AB176 - Taxation.

Amended IN Senate June 12, 2026 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Assembly Bill No. 176 Introduced by Assembly Member Gabriel Committee on Budget (Assembly Members Gabriel (Chair), Addis, Ahrens, Alvarez, Bennett, Bonta, Caloza, Connolly, Fong, Haney, Hart, Jackson, Lee, Ortega, Patel, Petrie-Norris, Quirk-Silva, Ramos, Rogers, Schiavo, Schultz, Sharp-Collins, Solache, Stefani, Ward, and Wilson) January 08, 2025 An act relating to the Budget Act of 2025. to amend Section 53084.5 of the Government Code, to amend Sections 6006, 6009, 6010, 6010.5, 6010.9, 6016, 6406, 7051.3, 17935, 17941, 17948, and 19533 of, to add Sections 6009.5, 6010.5.1, 6016.1, 6016.2, 6052, 6054, 6201.55, 6362.4, 6372, 6372.1, 7202.1, 7254, 17039.6, and 23036.6 to, and to add and repeal Part 10.8 (commencing with Section 22000) of Division 2 of, the Revenue and Taxation Code, relating to taxation, and making an appropriation therefor, to take effect immediately, bill related to the budget. LEGISLATIVE COUNSEL'S DIGEST AB 176, as amended, Committee on Budget. Budget Act of 2025. Taxation. (1) Existing state sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state of, or on the storage, use, or other consumption in this state of, tangible personal property purchased from a retailer for storage, use, or other consumption in this state. The Sales and Use Tax Law (SUT) defines “tangible personal property” to mean personal property that may be seen, weighed, measured, felt, or touched, or that is in any other manner perceptible to the senses. Existing law punishes various violations of the SUT as crimes. The Bradley-Burns Uniform Local Sales and Use Tax Law (Bradley-Burns) authorizes counties and cities to impose local sales and use taxes in conformity with the SUT, and existing laws authorize districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the SUT. Amendments to the SUT are automatically incorporated into the local tax laws. This bill would define “tangible personal property” to additionally mean a digital product and any copyright or patent interests associated therewith for the purposes of the application of the SUT, as prescribed. The bill would define “digital product” to mean, except as provided, prewritten computer software transferred on tangible storage media, transferred electronically, or accessed remotely. The bill would also make various conforming changes. By expanding the scope of violating the SUT, this bill would impose a state-mandated local program. This bill would prohibit a purchaser or retailer of a digital product that is transferred electronically or accessed remotely from entering into any form of agreement that would result, directly or indirectly, in the payment, transfer, diversion, or rebate of any tax revenue resulting from the imposition of a sales and use tax under Bradley-Burns imposed on the sale or purchase of a digital product that is transferred electronically or accessed remotely. This bill would make an appropriation of $750,000 from the General Fund to the California Department of Tax and Fee Administration for the purpose of administering these sales and use tax provisions. (2) The Personal Income Tax Law and the Corporation Tax Law authorize various credits against the taxes imposed by those laws. Existing law, for taxable years beginning on or after January 1, 2024, and before January 1, 2027, limits the total tax reduction by all business credits, as defined, to $5,000,000 per taxable year, except as specified. This bill would similarly apply a business credit limit of 50% of the total taxes imposed or $5,000,000, whichever is greater, for taxable years beginning on or after January 1, 2027, except as specified. (3) Existing law imposes an annual minimum franchise tax of $800, except as provided, on every corporation incorporated in this state, qualified to transact intrastate business in this state, or doing business in this state, and an annual tax in an amount equal to the minimum franchise tax, except as provided, on every limited partnership, limited liability partnership, and limited liability company doing business in this state, as specified. This bill, for taxable years beginning on or after January 1, 2027, and before January 1, 2030, would reduce the amount of the annual tax imposed on a limited partnership, limited liability partnership, and limited liability company doing business in this state from $800 to $400 for the corporation’s first taxable year. The bill would require the Franchise Tax Board to submit an annual report to the Legislature regarding the reduction of the annual tax for these corporations, as provided. (4) The Personal Income Tax Law and Corporation Tax Law impose taxes according to or measured by net income of a taxpayer