california legislature—2023–24 regular session

ASSEMBLY BILL No. 259

Introduced by Assembly Member Lee

(Principal coauthor: Assembly Member Kalra)
(Coauthors: Assembly Members Wendy Carrillo, Haney, Jackson,
Ortega, and Santiago)
(Coauthors: Senators Durazo, Gonzalez, and Smallwood-Cuevas)

January 19, 2023

An act to amend Section 12651 of the Government Code, and to

amend Section 19441 of, to add Section 19573 to, and to add Part 27
(commencing with Section 50300) to Division 2 of, the Revenue and
Taxation Code, relating to taxation, and making an appropriation
therefor.

legislative counsel’s digest

AB 259, as introduced, Lee. Wealth Tax: False Claims Act.
Existing law imposes taxes upon income and real property, as well
as taxes upon certain transactions and excise taxes.
This bill would, for taxable years beginning on or after January 1,
2024, and before January 1, 2026, impose an annual tax at a rate of
1.5% of a resident of this state’s worldwide net worth in excess of
$1,000,000,000, or in excess of $500,000,000 in the case of a married
taxpayer filing separately. The bill would, for taxable years beginning
on or after January 1, 2026, impose an annual tax at a rate of 1% of a
resident’s worldwide net worth in excess of $50,000,000, or in excess
of $25,000,000 in the case of a married taxpayer filing separately. The
bill would also impose, for taxable years beginning on or after January
1, 2026, an additional tax at a rate of 0.5% of a resident’s worldwide
net worth in excess of $1,000,000,000, or in excess of $500,000,000 in

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the case of a married taxpayer filing separately. The bill would describe
worldwide net worth with reference to specific federal provisions and
would provide that worldwide net worth does not include specific assets,
including personal property situated out of state, directly held real
property, or liabilities related to directly held real property. The bill
would also authorize the Franchise Tax Board to adopt regulations to
carry out these provisions, including regulations regarding the valuation
of certain assets that are not publicly traded. The bill would require new
certifications by taxpayers, made under penalty of perjury. By expanding
the crime of perjury, this bill would impose a state-mandated local
program.
This bill would establish the Wealth Tax Advisory Council. The bill
would require the council to determine an adequate level of annual
funding and staffing for the administration and collection of the wealth
tax imposed by this bill. The bill would provide specific guidelines for
what constitutes adequate levels of annual funding and staffing for the
administration and collection of a wealth tax. The bill would establish
2 continuously appropriated funds in the State Treasury to cover the
expenses of the administration and collection of the wealth tax. Under
the bill, the funds would be funded by the greater of either a specified
amount or a certain percentage of revenues estimated to be generated
by the wealth tax. By establishing new continuously appropriated funds,
this bill would make an appropriation.
Existing law, the False Claims Act, provides that any person who
commits specified acts, including, but not limited to, knowingly
presenting a false or fraudulent claim for payment or approval or
knowingly making or using a false record or statement material to a
false or fraudulent claim, is liable to the state or to the political
subdivision for 3 times the amount of damages that the state or political
subdivision sustained because of the act and for the costs of a civil
action brought to recover any penalties or damages, and is subject to a
civil penalty. That act requires the Attorney General or the prosecuting
authority of a political subdivision to diligently investigate violations
of those specific acts involving state funds or political subdivision funds,
respectively, and authorizes the Attorney General, the prosecuting
authority, or a qui tam plaintiff to bring a civil action against a person
who commits those acts. That act does not apply to claims, records, or
statements made under the Revenue and Taxation Code.

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This bill would apply the provisions of the False Claims Act to claims,
records, or statements made in relation to the wealth tax imposed by
the bill, as specified.
Existing law generally makes it a misdemeanor for specified persons,
including, among others, officers or employees of the state or its political
subdivisions, to disclose information set forth or disclosed in returns,
reports, or documents required to be filed under the franchise and income
tax laws.
This bill would create an exception to these rules in the case of
information related to the Wealth Tax, as requested by the University
of California or the Wealth Tax Advisory Council, so long as specified
information privacy protections are in place, and the request is for a
specified purpose.
This bill would specify that the tax imposed by the bill shall only
become operative if a specified constitutional amendment is approved
by the voters and takes effect.
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
XIIIA of the California Constitution, and thus would require for passage
the approval of 2⁄3 of the membership of each house of the Legislature.
Existing constitutional provisions require that a statute that limits the
right of access to the meetings of public bodies or the writings of public
officials and agencies be adopted with findings demonstrating the
interest protected by the limitation and the need for protecting that
interest.
This bill would make legislative findings to that effect.
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.
Vote: 2⁄3. Appropriation: yes. Fiscal committee: yes.​
State-mandated local program: yes.​

The people of the State of California do enact as follows:

line 1 SECTION 1. Section 12651 of the Government Code is

line 2 amended to read:
line 3 12651. (a)  Any person who commits any of the following
line 4 enumerated acts in this subdivision shall have violated this article

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line 1 and shall be liable to the state or to the political subdivision for
line 2 three times the amount of damages that the state or political
line 3 subdivision sustains because of the act of that person. A person
line 4 who commits any of the following enumerated acts shall also be
line 5 liable to the state or to the political subdivision for the costs of a
line 6 civil action brought to recover any of those penalties or damages,
line 7 and shall be liable to the state or political subdivision for a civil
line 8 penalty of not less than five thousand five hundred dollars ($5,500)
line 9 and not more than eleven thousand dollars ($11,000) for each
line 10 violation, as adjusted by the Federal Civil Penalties Inflation
line 11 Adjustment Act of 1990, Public Law 101–410 Section 5, 104 Stat.
line 12 891, note following 28 U.S.C. Section 2461.
line 13 (1)  Knowingly presents or causes to be presented a false or
line 14 fraudulent claim for payment or approval.
line 15 (2)  Knowingly makes, uses, or causes to be made or used a false
line 16 record or statement material to a false or fraudulent claim.
line 17 (3)  Conspires to commit a violation of this subdivision.
line 18 (4)  Has possession, custody, or control of public property or
line 19 money used or to be used by the state or by any political
line 20 subdivision and knowingly delivers or causes to be delivered less
line 21 than all of that property.
line 22 (5)  Is authorized to make or deliver a document certifying receipt
line 23 of property used or to be used by the state or by any political
line 24 subdivision and knowingly makes or delivers a receipt that falsely
line 25 represents the property used or to be used.
line 26 (6)  Knowingly buys, or receives as a pledge of an obligation or
line 27 debt, public property from any person who lawfully may not sell
line 28 or pledge the property.
line 29 (7)  Knowingly makes, uses, or causes to be made or used a false
line 30 record or statement material to an obligation to pay or transmit
line 31 money or property to the state or to any political subdivision, or
line 32 knowingly conceals or knowingly and improperly avoids, or
line 33 decreases an obligation to pay or transmit money or property to
line 34 the state or to any political subdivision.
line 35 (8)  Is a beneficiary of an inadvertent submission of a false claim,
line 36 subsequently discovers the falsity of the claim, and fails to disclose
line 37 the false claim to the state or the political subdivision within a
line 38 reasonable time after discovery of the false claim.
line 39 (b)  Notwithstanding subdivision (a), the court may assess not
line 40 less than two times and not more than three times the amount of

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line 1 damages which the state or the political subdivision sustains

line 2 because of the act of the person described in that subdivision, and
line 3 no civil penalty, if the court finds all of the following:
line 4 (1)  The person committing the violation furnished officials of
line 5 the state or of the political subdivision responsible for investigating
line 6 false claims violations with all information known to that person
line 7 about the violation within 30 days after the date on which the
line 8 person first obtained the information.
line 9 (2)  The person fully cooperated with any investigation by the
line 10 state or a political subdivision of the violation.
line 11 (3)  At the time the person furnished the state or the political
line 12 subdivision with information about the violation, no criminal
line 13 prosecution, civil action, or administrative action had commenced
line 14 with respect to the violation, and the person did not have actual
line 15 knowledge of the existence of an investigation into the violation.
line 16 (c)   Liability under this section shall be joint and several for
line 17 any act committed by two or more persons.
line 18 (d)  This section does not apply to any controversy involving an
line 19 amount of less than five hundred dollars ($500) in value. For
line 20 purposes of this subdivision, “controversy” means any one or more
line 21 false claims submitted by the same person in violation of this
line 22 article.
line 23 (e)  This section does not apply to claims, records, or statements
line 24 made pursuant to Division 3.6 (commencing with Section 810) of
line 25 Title 1 or to workers’ compensation claims filed pursuant to
line 26 Division 4 (commencing with Section 3200) of the Labor Code.
line 27 (f)  (1)  This section does not shall apply to claims, records, or
line 28 statements made under Part 27 (commencing with Section 50300)
line 29 of Division 2 of the Revenue and Taxation Code. Code only if the
line 30 damages pleaded in the action exceed two hundred thousand
line 31 dollars ($200,000).
line 32 (2)  For purposes of this subdivision only, “person” has the
line 33 same meaning as that term is defined in Section 17007 of the
line 34 Revenue and Taxation Code.
line 35 (3)  The Attorney General or prosecuting authority shall consult
line 36 with the taxing authorities to whom the claim, record, or statement
line 37 was submitted prior to filing or intervening in any action under
line 38 this article that is based on the filing of false claims, records, or
line 39 statements made under the Revenue and Taxation Code.

