We Must UnRig California!

How AB 1790 Would End the Water's Edge Tax Election and Recover Billions for California

By Woody Hastings

California must stop giving taxpayer money to fossil fuel and other multinational corporations.

The UnRig California campaign was launched on March 11, with well over 200 union and environmental advocates in Sacramento, determined to make multinational corporations pay their fair share in taxes. It was also the launch of the related legislation, AB 1790, that will repeal the little-known “Water’s Edge” tax election. Believe me, the multinationals know all about it!

A broad coalition called UnRig California has coalesced to lead California’s latest push to close a longstanding corporate tax mega-loophole and a bill introduced in the Legislature to make it real. Assemblymember Damon Connolly’s AB 1790 will repeal the so-called “Water’s Edge” election — a multibillion-dollar scheme that lets many multinational corporations shelter profits from California taxation.

It would return the state to the system that worked for 50 years before Water’s Edge — worldwide combined reporting — beginning in 2028. This correction will both restore fairness to the tax code and free up funds for basic human needs, climate, health, and services Californians depend on.

What Is the Water’s Edge Election—and Why Does It Matter Now?

In early 2025, the Sonoma County-based Climate Center published research entitled “Water’s Edge Tax Haven and California’s Budget Shortfall: How Oil and Gas Majors Crafted a Tax Avoidance Policy Contributing to Ongoing Budget Woes.” The paper describes how the multinationals and their lobbyists browbeat the California legislature, over a 10-year period, into submission.

The Water’s Edge election was enacted in 1986 and allows U.S.-based multinational corporations to elect to compute their California taxable income by excluding many foreign affiliates, effectively drawing a “water’s edge” around domestic operations and leaving offshore profits untaxed by the state.

Over decades, that election became a route for profit-shifting to low- or no-tax jurisdictions, reducing California corporate tax receipts substantially. Estimates put the current annual cost to the state at roughly $3–4 billion; for 2024–25 the figure has been reported at $4.1 billion. That shortfall represents funds many advocates say could otherwise shore up public services, climate programs, and social safety nets.

What AB 1790 Would Change

AB 1790, authored by Assemblymember Damon Connolly, D-San Rafael, would repeal the Water’s Edge election and reinstate mandatory worldwide combined reporting for large multinationals doing business in California, beginning for tax years on or after January 1, 2028.

Under worldwide combined reporting, a multistate or multinational firm’s global earnings are combined for tax apportionment purposes, reducing the opportunity to hide profits offshore and more closely aligning state tax liability with actual economic activity in California. This will end a major corporate tax giveaway and generate meaningful recurring revenue for the state.

Who’s Behind the Campaign—and Why UnRig California Matters

UnRig California is a statewide coalition led by Service Employees International Union, the sponsor of the bill, along with a long list of other labor unions, climate, environmental, social justice, health, community organizations, faith leaders, and everyday Californians working to “unrig” rules that favor big corporations over workers and communities.

The coalition has prioritized ending corporate tax loopholes — including Water’s Edge — as part of a larger platform to make corporations pay their fair share and protect public investments threatened by federal cutbacks and rising cost pressures.

AB 1790 is not only a revenue measure, but is also a tool to rebalance power and ensure corporations that benefit from California’s economy contribute to the services their employees and customers rely on.

Supporters and the Political Landscape

When Connolly announced AB 1790 in February, he was joined by fellow assemblymembers, union leaders, environmental and education groups, SEIU, California Environmental Voters, teachers, and domestic worker unions.

Supporters assert that closing the mega-loophole will protect essential programs, from Medi-Cal and CalFresh services to climate investments, childcare, and more. These services are vulnerable to budget pressures.

How Much Revenue—and Where Would It Go?

Estimates vary by methodology, but the commonly cited range is $3 to $4 billion per year in revenue lost to Water’s Edge. Advocates say recapturing even a portion of that amount would allow California to expand human services, climate resilience and clean energy projects, protect frontline community health, and shore up affordability and services for low- and middle-income families.

The Climate Center highlights the bill’s potential to redirect funds toward climate solutions, and notes that eliminating fossil fuel tax breaks and subsidies would further align policy with California’s emissions goals.

Why This Matters for Climate and Equity

AB 1790 is more than a tax reform; it is a social equity and climate tool. The largest corporate tax break in the state has historically benefited industries, including oil and gas, whose activities contribute disproportionately to climate harms.

Reclaiming revenues could provide a dependable funding stream for decarbonization, public health protections in frontline communities, and investments that create good jobs in the clean energy economy. For labor and community organizations, the bill is a step toward reversing decades of tax policy that favors large corporations over working families.

Expected Arguments Against Repeal

Opponents, including fossil fuel, tech, and other multinational corporations and their front groups, are likely to argue that eliminating Water’s Edge could raise costs for businesses, reduce California’s competitiveness, or create tax complexity for firms operating in multiple jurisdictions.

They will also say that if California moves alone to repeal Water’s Edge, it could create interstate competitive questions for multistate corporations.

What Comes Next?

AB 1790 represents a rare alignment of labor, climate, justice, and community advocates around a technical but consequential tax reform: ending an offshore profit-shifting mechanism that has cost California billions.

UnRig California offers the public face and organizing muscle to press the case that the state can, and should, require multinational corporations that have been recording profits year after year, in the tens and even hundreds of billions, to contribute to the safety net and investments that sustain communities and the climate.

Readers interested in supporting AB 1790 can contact their representatives and learn more through the UnRig California campaign .

For more information, contact Woody Hastings, Phase Out Polluting Fuels Program Director for The Climate Center.

Published in the May 2026 edition of the Peace Press