Prop 24 - Repeal of Legislation Regarding Business Tax Carrybacks
Prop 24 - Repeal of Legislation Regarding Business Tax Carrybacks
The Way Things Are Now:
Pre-2008:
Federal tax law allowed businesses to "carry back" losses, i.e. if a business had losses in Fiscal Year 3, it could re-calculate its tax returns for Years 1 and 2, and get a tax refund for those years. However, California did not allow carrybacks, only carryforwards (i.e. businesses can only carry its losses from previous years forward to current/future years). It further only allowed carryforwards for ten years from a loss.
Post-2008:
In 2008, the Legislature passed laws allowing carryback of up to 3 years (to match Federal tax law), and allowed carryforwards of up to 20 years. This was done to standardize tax law, to allow multi-state corporations operating in California to standardize their tax operations. Simply put, in addition to giving businesses flexibility in their ability to "smooth out" their tax liability, backward as well as forward, it also minimizes operating expenses of not keeping two sets of bookkeeping, one for California taxes, one for federal and other state taxes.
Further, the laws passed in 2008 allow a business with an unused tax credit to pass the credit to an "affiliated" business (generally, one operated or managed in concert with the original business).
What This Changes:
Prop 24 repeals the laws passed in 2008 regarding the above.
My Take:
California has a well-earned reputation as a business-hostile environment, and it has been paying the price in loss of jobs and tax revenue, revenue that had allowed the State to put off its day of judgment. One of the few sops to businesses was the laws passed in 2008. Not content to give businesses a bit of help (with the long-term, but so often ignored, benefit to the tax base), short-sighted "tax boosters" can't give up a single dollar if it goes to "demon corporations."
Look, as much as some people don't want to admit it, private business is the place where innovation, most peoples' employment, and, dirty little secret, all of California's tax receipt comes from. And most businesses have options where they exist, and which State's residnets they employ. Sad to say, California only has a very few natural "uniquenesses." Most of what made California a magnet for businesses in the last century were created, primarily by a business-friendly posture. For instance, California's renowned agricultural environment is mostly a function of the California Aqueduct and man-made dam capacity (the Central Valley is dry enough during the normal growing season to make it a desert, and no natural reservoir capacity to hold the winter rains to counteract that desert climate). Trying to wring every last dime from California businesses has so far only proven that businesses will find somewhere else to, well, do business.
What's worse, California's 2008 laws didn't give businesses some "unfair advantage" that no other tax payer had, but gave them something the Fed and many States already give them, and merely evened the playing field with the Fed.
Folks, I work for the government. I'm as insulated from the business cycle as one can get, but taxpayers pay my salary, just like every government employee. We have to give private business something, or there will, in a very none-too-distant future, be no businesses in California. Please, folks, vote NO on this one.
The Way Things Are Now:
Pre-2008:
Federal tax law allowed businesses to "carry back" losses, i.e. if a business had losses in Fiscal Year 3, it could re-calculate its tax returns for Years 1 and 2, and get a tax refund for those years. However, California did not allow carrybacks, only carryforwards (i.e. businesses can only carry its losses from previous years forward to current/future years). It further only allowed carryforwards for ten years from a loss.
Post-2008:
In 2008, the Legislature passed laws allowing carryback of up to 3 years (to match Federal tax law), and allowed carryforwards of up to 20 years. This was done to standardize tax law, to allow multi-state corporations operating in California to standardize their tax operations. Simply put, in addition to giving businesses flexibility in their ability to "smooth out" their tax liability, backward as well as forward, it also minimizes operating expenses of not keeping two sets of bookkeeping, one for California taxes, one for federal and other state taxes.
Further, the laws passed in 2008 allow a business with an unused tax credit to pass the credit to an "affiliated" business (generally, one operated or managed in concert with the original business).
What This Changes:
Prop 24 repeals the laws passed in 2008 regarding the above.
My Take:
California has a well-earned reputation as a business-hostile environment, and it has been paying the price in loss of jobs and tax revenue, revenue that had allowed the State to put off its day of judgment. One of the few sops to businesses was the laws passed in 2008. Not content to give businesses a bit of help (with the long-term, but so often ignored, benefit to the tax base), short-sighted "tax boosters" can't give up a single dollar if it goes to "demon corporations."
Look, as much as some people don't want to admit it, private business is the place where innovation, most peoples' employment, and, dirty little secret, all of California's tax receipt comes from. And most businesses have options where they exist, and which State's residnets they employ. Sad to say, California only has a very few natural "uniquenesses." Most of what made California a magnet for businesses in the last century were created, primarily by a business-friendly posture. For instance, California's renowned agricultural environment is mostly a function of the California Aqueduct and man-made dam capacity (the Central Valley is dry enough during the normal growing season to make it a desert, and no natural reservoir capacity to hold the winter rains to counteract that desert climate). Trying to wring every last dime from California businesses has so far only proven that businesses will find somewhere else to, well, do business.
What's worse, California's 2008 laws didn't give businesses some "unfair advantage" that no other tax payer had, but gave them something the Fed and many States already give them, and merely evened the playing field with the Fed.
Folks, I work for the government. I'm as insulated from the business cycle as one can get, but taxpayers pay my salary, just like every government employee. We have to give private business something, or there will, in a very none-too-distant future, be no businesses in California. Please, folks, vote NO on this one.