06/18/2018

Federal Tax Reform Means More Business Taxes for California

California’s corporate tax base may increase by up to 12 percent as a result of federal tax reform legislation, according to a study recently released by the State Tax Research Center. This means that revenues from California’s corporate income tax could increase by as much as $1.3 billion – without any action by state lawmakers to increase corporate tax rates or income definitions.

Larger tax revenues will result from the new tax reform law, which limited deductions and changed foreign-tax rules. The federal tax law imposed new restrictions on companies’ ability to deduct interest payments, exchange property without paying capital-gains taxes, deduct some fringe benefits and immediately write off future research costs. At the federal level, those changes were far outweighed by the rate cut.

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