Iteration of Prop. 24 is back

February 18, 2011

Last year, media companies including the Walt Disney Co. and Time-Warner Inc., parent of Burbank’s Warner Bros. Studios, spent millions of dollars to help defeat California’s Proposition 24. Now a key part of the measure is back in a different form, pushed by state Sen. Kevin De Leon (D-Los Angeles).

Proposition 24, among other provisions, would have eliminated the ability of companies to choose between two formulas for calculating corporate income taxes.

In California, companies can choose between paying based on their in-state sales or on a formula that factors in sales, property and payroll. The option was a perk packed into last-minute budget negotiations between Gov. Arnold Schwarzenegger and top legislative leaders in February 2009.


Funded primarily by the California Teachers Assn., Proposition 24 sought to undo the deal. Time-Warner contributed $1.5 million to the “No on 24” campaign, according to state campaign finance records, and Disney added $1.4 million. Biotech firms concerned with another aspect of the measure poured in funds, and the initiative lost, 58% to 42%.

De Leon has revived part of the proposition, making it mandatory for companies to use the so-called single sales factor. According to the state legislative analyst’s office, the measure’s major impact would be on companies that manufacture products elsewhere, but that have significant sales in California.

The analyst’s January report found the shift would raise as much as $1 billion a year for the state and could cause a “small but noticeable increase” in California jobs.

De Leon spokesman Greg Hayes said the report “confirmed our suspicions: making [the single sales factor] optional hurts California companies and the expansion of jobs here.”

Hayes said De Leon is lining up business support for the measure from firms that see outside manufacturers, such as Microsoft, as benefiting disproportionately from the current setup. He also said lawmakers are open to a change, because of the state’s gaping deficit and because they had little say in the 2009 tax deal.

“We’re facing a dire situation,” Hayes said. “Do we want to go find $1 billion in cuts, or close a corporate loophole for out-of-state companies?”

A spokesperson for Warner Bros. declined to comment on the bill, and a Disney spokesperson did not return calls.

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