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Yes: 127 • No: 14
CaliforniaSB 1322025-2026 Regular SessionSenateWALLET
Budget Act of 2025.
Sponsored By: Sponsor information unavailable
Signed by Governor
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Bill Overview
Analyzed Economic Effects
24 provisions identified: 10 benefits, 6 costs, 8 mixed.
Chiquita Canyon payments are untaxed
For tax years 2024–2028, payments you received on or after March 1, 2024 for losses from the Chiquita Canyon landfill event are not taxed by the state. Covered payments include damages, relocation, lost property value, closing costs, and inconvenience. Payors include government agencies and Waste Connections, Inc. or related parties.
Credits for owners of electing pass-throughs
Owners of an electing partnership or S‑corporation can claim a state credit equal to 9.3% of their qualified guaranteed payments and distributive share. This applies for 2021–2025 (pilot) and again for 2026–2030. Credits you cannot use carry forward up to four years. For 2026–2030, your credit is cut by 12.5% of your share of any required entity payments the entity failed to make. These credits only operate if the federal SALT cap rule (IRC 164(b)(6)) is extended.
Historic building rehab credit through 2027
The state offers a credit for fixing certified historic buildings through 2027. Most projects get 20% of qualified costs (25% for some cases). Income‑qualified homeowners can get $5,000–$25,000 once every 10 years for a principal home (AGI up to $200,000). The annual statewide cap is $50 million, with $8 million set aside for projects under $1,000,000. You claim the credit when the building is placed in service; extra credit carries forward up to seven years.
Up to $20,000 tax break for military pay
For tax years 2025–2029, you can exclude up to $20,000 each year of uniformed services retirement pay. You can also exclude up to $20,000 of Department of Defense Survivor Benefit Plan annuity payments. You qualify if your federal AGI is $250,000 or less for surviving spouses filing jointly, or $125,000 or less for other taxpayers. This program ends December 1, 2030.
Wildfire settlement payments are untaxed
For tax years starting in 2021 and continuing through the program’s repeal on December 1, 2030, qualified wildfire settlement payments are not counted as state income. The payment must come from an approved settlement entity and compensate costs you paid or incurred for damaged property or a business. Keep your documents; you or the settlement entity must provide them if asked.
Bigger film and TV credits, 2025–2030
The state sets $750 million per year for film and TV credits from FY 2025–26 through 2029–30. Productions can get a 20% or 25% base credit, with extra bonuses for shooting outside the LA zone and for California visual effects. A wage‑based bonus (10% or 5%) applies for work by California residents living outside the LA zone. The Commission certifies 96% of allocations by default and adds 4% if you file a timely diversity plan and meet or try to meet the goals. Recurring TV series keep getting credits each season within limits, allocations run in at least two rounds per year ranked by jobs ratio, and starting July 1, 2030 unused prior reservations may be reallocated.
Sell, assign, or refund film credits
You can elect refunds of up to 90% of the credit amount that exceeds your first‑year tax, paid 20% a year over five years. You may assign credits to affiliates for the year, and independent film credits may be sold one time to an unrelated buyer after reporting to the tax board. Purchased credits cannot be resold. Unused credit can carry forward for up to eight years. The refund election must be made on your original, timely filed return, and it is not allowed for purchased credits.
New elective tax for pass-throughs
For tax years 2026–2030, a qualified partnership or S corporation may choose to pay a 9.3% tax on its qualified net income. The choice is made on the original, timely return and is irrevocable for that year. The election binds all partners, shareholders, and members for that year. Publicly traded partnerships and entities in combined reporting groups cannot make this election.
New $5M cap on business credits
For tax years 2024–2026, business tax credits can only cut a taxpayer’s net tax by up to $5,000,000 each year. Combined reporting groups share one $5,000,000 cap. Some listed credits are excluded from this cap. Disallowed amounts carry forward under ordering rules. The state may suspend this cap for 2025 or 2026 if the Director of Finance finds enough funds and the Budget Act says so.
