Bill > A5039

Introduced Session

This bill modifies the method used to determine the members of a combined group under the Corporation Business Tax Act (1945). Specifically, the bill amends current law to require that a combined group be determined on a world-wide basis. Under current law, a group of business entities that are engaged in a unitary business is required to submit a combined return for State corporation business tax purposes. This group of business entities is also known as a combined group. A "unitary business," is a single economic enterprise that is made up either of separate parts of a single business entity or of a group of business entities under common ownership that are sufficiently interdependent, integrated, or interrelated through their activities so as to provide a synergy and mutual benefit that produces a sharing or exchange of value among them and a significant flow of value among the separate parts. Under current law, a combined group is required to be determined on a water's-edge basis, unless the combined group elects to be determined on a world-wide basis or affiliated group basis. Instead, this bill provides that for privilege periods beginning on or after July 31, 2026, a combined group is required to be determined on a world-wide basis, unless the combined group elects to be determined on an affiliated group basis. Thereafter, the State will no longer allow combined groups to be determined on a water's-edge basis under this bill. In general, the primary difference between the world-wide and water's-edge basis is the geographic scope of the business entities included in the combined group. Under a "world-wide basis" of combined reporting, the combined group is required to include all business entities, both domestic and foreign, that are engaged in the unitary business. This differs from a "water's-edge basis" of combined reporting, in which the combined group is only required to include business entities that are engaged in the unitary business and that have significant business operations in the United States. Unlike a water's-edge or world-wide basis, an affiliated group basis of combined reporting does not require the existence of a unitary business relationship. An affiliated group basis requires the inclusion of income from all United States domestic corporations, including business entities that under federal tax law are treated as domestic corporations or are foreign-incorporated entities with effectively connected income, that are commonly owned, directly or indirectly, by any member of such affiliated group.

AI Summary

Committee Categories

Katie Brennan (D)*, 

Introduced, Referred to Assembly Commerce and Economic Development Committee (on 05/11/2026)

Official Document