Proposed California legislation that would tax global intangible low-taxed income (GILTI) has stalled for the year. On April 19, 2021, the California Assembly Committee on Revenue and Taxation approved AB 71. The bill went to the Assembly Housing and Community Development Committee but was not advanced. The bill’s purpose was to generate revenue to combat California’s homeless crisis. The revenue would be used to expand emergency shelters, create more affordable housing, and fund services.
AB 71, the Bring California Home Act, was introduced in December 2020 and was amended in January 2021 to include state taxation of GILTI. Beginning in 2022, the bill would require taxpayers that have made a water’s-edge election to include 50% of their GILTI for state tax purposes. The bill additionally would require taxpayers to include 40% of their repatriated foreign income in their California gross income. The legislation included provisions that would allow taxpayers to seek alternative apportionment and the opportunity to revoke their water’s-edge election. Earlier provisions of the bill, which were later removed, had also proposed a corporate income tax increase for some taxpayers.
As noted in Ryan’s tax development dated April 26, 2021, proposing a tax increase at this time is interesting because of California’s significant surplus of revenue. In 1979, voters approved a limit to state spending. Any revenue in excess of the approved limit is split between rebates to taxpayers and education spending. It is projected that California will have more than $100 million in excess revenue for the 2021–22 fiscal year.
In the end, the bill’s authors decided not to advance the bill. This decision was made because the Legislature agreed to invest more than $10 billion in funding to address the homelessness crisis and proposed another $1 billion in ongoing support for local governments.
TECHNICAL INFORMATION CONTACTS:
Mark L. Nachbar
The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at email@example.com.