Daily Tax Report: State

California Passes Bill to Disclose Corporate Tax Giveaways

Sept. 6, 2019, 4:24 PM

A bill to let cities continue business incentive deals between cities and companies including Apple Inc. and Best Buy as long as they are more transparent is on its way to Gov. Gavin Newsom (D).

The Assembly passed A.B. 485 by a final vote of 62-16 Sept. 5 without debate to agree to amendments taken while the bill was in the Senate. It passed the Senate Sept. 3, and first passed the Assembly in May.

Another bill to go further and ban new tax-sharing deals but allow existing ones to continue is also headed to Newsom. He hasn’t taken a position on either measure and has until Oct. 13 to sign or veto them.

A.B. 485, authored by by Assemblyman Jose Medina (D), targets a practice in which some cities redirect a portion of local sales taxes they collect from consumers on e-commerce purchases to major companies that have distribution centers or headquarters in their boundaries.

A Bloomberg Tax investigation found that a number of cities in California have struck deals lasting decades to give companies half the 1 percentage point share of the 7.25% statewide sales tax rate they collected on their e-commerce sales in the state. About 10% of California’s 482 cities use the deals as a tool to attract jobs and boost tax revenue, but their neighbors view the deals as a tool that only benefits the companies.

Apple, Best Buy Have Deals

Apple has received about $70 million from its hometown of Cupertino, according to data reviewed by Bloomberg Tax. Best Buy has received or is owed $9.5 million from Dinuba, a small city in the economically struggling Central Valley. QVC Inc. and Staples Inc. have similar deals with the city of Ontario.

Under the bill, cities would be allowed to keep existing deals in place, but would be required to disclose the number of permanent or temporary jobs, what benefits and job training workers would receive, and the amount of other state and federal subsidies the company is applying for or has received.

The bill is backed by the California Labor Federation. The California Chamber of Commerce, California Retailers Association, and the city of Fresno removed their opposition after Medina deleted a requirement that companies disclose their plans for automation in the future.

Former Gov. Jerry Brown (D) vetoed a similar bill from Medina in 2018, saying he favored transparency with economic incentives but the measure would be too burdensome.

To contact the reporter on this story: Laura Mahoney in Sacramento, Calif. at lmahoney@bloomberglaw.com

To contact the editor responsible for this story: Jeff Harrington at jharrington@bloombergtax.com

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