In his draft budget plan for Fiscal Year 2025-2026 released on January 10, 2025, California Governor Gavin Newsom proposed to bring financial institutions in line with most other corporate taxpayers when it comes to apportioning multistate income. Banks and “financial corporations” currently use a three-factor apportionment formula consisting of property, payroll and sales to apportion income. For California purposes, a financial corporation is a corporation that “predominantly deals in money or moneyed capital in substantial competition with the business of national banks,” except for a corporation whose principal business activity consists of leasing tangible personal property. (18 Cal. Code Regs. § 23183(a).) The governor’s proposal would replace the three-factor formula with the single sales factor formula that applies to most other multistate corporations. California’s special rules for computing a financial institution’s sales factor likely would remain the same. (See 18 Cal. Code Regs. § 25137-4.2(c).) The proposal is estimated to increase revenue by hundreds of millions of dollars each year.