Yesterday, we read an article written by Virginia La Torre Jeker, JD that caught our attention! You should read her article as it is beautifully written as she always does an outstanding job. However, we ask you to carefully read through the Bill No 2088 Text as tax professionals and taxpayers globally will be stunned what Virginia La Torre Jeker brings to light:
“California’s Legislature is contemplating a wealth tax on ANY person who spends more than 60 days within the State in a single year. Assembly Bill 2088 will assess a wealth tax annually for a 10-year shadow period and extend to residents, part-year residents, foreigners – in short, every individual who is in the state for over 60 days in a calendar year. Even those who move out of California to another state, or foreigners who return to their home country, say, after extended medical care in Cedars Sinai Hospital or attendance at UCLA, would continue to be subject to the wealth tax for a decade. The law makes no distinction between a nonresident from North Dakota or a nonresident from Dubai.”
Here is a portion of California Legislature Bill No 2088 you will want to read:
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
Part 27 (commencing with Section 50301) is added to Division 2 of the Revenue and Taxation Code, to read:
PART 27. Wealth Tax
CHAPTER 1. General Provisions and Definitions
This part shall be known, and may be cited, as the Wealth Tax Act.
The collection and administration of the tax described in this part shall be governed by the provisions of Part 10.2 (commencing with Section 18401) unless expressly superseded by the provisions of this part.
(a) The Wealth Tax shall be reported with, and is due at the same time as, the annual income taxes of a taxpayer under Part 10 (commencing with Section 17001). The Franchise Tax Board shall amend the Personal Income Tax Forms, and amend or create any other forms necessary, for the reporting of certain assets. Assets that must be reported separately shall include, but shall not be limited to, the following categories:
If any section, subdivision, paragraph, or provision of this part is found to be invalid, unconstitutional, or otherwise unenforceable that finding shall not affect any other section, subdivision, paragraph, or provision in this part that can be enforced without the use of the offending provision.
CHAPTER 2. Imposition of Tax on Wealth
(a) For the benefit of accumulating excessive wealth in this state, there shall be imposed an annual tax of 0.4 percent upon the worldwide net worth of every resident in this state in excess of the following:
Worldwide net worth shall not include any real property directly held by the taxpayer. However, worldwide net worth shall include the value of real property held indirectly, as through a corporation, partnership, limited liability company, trust, or other such legal form, except to the extent that such inclusion is prohibited by the California Constitution, by the United States Constitution, or other governing federal law.
The Franchise Tax Board shall adopt regulations on the following subjects to clarify valuation methods.
(a) The value of all assets subject to the Wealth Tax shall be reported annually, but any amount of net-worth wealth tax on those assets paid to another jurisdiction shall be credited against the Wealth Tax. Any credits created by this section, however, shall not exceed the total tax owed under the Wealth Tax. For the avoidance of doubt, this section shall only provide a credit for a tax on net worth, or a tax on real property as described in subdivision (b), and no credit shall be created by any tax on transactions, income, capital gains, or other taxes.
Notwithstanding the provisions of Section 50306, the value of directly held real property excluded from calculation of a taxpayer’s worldwide net worth shall be reported on the taxpayer’s annual return, along with any liabilities secured by or used for the benefit of directly held real property. Liabilities secured by or used for the benefit of directly held real property shall not be considered in determining worldwide net worth of a taxpayer. The Franchise Tax Board shall adopt regulations for apportioning taxpayer’s overall liabilities to exclude liabilities related to directly held real property. These regulations shall provide that, at a minimum, a percentage of each taxpayer’s overall liabilities, equal to the percentage the taxpayer’s directly held real property interest bears to all of the taxpayer’s worldwide assets, shall be excluded from the calculation of the taxpayer’s worldwide net worth.
(a) (1) For purposes of this part, a taxpayer is considered a resident of California for a given year, if such taxpayer is a California resident for purposes of the California income tax as determined by Section 17014.
(a) A taxpayer subject to the tax imposed under this part with an understatement of tax for any taxable year shall be subject to the penalty imposed under this section if that understatement exceeds the greater of the following:
This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
Subscribe to TaxConnections Blog
Enter your email address to subscribe to this blog and receive notifications of new posts by email.