Earlier, we posted information regarding AB 2640, a bill introduced in the California Assembly on February 19 that would have changed California tax law and taxed many transactions that are tax-free under federal law.
The proposal was referred to the Committee on Revenue & Taxation. Last week, it emerged from the Committee on Revenue & Taxation to be read for a second time. This reading, though, was substantially shorter than the first. The proposed bill has been heavily amended and the provisions that would have taxed transactions in California that are exempt from tax on the federal level have been removed. The non-recognition provisions for like kind exchanges, rollovers of qualified small business stock and other transactions will continue in California just as they do in the Internal Revenue Code.
After the second reading, the bill was re-referred to the Committee on Revenue & Taxation yesterday. Unless there are amendments restoring provisions that would have been hugely unpopular, it appears the California legislature will need to find some other mechanisms for addressing the budget deficit. You may continue to track the bill’s progress here by entering “AB 2640” into the search line.