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line 1 (4)  Notwithstanding Section 19542 of the Revenue and Taxation

line 2 Code or any other law, the Attorney General or prosecuting
line 3 authority, but not the qui tam plaintiff, is hereby authorized to
line 4 obtain otherwise confidential records relating to taxes, fees,
line 5 surcharges, or other obligations under the Revenue and Taxation
line 6 Code needed to investigate or prosecute suspected violations of
line 7 this subdivision from state and local taxing and other governmental
line 8 authorities in possession of such information and records, and
line 9 such authorities are hereby authorized to make those disclosures.
line 10 The taxing and other governmental authorities shall not provide
line 11 federal tax information without authorization from the Internal
line 12 Revenue Service.
line 13 (5)  Any information received pursuant to paragraphs (3) and
line 14 (4) shall be kept confidential except as necessary to investigate
line 15 and prosecute suspected violations of this subdivision.
line 16 (6)  This subdivision does not and shall not be construed to have
line 17 retroactive application to any claims, records, or statements made
line 18 under the Revenue and Taxation Code before January 1, 2024.
line 19 (g)  This section does not apply to claims, records, or statements
line 20 for the assets of a person that have been transferred to the
line 21 Commissioner of Insurance, pursuant to Section 1011 of the
line 22 Insurance Code.
line 23 SEC. 2. Section 19441 of the Revenue and Taxation Code is
line 24 amended to read:
line 25 19441. (a)  The Franchise Tax Board or any person authorized
line 26 in writing by the Franchise Tax Board is authorized to enter into
line 27 an agreement in writing with any person (or the person or estate
line 28 for whom that person acts) in respect of any tax, interest, penalty,
line 29 or addition to tax levied under Part 10 (commencing with Section
line 30 17001), Part 11 (commencing with Section 23001), Part 27
line 31 (commencing with Section 50300), or this part for any taxable
line 32 period.
line 33 (b)  If the agreement is approved by the Franchise Tax Board,
line 34 itself, within the time as may be stated in the agreement, or later
line 35 agreed to, the agreement shall be final and conclusive, and except
line 36 upon a showing of fraud or malfeasance, or misrepresentation of
line 37 a material fact:
line 38 (1)  The case shall not be reopened as to the matters agreed upon
line 39 or the agreement modified, by any officer, employee, or agent of
line 40 the state, and

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line 1 (1)  For married taxpayers filing separately, twenty-five million

line 2 dollars ($25,000,000).
line 3 (2)  For all other taxpayers, fifty million dollars ($50,000,000).
line 4 (c)  In addition to the tax imposed under subdivision (b), there
line 5 is also hereby imposed an additional 0.5 percent surtax, for a total
line 6 combined tax rate of 1.5 percent, upon the worldwide net worth
line 7 of every resident in this state in excess of the following:
line 8 (1)  For married taxpayers filing separately, five hundred million
line 9 dollars ($500,000,000).
line 10 (2)  For all other taxpayers, one billion dollars ($1,000,000,000).
line 11 (d)  (1)  Except as explicitly provided for in this part, for
line 12 purposes of subdivisions (a), (b), and (c), worldwide net worth
line 13 shall be calculated in the manner set for calculation of the Federal
line 14 Estate Tax under Chapter 11 (commencing with Section 2001) of
line 15 Subtitle B of the Internal Revenue Code.
line 16 (2)  Except as otherwise provided in this part, and only to the
line 17 extent allowable under the California Constitution, the United
line 18 States Constitution, and other governing federal law, worldwide
line 19 net worth shall be the value of all worldwide property owned by
line 20 the taxpayer on December 31 of each year. Any transaction with
line 21 a primary purpose of reducing the valuation of a taxpayer’s
line 22 worldwide net worth as of December 31 shall be disregarded.
line 23 50306. Worldwide net worth shall not include any real property
line 24 directly held by the taxpayer. Worldwide net worth shall also not
line 25 include any tangible personal property directly held by the taxpayer
line 26 and located outside of this state. However, worldwide net worth
line 27 shall include the value of real property or out-of-state tangible
line 28 personal property held indirectly, as through a corporation,
line 29 partnership, limited liability company, trust, or other such legal
line 30 form, except to the extent that such inclusion is prohibited by the
line 31 United States Constitution or other governing federal law.
line 32 50307. (a)  Any assets of a person who can be claimed as a
line 33 dependent that are in excess of fifty thousand dollars ($50,000),
line 34 shall be deemed to be assets of the taxpayer who can claim them
line 35 as a dependent.
line 36 (b)  A taxpayer’s worldwide wealth shall include any asset
line 37 transferred by the taxpayer to a related party, or otherwise to any
line 38 party under circumstances in which the transferor remains in
line 39 control of or directly benefits from the transferee’s use of the
line 40 transferred asset.

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line 1 than an employee of the University of California, and shall be

line 2 utilized in a form and manner to safeguard the tax information as
line 3 required by the Franchise Tax Board, including, but not limited
line 4 to:
line 5 (1)  The completion of a data exchange security questionnaire
line 6 provided by the Franchise Tax Board prior to approval of a data
line 7 exchange by the Franchise Tax Board.
line 8 (2)  The requester shall allow for an onsite safeguard review
line 9 conducted by the Franchise Tax Board.
line 10 (3)  The completion of disclosure training provided by the
line 11 Franchise Tax Board and a confidentiality statement signed by all
line 12 employees with access to information provided by the Franchise
line 13 Tax Board confirming the requirement of data security with respect
line 14 to that information and acknowledging awareness of penalties for
line 15 unauthorized access or disclosure under Sections 19542 and 19552
line 16 of this code and Section 502 of the Penal Code.
line 17 (4)  The requester shall notify the Franchise Tax Board within
line 18 24 hours upon discovery of any incident of unauthorized or
line 19 suspected unauthorized access or disclosure of the tax information
line 20 and provide a detailed report of the incident and the parties
line 21 involved.
line 22 (5)  All records received by the requester shall be destroyed in
line 23 a manner to make them unusable or unreadable so an individual
line 24 record may no longer be ascertained in a timeframe specified by
line 25 the Franchise Tax Board.
line 26 (i)  Nothing in this section shall be construed to prohibit a
line 27 requester of information from the publication of statistics, in an
line 28 aggregated and anonymized manner to prevent the identification
line 29 of any particular taxpayer or taxpayer identifying information.
line 30 SEC. 4. Part 27 (commencing with Section 50300) is added to
line 31 Division 2 of the Revenue and Taxation Code, to read:
line 32
line 33 PART 27. WEALTH TAX
line 34
line 35 Chapter 1. General Provisions and Definitions
line 36
line 37 50300. (a)  This part shall be known, and may be cited, as the
line 38 Wealth Tax Act.
line 39 (b)  The Legislature finds and declares that the intention of this
line 40 act is to provide revenue to be expended for the purpose of

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line 1 advancing California towards meeting the conditions set forth in

line 2 subdivision (b) of Section 1 of Article XIII B of the California
line 3 Constitution.
line 4 50301. For purposes of this part, the following definitions shall
line 5 apply:
line 6 (a)  “Dependent” shall have the same meaning as that term is
line 7 defined in Section 152 of the Internal Revenue Code.
line 8 (b)  “GAAP” means generally accepted accounting principles.
line 9 (c)  “Internal Revenue Code” shall have the same meaning as
line 10 that term is defined in Section 17024.5.
line 11 (d)  “Person” shall have the same meaning as that term is defined
line 12 in Section 17007.
line 13 (e)  “Related persons” shall mean any person that is related to
line 14 the taxpayer under either Section 267 or 3Ü18 of the Internal
line 15 Revenue Code plus any other person so specified via regulations
line 16 adopted by the Franchise Tax Board.
line 17 50302. The collection and administration of the tax described
line 18 in this part shall be governed by Part 10.2 (commencing with
line 19 Section 18401) unless expressly superseded by this part.
line 20 50303. (a)  The Wealth Tax shall be reported with, and is due
line 21 at the same time as, the annual income taxes of a taxpayer under
line 22 Part 10 (commencing with Section 17001). The Franchise Tax
line 23 Board shall amend the Personal Income Tax Forms, and amend
line 24 or create other forms as necessary, for the reporting of certain
line 25 assets.
line 26 (b)  Every taxpayer required to file a California tax return is
line 27 required to either declare their worldwide net worth is less than
line 28 the exemption threshold in subdivision (a) of Section 50305 or
line 29 shall report worldwide net worth.
line 30 (c)  For purposes of reporting a taxpayer’s worldwide net worth,
line 31 assets that must be reported separately shall include, but shall not
line 32 be limited to, the following categories:
line 33 (1)  Stock in any publicly and privately traded C-corporation.
line 34 (2)  Stock in any S-corporation.
line 35 (3)  Interests in any partnership.
line 36 (4)  Interests in any private equity or hedge fund.
line 37 (5)  Interests in any other noncorporate businesses.
line 38 (6)  Bonds and interest-bearing savings accounts.
line 39 (7)  Cash and deposits.
line 40 (8)  Farm assets.

