AB 1790 will end the multibillion-dollar corporate tax loophole known as the “Water’s Edge Election,” which allows fossil fuel corporations to avoid paying California taxes on their profits.
The Water’s Edge tax election, established in 1986, enables multinational corporations to avoid taxes on earnings they designate as beyond the “water’s edge” of California’s borders. Big Oil used lobbying, campaign contributions, industry association funding, and legal pressure in a decade-long campaign to establish this enormous tax loophole, which now costs Californians between $3 and 4 billion per year.
This tax loophole is the largest corporate tax break in California. It cost the state $4.1 billion in 2024-25, more than every other major identifiable tax expenditure for corporations combined. Every dollar lost to this tax giveaway is a dollar that could be invested in climate solutions. Eliminating all fossil fuel tax breaks and subsidies would not only align with California’s climate goals, but also free up hundreds of millions to address the state’s climate, health, and affordability crises.
AB 1790 will return the state to the Worldwide Combined Reporting (WWCR) method for taxing multinational corporations doing business in California beginning in 2028. WWCR worked well and taxed corporations fairly for the 50 years preceding the introduction of the Water’s Edge Election in 1986. Between $75 and $146 million annually would come from increased taxes on fossil fuel corporations.
It’s time to stop propping up the corporations responsible for the climate crisis and use our tax dollars to protect frontline community health, grow the clean energy economy, implement sustainable agricultural practices, and more.
Full bill text and more information.
Committee Status: This bill will be heard in the Assembly Revenue and Taxation Committee.
Urge your assemblymember to support AB 1790!
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