AB 1790 and the Water’s Edge Election
The election contract binds the taxpayer, not the Legislature.
Assembly Bill 1790 would end the water’s edge election. For taxable years beginning in 2026 and 2027, an electing group could walk away without Franchise Tax Board consent, and a group that stayed would include forty percent of its net CFC tested income in the base with no factor relief, and would test foreign affiliates for full inclusion on a United States sales factor of twenty percent alone, in place of the three-factor average. For taxable years beginning on or after January 1, 2028, every election terminates and worldwide combined reporting becomes mandatory. The bill cleared its first committee in April and has sat on the Assembly Appropriations suspense file since May. A two-thirds vote stands between the text and the law, and the idea has outlived every bill that has carried it. Groups built on the election should already know their worldwide number.
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