation Vote: 6-3
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires the Franchise Tax Board to post on its
website, by March 31, 2011 and annually thereafter, a list of
the 100 largest publicly traded corporations that file tax
returns for the year. Specifically, the bill:
1)Provides that list shall include the corporation's name,
address, aggregate amount of tax expenditures (deductions,
credits, exclusions, and other tax preferences) claimed on the
return, its effective tax rate, and, for multinational
corporations, whether the company has elected to file its
combined report based on water's edge (that is, the combined
income from just its U.S. operations) or a worldwide basis.
2)Defines "tax expenditures" as those detailed in the California
Income Tax Expenditures Compendium of Individual Provisions
Report, compiled by the FTB, except for the waters' edge
election and accelerated depreciation. (The later two items
are excluded because they are not explicitly shown on
returns.)
3)Defines effective tax rate as the company's tax liability
divided by the sum of its taxable income and tax expenditures
claimed.
FISCAL EFFECT
The Franchise Tax Board estimates the bill would result in: (a)
one-time costs of $70,000 for programming changes and testing,
and staff time determining the top 100 publicly traded
corporations in California; and (b) minimal ongoing costs to
AB 2230
Page 2
maintain and update the list.
COMMENTS
1)Background. Tax expenditures are deductions, credits,
exclusions, and other provisions in tax code that are designed
to accomplish a specific purpose, such as job creation,
research and development, or investment in the state. Examples
of business tax expenditures include accelerated depreciation,
the research and development credit, hiring credit, and
net-operating loss carry-forwards.
2)Rationale . According to the author, corporate disclosure is
the best available tool to determine whether California's
largest corporations, as a group, pay their far share of
taxes, whether tax policies designed to promote economic
development are effective, and whether the existing corporate
income tax system needs to be reformed. The bill is intended
to shed light on the details of corporate tax payments, and
aid policymakers in evaluating whether California has the
highest corporate tax in the nation and whether tax reform is
warranted.
3)Opponents (the California Taxpayers Association and several
business groups) argue that public disclosure of tax
information violates corporate privacy and creates an
anti-business climate.
4)Other issues . While the disclosures will provide general
information about the use of tax expenditures and effective
tax rates of large corporations, it is unlikely to enable
policymakers to draw meaningful conclusions about the efficacy
of the current tax system or the effectiveness of tax
expenditures. For example, would a large amount of tax
expenditures utilized by a corporation be the sign of a flawed
policy, or evidence that the policy is having its intended
effect - by promoting investment, hiring, or research and
development that would not otherwise occur?
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081