Legislators Revive Tax Increases on Top Earners and Inclusion of GILTI for Corporations
Legislators revised bills to increase tax rates on high incomes and to require taxpayers to include certain international income in gross income.
California legislators introduced bills to increase taxes on individuals making more than $1 million annually and made additional revisions to AB 71 to require taxpayers to include certain international income in their gross income.
Legislators revive proposal to increase taxes on top earners
California legislators amended AB 1253, which would impose additional taxes on incomes of more than $1 million for tax years after January 1, 2021. It would add to the current top marginal rate of 13.3%:
1 percent on adjusted income of $1 million to $2 million;
3 percent on adjusted income of more than $2 million up to $5 million; and
3.5 percent on adjusted income of more than $5 million.
AB 1253 is the same bill that stalled in the legislation 2020.
Homelessness funding bill amended to focus on GILTI
Legislators also amended AB 71 to remove the corporate tax increases and focus on the inclusion of the taxpayer’s global intangible low-taxed income (GILTI) in their gross income in modified conformity with the federal tax law for tax years beginning on or after January 1, 2022. The bill would:
require a taxpayer that makes a water’s-edge election to take into account 50% of the GILTI and 40% of the repatriation income of its affiliated corporations beginning January 1, 2022;
allow a taxpayer, for calendar year 2022 only, the opportunity to revoke a water’s-edge election if the taxpayer includes GILTI as required by these provisions; and
limit business credits to $5 million.
This bill would require any revenue resulting from these changes to be used to fund homelessness programs under the Bring California Home Act.
The original version of AB 71, introduced in December, would have increased both personal and corporate taxes for tax years after January 1, 2022. A revised version from January removed the personal income tax provisions that were in the December version of the bill (see article), and focus on corporate taxes.