AB2222 - Personal Income Tax Law and Corporation Tax Law: credits: local news outlets: business expense deduction: excessive employee remuneration.

Amended IN Senate August 27, 2026 Amended IN Senate August 21, 2026 Amended IN Senate August 20, 2026 Amended IN Senate June 29, 2026 Amended IN Senate June 17, 2026 Amended IN Assembly May 22, 2026 Amended IN Assembly May 21, 2026 Amended IN Assembly April 22, 2026 Amended IN Assembly March 09, 2026 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Assembly Bill No. 2222 Introduced by Assembly Members Ward and Wicks (Coauthors: Assembly Members Lowenthal, McKinnor, and Quirk-Silva) (Coauthor: Senator McNerney) February 19, 2026 An act to amend Sections 17039, 17271, 23036, and 24343 of, and to add and repeal Sections 17053.76 and 23633 of, the Revenue and Taxation Code, relating to taxation, and making an appropriation therefor. LEGISLATIVE COUNSEL'S DIGEST AB 2222, as amended, Ward. Personal Income Tax Law and Corporation Tax Law: credits: local news outlets: business expense deduction: excessive employee remuneration. (1) The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including a credit for specified new hiring and employment. Existing law establishes the continuously appropriated Tax Relief and Refund Account and provides that payments required to be made to taxpayers or other persons from the Personal Income Tax Fund are to be paid from that account. Existing law also establishes the continuously appropriated Corporation Tax Fund in the State Treasury for the purpose of making refunds pursuant to existing law. This bill would, for taxable years beginning on or after January 1, 2027, and before January 1, 2032, allow a credit against those taxes to a qualified taxpayer, as defined, equal to $20,000 for each qualifying journalist, as defined, continuously employed on a full-time basis by the taxpayer, not to exceed 5 qualifying journalists. The bill would also allow a credit of $15,000 for each qualifying journalist continuously employed on a full-time basis by the taxpayer in excess of 5 qualifying journalists, and a credit of $7,500 for each qualifying journalist employed on a part-time basis by the taxpayer. The bill would allow an additional credit of $15,000 for each qualifying journalist employed on a full-time basis in a new journalism position, as defined. The bill would require the amount of the credit exceeding the taxpayer’s liability to be credited against other amounts due, if any, and would require the balance to be paid from the Tax Relief and Refund Account or the Corporation Tax Fund, as specified, and refunded to the taxpayer. By increasing the payments from the Tax Relief and Refund Account and the Corporation Tax Fund, which are continuously appropriated funds, the bill would make an appropriation. The bill would allow the credit to organizations that are exempt from income taxation, as specified, and would allow the refund provisions to apply for those organizations. Existing law requires any bill authorizing a new tax expenditure, as defined, to include tax credits, to contain, among other things, specific goals that the tax credit will achieve, detailed performance indicators, and data collection requirements. This bill also would include additional information required for any bill authorizing a new tax expenditure. The bill would also require the Franchise Tax Board to publish a report on its internet website detailing the total number of taxpayers allowed the credit, the total dollar value of credits allowed, and the average dollar amount per qualified taxpayer allowed a credit. The bill would require the Franchise Tax Board to submit a report to the Legislature providing guidance on potential administration and enforcement of a refundable tax credit for organizations exempt from federal income tax, as provided. (2) Under the Personal Income Tax Law and the Corporation Tax Law, various provisions of the federal Internal Revenue Code, as enacted as of a specified date, are referenced in various sections of the Revenue and Taxation Code. Those laws provide that, for taxable years beginning on or after January 1, 2025, the specified date of those referenced Internal Revenue Code sections is January 1, 2025, unless otherwise specifically provided. The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax laws, allow various deductions from gross income in calculating adjusted gross income, including a deduction for the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business. Existing law does not allow a deduction as an ordinary and necessary business expense for the wages or other remuneration of a covered employee, as defined, to the extent that remuneration exceeds $1,000,000. Existing federal income tax law, enacted