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Daily Tax Report: State

California Will Require Candidate Tax Returns for Primary Ballot (1)

July 30, 2019, 5:44 PMUpdated: July 30, 2019, 8:00 PM

California is the first state to block presidential and gubernatorial candidates from its primary ballot if they don’t release their tax returns.

Gov. Gavin Newsom on July 30 signed S.B. 27, a bill Democratic lawmakers sent to him in response to President Donald Trump’s break from years of tradition by choosing not to release his tax returns. Newsom didn’t follow the lead of his predecessor, former Gov. Jerry Brown, who vetoed a similar bill in 2018 because he said it could be unconstitutional. Newsom and Brown are both Democrats.

The law took effect immediately and will apply to all statewide primary ballots, although it is likely to face legal challenges. In a signing message, Newsom said he believes California is within its constitutional rights in enacting the law, and he wants it to set a national standard.

“These are extraordinary times and states have a legal and moral duty to do everything in their power to ensure leaders seeking the highest offices meet minimal standards, and to restore public confidence,” Newsom said. “The disclosure required by this bill will shed light on conflicts of interest, self-dealing, or influence from domestic and foreign business interest.”

The Trump campaign said the law is likely unconstitutional.

“The Constitution is clear on the qualifications for someone to serve as president and states cannot add additional requirements on their own,” communications director Tim Murtaugh said. “The bill also violates the 1st Amendment right of association since California can’t tell political parties which candidates their members can or cannot vote for in a primary election.”

Newsom bolstered his claims that the new law is constitutional with comments in his announcement from legal heavyweights: University of California, Berkeley School of Law Dean Erwin Chemerinsky; Gibson, Dunn & Crutcher LLP partner Theodore J. Boutrous Jr.; and Boies Schiller Flexner LLP Chairman David Boies.

Boutrous cited a July 19 ruling from the U.S. Court of Appeals for the Ninth Circuit that said such laws are constitutional if they are “generally applicable, even-handed [and] politically neutral.”

“Here, California’s bill meets all of these requirements. It will apply to any candidate for President, whether Republican, Democrat, or Independent,” Boutros said. “And as the State Legislature concluded, the State has important interests ‘in ensuring that its voters make informed, educated choices in the voting booth,’ among many other important reasons.”

Democratic candidate Joe Biden on July 9 released his tax returns for 2017 and 2018. He and all other candidates must include returns as far back as 2015 to gain access to the California primary ballot.

California isn’t the only state seeking tax returns from presidential candidates. Trump has asked a federal judge for an emergency order to block House Democrats from getting his New York state tax returns using a law Gov. Andrew Cuomo (D) recently signed.

The House Ways and Means Committee sued the Treasury Department and the Internal Revenue Service for Trump’s returns on July 2, after Treasury denied previous requests and a subpoena.

Under the new California law, at least 98 days before the state primary, candidates must release their returns from the previous five years to the secretary of state’s office which will post redacted versions on its website.

Sen. Mike McGuire (D), the author of S.B. 27, said he believes the measure will pass constitutional muster because states have the authority to impose access conditions on the primary ballot under the U.S. and California constitutions.

(Updated to add comments from lawyers cited by Newsom and information about Joe Biden's tax returns.)

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

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; Karen Saunders at ksaunders@bloombergtax.com

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