what’s new for water's-edge taxpayers? March 2021 Tax News

Welcome to Tax News

Subscribe to get monthly updates on tax laws, policies, and events.

On September 29, 2020, Governor Newsom signed Assembly Bill 3372 (AB 3372).

AB 3372 allows unitary, non-U.S. affiliates that become a California taxpayer solely due to California’s economic nexus standard in Revenue and Taxation Code (R&TC) Section 23101(b), in a taxable year beginning on or after January 1, 2021, to be deemed to have made a water's-edge election with the existing water's-edge combined reporting group.

Before January 1, 2021, taxpayers can rely on three previously issued FTB Notices.[1] These FTB Notices provided similar treatment, which clarified that an otherwise valid water's-edge election, would not be terminated, if a foreign affiliate became a taxpayer pursuant to R&TC Section 23101(b), as long as certain conditions were met.


[1] FTB Notice 2016-02, FTB Notice 2017-04, and FTB Notice 2019-02
Last updated: 09/24/2025