after January 1, 2025, amends the application of the limitations relating to covered employees in the case of taxpayers that are members of a controlled group. This bill would specifically conform to the federal application of the limitations relating to covered employees in the case of taxpayers that are members of a controlled group for state tax purposes. The bill would also further conform to the federal definition of a covered employee. This bill would incorporate additional changes to Sections 17039 and 23036 of the Revenue and Taxation Code proposed by AB 2319 to be operative only if this bill and AB 2319 are enacted and this bill is enacted last. Digest Key Vote: 2/3 Appropriation: YES Fiscal Committee: YES Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. Section 17039 of the Revenue and Taxation Code is amended to read: 17039. (a) Notwithstanding any provision in this part to the contrary, for the purposes of computing tax credits, the term “net tax” means the tax imposed under either Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to lump-sum distributions) less the credits allowed by Section 17054 (relating to personal exemption credits) and any amount imposed under paragraph (1) of subdivision (d) and paragraph (1) of subdivision (e) of Section 17560. Notwithstanding the preceding sentence, the “net tax” shall not be less than the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions), if any. Credits shall be allowed against “net tax” in the following order: (1) Credits that do not contain carryover or refundable provisions, except those described in paragraphs (4) and (5). (2) Credits that contain carryover provisions but do not contain refundable provisions, except for those that are allowed to reduce “net tax” below the tentative minimum tax, as defined by Section 17062. (3) Credits that contain both carryover and refundable provisions, except the credit described in paragraph (10). (4) The minimum tax credit allowed by Section 17063 (relating to the alternative minimum tax). (5) (A) For taxable years beginning on or after January 1, 2002, and before January 1, 2022, credits that are allowed to reduce “net tax” below the tentative minimum tax, as defined by Section 17062. (B) For taxable years beginning on or after January 1, 2022, credits that are allowed to reduce “net tax” below the tentative minimum tax, as defined by Section 17062, except the credits described in paragraphs (7), (8), (10), (11), and (12). (6) Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001). (7) For taxable years beginning on or after January 1, 2022, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act). (8) For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act). (9) Credits that contain refundable provisions but do not contain carryover provisions, except the credits described in paragraphs (11) and (12). (10) For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1. (11) For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5. (12) For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 17053.76. (13) The credits provided by Sections 17061 (relating to refunds pursuant to the Unemployment Insurance Code) and 19002 (relating to tax withholding). (b) The order within each paragraph of subdivision (a) shall be determined by the Franchise Tax Board. (c) (1) Notwithstanding any other provision of this part, no tax credit shall reduce the tax imposed under Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions) below the tentative minimum tax, as defined by Section 17062, except the following credits: (A) The credit allowed by former Section 17052.2 (relating to teacher retention tax credit, repealed on August 24, 2007). (B) The credit allowed by former Section 17052.4 (relating to solar energy, repealed on December 1, 1989). (C) The credit allowed by former Section 17052.5 (relating to solar energy, repealed on January 1, 1987). (D) The credit allowed by former Section 17052.5 (relating to solar energy, repealed on December 1, 1994). (E) The credit allowed by Section 17052.12 (relating to research expenses). (F) The credit allowed by former Section 17052.13 (relating to sales and use tax credit, repealed on January 1, 1997). (G) The credit allowed by former Section 17052.15 (relating to Los Angeles Revitalization Zone sales tax credit, repealed on December 1, 1998). (H) The credit allowed by Section 17052.25 (relating to the adoption costs credit). (I) The credit allowed by Section 17053.5 (relating to the renter’s credit). (J) The credit allowed by former Section 17053.8 (relating to enterprise zone hiring credit, repealed on October 3, 1997). (K) The credit allowed by former Section 17053.10 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998). (L) The credit allowed by former