Proponents of the 2026 Billionaire Tax Act amended the initiative, prompting opponents to file five new initiatives aimed at undermining various aspects of the measure. The 2026 Billionaire Tax Act would impose a one-time wealth tax on California residents and trusts with “net worth,” defined in the initiative, exceeding $1 billion, as discussed more detail in our prior article.
Amendments to the Billionaire Tax Act Initiative
On November 26, the proponent of The 2026 Billionaire Tax Act introduced several substantive changes to the initiative. Significantly, the amended initiative removed the prior retroactive provision subjecting tax year 2025 California residents to the wealth tax in 2026. Of interest to tax practitioners, the amended measure would permit the Franchise Tax Board (FTB) to pursue de novo review in superior court of an Office of Tax Appeals (OTA) determination regarding the wealth tax. In contrast, under current law, the FTB cannot appeal an unfavorable OTA decision. The initiative also now expressly authorizes FTB and courts to rely on established state and federal income tax principles, such as economic substance, in administering the wealth tax.
Importantly, any individual who is a California resident as of January 1, 2026, will be subject to full apportionment under the wealth tax, regardless of prior residency history. The measure further allocates $50 million to the FTB for initial administration and removes any ongoing budgetary cap, granting the agency flexibility to fund enforcement in subsequent years.
On December 11, the California Legislative Analyst’s Office published their fiscal analysis on the initiative. It found that the state would likely experience a temporary revenue increase in the tens of billions of dollars; however, it is also likely to experience ongoing decreases in income tax revenues—which could be in the hundreds of millions of dollars per year—as some taxpayers may decide to leave the state.
New Initiatives Intended to Constrain the Billionaire Tax Act
On December 8, opponents of the billionaire tax filed five separate constitutional amendment initiatives designed to hinder, or outright conflict, with the wealth tax.
- The Budget Stability Act of 2026 would raise the voter approval threshold to a two-thirds supermajority vote for passage of any statewide initiative that creates a one-time tax, such as the proposed wealth tax.
- The California Residency Rules Act would establish new bright-line residency rules, providing that individuals spending 183 or fewer days of the year in California, and holding a valid driver’s license and voter registration in another state, are not California residents. If enacted, this rule could reduce the number of taxpayers subject to both the proposed wealth tax and state income tax.
The remaining three initiatives directly conflict with provisions of the wealth tax measure:
- The Protect Schools and Taxpayers Act of 2026 would bar any new state tax from being exempt from Proposition 98 (the constitutional funding guarantee for public schools and community colleges) and Proposition 4 (the state spending limit). The wealth tax expressly exempts itself from Proposition 98 and Proposition 4.
- The California Government Efficiency Improvement Act of 2026 would prohibit any new special tax, defined as a tax earmarked for specific purposes, unless the new tax requires the recipient government entity to eliminate its lowest-performing programs and reinvests in higher-performing ones. The wealth tax does not include such programmatic requirements.
- The Retirement and Personal Savings Protection Act of 2026 would prohibit any new state tax on the ownership or accumulation of retirement assets and other personal savings, directly opposing the wealth tax’s proposed tax base.
All of these initiatives must still gather sufficient signatures to qualify for the November 2026 ballot. Under the California Constitution, if both the wealth tax act and any conflicting initiative appear on the ballot and are approved by voters, the measure receiving the most votes will prevail.
Each initiative, if qualified and adopted, would make significant modifications to California’s tax and budget frameworks. We will continue to monitor these developments and provide updates as the ballot qualification process unfolds.
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