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Commercial Observer (February 17, 2019) To those outside California, it might be perplexing that the state treasurer, Fiona Ma, got the loudest applause during her keynote address at the NES Financial-sponsored Opportunity Zone Expo for simply proclaiming that when it came to opportunity zones, the state would abide by the federal government tax statute. But California has always gone its own way when it comes to taxing capital gains. Some might attribute the culture change to the ongoing lack of affordable housing in the state and, interconnected homeless crisis and the new governor’s campaign pledge to build 3.5 million homes from the time he takes office through 2025. It wasn’t surprising to attorney Michael Pruter, a partner at Allen Matkins, that Ma got such a rousing response to her proclamation. California taxes all capital gains as regular income, unlike the federal government, which differentiates between ordinary income and long- and short-term capital gains for tax purposes. Unlike at the federal level, that means Californians will be taxed at a rate anywhere from 1 to 13.3 percent, depending on one’s tax bracket. “A huge part of California’s tax base is driven by high-net worth taxpayers how have capital gains,” Pruter, a member of the firm’s opportunity zone specialty team, told Commercial Observer.
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