The California Attorney General approved the title and summary on December 26, 2025, for the "2026 Billionaire Tax Act" statewide initiative (AG Tracking No. 25-0024) (proposed measure). The proposed measure seeks to impose a "one-time tax on the accumulated wealth of California billionaires." The tax would apply to "all forms of personal property and wealth" including "shares of capital stock, bonds or other evidences of indebtedness, and any legal or equitable interest therein." Revenue from the tax would be earmarked for programs related to health care, including Medi-Cal. Specifically, the proposed measure would require 90% of the revenue to be spent on health care services for the public. The remaining 10% of the revenue would be spent on the administration of the tax, education and food assistance.

The current status of the initiative is for proponents to begin collecting the required signatures for the proposed measure to be placed on the November 2026 ballot.

Key details

If the initiative meets the requirements to appear on the November 2026 general election ballot and is approved by voters, for tax year 2026, a 5% excise tax would be imposed on individuals¹ and applicable trusts, with a net worth of $1.1 billion or more. The tax rate would be reduced for individuals (other than a trust) who have a net worth less than $1.1 billion. For the 2026 tax year, the proposed measure would require California resident individuals to file a declaration with their tax return, indicating whether their net assets were less than or equal to $1 billion as of the valuation date. Additionally, the tax would be retroactive to January 1, 2026.

Taxpayers would have the option to pay the tax due with their 2026 income tax or pay annually in five equal installments. However, if a taxpayer opts to pay the tax in installments, any unpaid balance after the initial payment will incur an annual nondeductible deferral charge of 7.5%.

Net worth calculation

The proposed measure would compute net worth by taking into account the taxpayer's debts and other liabilities, subject to certain limitations.

The fair market value (FMV) of each asset would be the price at which it would change hands between a willing buyer and seller; the asset's location would be considered when appropriate. The FMV of assets generally obtained via a retail market would be the price such item or a comparable item would be sold at retail. In determining an asset's value, taxpayers would not take into account certain features of an asset (e.g., a shareholder rights plan) if a significant purpose and effect of the feature is to reduce the asset's appraised value. The following valuation methods, exclusions and reporting requirements would apply:

• Publicly traded assets would be presumed to be the asset's market trading value at the end of the individual's tax year.
• Assets held by or through a sole proprietorship would be reported and valued as if they were directly owned and held by the taxpayer.
• For interests in any business entity (e.g., equity and ownership interest, debt interest, contractual and noncontractual interest), taxpayers would report their ownership percentage of the business entity, the book value of the entity at the end of the tax year, and the entity's book profits.
• Interest in any real property held directly by a taxpayer or via a revocable trust would not be included in net worth.
• Tangible personal property located outside California would be excluded if it is located outside the state for at least 270 days during 2026 but would be included if such property was relocated temporarily for tax avoidance purposes.

The proposed measure also would include a provision for determining the net worth of an interest in a trust and list categories of assets that would be exempt from taxation and reporting requirements related to this tax (such as qualified pensions, certain retirement arrangements, and nonqualified deferred compensation).

The proposed measure would include all receivables in net worth until the Franchise Tax Board (FTB) adopts regulations on the taxability of receivables and similar assets.

Taxpayers would be able to exclude up to $5 million of total asset value of "all other assets" (e.g., art and collectibles, certain financial instruments, intellectual property rights, debts and other liabilities owed to the taxpayer, and vehicles and other personal property) from the calculation of net worth and from certain reporting requirements. Except for excluded assets, the taxpayer would have to report the FMV of "all other assets" and for each asset group of substantially interchangeable assets (e.g., derivative contracts for the same underlying security) that have a worth exceeding $1 million. If any assets or group of assets are worth more than $1 million, the proposed measure would require the taxpayer to submit a certified appraisal.

The value of an asset could not be less than the amount for which it is insured, while the value of a business entity could not be less than the valuation reflected in any funding round or other sale of equity occurring within two years of the valuation date (with an exception if shown that the entity's value was significantly overstated).

Net worth would also include the value of property transferred by the individual for less than FMV after October 15, 2025, if the property alone or considered with other substantially interchangeable transferred items have a FMV exceeding $1 million.

Trusts and net worth considerations

Under the proposed measure, an individual's net worth would include the net worth of any grantor trust of that individual. Additionally, certain interests in "applicable trusts" would be included when determining a taxpayer's net worth, subject to certain exceptions, like those mentioned above that apply to individuals. For example, interests in real property held in a revocable trust would be excluded from the net worth calculation.

An "applicable trust" would refer to any trust into which an individual with a net worth of $1 billion has transferred property. If multiple individuals have contributed to a single trust, only the portion corresponding to the value of assets transferred by the individual with a net worth exceeding $1 billion would be considered.

In determining whether an individual's net worth exceeds $1 billion, the full value of property transferred to any trust in 2026 would be considered, along with 75% of the value of property transferred in 2025. Regardless of the trust's residency, the beneficiary would be deemed the owner of the trust's assets to the extent that the assets are distributable to them.

The proposed measure also would limit discounts if the effect would be a reduction in the value of a partial interest in an asset below the taxpayer's pro-rata portion of the asset's entire value. In addition, charitable or philanthropic pledges would not reduce net worth if they were made after October 15, 2025.

Other provisions

The initiative would establish provisions that would (1) allow qualifying taxpayers to enter into optional deferral accounts, (2) provide for the apportionment of tax between multiple jurisdictions and allow a credit against tax paid in other jurisdictions as well as tax paid on net wealth that is also taxed under these provisions, (3) define key terms, and (4) provide for the collection and administration of the tax.

Penalties would be imposed on a taxpayer with a substantial or gross understatement of tax. Penalties would not be imposed or could potentially be reduced if certain conditions are met.

Potential challenges

Currently, five separate initiatives have been filed by those that oppose the tax. The five proposed initiatives must still gather enough signatures to qualify for the November 2026 ballot. If any qualify for the ballot, the measure receiving the most votes will prevail over any other contradictory measure. The following initiatives, which are constitutional amendments, could potentially hinder the application or passage of the Billionaire Tax Act or outright contradict it:

• The Budget Stability Act of 2026 would raise the voter approval threshold to a two-thirds supermajority for the passage of any statewide initiative that creates a one-time tax.
• The California Residency Rules Act would change the residency rules to where individuals who spend 183 days or fewer in California and who hold a valid driver's license or voter's registration in another state would not be considered California residents. This initiative could potentially limit the number of individuals who would be subject to the wealth tax.
• The Protect Schools and Taxpayers Act of 2026 would prevent the exemption of any new state tax from Proposition 98 and Proposition 4, which the Billionaire Tax Act expressly exempts itself from.
• The California Government Efficiency Improvement Act of 2026 would prohibit any new tax that is designated for specific purposes unless the tax requires the recipient entity to eliminate its lowest-performing programs and reinvest in higher-performing programs. The Billionaire Tax Act does not incorporate these programmatic requirements.
• The Retirement and Personal Savings Protection Act of 2026 would disallow any new tax on the ownership or accumulation of retirement assets and other personal savings, which is in direct opposition to the proposed tax base of the wealth tax.

In addition, should the Billionaires Tax Act be approved by the voters in California this November, the Act will likely be challenged on numerous legal grounds.

Implications

While the initiative process is starting the signature gathering phase and it is still uncertain whether the Billionaire Tax Act or the proposed constitutional amendments will meet the deadlines and requirements to qualify for inclusion on the November 2026 ballot, high net worth California taxpayers should review the proposed wealth tax and consider whether they may fall within its scope.