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line 1 (9)  Interest in mutual funds or index funds.

line 2 (10)  Put and call options.
line 3 (11)  Futures contracts.
line 4 (12)  Art and collectibles.
line 5 (13)  Financial assets held offshore.
line 6 (14)  Pension funds.
line 7 (15)  Other assets, excluding real property.
line 8 (16)  Debts other than mortgages or other liabilities secured by
line 9 real property.
line 10 (17)  Real property.
line 11 (18)  Mortgages and other liabilities secured by real property.
line 12 (d)  For the avoidance of doubt, directly held real property, and
line 13 mortgages and other liabilities secured by directly held real
line 14 property, must be listed separately in accordance with subdivision
line 15 (c), but those items are not considered in calculating the taxpayer’s
line 16 worldwide net worth under this part pursuant to Section 50306.
line 17 50304. The provisions of this part are severable. If any
line 18 provision of this part or its application is held invalid, that
line 19 invalidity shall not affect other provisions or applications that can
line 20 be given effect without the invalid provision or application.
line 21
line 22 Chapter 2. Imposition of Tax on Wealth
line 23
line 24 50305. (a)  For taxable years beginning on or after January 1,
line 25 2024, and before January 1, 2026, on the activity of sustaining
line 26 excessive accumulations of wealth there is hereby imposed an
line 27 excise tax of 1.5 percent upon the worldwide net worth of every
line 28 resident, part-year resident, temporary resident, or wealth-tax
line 29 resident, as those terms are described in Section 50313, in this
line 30 state in excess of the following:
line 31 (1)  For married taxpayers filing separately, five hundred million
line 32 dollars ($500,000,000).
line 33 (2)  For all other taxpayers, one billion dollars ($1,000,000,000).
line 34 (b)  For taxable years beginning on or after January 1, 2026, on
line 35 the activity of sustaining excessive accumulations of wealth, there
line 36 is hereby imposed an excise tax of 1 percent upon the worldwide
line 37 net worth of every resident, part-year resident, temporary resident,
line 38 or wealth-tax resident, as those terms are described in Section
line 39 50313, in this state in excess of the following:

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line 1 (1)  For married taxpayers filing separately, twenty-five million

line 2 dollars ($25,000,000).
line 3 (2)  For all other taxpayers, fifty million dollars ($50,000,000).
line 4 (c)  In addition to the tax imposed under subdivision (b), there
line 5 is also hereby imposed an additional 0.5 percent surtax, for a total
line 6 combined tax rate of 1.5 percent, upon the worldwide net worth
line 7 of every resident in this state in excess of the following:
line 8 (1)  For married taxpayers filing separately, five hundred million
line 9 dollars ($500,000,000).
line 10 (2)  For all other taxpayers, one billion dollars ($1,000,000,000).
line 11 (d)  (1)  Except as explicitly provided for in this part, for
line 12 purposes of subdivisions (a), (b), and (c), worldwide net worth
line 13 shall be calculated in the manner set for calculation of the Federal
line 14 Estate Tax under Chapter 11 (commencing with Section 2001) of
line 15 Subtitle B of the Internal Revenue Code.
line 16 (2)  Except as otherwise provided in this part, and only to the
line 17 extent allowable under the California Constitution, the United
line 18 States Constitution, and other governing federal law, worldwide
line 19 net worth shall be the value of all worldwide property owned by
line 20 the taxpayer on December 31 of each year. Any transaction with
line 21 a primary purpose of reducing the valuation of a taxpayer’s
line 22 worldwide net worth as of December 31 shall be disregarded.
line 23 50306. Worldwide net worth shall not include any real property
line 24 directly held by the taxpayer. Worldwide net worth shall also not
line 25 include any tangible personal property directly held by the taxpayer
line 26 and located outside of this state. However, worldwide net worth
line 27 shall include the value of real property or out-of-state tangible
line 28 personal property held indirectly, as through a corporation,
line 29 partnership, limited liability company, trust, or other such legal
line 30 form, except to the extent that such inclusion is prohibited by the
line 31 United States Constitution or other governing federal law.
line 32 50307. (a)  Any assets of a person who can be claimed as a
line 33 dependent that are in excess of fifty thousand dollars ($50,000),
line 34 shall be deemed to be assets of the taxpayer who can claim them
line 35 as a dependent.
line 36 (b)  A taxpayer’s worldwide wealth shall include any asset
line 37 transferred by the taxpayer to a related party, or otherwise to any
line 38 party under circumstances in which the transferor remains in
line 39 control of or directly benefits from the transferee’s use of the
line 40 transferred asset.

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line 1 (1)  For purposes of this subdivision, a grant of an asset to an

line 2 organization described in subparagraph (K) of paragraph (5) of
line 3 subdivision (c) of Section 50308, where the grant is subject to
line 4 conditions imposed by the donor, will not ordinarily constitute
line 5 “control” so long as the conditions imposed do not allow the use
line 6 of the asset to inure to the private benefit of the donor.
line 7 (2)  In the event that a taxpayer receives consideration other than
line 8 services for any transfer described in this subdivision, the amount
line 9 included in the transferor taxpayer’s worldwide wealth shall be
line 10 reduced by the amount of consideration received, but in no event
line 11 shall that reduction exceed the fair market value of the transferred
line 12 asset, and any consideration received shall thereafter be subject to
line 13 inclusion in the taxpayer’s worldwide wealth pursuant to this part.
line 14 (A)  The value of any consideration received shall be determined
line 15 in accordance with Section 50308.
line 16 (B)  If any consideration includes an assumption of a liability
line 17 of the taxpayer, the amount of consideration credited cannot exceed
line 18 the amount by which that liability would have reduced the
line 19 worldwide wealth of the taxpayer.
line 20 (3)  Any trust which has a potential beneficiary who is a related
line 21 person to the taxpayer is itself a related person to that taxpayer.
line 22 (4)  If application of this subdivision would result in any asset
line 23 or portion of an asset being taxed to more than one taxpayer in a
line 24 given tax year, that asset or portion thereof will instead be included
line 25 only in the worldwide wealth of the taxpayer for whom that
line 26 inclusion would result in the greatest amount of tax. If two or more
line 27 taxpayers would owe an equal amount of tax as a result of that
line 28 inclusion, the asset shall be taxed to its owner.
line 29 50308. (a)  No later than January 1, 2024, the Franchise Tax
line 30 Board shall publish, and post on its internet website, an Estimated
line 31 Economy-wide Normal Rate of Return for each of the prior 10 tax
line 32 years. Unless the Franchise Tax Board determines that some other
line 33 methodology is more appropriate for a particular year or set of
line 34 years, the Estimated Economy-wide Normal Rate of Return for
line 35 each year shall be determined by adding 300 basis points to the
line 36 rate of return on the most appropriate one-year United States
line 37 Treasury Bill for that year.
line 38 (b)  No later than January 1, 2024, and each year thereafter, the
line 39 Franchise Tax Board shall publish the Estimated Economy-wide

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line 1 Normal Rate of Return for the prior year, based on the best
line 2 available methodology.
line 3 (c)  (1)  For all publicly traded assets, the value of the asset shall
line 4 be presumed to be the asset’s market value at the end of the tax
line 5 year.
line 6 (2)  All assets owned by or held through a sole proprietorship
line 7 shall be reported and valued as though they were directly owned
line 8 and held by the taxpayer.
line 9 (3)  For all interests in business entities other than sole
line 10 proprietorships, including, but not limited to, equity and other
line 11 ownership interests, all debt interests, and all other contractual or
line 12 noncontractual interests that are not governed by paragraph (1),
line 13 the following rules apply:
line 14 (A)  The taxpayer shall report annually all of the following:
line 15 (i)  The percentage of the business entity owned by the taxpayer.
line 16 (ii)  The book value of the business entity according to GAAP.
line 17 (iii)  The book profits of the business entity in the tax year
line 18 according to GAAP.
line 19 (B)  If reporting pursuant to subparagraph (A) is impossible
line 20 because the taxpayer lacks information on the book value or the
line 21 book profits of the business entity and also lacks the right to obtain
line 22 that information, then the taxpayer shall instead submit a certified
line 23 appraisal of all of the taxpayer’s interests in the business entity
line 24 and shall include the value derived from that certified appraisal in
line 25 the taxpayer’s wealth tax base for the tax year.
line 26 (C)  A taxpayer is exempt from the requirements of
line 27 subparagraphs (A) and (B) only if all of the following conditions
line 28 are met:
line 29 (i)  The taxpayer has received no information reporting from the
line 30 business entity, as specified in Section 50309, and has received
line 31 no other communications from the business entity sufficient for
line 32 estimating a minimum plausible value for the taxpayer’s interests
line 33 in the business entity.
line 34 (ii)  The taxpayer lacks the legal rights to obtain that information
line 35 reporting or other communications from the business entity.
line 36 (iii)  The taxpayer declares that the total value of all of the
line 37 taxpayer’s interests in that business entity are de minimis. A
line 38 taxpayer’s interests in a business entity are considered to be de
line 39 minimis if the sum of all of the taxpayer’s interests in the business
line 40 entity, except for any rights to receive reasonable future

