SACRAMENTO—The
Honest Corporate Tax Reporting Act, AB 675 (Klehs), passed out of the
Legislature today and heads to the Governor’s desk. Over the next
thirty days, Governor Schwarzenegger has the opportunity to sign a bill
that will increase fairness and transparency in corporate taxes.
“While the gubernatorial candidates may spar over whether tax increases
are appropriate, they should both agree that California should not be
allowing companies to hide profits from the state tax board,” said
Emily Rusch, Advocate with CALPIRG.
Corporations
report profits to the California state tax board that are on average 20
percent lower than the profits they report to shareholders. Because
corporations keep two sets of books, some companies are able to
manipulate profit numbers through the use of offshore tax shelters and
other tactics. The Honest Corporate Tax Reporting Act, AB 675 (Klehs),
would require corporations to disclose and explain any differences
between profits reported to shareholders and profits reported to the
state tax board. The Franchise Tax Board has characterized the
reporting required in this bill as “a significant audit tool” that
“could assist auditors in identifying tax shelter activity and dissuade
some taxpayers from entering into tax avoidance schemes.”
“Californians
need to be able to trust that taxes are being collected fairly and
effectively,” said Rusch. “We urge the Governor to sign this bill.”
