Tax law changing? Commission exploring ways to stabilize state economy.

• Author: Allen, Bruce C.
• Position: Capital Beat

The California Legislature returned from its summer recess Aug. 17 to a flurry of activity prior to its scheduled interim recess Sept. 11.

This year's interim recess promises to be a very short one since Gov. Schwarzenegger has indicated he will call a special session of the Legislature in mid-September to consider a massive overhaul of California's tax law.

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The 14-member Commission on the 21st Century Economy, created by the governor with seven of his appointees and six appointees from the Legislature, will be considering long-term solutions to stabilize California's economy. The Commission is reportedly considering recommending an overhaul of California's tax law, including expansion of some kind of business tax or net receipts tax.

CalCPA members are encouraged to visit the Commission's website (www.cotce.ca.gov)and review meeting transcripts. The June 16 meeting contains an in-depth discussion of net receipts tax options.

According to an Ernst and Young economist hired by the Commission to evaluate business tax options for the state, California could follow other states that have focused on improving the business tax system to reduce taxes on mobile capital. This includes reworking property taxes and shifting taxes to "out-of-state" taxpayers by moving from origin- to destination-based taxes.

The economist also explained to commissioners the options to avoid double taxation (or pyramiding) and provided background on the experiences of other states that have imposed similar measures.

The Commission will also consider establishing a more stable source of business tax revenue other than corporate income taxes; taxing all forms of doing business, not just corporations, to broaden the base; lowering tax rates and reducing distortions; and searching for ways to tax services and cross-border sales.

The commissioners are attempting to complete their deliberations and develop recommendations by Sept. 15.

CalCPA's Legislative Agenda Making Progress

SB 691(Yee, Niello, Ma): Would establish California as a substantially equivalent state. Status: Assembly floor.

SB 691 will require that all candidates entering the profession after Jan. 1, 2014, meet the Uniform Accountancy Act's 150-hour educational requirement: A total of 150 units with a bachelor's degree, and at least 24 hours in business and 24 hours in accounting.

The success of this legislation is essential to allowing current and future California CPAs represent the...