Proposition 24 on the California ballot would eliminate the ability of businesses to take Net Operating Losses (NOLs) as federal tax law allows. Additionally, the measure would continue the usage of a three-factor system for taxation of multi-state entities by California.
Under federal tax law, an NOL can be carried back two years or carried forward 20 years. Under California law as it currently exists NOLs cannot be carried back and can only be carried forward 10 years. However, as part of the 2008 budget compromise, beginning in 2010, California law now conforms to federal law. Proposition 24 would revert California law to the old rules. It would also stop a single-factor method of apportioning California sales rather than the current three-factor system.
This may seem like much ado about nothing–it doesn’t directly impact consumers. Well, that’s not really the case because California tax law is so anti-business that anything causes pro-business tax policy should be enshrined into law. That’s not how public employee unions see it (they’re proponents of Proposition 24); they don’t want anything to stop tax revenues. Of course, that’s rather short-sighted: Many businesses have expanded outside of California and/or have moved out-of-state due to California’s business climate.
No matter where you stand on Proposition 24, remember to vote on November 2nd.
Tags: CalBallot2010