Section 17053.11 (relating to program area hiring credit, repealed on January 1, 1997). (M) For each taxable year beginning on or after January 1, 1994, the credit allowed by former Section 17053.17 (relating to Los Angeles Revitalization Zone hiring credit, repealed on December 1, 1998). (N) The credit allowed by former Section 17053.33 (relating to targeted tax area sales or use tax credit, repealed on December 1, 2015). (O) The credit allowed by former Section 17053.34 (relating to targeted tax area hiring credit, repealed on December 1, 2019). (P) The credit allowed by former Section 17053.49 (relating to qualified property, repealed on January 1, 2004). (Q) The credit allowed by former Section 17053.70 (relating to enterprise zone sales or use tax credit, repealed on December 1, 2015). (R) The credit allowed by former Section 17053.74 (relating to enterprise zone hiring credit, repealed on December 1, 2019). (S) The credit allowed by Section 17054 (relating to credits for personal exemption). (T) The credit allowed by Section 17054.5 (relating to the credits for a qualified joint custody head of household and a qualified taxpayer with a dependent parent). (U) The credit allowed by Section 17054.7 (relating to the credit for a senior head of household). (V) The credit allowed by former Section 17057 (relating to clinical testing expenses, repealed on December 1, 1993). (W) The credit allowed by Section 17058 (relating to low-income housing). (X) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 17059.2 (relating to GO-Biz California Competes Credit). (Y) The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code). (Z) Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001). (AA) The credit allowed by Section 19002 (relating to tax withholding). (AB) For taxable years beginning on or after January 1, 2014, the credit allowed by former Section 17053.86 (relating to the College Access Tax Credit Fund, repealed on December 1, 2017). (AC) For taxable years beginning on or after January 1, 2017, the credit allowed by Section 17053.87 (relating to the College Access Tax Credit Fund). (AD) For taxable years beginning on or after January 1, 2021, the credit allowed by Section 17052.10 (relating to the elective tax under the Small Business Relief Act). (AE) For taxable years beginning on or after January 1, 2020, the credit allowed by Section 17053.98 (relating to the California Motion Picture and Television Production Credit). (AF) For taxable years beginning on or after January 1, 2025, the credit allowed by Section 17053.98.1 (relating to the California Motion Picture and Television Production Credit). (AG) For taxable years beginning on or after January 1, 2027, the credit allowed by Section 17039.5. (AH) For taxable years beginning on or after January 1, 2026, the credit allowed by Section 17052.11 (relating to the elective tax under the Small Business Relief Act). (AI) For taxable years beginning on or after January 1, 2026, and before January 1, 2036, the credit allowed by Section 17053.40 (relating to eligible transmission projects). (AJ) For taxable years beginning on or after January 1, 2027, and before January 1, 2032, the credit allowed by Section 17053.76 (relating to local news outlets). (2) Any credit that is partially or totally denied under paragraph (1) shall be allowed to be carried over and applied to the net tax in succeeding taxable years, if the provisions relating to that credit include a provision to allow a carryover when that credit exceeds the net tax. (d) Unless otherwise provided, any remaining carryover of a credit allowed by a section that has been repealed or made inoperative shall continue to be allowed to be carried over under the provisions of that section as it read immediately before being repealed or becoming inoperative. (e) (1) Unless otherwise provided, if two or more taxpayers (other than spouses) share in costs that would be eligible for a tax credit allowed under this part, each taxpayer shall be eligible to receive the tax credit in proportion to the taxpayer’s respective share of the costs paid or incurred. (2) In the case of a partnership, the credit shall be allocated among the partners pursuant to a written partnership agreement in accordance with Section 704 of the Internal Revenue Code, relating to partner’s distributive share. (3) In the case of spouses who file separate returns, the credit may be taken by either or equally divided between them. (f) Unless otherwise provided, in the case of a partnership, any credit allowed by this part shall be computed at the partnership level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit shall be applied to the partnership and to each partner. [Text truncated for display. Full text available on Congress.gov.]