subject to those laws, including residents of the state, at specified rates. Existing law requires the Franchise Tax Board to administer the Personal Income Tax Law and the Corporation Tax Law pursuant to existing law, the violation of which is a crime. The United States Department of Justice announced on May 18, 2026, the establishment of the federal Anti-Weaponization Fund for the purpose of providing a systematic process to hear and redress claims of persons who suffered weaponization and lawfare. This bill would, for taxable years beginning on or after January 1, 2026, and before January 1, 2030, impose a tax on any settlement fund payment from the federal Anti-Weaponization Fund, or any subsequent fund, settlement, or agreement, as provided, at a rate of 100%. The bill would provide that the taxes imposed by these provisions would not be subject to reduction due to deductions or credits, as provided. The bill would require the Franchise Tax Board to administer this tax consistent with existing law relating to the administration of the Personal Income Tax Law and the Corporation Tax Law. By expanding the scope of crimes relating to those provisions, this bill would impose a state-mandated local program. (5) This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2 / 3 of the membership of each house of the Legislature. (6) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. (7) This bill would declare that it is to take effect immediately as a bill providing for appropriations related to the Budget Bill. This bill would express the intent of the Legislature to enact statutory changes relating to the Budget Act of 2025. Digest Key Vote: MAJORITY 2/3 Appropriation: NO YES Fiscal Committee: NO YES Local Program: NO YES Bill Text The people of the State of California do enact as follows: SECTION 1. Section 53084.5 of the Government Code is amended to read: 53084.5. (a) On or after January 1, 2016, a local agency shall not enter into any form of agreement that would result, directly or indirectly, in the payment, transfer, diversion, or rebate of any tax revenue resulting from the imposition of a sales and use tax under the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200) of Division 2 of the Revenue and Taxation Code) to any person for any purpose when both of the following apply: (1) The agreement results in a reduction in the amount of revenue under the Bradley-Burns Uniform Local Sales and Use Tax Law that, in the absence of the agreement, would be received by another local agency. (2) The retailer continues to maintain a physical presence within the territorial jurisdiction of that other local agency. (b) (1) A local agency entering into an agreement that results in a reduction of the amount of revenue under the Bradley-Burns Uniform Local Sales and Use Tax Law that, in the absence of the agreement, would be received by another local agency shall post the proposed agreement on its Internet Web site internet website for at least 30 days prior to ratification or approval of that agreement by its governing body. (2) A local agency entering into an agreement that results in a reduction of the amount of revenue under the Bradley-Burns Uniform Local Sales and Use Tax Law that, in the absence of the agreement, would be received by another local agency shall notify the other local agency by certified mail addressed to the attention of the chief executive of that other local agency at least 60 days prior to ratification or approval of that agreement by its governing body. (3) A local agency shall post any agreement on its Internet Web site internet website it has entered into that results in a reduction of the amount of revenue under the Bradley-Burns Uniform Local Sales and Use Tax Law that, in the absence of the agreement, would be received by another local agency, including any agreements entered into prior to January 1, 2016, that are still in effect on and after that date. (c) (1) A local agency shall not enter into any form of agreement that would result, directly or indirectly, in the payment, transfer, diversion, or rebate of any tax revenue resulting from the imposition of a sales and use tax under the Bradley-Burns Uniform Local Sales and Use Tax Law (Part 1.5 (commencing with Section 7200) of Division 2 of the Revenue and Taxation Code) imposed on the sale or purchase of a digital product that is transferred electronically or accessed remotely. (2) A payment, transfer, diversion, or rebate of any tax revenue pursuant to an agreement described in paragraph (1) may be subject to redistribution by the California Department of Tax and Fee Administration pursuant to Section 7209 of the Revenue and Taxation Code. (c) (d) For the purposes of this section, the following terms have the following meanings: