Assembly OKs corporate tax change to raise $1 billion for scholarships

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The state Assembly voted Monday to close what Democratic legislative leaders call a corporate tax loophole to raise $1 billion for scholarships for middle-class college students in California.

The Assembly voted to eliminate a provision of tax law that allows out-of-state corporations to pay less in taxes than businesses based in California by letting them be taxed based on the portion of their property and hiring they have inside California, as well as sales in the state.

The bill by Assembly Speaker John Perez (D-Los Angeles) bases the corporate taxes on sales.

Perez said his legislation ‘Fundamentally speaks to the question of tax fairness for California businesses’ and gets rid of a ‘perverse incentive for businesses to create jobs outside California.’

The measure and a companion bill would reduce student fees by two-thirds for University of California and California State University students whose families earn less than $150,000 per year, Perez said.

To get the two-thirds vote needed for the bill, Democrats were joined in voting for the measure by Assemblyman Nathan Fletcher, an independent from San Diego, and Assemblyman Brian Nestande (R-Palm Desert). Assemblyman Tony Mendoza (D-Artesia) said he provided a ‘courtesy vote’ even though he has ‘serious concerns’ about ‘where this money is going to go to.’

It is less certain whether the measure will get the needed votes in the Senate.

Most Republican lawmakers, including Assemblyman Tim Donnelly of San Bernardino, opposed the measure as harmful to corporations during an economic slump.

‘It’s a bad idea,’ Donnelly said. ‘We’re going to raise taxes on corporations who are going to make a decision on whether they are going to stay in California or locate in California.’

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-- Patrick McGreevy in Sacramento