SACRAMENTO—The
Honest Corporate Tax Reporting Act, AB 675 (Klehs), passed out of the
Senate Revenue and Taxation Committee today. CALPIRG, the California
Labor Federation, and the California Tax Reform Association applaud
Senator Machado, Senator Cedillo, Senator Scott, and Senator Alquist
for supporting the bill.
“When
corporations don’t pay their fair share of taxes, the rest of us have
to pick up the tab for funding schools, public safety, and other
needs,” said Emily Rusch, Tax and Budget Advocate with CALPIRG. “The
Honest Corporate Tax Reporting Act will discourage companies from
hiding profits from the state tax board.”
Corporations
are allowed to routinely report lower profits to the state tax board
than they do to their shareholders. The widespread abuse of double
accounting practices allows companies to manipulate profit numbers
through the use of offshore tax shelters and other tactics. For
example, Enron reported to their shareholders that they made $3.625
billion in profits between 1996 and 2000. Yet they reported only a
small fraction of that amount, $76 million, in profits to the IRS over
that same period. Unfortunately, Enron isn’t the only corporation that
has reported widely different numbers to either inflate their profits
to shareholders or hide profits from tax agencies. A Harvard study
found that in 1998, for every $1 in income reported to the federal
government for tax purposes, $1.63 in income was reported to
shareholders.
The
Honest Corporate Tax Reporting Act, AB 675 (Klehs), would require
corporations to disclose and explain to the state tax board any
differences between profits reported to shareholders and profits
reported to the state.
“Californians need to be able to trust that taxes are being collected
fairly and effectively,” concluded Rusch. “We urge the Legislature to
move quickly to pass the Honest Corporate Tax Reporting Act.”
The
Senators voting for the bill were Senator Machado, Senator Scott,
Senator Alquist, and Senator Cedillo. The Senators voting against the
bill were Senator Runner, Senator Poochigian, and Senator Dutton. The
bill will now advance to the Senate Appropriations Committee.