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line 1 compensation for future work or future services to be performed

line 2 by the taxpayer, is less than fifty thousand dollars ($50,000). For
line 3 purposes of assessing whether a taxpayer’s interests in a business
line 4 entity are de minimis, any rights of related persons shall be deemed
line 5 to be rights of the taxpayer.
line 6 (D)  For purposes of this part, if a valuation is to be calculated
line 7 by the proxy valuation formula for business entities, that valuation
line 8 shall be the book value of the business entity according to GAAP
line 9 plus 7.5 times the book profits of the business entity for the taxable
line 10 year according to GAAP. However, if the taxpayer can demonstrate
line 11 with clear and convincing evidence that a valuation calculated via
line 12 the proxy valuation formula would substantially overstate the value
line 13 as applied to the facts and circumstances for any taxable year, then
line 14 the taxpayer can instead submit a certified appraisal of the value
line 15 of the taxpayer’s ownership interests in the business entity for that
line 16 year and use that certified appraisal value in place of applying the
line 17 primary valuation rules of subparagraph (F) or (G).
line 18 (E)  For any interests that confer voting or other direct control
line 19 rights, the percentage of the business entity owned by the taxpayer
line 20 shall be presumed to be no less than the taxpayer’s percentage of
line 21 the overall voting or other direct control rights. However, if the
line 22 taxpayer can demonstrate with clear and convincing evidence that
line 23 such a presumption would substantially overstate the actual
line 24 percentage of the business entity owned by the taxpayer for any
line 25 taxable year, then the taxpayer can instead submit a certified
line 26 appraisal of the percentage of the business entity owned by the
line 27 taxpayer for that year and use such certified appraisal value in
line 28 place of the presumed percentage.
line 29 (i)  For any interests that confer rights to the taxpayer in excess
line 30 of the rights associated with voting or other direct control rights,
line 31 unless the total value of all of the taxpayer’s interests in the
line 32 business entity are de minimis under the definition in subparagraph
line 33 (A) of paragraph (3), the taxpayer shall submit a certified appraisal
line 34 for the estimated excess of the value of all rights above the value
line 35 of the taxpayer’s voting or other direct control rights. This excess
line 36 shall be added to the valuation derived from the taxpayer’s voting
line 37 and other direct control rights.
line 38 (ii)  Interests that confer rights in excess of voting or other direct
line 39 control rights include rights for any potential future payments,
line 40 potential future services, or other valuable receipts potentially

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line 1 obtainable from the business entity, regardless of whether these

line 2 rights are contingent, and regardless of whether these rights are in
line 3 the form of equity, debt, or other contractual or noncontractual
line 4 rights.
line 5 (iii)  Interests that confer rights in excess of voting or other direct
line 6 control rights do not include any rights to be paid reasonable
line 7 compensation for future work or for future services to be provided
line 8 by the taxpayer or by an entity controlled by the taxpayer.
line 9 (iv)  For purposes of this subparagraph, any rights of a related
line 10 person shall be deemed to be the rights of the taxpayer unless the
line 11 taxpayer submits evidence that the related person both reported
line 12 and paid wealth tax on those rights to the state, to another state,
line 13 or to a jurisdiction outside of the state.
line 14 (F)  For business entities for which the valuation calculated by
line 15 the proxy valuation formula for business entities is less than fifty
line 16 million dollars ($50,000,000), the value of the taxpayer’s
line 17 ownership interests in the business entity will be presumed to be
line 18 the percentage of the business entity owned by the taxpayer
line 19 multiplied by the valuation calculated by the proxy valuation
line 20 formula for business entities.
line 21 (G)  For business entities for which the valuation calculated by
line 22 the proxy valuation formula for business entities is fifty million
line 23 dollars ($50,000,000) or greater, the taxpayer shall submit a
line 24 certified appraisal of the value of the taxpayer’s ownership interests
line 25 in the business entity. The value of the taxpayer’s ownership
line 26 interests in the business entity will then be presumed to be the
line 27 greater of the following:
line 28 (i)  The certified appraisal value.
line 29 (ii)  The percentage of the business entity owned by the taxpayer
line 30 multiplied by the valuation calculated by the proxy valuation
line 31 formula for business entities.
line 32 (H)  Notwithstanding subparagraphs (B) to (G), inclusive, if at
line 33 any time within the past 10 years there has been a sale, partial sale,
line 34 or any other event that sets the value of the taxpayer’s interests in
line 35 a business entity based on an arm’s-length transaction, unless the
line 36 total value of all of the taxpayer’s interests in the business entity
line 37 are de minimis pursuant to subparagraph (C), the taxpayer shall
line 38 report the valuation derived from that arm’s-length transaction and
line 39 adjust that valuation by the annual published Estimated
line 40 Economy-wide Normal Rates of Return for each year or partial

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line 1 year since the transaction took place. The taxpayer shall also make
line 2 any proper adjustments for withdrawals from or contributions to
line 3 the business entity.
line 4 (i)  The rule established by this subparagraph shall be known as
line 5 the “Prospective Formulaic Alternative Minimum Valuation Rule.”
line 6 (ii)  If, in any taxable year, the valuation calculated pursuant to
line 7 the Prospective Formulaic Alternative Minimum Valuation Rule
line 8 exceeds the valuation Rule calculated based on the valuation rules
line 9 in subparagraph (F) or (G), reported based on a certified appraisal,
line 10 then the valuation calculated via the Prospective Formulaic
line 11 Alternative Minimum Valuation Rule shall supersede the valuation
line 12 calculated based on the valuation rule of either subparagraph (F)
line 13 or (G) or reported based on a certified appraisal.
line 14 (iii)  This subparagraph shall not apply if the taxpayer can
line 15 demonstrate with clear and convincing evidence that the valuation
line 16 calculated via the Prospective Formulaic Alternative Minimum
line 17 Valuation Rule would substantially overstate the value as applied
line 18 to the facts and circumstances.
line 19 (I)   Notwithstanding subparagraphs (B) to (H), inclusive, if in
line 20 any year there is a sale, partial sale, or any other event that sets
line 21 the value of the taxpayer’s interests in a business entity based on
line 22 an arm’s-length transaction, unless the total value of all of the
line 23 taxpayer’s interest in that business entity are de minimis pursuant
line 24 to subparagraph (C), the taxpayer shall report the valuation derived
line 25 from that arm’s-length transaction. If, in any year, the valuation
line 26 calculated based on the arm’s-length transaction described in this
line 27 subparagraph exceeds the valuation reported and used by the
line 28 taxpayer in any of the previous four taxable years, after adjusting
line 29 that valuation based on the annual published Estimated
line 30 Economy-wide Normal Rates of Return for each year or partial
line 31 year between the transaction and the valuation reported and used
line 32 by the taxpayer, and also after making proper adjustments for
line 33 withdrawals from or contributions to the business, then the taxpayer
line 34 shall report the excess of any valuation calculated based on the
line 35 arm’s-length transaction over the valuation reported and used by
line 36 the taxpayer in the prior taxable years. The excess calculated is
line 37 then adjusted based on the published Estimated Economy-wide
line 38 Normal Rates of Return, and based on withdrawals from or
line 39 contributions to the business, and is added to the taxpayer’s

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line 1 worldwide net worth for the current taxable year for purposes of
line 2 calculating the taxpayer’s wealth tax base.
line 3 (i)  The rule established by this subparagraph shall be known as
line 4 the “Retrospective Formulaic Alternative Minimum Valuation
line 5 Rule.”
line 6 (ii)  If, for any taxable year, the valuation calculated pursuant
line 7 to the Retrospective Formulaic Alternative Minimum Valuation
line 8 Rule exceeds the valuation calculated based on the valuation rules
line 9 in subparagraph (F) or (G), reported based on a certified appraisal,
line 10 or the valuation calculated pursuant to the Prospective Formulaic
line 11 Alternative Minimum Valuation, then the valuation calculated via
line 12 the Retrospective Formulaic Alternative Minimum Valuation Rule
line 13 shall supersede the valuation calculated based on those other
line 14 valuation rules.
line 15 (iii)  This subparagraph shall not apply if the taxpayer can
line 16 demonstrate with clear and convincing evidence that the valuation
line 17 calculated via the Retrospective Formulaic Alternative Minimum
line 18 Valuation Rule would substantially overstate the value as applied
line 19 to the facts and circumstances.
line 20 (J)  For purposes of this paragraph, the taxable year of a business
line 21 entity shall be the tax year of the entity ending within or with the
line 22 applicable taxable year of the taxpayer.
line 23 (4)  For all interest-bearing savings accounts, cash, foreign
line 24 currency, and other deposits, the value of the assets will be
line 25 presumed to be their dollar value as of the last day of the taxable
line 26 year.
line 27 (5)  For all interests in trusts, the following rules apply:
line 28 (A)  At the election of any trust, whether domiciled in California
line 29 or otherwise, that trust may be taxable under this act as if it were
line 30 an individual, except that for purposes of determining worldwide
line 31 net worth of the trust, paragraph (2) of subdivision (a) of Section
line 32 50305 shall be applied by replacing “fifty million dollars
line 33 ($50,000,000)” with “zero dollars ($0).”
line 34 (B)  In the case of a trust beneficiary whose interest does not
line 35 depend on the outcome of uncertain future events, such as the
line 36 exercise of discretion by the fiduciary or the income of that trust,
line 37 the assets of any trust shall be taxable to that beneficiary as if all
line 38 the beneficiary’s interests in that trust, other than those that depend
line 39 on uncertain future events, were owned by the beneficiary, but no
line 40 beneficiary shall be taxable on any trust asset in a given year to

