SeeSALT Blog
On February 10, 2026, Assembly Bill 1790 (AB 1790) was introduced in the California Legislature. Although recently placed in the suspense file, AB 1790 could still be put up for a vote this budget cycle or influence later budget proposals. While public reporting about AB 1790 has focused on its proposed elimination of the water’s-edge election, the bill also includes a less-discussed but significant change to California’s treatment of captive insurers—one that may raise concerns under the California Constitution.
The California Office of Tax Appeals (OTA) held a California resident was not entitled to claim an other state tax credit (OSTC) for taxes paid to Massachusetts because gain from the sale of an LLC membership interest was wholly sourced to the taxpayer’s domicile under California law. 
The Fifth Appellate District of the California Court of Appeal has struck another blow to taxpayers claiming California unconstitutionally discriminates against interstate commerce by permitting intrastate unitary businesses to file using either a combined reporting method or separate accounting method, while requiring interstate unitary businesses to file under the combined reporting method.