California Panel Advances Bill to Tax More Foreign Income

California lawmakers advanced a bill out of committee Monday that would change how much of a multinational company’s foreign income is subject to the state’s income tax.

The bill (A.B. 1790) would eliminate a corporate income tax filing option known as the water’s edge election, which allows multinationals to exclude income from subsidiaries in other countries from their taxable income in the state.

If the legislation becomes law, California would become the first state to mandate worldwide combined reporting for all companies, under which all income generated by a company—regardless of locale—is considered in apportioning revenue to the ...