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 AB 259 — 18 —

line 1 the extent that asset is taxed under this part for that year to the
line 2 trust.
line 3 (C)  In the case of a beneficiary of a trust whose interest depends
line 4 on the outcome of uncertain future events, such as the exercise of
line 5 discretion by the fiduciary or the income of the trust, the
line 6 beneficiary shall be treated as the owner of the assets of the trust
line 7 to the extent that those assets are distributable to the beneficiary,
line 8 whether distributed or not.
line 9 (D)  To the extent permitted by the United States Constitution
line 10 and the California Constitution, the assets of any trust shall be
line 11 taxable to the grantors of that trust, but a trust grantor shall not be
line 12 taxable on any trust asset in a given year to the extent that asset is
line 13 taxed under this act for that year to the trust or to any beneficiary
line 14 of the trust.
line 15 (E)  In the case of a trust with more than one grantor, where the
line 16 assets are taxable to one or more grantors, each asset of the trust
line 17 shall be taxable to each grantor proportionately, where that
line 18 proportion shall equal the ratio of the net value of the grantor’s
line 19 contributed assets and any appreciation thereon still owned by the
line 20 trust, all over the total net assets of the trust, and where, for
line 21 purposes of this calculation, any liabilities incurred or distributions
line 22 or purchases by the trust are deemed to have been made out of
line 23 contributed or appreciated funds in the same such proportion
line 24 existed that at the time of the liability, distribution, or purchase.
line 25 (F)  In the case of a beneficiary of a trust whose interest depends
line 26 on the outcome of uncertain future events, such as the exercise of
line 27 discretion by the fiduciary or the income of the trust, in any year
line 28 in which a portion of the trust assets becomes distributable to the
line 29 beneficiary, whether distributed or not, there shall additionally be
line 30 a throwback tax imposed on those assets for each prior year in
line 31 which that beneficiary was both a California resident and a
line 32 potential beneficiary of that trust or its predecessor trusts, but in
line 33 no case for a year prior to the effective date of this statute, except
line 34 that in the case in which an electing grantor, as described in
line 35 subparagraph (H), has already been taxed on a given asset for a
line 36 given year, no throwback liability shall accrue for a beneficiary
line 37 with respect to that asset in that year.
line 38 (G)  In the case of a throwback tax being imposed, the amount
line 39 of that tax shall be the amount of tax that would be due if the
line 40 taxpayer’s worldwide net worth for each applicable prior year were

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 AB 259 — 38 —

line 1 (1)  Makes, uses, or causes to be made or used, a false record or

line 2 statement material to their own obligation to pay money to the
line 3 state or a local government under this code, or an obligation of a
line 4 subsidiary, partnership, corporation, or entity that they control.
line 5 (2)  Conceals or improperly avoids or decreases their own
line 6 obligation to pay money to the state or a local government under
line 7 this code, or an obligation of a subsidiary, partnership, corporation,
line 8 or entity that they control.
line 9 (d)  Solely for the purpose of subdivision (c), a person shall be
line 10 liable for the damages specified in that subdivision regardless of
line 11 whether or not the person acted knowingly.
line 12 50316. (a)  The Wealth Tax Advisory Council is hereby
line 13 established.
line 14 (b)  (1)  The council shall determine an adequate level of annual
line 15 funding and staffing for the administration and collection of a
line 16 wealth tax enacted by the Legislature, including at the Franchise
line 17 Tax Board, Office of Tax Appeals, and the Department of Justice.
line 18 In determining the level of funding needed, the council will
line 19 consider the following:
line 20 (A)  The fair and efficient administration of the tax, with proper
line 21 consideration given both to the expense of compliance measures
line 22 and the potential size of uncollected tax liabilities.
line 23 (B)  The Franchise Tax Board’s ability to hire and pay reasonable
line 24 fees to any outside experts or outside counsel as appropriate to
line 25 fully administer and collect a wealth tax.
line 26 (2)  The council shall also make suggestions to the Legislature
line 27 as to modifying the Wealth Tax in order to improve its fairness
line 28 and efficiency.
line 29 (3)  The council shall develop objective metrics for determining
line 30 progress towards meeting the conditions of subdivision (b) of
line 31 Section 1 of Article XIII B of the California Constitution.
line 32 (A)  The council shall review the expenditure of wealth tax
line 33 revenues towards meeting these conditions, and develop an annual
line 34 report.
line 35 (B)  The council may hire consultants to help in the preparation
line 36 of the methodology and annual reports for purposes of this
line 37 paragraph.
line 38 (c)  There is hereby established in the State Treasury the
line 39 Franchise Tax Board Wealth Tax Administration Fund.

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 — 39 — AB 259

line 1 (1)  All money deposited in the Franchise Tax Board Wealth

line 2 Tax Administration Fund is hereby continuously appropriated to
line 3 the Franchise Tax Board, without regard to fiscal year, and shall
line 4 be used solely for the purpose of administering and collecting a
line 5 wealth tax or that part of administering other taxes that substantially
line 6 advances the administration and collection of a wealth tax.
line 7 (2)  (A)  For each of the first four years for which a wealth tax
line 8 is collected, the greater of the following amounts shall be deposited
line 9 into the Franchise Tax Board Wealth Tax Administration Fund:
line 10 (i)  Three hundred million dollars ($300,000,000), adjusted the
line 11 second year for inflation using the California Consumer Price
line 12 Index.
line 13 (ii)  One percent of all projected revenues from the wealth tax
line 14 for the taxable year.
line 15 (B)  For each subsequent year for which a wealth tax is collected,
line 16 the greater of the following amounts shall be deposited into the
line 17 fund:
line 18 (i)  One hundred million dollars ($100,000,000), adjusted
line 19 annually for inflation using the California Consumer Price Index.
line 20 (ii)  One-half of 1 percent of all projected revenues from the
line 21 wealth tax for the taxable year.
line 22 (3)  No later than December 1, 2026, and every three years
line 23 thereafter, the task force shall prepare a detailed report of the
line 24 reasonable costs incurred by the Franchise Tax Board in
line 25 administering and collecting the wealth tax over the prior three
line 26 years. If the amount deposited into the Franchise Tax Board Wealth
line 27 Tax Administration Fund over the prior three years pursuant to
line 28 paragraph (2) is in excess of the reasonable costs incurred by the
line 29 Franchise Tax Board in administering and collecting the wealth
line 30 tax over those years, the excess shall be transferred from the fund
line 31 to the General Fund. If the reasonable costs incurred over those
line 32 years are in excess of the amount deposited into the fund pursuant
line 33 to subparagraph (2), the council shall present the report to the
line 34 Governor, and the excess shall be included in the Governor’s
line 35 budget proposal under subdivision (a) of Section 12 of Article IV
line 36 of the California Constitution for the following fiscal year.
line 37 (d)  There is hereby established in the State Treasury the
line 38 Department of Justice Wealth Tax Administration Fund.
line 39 (1)  All money deposited in the Department of Justice Wealth
line 40 Tax Administration Fund is hereby continuously appropriated to

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 AB 259 — 42 —

line 1 the chairperson or vice chairperson, each of them must agree in

line 2 order to remove the chairperson or vice chairperson.
line 3 (8)  Actions of the task force may be taken only by a majority
line 4 vote of a quorum of the task force.
line 5 50317. (a)  The Franchise Tax Board may adopt any and all
line 6 regulations that are helpful and appropriate for implementing any
line 7 provision in this part.
line 8 (b)  Until January 1, 2026, the rulemaking provisions of the
line 9 Administrative Procedure Act (Chapter 3.5 (commencing with
line 10 Section 11340) of Part 1 of Division 3 of Title 2 of the Government
line 11 Code) shall not apply to any regulation, standard, criterion,
line 12 procedure, determination, rule, notice, guideline, or any other
line 13 guidance established or issued by the Franchise Tax Board pursuant
line 14 to this part.
line 15 (c)  Notwithstanding Section 19057 or any other law, every
line 16 notice of a proposed deficiency assessment under this part in
line 17 regards to taxable years beginning on or after January 1, 2024, and
line 18 before January 1, 2026, shall be mailed to the taxpayer within ten
line 19 years after the return was filed.
line 20 (d)  Not withstanding Section 50309 or any other law, the
line 21 Franchise Tax Board is not required to adopt any information
line 22 reporting forms in connection with this part until January 1, 2026.
line 23 (e)  Within six months after enactment, the Franchise Tax Board
line 24 shall promulgate the forms required for taxpayers to pay the tax
line 25 imposed by subdivision (a) of Section 50305. Those forms may
line 26 provide for taxpayer attachments demonstrating compliance.
line 27 50318. The provisions of this part shall be liberally construed
line 28 to effectuate its purposes.
line 29 SEC. 5. The provisions of this act adding Part 27 (commencing
line 30 with Section 50300) to Division 2 of the Revenue and Taxation
line 31 Code shall only become operative if Assembly Constitutional
line 32 Amendment __ of the 2023–24 Regular Session is approved by
line 33 the voters and takes effect.
line 34 SEC. 6. The Legislature finds and declares that Section 1 of
line 35 this act, which amends Sections 12651 of the Government Code,
line 36 imposes a limitation on the public’s right of access to the meetings
line 37 of public bodies or the writings of public officials and agencies
line 38 within the meaning of Section 3 of Article I of the California
line 39 Constitution. Pursuant to that constitutional provision, the

