Sunday 26 May 2019

California to Raise Taxes Significantly?: What Impact on the Entertainment and Technology Industries?

In past posts, here and here, I discussed federal estate taxes in the United States and the right of publicity.  Celebrities at death may owe significant federal estate taxes based on a valuation of their right of publicity.  Generally, most states in the United States do not have an estate tax, including California.  However, that may change soon.  According to a recent update by Baker and McKenzie, a California bill creates a California estate tax in SB 378 (as well as a gift tax and generation skipping tax).  It would include an exemption of around US $3.5 million and has a cap at the level of the federal exemption of a single filer of US $11.4 million (the federal exemption).  This means that California would basically receive around 40% of every dollar between US $3.5 million and US $11.4 million.  Every dollar above US $11.4 million would be taxed by the federal government by 40%, but not by the state of California, according to the article.  This new tax would seem to impact workers in many important California industries, including the entertainment and technology industry.  Notably, the taxes collected by SB 378 would be used specifically to create a fund to benefit under-resourced people in California to achieve “'socio-economic equality and build assets among people who have historically lacked them.'”  

Moreover, the U.S. Supreme Court will also soon decide a case concerning the ability of a state to tax undistributed income from out-of-state trusts (see here and here).  

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