Historic rehab credit up to 25%, if funded
The law offers a tax credit equal to 20% of qualified costs to fix up a certified historic building. The credit is 25% if the project meets extra tests, like being on federal surplus property, adding affordable housing, in certain census tracts, part of a base reuse, or transit‑oriented. It applies to tax years starting Jan 1, 2021 through Dec 31, 2026, and remains operative until Dec 1, 2027. But for those years, the credit is $0 unless the Budget Act provides funding.
Bigger film tax credits, new training fee
Starting Jan 1, 2025, certified productions can claim a 20% or 25% tax credit on qualified spending. Add-ons include: +5% for non‑wage qualified costs shot outside the LA zone, +5% for qualified visual effects in California, and wage adders of +10% or +5% for paying qualified California residents outside the LA zone (depending on the base rate). Credits face spending caps: up to $100,000,000 per feature, limited series, or TV season, and up to $10,000,000 for independent films. A Career Pathways fee applies to approved credits: 0.5% (0.25% for independent films) starting in 2025. From Jan 1, 2028, the Film Commission may raise that fee by 0.25% per year up to 1% (independent films stay exempt from the increase).
Budget Act takes effect immediately
The Budget Act’s spending and related items take effect right away. This lets the state start funding and running programs without delay.
New Court Collection Account rules
Money collected under these court provisions goes to a Court Collection Account and is then sent to the county or state fund owed, after the Franchise Tax Board’s costs. If collections are short, payments are shared pro rata, with some county priority rules. Starting in FY 2025–26, the Legislature intends FTB’s admin costs not exceed 20% of collections.
Dealers now the retailer for excise tax
Starting Oct 1, 2025, if a California licensed firearms dealer, maker, or ammo vendor transfers a gun, part, or ammo to a buyer here for an out‑of‑state seller, the in‑state transferor is treated as the retailer for the excise tax. This change applies only to that specific excise tax.
No state payback for crime-law costs
Local agencies and school districts do not get state reimbursement for costs that come only from creating, removing, or changing a crime or its penalty. If other state‑mandated costs exist, the state reimburses them under Government Code rules.
How California applies your tax credits
If you are a nonresident or part‑year resident, most credits are limited to your California income share. The formula is: credit × (California taxable income ÷ total taxable income). Credits tied to a transaction wholly in California and elective pass‑through credits under Sections 17052.10 or 17052.11 are allowed in full. The law also sets the order that credits apply against your tax, placing new credits that start in 2025, 2026, and 2027 into the sequence.
Dealers must pay DMV sales taxes
For retail vehicle sales, licensed dealers must pay sales and any use tax to DMV for CDTFA. This does not cover certain recreational vehicles in Health and Safety Code Section 18010. New or higher‑risk dealers started Jan 1, 2021; most others by Jan 1, 2023, with possible delay to Jan 1, 2026 for dealers with over 300 retail sales. A dealer’s DMV application counts as the CDTFA return and is filed on the date submitted. These rules apply to sales on or after Jan 1, 2021.
New DMV tax rules for dealers
CDTFA may excuse a dealer from remitting tax through DMV if the dealer sold 1,000+ vehicles in the current or prior year and stayed in good standing for the past 12 quarters. CDTFA can revoke the exemption after 30 days if sales drop below 1,000 or filings fall out of good standing. If a dealer files a DMV registration late and owes a delinquency penalty, the dealer also owes the Section 6591 penalty. No interest accrues on that penalty.
Film credits: fees, audits, and timing rules
The Film Commission charges a Career Pathways fee equal to 0.5% of your approved credit (independent films 0.25%), and it may raise the non‑independent rate up to 1% starting Jan 1, 2028. You must submit safety reports, detailed spending and wage records, diversity and copyright data, and pass audits before a certificate issues. The credit applies in the year the certificate is issued and cannot be claimed before July 1, 2025. The Commission rechecks jobs ratios; big shortfalls can cut credits and may bar you from applying for a year unless you show reasonable cause. Your submissions to the Commission are treated as confidential tax information, while the Commission posts program‑level summaries and annual diversity reports.