99
 AB 259 — 22 —

line 1 value of all those assets is less than one million dollars
line 2 ($1,000,000).
line 3 (8)  (A)  Where a taxpayer is required to report or submit a
line 4 certified appraisal pursuant to this part, if the taxpayer has
line 5 previously submitted, within the prior 10 years, a certified appraisal
line 6 for an asset or for a set of assets or for the taxpayer’s interests in
line 7 an entity, and if the taxpayer declares that the taxpayer has not
line 8 entered into any transactions since that prior certified appraisal
line 9 that would substantially alter either the valuation or the percentage
line 10 of the asset or assets or entity owned by the taxpayer, then the
line 11 taxpayer may choose to do either of the following:
line 12 (i)  Submit a new certified appraisal for the value and the
line 13 percentage owned by the taxpayer on December 31 of the taxable
line 14 year.
line 15 (ii)  Submit the prior certified appraisal with all valuations
line 16 adjusted by the annual published Estimated Economy-wide Normal
line 17 Rates of Return for each year or partial year since the prior certified
line 18 appraisal.
line 19 (B)  Any appraiser making a certified appraisal for the purposes
line 20 of this part shall send a copy of that certified appraisal to the
line 21 Franchise Tax Board, along with also providing information
line 22 sufficient for identifying the taxpayer for whom the certified
line 23 appraisal was prepared, as well as also following any regulations
line 24 or other relevant instructions adopted by the Franchise Tax Board.
line 25 (C)  An appraiser shall include within the contents of the
line 26 appraisal a signed declaration as to whether the appraiser has
line 27 “high,” “medium,” or “low” confidence that the amount determined
line 28 to be the correct value of the appraised assets or property will not
line 29 exceed 150 percent of the amount reported as the value of those
line 30 assets or property in the certified appraisal.
line 31 (i)  Where an appraiser declares “high” confidence, and it is
line 32 subsequently determined the correct value of the appraised assets
line 33 or property exceeds 150 percent of the amount reported in the
line 34 certified appraisal, there shall be a penalty imposed on the appraiser
line 35 equal to ten thousand dollars ($10,000) plus 125 percent of the
line 36 sum of all payments for applicable appraisal services received
line 37 from the taxpayer.
line 38 (ii)  Where the taxpayer reports or submits one or more certified
line 39 appraisals for which the appraiser has declared only either

99
 — 23 — AB 259

line 1 “medium” or “low” confidence, the taxpayer shall do one of the

line 2 following:
line 3 (I)  Initiate an Optional Unliquidated Tax Claim Agreement
line 4 (OUTCA), as described in subdivision (b) of Section 50310, to be
line 5 attached to all of the taxpayer’s assets that are the subject of a
line 6 certified appraisals wherein the appraiser declared only “medium”
line 7 or “low” confidence.
line 8 (II)  Request an authorized independent appraisal pursuant to
line 9 paragraph (9).
line 10 (D)  The Franchise Tax Board may adopt regulations further
line 11 detailing the requirements for certified appraisals and for appraisers
line 12 based on the qualified appraisal and qualified appraiser rules of
line 13 Section 1.170A-17 of Title 26 of the Code of Federal Regulations.
line 14 (9)  (A)  The Franchise Tax Board shall solicit and enter into
line 15 contracts with independent appraisers such that the appraisers may
line 16 be selected by the Franchise Tax Board to conduct authorized
line 17 independent appraisals.
line 18 (B)  Upon the appropriately filed request of a taxpayer, the
line 19 Franchise Tax Board shall present the taxpayer with two different
line 20 options for independent appraisers who may be selected to conduct
line 21 the authorized independent appraisal. A schedule of the reasonable
line 22 fees shall be provided to the taxpayer. The reasonable fees are to
line 23 be charged by the independent appraisers to the taxpayer if selected.
line 24 The taxpayer may select one of the independent appraisers
line 25 proposed, or may initiate an OUTCA to be attached to all of the
line 26 taxpayer’s assets for which the taxpayer submitted certified
line 27 appraisals wherein the appraiser declared only “medium” or “low”
line 28 confidence pursuant to subparagraph (C) of paragraph (8).
line 29 (C)  Upon the completion of an authorized independent appraisal,
line 30 the appraiser shall submit copies of the authorized independent
line 31 appraisal to the taxpayer and to the Franchise Tax Board. The
line 32 taxpayer shall then choose either report the values determined by
line 33 the authorized independent appraisal with respect to all relevant
line 34 assets, or the taxpayer may choose to initiate an OUTCA to be
line 35 attached to all of the taxpayer’s assets for which the taxpayer
line 36 submitted certified appraisals wherein the appraiser declared only
line 37 “medium” or “low” confidence pursuant to subparagraph (C) of
line 38 paragraph (8).
line 39 (D)  Both in soliciting and entering into contracts with
line 40 independent appraisers and in selecting independent appraisers to

99
 AB 259 — 24 —

line 1 be presented to taxpayers as one of the two options that may be

line 2 designated by the taxpayer to conduct the taxpayer’s authorized
line 3 independent appraisal, the Franchise Tax Board shall primarily
line 4 seek to promote accuracy in the authorized independent appraisals.
line 5 In so seeking to promote accuracy, the Franchise Tax Board shall
line 6 primarily prioritize the selection of independent appraisers who
line 7 have a demonstrated history of conducting accurate authorized
line 8 independent appraisals and shall secondarily prioritize the selection
line 9 of independent appraisers who have the best capacity and expressed
line 10 commitment for conducting accurate authorized independent
line 11 appraisals.
line 12 (E)  The Franchise Tax Board shall adopt regulations further
line 13 detailing the requirements for authorized independent appraisals
line 14 and for selecting appraisers for conducting those appraisals.
line 15 (10)  If, pursuant to the provisions of paragraph (8) or (9), a
line 16 taxpayer chooses to initiate an OUTCA to be attached to all of the
line 17 taxpayer’s assets for which the taxpayer submitted certified
line 18 appraisals wherein the appraiser declared only “medium” or “low”
line 19 confidence, and if some or all of those assets previously had either
line 20 an OUTCA or a Liquidity-based Optional Unliquidated Tax Claim
line 21 Agreement (LOUTCA), as described in subdivision (a) of Section
line 22 50310, attached to them, then that prior OUTCA or LOUTCA
line 23 shall not be fully reconciled or closed and instead shall continue
line 24 to apply to any and all assets for which either the OUTCA or
line 25 LOUTCA was previously attached and for which the taxpayer
line 26 submitted certified appraisals wherein the appraiser declared only
line 27 “medium” or “low” confidence, and then with a new OUTCA to
line 28 be initiated and attached to any other assets for which the taxpayer
line 29 submitted certified appraisals wherein the appraiser declared only
line 30 “medium” or “low” confidence and for which no OUTCA or
line 31 LOUTCA was previously attached.
line 32 (d)  The Franchise Tax Board may adopt regulations on the
line 33 following:
line 34 (1)  Detailing abusive transactions whose aim is to change the
line 35 nature of an asset from public to nonpublic or vice versa.
line 36 (2)  Detailing abusive transactions whose aim is to artificially
line 37 reduce the assessed value of a taxpayer’s assets. Any feature of
line 38 an asset intended to, and having the effect of, decreasing the value
line 39 of the asset, such as a “poison pill,” shall be disregarded.
line 40 Additionally, no valuation discount, or any other discount, shall

99
 — 25 — AB 259

line 1 apply if the effect of the discount would be to reduce the value of
line 2 a pro rata economic interest in an asset below the pro rata value
line 3 of the entire asset.
line 4 (3)  Any other issue related to valuation methods.
line 5 50309. The Franchise Tax Board may adopt regulations and
line 6 appropriate forms on the following subjects to require information
line 7 reporting.
line 8 (a)  (1)  All nonpublicly traded business entities other than sole
line 9 proprietorships that are doing business in this state, organized in
line 10 this state, or registered with the Secretary of State shall file an
line 11 annual information return specifying all of the following:
line 12 (A)  The information required to calculate the value of the
line 13 business pursuant to the rules of subdivision (c) of Section 50308.
line 14 (B)  The names, addresses, and taxpayer identification numbers
line 15 of the persons, whether residents or nonresidents, who would be
line 16 entitled to share in the net income of the entity if distributed and
line 17 the amount of the distributive share of each person.
line 18 (C)  The information return shall contain or be verified by a
line 19 written declaration that it is made under penalty of perjury, signed
line 20 by one of the partnership members or corporate officers. The
line 21 Franchise Tax Board shall request the information described under
line 22 the paragraph from a business entity not required to submit the
line 23 information return but subject to jurisdiction of the State of
line 24 California under Section 410.10 of the Code of Civil Procedure if
line 25 the Franchise Tax Board reasonably believes that entity contributes
line 26 substantial wealth to a taxpayer subject to the wealth tax.
line 27 (D)  Each business entity required to file an information return
line 28 under this paragraph shall, on or before the day on which the return
line 29 for that taxable year is required to be filed, furnish to each person
line 30 who holds an interest in that entity at any time during that taxable
line 31 year a copy of the information required by this paragraph.
line 32 (2)  All trusts required to file income tax returns in California
line 33 shall file an annual information return specifying all of the
line 34 following:
line 35 (A)  The information required to calculate the value of the assets
line 36 in the trust.
line 37 (B)  The names, addresses, and taxpayer identification numbers
line 38 of the persons, whether residents or nonresidents, who would be
line 39 entitled to share in the net income or assets of the trust if distributed
line 40 and the amount of the distributive share of each person.

