Gov. Davis Signs California's New Anti-Offshore Bill

by Mike Godfrey, for LawAndTax-News.com, Washington

07 October 2003

California governor, Gray Davis last week signed new legislation designed to crack down on US companies which choose to reincorporate in offshore jurisdictions for tax purposes.

The bill, SB 640, authored by Senator John Burton (D - San Francisco) prohibits the Californian authorities from doing business with 'expatriate' firms such as Ingersoll Rand and Accenture. However, it provides for a limited exclusion from the ban for current corporate expats which agree to restore certain shareholder rights and employ a combined reporting system for calculating Californian income tax.

In a recent statement, 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."

However, speaking to the local media following Gov. Gray's signing of the bill, an Ingersoll Rand spokesman suggested that the new law may end up costing the state more money than it saves, because it will lose major bidders in several key areas.

"We don't ever like losing business. It's hard for us to see how this legislation benefits the people of California," he announced.

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