Taxation: tax expenditures: Legislative Analyst’s Office: assessment, report, and recommendation

The reviews will measure whether major tax expenditures deliver their intended results and identify potential savings, including effects on the General Fund and Proposition 98 funding.

What the law does ​

• Requires the Legislative Analyst’s Office to assess and report on six specified tax expenditures, including the water’s-edge election, research credits, inherited-property basis rules, like-kind exchanges, research-cost depreciation, and cable-operator income apportionment.
• Requires each review to evaluate cost-effectiveness, General Fund and Proposition 98 effects, employment, wages, the economy, and options to improve or repeal the tax expenditure.
• Requires the Legislative Analyst’s Office to identify savings available from reducing or limiting the tax expenditures and make recommendations to the Legislature.
• Requires the first report by January 1, 2028, annual subsequent reports through the fifth and final report on January 1, 2032.
• Requires legislative tax committees to hold joint public hearings on the reports.
• Requires specified tax agencies to provide relevant anonymized taxpayer data to the Legislative Analyst’s Office with security and privacy protections.

Who it affects ​

• Businesses and taxpayers that use the six reviewed tax provisions.
• The Legislature and its Senate and Assembly tax committees.
• The Legislative Analyst’s Office, Franchise Tax Board, California Department of Tax and Fee Administration, and Employment Development Department.

Context ​

The reporting requirement ends January 1, 2033.