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 AB 259 — 26 —

line 1 (C)  The information return shall contain or be verified by a

line 2 written declaration that it is made under penalty of perjury, signed
line 3 by one of the partnership members or corporate officers.
line 4 (D)  The Franchise Tax Board shall request the information
line 5 described in this paragraph from a trust not required to submit the
line 6 information return but subject to jurisdiction pursuant to Section
line 7 410.10 of the Code of Civil Procedure if the Franchise Tax Board
line 8 reasonably believes the trust contributes substantial wealth to a
line 9 taxpayer subject to the wealth tax.
line 10 (E)  Each trust required to file an information return under this
line 11 paragraph shall, on or before the day on which the return for that
line 12 taxable year is required to be filed, furnish to each person who
line 13 holds an interest in the trust at any time during that taxable year a
line 14 copy of the information required by this paragraph.
line 15 (b)  Any taxpayer that submits a certified appraisal shall file an
line 16 agreement in the form required by the Franchise Tax Board. The
line 17 agreement shall do all of the following:
line 18 (1)  Acknowledge that the appraisal is being accepted as proof
line 19 of value because of uncertainty as to contingent events or lack of
line 20 reasonable access to information.
line 21 (2)  Confirms the taxpayer agrees to file an information return
line 22 for the subsequent four taxable years concerning each of the
line 23 following:
line 24 (A)  Whether any of the transactions permitting Retrospective
line 25 Formulaic Alternative Minimum Valuation Rule, pursuant to
line 26 subparagraph (A) of paragraph (3) of subdivision (c) of Section
line 27 50308 have occurred.
line 28 (B)  Whether any other material information is now available
line 29 permitting substantially more accurate valuation.
line 30 (3)  The Franchise Tax Board shall mail a notice of a proposed
line 31 deficiency assessment to a taxpayer within five years after the
line 32 agreement was filed.
line 33 50310. (a)  Liquidity-based Optional Unliquidated Tax Claim
line 34 Agreements, to be referred to as LOUTCAs, shall be governed by
line 35 the following rules:
line 36 (1)  Taxpayers who are specified as liquidity-constrained
line 37 taxpayers and who have ownership interests in designated highly
line 38 illiquid assets, such as startup business entities, shall be able to
line 39 elect to initiate a LOUTCA to be attached to their ownership
line 40 interests in those designated highly illiquid assets instead of the

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line 1 net value of those ownership interests or the net value of those
line 2 assets being assessed at the end of a tax year.
line 3 (2)  Any taxpayer subject to the tax imposed by this part is
line 4 presumed to not be specified as a liquidity-constrained taxpayer
line 5 if the taxpayer’s designated highly illiquid assets are less than 80
line 6 percent of the taxpayer’s total net worth. The Franchise Tax Board
line 7 may adopt regulations in regard to substantiating who is a specified
line 8 liquidity-constrained taxpayer and in regard to what is a designated
line 9 highly illiquid asset. It is the intent of the Legislature that most
line 10 taxpayers subject to the tax imposed by this part should not be
line 11 specified as liquidity-constrained taxpayers and that publicly traded
line 12 assets and ownership interests conferring control rights in
line 13 substantially profitable privately held business entities shall not
line 14 be designated as highly illiquid assets.
line 15 (3)  To initiate any LOUTCA, a taxpayer shall sign forms to be
line 16 created by the Franchise Tax Board that shall have the effect of
line 17 creating a binding contractual agreement between the taxpayer
line 18 and the state. A LOUTCA shall be legally binding on the taxpayer,
line 19 and also on the taxpayer’s estate and assigns, until such time as
line 20 either the taxpayer or the taxpayer’s estate reconciles the LOUTCA
line 21 so as to fully liquidate the accumulated tax claims and to then pay
line 22 all tax due on those liquidated tax claims. As part of each
line 23 LOUTCA, the taxpayer shall agree to do all of the following:
line 24 (A)  File annual information returns.
line 25 (B)  Reconcile and pay all tax liabilities arising under the
line 26 LOUTCA.
line 27 (C)  Be subject to personal jurisdiction in this state for purposes
line 28 of the collection of wealth taxes, together with any related interest
line 29 or penalties, imposed on the taxpayer by this state, with respect to
line 30 the LOUTCA.
line 31 (4)  If a taxpayer has initiated a LOUTCA in any prior year, until
line 32 that LOUTCA has been reconciled and closed, the taxpayer shall
line 33 annually complete and file any form or forms that shall be created
line 34 by the Franchise Tax Board for the purposes of reporting any
line 35 material transactions made with regard to the LOUTCA. These
line 36 reporting requirements shall continue even if and after the taxpayer
line 37 is no longer a resident and shall then be enforced as a legally
line 38 binding contract with the state. Failure to file these annual forms
line 39 shall be treated as a breach of contract and shall also be subject to
line 40 the same penalties as failure to file income tax forms for residents

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 AB 259 — 28 —

line 1 who are required to file income tax forms. Upon the death of any
line 2 taxpayer who has initiated a LOUTCA that has not been fully
line 3 reconciled and closed, that taxpayer’s estate and assigns shall be
line 4 required to reconcile the LOUTCA so as to fully liquidate the
line 5 accumulated tax claims and to then pay all tax owed on those
line 6 liquidated tax claims, treating these claims as an unpaid tax liability
line 7 of the taxpayer owed to the state.
line 8 (5)  If, in any year, a taxpayer who has previously initiated a
line 9 LOUTCA no longer qualifies as a liquidity-constrained taxpayer,
line 10 then that taxpayer shall reconcile any and all LOUTCAs in that
line 11 year so as to fully liquidate the accumulated tax claims and to then
line 12 pay all tax owed on those liquidated tax claims so as to close all
line 13 LOUTCAs.
line 14 (6)  In any year, a taxpayer who has previously initiated a
line 15 LOUTCA may opt to reconcile the LOUTCA so as to fully
line 16 liquidate the accumulated tax claims and to then pay all tax owed
line 17 on those liquidated tax claims, thereby closing the LOUTCA for
line 18 subsequent years.
line 19 (7)  For the year in which a taxpayer initiates a LOUTCA and
line 20 also in every subsequent year until the LOUTCA has been fully
line 21 reconciled and closed, the taxpayer shall file the forms to be created
line 22 by the Franchise Tax Board for purposes of calculating the
line 23 taxpayer’s Accumulated Unliquidated Tax Liability Percentage
line 24 with respect to the LOUTCA. For the initial year in which a
line 25 taxpayer initiates a LOUTCA, the taxpayer’s Accumulated
line 26 Unliquidated Tax Liability Percentage shall equal the taxpayer’s
line 27 highest marginal wealth tax rate for that year. For each subsequent
line 28 year after a taxpayer has initiated a LOUTCA and until the
line 29 LOUTCA is closed, the taxpayer’s Accumulated Unliquidated Tax
line 30 Liability Percentage for the year shall be the taxpayer’s
line 31 Accumulated Unliquidated Tax Liability Percentage for the prior
line 32 year plus the product of the following:
line 33 (A)  The taxpayer’s highest marginal wealth tax rate for the year.
line 34 (B)  The excess of 100 percent over the taxpayer’s Accumulated
line 35 Unliquidated Tax Liability Percentage for the prior year.
line 36 (8)  To reconcile a LOUTCA so as to fully liquidate the
line 37 accumulated tax claims and to then close the LOUTCA, a taxpayer
line 38 shall report the current tax year value of all of the taxpayer’s
line 39 ownership interests in all of the assets to which the LOUTCA is
line 40 attached. The taxpayer shall then multiply the total of these

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 — 29 — AB 259

line 1 reported values by the taxpayer’s Accumulated Unliquidated Tax

line 2 Liability Percentage with respect to the LOUTCA. The taxpayer
line 3 shall then add this product to the taxpayer’s other wealth tax
line 4 liability for the tax year and then shall pay that wealth tax in order
line 5 to close the LOUTCA.
line 6 (9)  If, prior to closing a LOUTCA, a taxpayer withdraws any
line 7 money, property, or other value from any assets to which a
line 8 LOUTCA is attached or from being attached to a LOUTCA, or if
line 9 any assets to which a LOUTCA is attached are used in any
line 10 transactions that have the effect of either transferring any assets
line 11 or value from being attached to the LOUTCA to the taxpayer
line 12 without those attachments or to a related person or of using any
line 13 such assets or value for the benefit of the taxpayer or of a related
line 14 person, then those withdrawals or transactions shall be deemed to
line 15 be material transactions that the taxpayer shall report annually.
line 16 For any such reported material transactions, the taxpayer shall
line 17 report the value withdrawn from being attached to the LOUTCA
line 18 or transferred or used for the benefit of the taxpayer or of a related
line 19 person. The taxpayer shall then multiply the taxpayer’s
line 20 Accumulated Unliquidated Tax Liability Percentage with respect
line 21 to the LOUTCA by the reported value of all those material
line 22 transactions for the tax year and shall then add this product to the
line 23 taxpayer’s other wealth tax liability for the tax year.
line 24 (10)  Notwithstanding paragraph (9), a taxpayer does not have
line 25 to report transactions that are ordinary and necessary for
line 26 maintaining or increasing the value of assets to which a LOUTCA
line 27 is attached and that would not have the effect of distributing any
line 28 profits, dividends, or other payments to owners for the use of
line 29 capital.
line 30 (b)  Optional Unliquidated Tax Claim Agreements that are not
line 31 liquidity based, to be referred to as OUTCAs, shall be governed
line 32 by the following rules:
line 33 (1)  In order to initiate any OUTCA, a taxpayer shall sign forms
line 34 to be created by the Franchise Tax Board that shall have the effect
line 35 of creating a binding contractual agreement between the taxpayer
line 36 and the state. An OUTCA shall be legally binding on the taxpayer,
line 37 and on the taxpayer’s estate and assigns, until such time as the
line 38 taxpayer or the taxpayer’s estate reconciles the OUTCA and pays
line 39 all tax due on the liquidated tax claims. As part of that contract,
line 40 the taxpayer shall agree to do all of the following:

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 AB 259 — 30 —

line 1 (A)  File annual information returns.

