Corporation taxes: tax rates: publicly held corporations: credits.
The legislation prescribes that for taxable years commencing on or after January 1, 2019, corporations that show a decrease in domestic full-time employees will face a 50% increase in their applicable tax rate. Additionally, the bill introduces tax credits designed to incentivize corporations to create or retain jobs within California. The California Competes Tax Credit Committee is tasked with overseeing these credits, which are based on agreed factors like job creation and investment levels.
Senate Bill 1398, introduced by Senator Skinner, proposes significant changes to California's Corporation Tax Law, specifically targeting publicly held corporations. The bill seeks to amend sections of the Revenue and Taxation Code to increase the tax rate on these corporations from 8.84% to a range between 8.84% and 13%, and for financial institutions, from 10.84% to 15%. This adjustment is contingent upon a specified compensation ratio and aims to penalize those corporations that reduce their U.S. workforce while increasing contracted or foreign employment.
A notable point of contention is the requirement that the approval for such tax increases must be garnered from two-thirds of the legislature, reflecting the potential political and fiscal implications of altering tax rates. Proponents argue that these measures will encourage local employment and investment; however, critics may view this as a punitive measure against businesses that seek to manage labor costs effectively in a competitive global market. Furthermore, the necessity of legislative approval underscores the contentious nature of tax reform in California, suggesting that any changes will be heavily debated.