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Tax Treatment for Multistate Businesses

Prop. 39 would repeal an existing law that allows multistate businesses to choose a tax liability formula that provides favorable tax treatment for businesses with property and payroll outside California. It would require require multistate businesses to calculate their California income tax liability based on the percentage of their sales in California. Some of the increased revenues would be used to fund projects that create energy efficiency and clean energy jobs.

Official Election Results:

Yes: 7,384,417 [61.1%]
No: 4,701,563 [38.9%]

Pro / Con


Proponents of Prop. 39 say that it will eliminate the out-of-state tax loophole that they believe was created by the Legislature in 2009 in a deal with lobbyists from out-of-state corporations. They say that Prop. 39 will force multistate companies to play by the same rules as California employers. Proponents also say that the measure will create new jobs in California and will bring savings to taxpayers.


Yes on 39 [Website archived in Internet Archive]


Opponents of Prop. 39 say that the measure will target job creators and make the state's unemployment situation worse. They believe the measure will spend money on a new unnecessary bureaucracy which could be spent on schools, health and welfare, environmental protection or public safety. They say that the tax increase in the measure will change existing tax laws and will cost middle class workers their jobs.


Stop 39 [Website archived in Internet Archive]



In Depth

Proposition 39 would eliminate the ability of multistate businesse to choose a tax liability formula for determining taxable income. Begininning in 2013, multistate businesses would be required to use the single sales factor method. Proposition 39 also imposes a set of rules on how multistate businesses calculate the portion of sales in California. Certain cable companies would be required to work under a set of separate rules.

Proposition 39 would also establish a new state fund called the Clean Energy Job Creation Fund. The fund would be used to expand the use of alternative energy, and maximize energy efficiency. Specifically, the measure would support:

  • Energy efficiency retrofits and alternative energy programs in state public schools, colleges, universities, and other public facilities.
  • Funding and technical assistance for energy retrofitting projects.
  • Workforce and job development and training programs as funded by the Legislature. The Legislature would determine which projects would be funded at which agencies.
  • All projects must be coordinated with the California Public Utilities Commission and the California Energy Commission.
  • The creation of an oversight board to annually review and evaluate spending from the Clean Energy Job Creation Fund.

Proposition 39 would raise approximately $1 billion annually in additional tax revenues from multistate businesses. The additional revenues would start in 2013-14. For five years from 2013-14, about half the additional revenues would be transferred to the Clean Energy Job Creation Fund.

Any revenue designated to Clean Energy Job Creation Fund would not fall under the state's annual Proposition 98 education funding guarantee. Revenues generated from Proposition 39 that do not go to the Clean Energy Job Creation Fund, would increase Proposition 98 minimum by approximately $200 million anually.


Voter Resources

Voter Resources

Official CA Documents

Official Voter Information Guide

Campaign Finance Information

Cal-Access Check out how much money is being raised and spent to pass or defeat this measure, and where the money is coming from.

Cal-Access Ballot Measure Summary Data Search Select "General 06 November 2012" and "Proposition 039" from the drop-down menus. Cal-Access provides financial information supplied by state candidates, donors, lobbyists, and others.

Nonpartisan Analyses


California Initiative Review - Pacific McGeorge Capital Center for Public Law and Policy.

Maplight: Voter's Edge

League of Women Voters: Pros and Cons






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