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California Unitary Method or Waters Edge Election

How does a multistate or multinational corporation approach the question of the California unitary method or waters edge election for tax calculation purposes?  The integrated tax, accounting, legal and business service at Allen Barron allow you to receive a more comprehensive answer from a broader perspective, yet detailed as we balance each of these disciplinary perspectives.  The California legislature is considering Senate bill 567 which would abandon the waters edge election and implement a mandatory waters edge combination.  The proposed legislation could remove the waters edge election as of January 1, 2017 meaning corporations would be unable to use the waters edge election for tax years following January 1, 2023.

Presently qualified corporations may elect to calculate its income based upon or attributed to sources within California.  The waters edge election requires all entities within a “unit” or reporting group of companies to take this election.  Would your multistate or multinational corporation best benefit from the California unitary method or waters edge election and what triggers California tax obligations in the first place?  California’s state legislature changed the statute so that any business with more than $500,000 of California sales in a tax year was considered to be “doing business” in California, even if they do not have a physical location within the State.  Which option provides the most advantageous tax position?  What happens if there are changes within a waters edge group after the election is made?  What will the impact of the 2011 factor presence nexus statute make on previous waters edge elections?

Allen Barron’s experienced IRS and California tax attorneys work seamlessly with our tax and accounting group to evaluate the unique circumstances of your group and the best strategy for maximizing profit and reducing tax exposures.  Are you interested in a more complete answer to your questions?  Are you tired of trying to piece together portions of the answer from 4 or 5 separate professionals?  We invite you to contact us or call 866-631-3470 for a free consultation and to learn more about the benefit and cost-savings of our integrated services.