Tesla will open a global engineering headquarter in Palo Alto, Calif., CEO Elon Musk said Feb. 22 at a press conference alongside California Governor Gavin Newsom. The announcement was widely interpreted as Tesla’s return to California more than a year after moving its base to Texas from the Golden State. However, it’s really a partial return, as Tesla’s corporate headquarter will remain in Austin, Texas and the new office in California won’t change its corporate tax status.
It’s unclear whether Newsom offered Tesla any tax incentives for it to expand its presence in California. Tesla may share more details at its Investor Day event on March 1.
Tesla will set up shop in the former office building of Hewlett Packard in Palo Alto, a landmark in the history of Silicon Valley.
In December 2021, Musk moved Tesla’s registration to Austin, where the company was building a new Gigafactory. The decision was triggered by Musk’s spat with California’s public health officials over the closure of Tesla’s Fremont, California, factory in the early days of the Covid-19 pandemic. Musk criticized California for “overregulation, overlitigation, overtaxation.”
Texas levies no state corporate income tax and has lower labor costs than California. Before the corporate relocation, Musk had moved his residence from California to Texas, where there is no state personal income tax, either.
Since then, Musk has sold most of his properties in California and currently lives in a small rented house in Boca Chica, Texas, near SpaceX’s development site.
Musk still pays California’s state income tax based on the time he spends in the state, he said in a tweet in June 2021. He will likely spend more time in California following the opening of Tesla’s engineering headquarter. His newly acquired Twitter is also headquartered in California.