Critical Time for Determining Future of Proposed Bills

In June , the Legislature crossed an important milestone in the House of Origin deadline . This deadline marked a significant point in the legislative calendar when bills must pass their house of origin — either the Senate or the Assembly — to remain viable for further consideration this year .

As a critical checkpoint , lawmakers prioritized and advanced bills that have garnered sufficient support and momentum . Importantly , this deadline injects a sense of urgency into the legislative process , prompting lawmakers to assess the viability and popularity of their proposed measures before they proceed to the next phase of the legislative journey .

With the number of bills culled down , July will begin a renewed process for bills beginning their path through the second house . Committees will hold hearings and discussions , allowing legislators to vet proposed legislation , review testimonies from experts and stakeholders , and consider potential amendments . This process will be expedited through the first few weeks of July before legislators break for a summer recess .

Regardless of the condensed timeframe , the next few weeks will make or break for much of the remaining legislative proposals .

ESG Legislation Moving Forward Two major environmental , social and corporate governance ( ESG ) reporting proposals are moving forward in the Legislature .

SB 253 , the Climate Corporate Data Accountability Act , would require all companies doing business in California with over $ 1 billion in revenue to report their carbon emissions to the public . It would also require that the reporting is verified by a third-party auditor approved by the air resources board .

SB 261 would require a climate-related financial risk report disclosing an entity ’ s climate-related financial risk and measures adopted to reduce the risks .

Both proposals are reintroductions of similar ones from last year that failed to get enough support to pass out of the Legislature . To date , the politics and complexity of such a requirement have made these proposals a long shot . However , there is growing speculation that these could gain traction this year . There has been significant turnover of the Legislature — particularly the Assembly — and a gridlocked Congress has stalled similar efforts at the federal level , elevating the desire for California to lead the way .

CalCPA is closely following these bills and has been working with California firms that have invested in ESG services for their clients . Given that these have an increased potential to move forward and become a reality , it is more important than ever for the profession to engage , share feedback and provide input to decision-makers .

New Speaker Steps into Leadership After a protracted battle over who will become the next speaker of the Assembly , Assemblymember Robert Rivas took over from Assemblymember Anthony Rendon on June 30 . Rivas represents the 29th Assembly District , which covers Salinas , Hollister , Gilroy and Watsonville on the California central coast .

The speaker of the assembly serves as the leader of the Assembly setting legislative priorities , committee appointments , political strategy and other processes within the Legislature . The speaker also serves as a lead negotiator with the senate pro temp and the governor on budget and other policy priorities .

The transition is likely to bring a number of substantive changes within the Assembly that may impact the remaining months of the Legislative session .

Senate Democrats Propose Tax Changes Earlier this Spring Democratic leadership outlined its plan for balancing a state budget with a growing deficit . The plan included shifting funding priorities , targeted cuts , tapping reserves and several tax changes that would net an increase in revenue .

Among the changes included a temporary pause in the net operating loss deduction , changing the current 8.84 percent tax rate for C corps into two rates : 6.63 percent for the first $ 1.5 million in taxable income and 10.99 percent for taxable income over $ 1.5 million . These provisions were introduced into SB 220 ( Senate Committee on Budget and Fiscal Review ).

Similar to other legislative tax increase proposals , like recent wealth tax proposals , the proposal received strong opposition from the business community arguing the negative impact on businesses already struggling to be competitive in a high-cost state .

Gov . Newsom signaled that he would not support a tax increase under the current economic conditions . Despite the early opposition , Democratic leaders in the Senate moved forward with amending the proposed language into SB 220 . The bill will likely serve as a negotiating point between the Assembly and the governor as they work to address ongoing state budget challenges .

Budget Adopted , but More to Come The Legislature approved and the governor signed the framework of a state budget by the constitutional deadline of June 15 . However , as has become customary , the Legislature and the governor will continue to make changes to the budget priorities and corresponding programs via budget trailer bills . These bills can be wide-ranging and include significant policy changes . CalCPA will be closely monitoring these legislative vehicles over the course of the legislative session .

Jason Fox is CalCPA ’ s vice president of advocacy and public affairs . You can reach him at jason . fox @ calcpa . org .

24 CALIFORNIA CPA JULY 2023 www . calcpa . org