California Prop 40 failed... so business owners are safe? No.
From #LegalBytes: The Official Podcast of Cummings & Cummings Law · 13:53
Show by Cummings & Cummings Law
Attorney and CPA Chad D. Cummings notes that Proposition 40 did not pass, but if you were waiting for the California billionaire wealth tax to disappear before deciding whether to move yourself or your company, the answer is almost the opposite. Proposition 40’s defeat did not eliminate the uncertainty. It gave the people who want a California wealth tax a detailed postmortem showing them exactly where the proposal failed and what they need to change before they try again. They have already said they intend to try again. Roughly 47 percent of voters still supported it. Its proponents now know where the political resistance is, which features of the measure were vulnerable, and what happened when retroactivity, valuation of private businesses, and the one-time structure were put in front of voters. The next proposal does not have to look exactly like Proposition 40. Proposition 42 passed as well and creates a new obstacle to future wealth taxes by restricting new taxes on financial assets and other personal property. Proposition 42 itself can be changed by California voters. Proposition 40 lost. The underlying political movement did not disappear. Election Day was November 3, but Proposition 40 was not finally called until November 9, nearly a full week later. California law permits ballots to continue arriving and being processed after Election Day. From the standpoint of somebody making financial and business decisions, Californians spent almost a week not knowing whether an unprecedented wealth tax had passed. Since Proposition 40 was defeated, inquiries from California business owners interested in moving their companies out of the state through redomestication have increased, not decreased. Many owners appear to have reached a different conclusion: the fact that Proposition 40 came this close, attracted this much political support, and is already expected to return is itself information about California’s future direction. Florida and Texas impose no personal income tax and no wealth tax. Redomestication can move an existing company without dissolving it, preserving the same federal employer identification number, business history, contracts, and credit relationships. All 50 states permit an interstate change of domicile, although the terminology and methodology vary considerably. The relevant question after Proposition 40 is not simply whether the tax passed. It did not. The better question is what California just told you about the probability distribution of future tax policy. Its proponents learned from the failure. They have already said they are coming back. For business owners making decisions measured in decades rather than election cycles, that may create more reason to examine California domicile now, not less. Learn more about how to move your business out of California: https://www.cummings.law/redomestication/move-business-out-of-california/
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