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September 21, 2011

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William Leiter (916) 651-4011 .(JavaScript must be enabled to view this email address)


SACRAMENTO – Governor Jerry Brown has signed into law a bill by State Senator Joe Simitian (D-Palo Alto) to revise and update California’s bond laws. Senate Bill 506 changes existing law to clearly allow the recipient of a registered warrant to use the warrant to offset or pay an existing tax liability.

Major corporations in California including Apple, eBay and Google currently shy away from investing in California debt because the state’s bonds do not meet those companies’ investment criteria. “The problem is technical, but the law has not kept up with changing practices in the bond market. It was a lose-lose situation for investors and the State. California companies had fewer investment opportunities; and the State of California was losing out on would-be investors. Senate Bill 506 provides a simple, clarifying remedy,” Simitian said. 

California allows taxpayers to use registered warrants, including those issued in lieu of bond interest or principal, to pay state income and corporate tax liabilities. However, when that statute was drafted companies owned bonds in paper form; now those documents are held in electronic form by third parties. As a result, state law did not clearly establish whether it was the investor that purchased the bond, or the third party, that could use a warrant to pay its tax liabilities. 

Senate Bill 506 clarifies that the purchaser of the bond can submit the warrant as payment for its tax liabilities, rather than the third party. Simitian noted that, “With the Governor’s signature on SB 506, California corporations will have additional investment opportunities, and the State of California will have additional investors.”

Simitian was alerted to the problem by Silicon Valley business leaders, and worked with them to craft a solution. “Apple, a company that is incorporated in California, raised this issue with my office because it was preventing them from investing in California bonds. While it is a relatively narrow and technical point, I believe they made a good case,” Simitian explained. 

Other California businesses shared the same concern. Senate Bill 506 was supported by Apple Inc., eBay Inc., Oracle Corporation, Cisco Systems, Inc., Google Inc., Qualcomm Inc., TechNet and the California Bankers Association.

The new law will go into effect on Jan. 1, 2012. For more information on SB 506, visit