New apportionment rule for some industries
Beginning Jan 1, 2025, only agricultural and extractive activities count as “qualified” for the over‑50% receipts test. If over half of a company’s receipts are from those qualified activities, it uses property, payroll, and sales to apportion income to California. Banking and savings and loan activities no longer count as qualified for this rule.
Chiquita Canyon payments don’t cut benefits
Payments tied to the Chiquita Canyon landfill event do not count as income or resources for certain California means‑tested programs. Programs include CalWORKs, Medi‑Cal, CalFresh, and others, as allowed by federal law. The payments also are not counted for guaranteed income programs.
Historic rehab: apply on time, pay fees
You must request an allocation from the Tax Credit Allocation Committee with the Office of Historic Preservation. The Office sets a deadline to start work; if you do not start in time, you lose the allocation. Agencies may charge application and reporting fees, limited to their reasonable costs.
Sonoma County may raise local sales tax
Sonoma County, its cities, and the county transportation authority can increase local sales tax by up to 1 percentage point above the usual cap if voters approve. Elections to approve these taxes must occur between November 6, 2018 and January 1, 2026.
Updates to state fees and code
The law treats several charges as fees under Part 30, including lead‑acid battery recycling, the lumber assessment, e‑waste recycling, and the California tire fee. It excludes the fee in Part 21.1 from Part 30. It also repeals Revenue and Taxation Code Section 7292.9. These are administrative updates and do not set new fee amounts.
Sponsors & Cosponsors
Sponsors
There is no primary sponsor on record.
Cosponsors
There are no cosponsors for this bill.
Roll Call Votes
House vote • 6/27/2025
Item 1000 — Assembly AFLOOR
Yes: 68 • No: 1
Senate vote • 6/27/2025
Item 133 — Senate SFLOOR
Yes: 31 • No: 3
Senate vote • 3/20/2025
Item 66 — Senate SFLOOR
Yes: 28 • No: 10
Actions Timeline
Chaptered by Secretary of State. Chapter 17, Statutes of 2025.
6/27/2025SenateApproved by the Governor.
6/27/2025legislatureEnrolled and presented to the Governor at 3 p.m.
6/27/2025legislatureAssembly amendments concurred in. (Ayes 31. Noes 3. Page 1815.) Ordered to engrossing and enrolling.
6/27/2025SenateIn Senate. Concurrence in Assembly amendments pending.
6/27/2025SenateRead third time. Passed. (Ayes 68. Noes 1. Page 2324.) Ordered to the Senate.
6/27/2025HouseAssembly Rule 63 suspended. (Ayes 55. Noes 19. Page 2316.)
6/27/2025HouseOrdered to third reading.
6/27/2025HouseWithdrawn from committee pursuant to Assembly Rule 96.
6/27/2025HouseFrom committee with author's amendments. Read second time and amended. Re-referred to Com. on BUDGET.
6/24/2025HouseReferred to Com. on BUDGET.
3/24/2025HouseIn Assembly. Read first time. Held at Desk.
3/20/2025HouseRead third time. Passed. (Ayes 28. Noes 10. Page 441.) Ordered to the Assembly.
3/20/2025SenateRead second time. Ordered to third reading.
3/18/2025SenateOrdered to second reading.
3/17/2025SenateWithdrawn from committee. (Ayes 27. Noes 10. Page 384.)
3/17/2025SenateReferred to Com. on B. & F. R.
2/5/2025SenateFrom printer. May be acted upon on or after February 23.
1/24/2025SenateIntroduced. Read first time. To Com. on RLS. for assignment. To print.
1/23/2025Senate
Bill Text
Chaptered
6/27/2025
Enrolled
6/27/2025
Amended Assembly
6/24/2025
Introduced
1/23/2025