section: (1) “Accessed remotely” has the same meaning as defined in Section 6016.2 of the Revenue and Taxation Code. (2) “Digital product” has the same meaning as defined in Section 6016.1 of the Revenue and Taxation Code. (1) (3) “Local agency” means a chartered or general law city, a chartered or general law county, or a city and county, of this state. (2) (4) “Person” means a person has the same meaning as defined in Section 6005 of the Revenue and Taxation Code. (3) (5) “Physical presence” means the lease or ownership of any real property for the purpose of carrying on business operations. (6) “Purchase” has the same meaning as defined in Section 6010 of the Revenue and Taxation Code. (4) (7) “Retailer” means a retailer has the same meaning as defined by in Section 6015 of the Revenue and Taxation Code. (8) “Sale” has the same meaning as defined in Section 6006 of the Revenue and Taxation Code. (9) “Transferred electronically” has the same meaning as defined in Section 6016.2 of the Revenue and Taxation Code. (d) This (e) Except as provided in subdivision (c), this section shall not apply to any agreement by a local agency to pay or rebate any use tax revenue resulting from the imposition of a use tax under the Bradley-Burns Uniform Local Sales and Use Tax Law relating to a use tax direct payment permit issued under Section 7051.3 of the Revenue and Taxation Code. (e) (f) This section shall not be interpreted to limit the ability of a local agency to contract with or otherwise enter into an agreement pursuant to subdivision (b) of Section 7056 of the Revenue and Taxation Code. (f) (g) This section shall not apply to any mutual tax revenue sharing agreement between local agencies to pay, transfer, or divert tax revenues that would be received by a local agency resulting from the imposition of a sales and use tax under the Bradley-Burns Uniform Local Sales and Use Tax Law to another local agency, and where the agreement would not result, directly or indirectly, in the payment, transfer, diversion, or rebate of those tax revenues to a retailer. (h) The amendments to this section by the act adding this subdivision shall become operative immediately upon enactment. SEC. 2. Section 6006 of the Revenue and Taxation Code is amended to read: 6006. “Sale” means and includes: (a) Any transfer of title or possession, exchange, or barter, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property for a consideration. “Transfer of possession” includes only transactions found by the board department to be in lieu of a transfer of title, exchange, or barter. (b) The producing, fabricating, processing, printing, or imprinting of tangible personal property for a consideration for consumers who furnish either directly or indirectly the materials used in the producing, fabricating, processing, printing, or imprinting. (c) The furnishing and distributing of tangible personal property for a consideration by social clubs and fraternal organizations to their members or others. (d) The furnishing, preparing, or serving for a consideration of food, meals, or drinks. (e) A transaction whereby the possession of property is transferred but the seller retains the title as security for the payment of the price. (f) A transfer for a consideration of the title or possession of tangible personal property which has been produced, fabricated, or printed to the special order of the customer, or of any publication. (g) Any lease of tangible personal property in any manner or by any means whatsoever, for a consideration, except a lease of: (1) Motion pictures or animated motion pictures, including television, films, and tapes. (2) Linen supplies and similar articles when an essential part of the lease agreement is the furnishing of the recurring service of laundering or cleaning the articles. (3) Household furnishings with a lease of the living quarters in which they are to be used. (4) Mobile transportation equipment for use in transportation of persons or property as defined in Section 6023. (5) Tangible personal property leased in substantially the same form as acquired by the lessor or leased in substantially the same form as acquired by a transferor, as to which the lessor or transferor has paid sales tax reimbursement or has paid use tax measured by the purchase price of the property. For purposes of this paragraph, “transferor” shall mean the following: (A) A person from whom the lessor acquired the property in a transaction described in subdivision (b) of Section 6006.5. (B) A decedent from whom the lessor acquired the property by will or the laws of succession. (6) A mobilehome, as defined in Sections 18008 and 18211 of the Health and Safety Code, other than a mobilehome ori [Text truncated for display. Full text available on Congress.gov.]