California Bill Aims at Taxing More Corporate Foreign Income

Companies would lose the ability to choose how their foreign income is apportioned in California under a bill introduced in the state legislature Tuesday.

The bill (A.B. 1790) would eliminate the a corporate income tax filing option known as the water’s edge election, which concerns how foreign income is apportioned to California. The election allows multinational companies to exclude income from foreign subsidiaries from their taxable income in the state.

Instead, the bill would mandate worldwide combined reporting, under which the state takes into account income generated by a company and all of its subsidiaries globally. In California, companies can ...