BILL ANALYSIS �
AB 2439
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Date of Hearing: May 16, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2439 (Eng) - As Amended: May 2, 2012
Policy Committee: Revenue and
Taxation Vote: 5-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires a publicly traded corporation to disclose
annually to the State Controller's Office (SCO) the payments
made to the Franchise Tax Board (FTB), as provided, and
authorizes the publication of this information on the SCO
website, as specified. Specifically, this bill:
1)Requires each corporation that files an annual Form 10-K with
the SEC to disclose to the SCO annually the payments made to
the FTB pursuant to Revenue &Taxation Code Part 11
(commencing with Section 23001) for the previous taxable year.
Provides that the disclosure must be made within three months
of the corporation's filing deadline.
2)Requires the SCO to publish the payment information on its
Internet website and maintain a record, available to the
public, of that information.
3)Provides that, if the payment amount is contested by either
side or otherwise is under dispute, the SCO shall include that
information on the website and in its records.
FISCAL EFFECT
Estimated SCO costs of approximately $1 million to develop the
program with approximately $400,000 in ongoing administration
costs.
Minor and absorbable costs the FTB.
COMMENTS
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1)Author's Statement . The author states, "AB 2439 helps provide
transparency and accountability in the corporation tax. It
asks for one simple data point which is very close to data
which is already publicly reported in the SEC 10-K, for
publicly-traded corporations. Reporting tax liability
consistent with federal reporting will greatly advance the
discussion of corporate tax reform and potential changes in
the law, as it has at the federal level. Combined with other
publicly-available data, this information will be very helpful
in analyzing the impact of recent major changes in the
corporation tax. In order to have an informed discussion of
on-going tax reform and to evaluate future proposed policies,
it is important to know who pays and who has benefitted from
the recent tax changes and what the impacts may be of changing
the system during this difficult budget climate."
2)Arguments in Support . The proponents of this bill, Service
Employees International Union and the California Labor
Federation, argue that "it is imperative that state
policymakers have the information necessary to determine how
the "elective sales factor apportionment" impacts the state
budget." They believe that AB 2439 "creates an important
opportunity to determine the impacts of this policy."
3)Arguments in Opposition . The opponents of this bill,
including the Chamber of Commerce and the California Taxpayers
Association, state it is important for legislators to have
access to information that will help them identify areas for
tax reform. However, they contend the information sought by
AB 2439 is potentially misleading and raises concerns that it
might be misused by the public to harm individual California
employers. Opponents assert that attempting to draw
conclusions about the effectiveness of the entire corporation
income tax code based on one number is a risky proposition
that is bound to lead to inaccurate conclusions. Finally,
they believe that AB 2439 erodes important taxpayer
confidentiality without providing any significant data this is
not already available to legislators.
4)Public Disclosure of Corporate Tax Information. Disclosure of
corporate tax information has been debated for a long time.
The advocates of public disclosure have argued that making
corporate income tax returns public would shed light on the
effectiveness of tax policies designed to promote economic
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development, would improve tax compliance, and would increase
political pressure for a more fair and efficient tax system.
While the federal lawmakers have access, albeit limited
through the SEC filings, to some information on corporate
profits and the amount of federal corporate taxes paid, almost
no public information is available to state legislators in
evaluating the state corporate income tax laws.
Publicly traded companies filing Form 10-K with the SEC and
paying corporate tax to California would be subject to the
disclosure requirement proposed by AB 2439. Form 10-K is an
annual report that provides an overview of a public company's
business and a comprehensive summary of the company's
performance, including its financial condition. A company's
Form 10-K is public information and may be found in the SEC's
database. According to the SEC's website, Form 10-K generally
must be filed with the SEC within 90 days after the end of the
company's fiscal year (FY).
5)Disclosure of Tax Information in California . The State of
California, as well as other states, readily publishes
information on unpaid taxes and delinquent taxpayers with
respect to property taxes. An unpaid property tax becomes a
lien against the real property and dissemination of
information on such liabilities is important for protecting
potential buyers, lenders, etc. In the area of income tax
liabilities, however, the state law generally prohibits
disclosure or inspection of any income tax return information,
except as specified in law. In fact, the FTB is required to
notify taxpayers if criminal charges have been filed for
willful unauthorized inspection or disclosure of their tax
data. The BOE is similarly restricted from divulging taxpayer
information.
6)Elective Single Sales Factor (SSF) Apportionment Formula.
Under California's Corporate tax 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 earned by businesses that operate
in other states (or nations), in addition to California. That
amount is determined by an apportionment formula.
Starting in 2011, multi-state businesses may choose to
apportion their business income to California using only their
percentage of sales in California (SSF), as an alternative to
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using the double-weighted apportionment formula. 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.
7)Previous Legislation.
a) AB 2666 (Skinner), 2010, required FTB to compile
information on tax expenditures claimed and reported by
publicly traded companies and requires publishing this
information on the Reporting Transparency in Government
website. AB 2666 was vetoed by Governor Schwarzenegger.
b) AB 2230 (Charles Calderon), 2010, required FTB to post
annually on its website a list of the 100 largest publicly
traded corporations certain tax-related information
reported by those corporations. AB 2230 died on the
Assembly floor.
c) SBX6 19 (Florez), 2010, required corporate tax credits
of $20,000 or more to be reported on the Reporting
Transparency in Government website. SBX6 19 was held on
the Senate Appropriations committee suspense file.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081