California Approves Anti-Offshore Bill

by Leroy Baker, for LawAndTax-News.com, New York

17 September 2003

Californian lawmakers have approved a bill which will prohibit the state authorities from contracting with companies which have performed corporate inversions, and have relocated their headquarters offshore.

The bill, which was authored by Senator John Burton (D-San Francisco), and sponsored by State Treasurer, Phil Angelides provides for a limited exclusion from the ban for current corporate 'expatriates' which agree to restore certain shareholder rights and employ a combined reporting system for calculating Californian income tax.

Speaking recently, Burton explained that:

'I don’t think it makes sense for California to do business with companies that go offshore on paper to avoid our tax, labor and shareholder rights laws. If they want to do business with us and get the benefits of operating in this state, then they should abide by our rules and pay US taxes.'

The State Franchise Tax Board has estimated that the cash-strapped state will lose substantial amounts of revenue from companies choosing to relocate offshore over the coming decade.

In a statement issued last week following the passing of SB 640 in the Senate by a 25-13 vote, the State Treasury department announced that:

'If the number of corporations that expatriate continues to grow at the same rate of the past 10 years, the Franchise Tax Board estimates that California will lose an estimated $180 million in tax revenues over the next 10 years.'

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