Statement by CALPIRG
We
are mystified and disappointed that the governor vetoed the Honest
Corporate Tax Reporting Act (AB 675, Klehs), a bill that would have
protected taxpayers and investors alike. The bill would have required
corporations to explain to the Franchise Tax Board any differences
between profits reported to state tax authorities and those reported to
shareholders. This commonsense bill would have prevented corporations
from underreporting profits to the state and from overstating profits
to shareholders.
Just
a few years removed from the Enron debacle, it's hard to fathom a
legitimate justification for vetoing a bill to increase the honesty and
transparency in corporate taxes. Between 1996 and 2000 Enron reported
$3.265 billion in profits to shareholders but a measly $76 million in
profits to the IRS over the same period.
The
governor's veto clashes with federal tax standards. The Bush
administration has acknowledged that corporations often use loopholes
like this to avoid paying their fair share of taxes. Last year, under
the Bush administration, the IRS began requiring companies to reconcile
their income reported to shareholders and their tax income reported to
the IRS.
The
Honest Corporate Tax Reporting Act would have given the Franchise Tax
Board the same information as the IRS, but with better enforcement
mechanisms. The Franchise Tax Board characterized the reporting
required in this bill as "a significant audit tool" that "could assist
auditors in identifying tax shelter activity and dissuade some
[business] taxpayers from entering into tax avoidance schemes."
In light of this veto, we call on the governor to propose serious steps to crack down on corporate tax evaders.