line 2 (B)  Reconcile and pay all tax liabilities arising under the
line 3 OUTCA.
line 4 (C)  Be subject to personal jurisdiction in this state for purposes
line 5 of the collection of wealth taxes, together with any related interest
line 6 or penalties, imposed on the taxpayer by this state, with respect to
line 7 the OUTCA.
line 8 (2)  If a taxpayer has initiated an OUTCA in any prior year, until
line 9 that OUTCA has been reconciled and closed, the taxpayer shall
line 10 annually complete and file any form or forms that shall be created
line 11 by the Franchise Tax Board for the purposes of reporting any
line 12 material transactions made with regard to the OUTCA. These
line 13 reporting requirements shall continue even if and after the taxpayer
line 14 is no longer a resident and shall then be enforced as a legally
line 15 binding contract with the state. Failure to file those annual forms
line 16 shall be treated as a breach of contract and shall also be subject to
line 17 the same penalties as failure to file income tax forms for residents
line 18 required to file. Upon the death of any taxpayer who has initiated
line 19 an OUTCA that has not been fully reconciled and closed, that
line 20 taxpayer’s estate and assigns shall be required to reconcile the
line 21 OUTCA so as to fully liquidate the accumulated tax claims and
line 22 to then pay all tax owed on those liquidated tax claims, treating
line 23 these claims as an unpaid tax liability of the taxpayer owed to the
line 24 state.
line 25 (3)  For the year in which a taxpayer initiates an OUTCA and
line 26 every subsequent year until the OUTCA has been fully reconciled
line 27 and closed, the taxpayer shall file the forms to be created by the
line 28 Franchise Tax Board for purposes of calculating the taxpayer’s
line 29 Accumulated Unliquidated Tax Liability Percentage with respect
line 30 to the OUTCA. For the initial year in which a taxpayer initiates
line 31 an OUTCA, the taxpayer’s Accumulated Unliquidated Tax
line 32 Liability Percentage shall equal the taxpayer’s highest marginal
line 33 wealth tax rate for that year. For each subsequent year after a
line 34 taxpayer has initiated an OUTCA and prior to that OUTCA having
line 35 been closed, the taxpayer’s Accumulated Unliquidated Tax
line 36 Liability Percentage for the year shall equal the taxpayer’s
line 37 Accumulated Unliquidated Tax Liability Percentage for the prior
line 38 year plus the product of the following:
line 39 (A)  The taxpayer’s highest marginal wealth tax rate for the year.

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 — 31 — AB 259

line 1 (B)  The excess of 100 percent over the taxpayer’s Accumulated

line 2 Unliquidated Tax Liability Percentage for the prior year.
line 3 (4)  For the year in which a taxpayer initiates an OUTCA and
line 4 each subsequent taxable year until after the OUTCA has been fully
line 5 reconciled and closed, the taxpayer shall file the forms to be created
line 6 by the Franchise Tax Board for purposes of calculating the
line 7 Accumulated Prior Wealth Tax Payments made with respect to
line 8 the OUTCA and assets to which the OUTCA is attached. Those
line 9 calculations shall assess and track the sum of all prior wealth tax
line 10 paid by the taxpayer on account of owning assets to which an
line 11 OUTCA is attached, beginning in the later of either the year of the
line 12 initiation of the OUTCA or the year in which the OUTCA was
line 13 attached to those assets and continuing throughout all subsequent
line 14 years until after the OUTCA has been fully reconciled and closed.
line 15 (5)  If, prior to closing an OUTCA, a taxpayer withdraws any
line 16 money, property, or other value from any assets to which an
line 17 OUTCA is attached, or if any assets to which an OUTCA is
line 18 attached are used in any transactions that have the effect of either
line 19 transferring any assets or value from being attached to the OUTCA
line 20 to the taxpayer without those attachments or to a related person or
line 21 of using any such assets or value for the benefit of the taxpayer or
line 22 of a related person, then those withdrawals or transactions shall
line 23 be deemed to be material transactions that the taxpayer shall report
line 24 annually. For any of these material transactions, the taxpayer shall
line 25 report the value withdrawn from the assets to which the OUTCA
line 26 is attached or otherwise transferred or used for the benefit of the
line 27 taxpayer or of a related person. The taxpayer shall then multiply
line 28 the taxpayer’s Accumulated Unliquidated Tax Liability Percentage
line 29 with respect to the OUTCA by the reported value of all those
line 30 material transactions for the tax year. This product shall then be
line 31 subtracted from the taxpayer’s accumulated prior wealth tax
line 32 payments made with respect to the OUTCA. To the extent that
line 33 this subtraction would reduce the taxpayer’s accumulated prior
line 34 wealth tax payments made with respect to the OUTCA to below
line 35 zero, the taxpayer shall add the excess to the taxpayer’s other
line 36 wealth tax liability to be reported and paid for the taxable year.
line 37 (6)  Notwithstanding paragraph (5), a taxpayer does not have to
line 38 report transactions that are ordinary and necessary for maintaining
line 39 or increasing the value of assets to which an OUTCA is attached

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 AB 259 — 32 —

line 1 and that would not have the effect of distributing any profits,
line 2 dividends, or other payments to owners for the use of capital.
line 3 (7)  If and when a taxpayer reconciles an OUTCA so as to fully
line 4 liquidate the accumulated tax claims and to then pay all tax owed
line 5 on those liquidated tax claims so as to close the OUTCA, the
line 6 taxpayer shall submit a certified appraisal of all of the assets to
line 7 which the OUTCA was attached immediately prior to that
line 8 reconciliation. The taxpayer shall then multiply the taxpayer’s
line 9 Accumulated Unliquidated Tax Liability Percentage with respect
line 10 to the OUTCA by total value reported based on that certified
line 11 appraisal for all of the assets to which the OUTCA was attached
line 12 prior to that reconciliation. This product shall then be subtracted
line 13 from the taxpayer’s accumulated prior wealth tax payments made
line 14 with respect to the OUTCA. To the extent that this subtraction
line 15 would reduce the taxpayer’s accumulated prior wealth tax payments
line 16 made with respect to the OUTCA to below zero, the taxpayer shall
line 17 add the excess to the taxpayer’s other wealth tax liability to be
line 18 reported and paid for the taxable year. Following the payment of
line 19 any and all wealth tax owed as a result of this, the OUTCA shall
line 20 be deemed to be closed for all subsequent years.
line 21 (8)  If, in any year, a taxpayer who has previously initiated an
line 22 OUTCA sells, disposes of, or otherwise terminates all of the
line 23 taxpayer’s interests in the OUTCA and in all assets to which the
line 24 OUTCA is attached, then after paying any wealth tax owed as a
line 25 result of any material transactions, the OUTCA shall be deemed
line 26 fully liquidated and closed.
line 27 (9)  If, in any two subsequent years, a taxpayer who has
line 28 previously initiated an OUTCA ceases to owe any wealth tax to
line 29 the state, such as either because the taxpayer’s worldwide net worth
line 30 is less than the relevant exemption threshold or because the
line 31 taxpayer ceases to be a wealth tax resident, then the taxpayer may
line 32 opt to reconcile any or all OUTCAs in that second year so as to
line 33 fully liquidate the accumulated tax claims and to then pay all tax
line 34 owed on those liquidated tax claims so as to then close the
line 35 OUTCA.
line 36 (c)  As used in both subdivisions (a) and (b), the term “taxpayer”
line 37 shall also include any estate or assigns of a taxpayer made liable
line 38 under this section for satisfaction of that taxpayer’s LOUTCA or
line 39 OUTCA.

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line 1 (d)  Upon liquidation of an OUTCA, the amount of the OUTCA,

line 2 after accounting for any prior wealth tax payments, shall reduce
line 3 the tax due. To the extent this reduction exceeds the tax due for
line 4 the taxable year in which the OUTCA is liquidated, the excess
line 5 may be used to reduce the tax due in any subsequent taxable year.
line 6 50311. (a)   There shall be allowed as a credit against the tax
line 7 imposed by this part, an amount equal to the amount of net-worth
line 8 wealth tax paid to another jurisdiction relating to assets subject to
line 9 the tax imposed by this part. The credit allowed by this section
line 10 shall not reduce taxes owed pursuant to this part below zero. For
line 11 the avoidance of doubt, this section shall only provide a credit for
line 12 a tax on net worth, or a tax on real property as described in
line 13 subdivision (b), and no credit shall be created by any other tax,
line 14 including, but not limited to, a tax whose amount is determined
line 15 by reference to the occurrence or amount of any transactions,
line 16 income, capital gains, death, or inheritance, whatever the economic
line 17 incidence of that tax.
line 18 (b)   For any taxpayer who owns real property indirectly, as
line 19 through a corporation, partnership, limited liability company, trust,
line 20 or other such legal form, there shall be allowed as a credit against
line 21 the tax imposed by this part an amount equal to the taxpayer’s pro
line 22 rata share of any property taxes paid on the gross or net value of
line 23 real property to any jurisdiction. This credit is limited to taxes paid
line 24 with regard to ownership of the real property, and no credit shall
line 25 be created by any transactions tax, excise tax, or any other tax
line 26 based on use of the property. The credit created by this subdivision
line 27 for each separate unit of real property shall not exceed the portion
line 28 of the taxpayer’s total wealth tax liability attributable to the
line 29 taxpayer’s ownership interest in the real property.
line 30 (c)  To claim the credits described in subdivision (b), a taxpayer
line 31 shall separately report each of the following items:
line 32 (1)  The fair market value of each unit of real property.
line 33 (2)  The assessed value used to calculate any creditable property
line 34 taxes imposed on each unit of real property.
line 35 (3)  The property taxes paid, for which credit is being claimed.
line 36 (4)  All mortgages and other liabilities secured by or used for
line 37 the purpose of each unit of real property.
line 38 50312. The value of directly held real or personal property
line 39 excluded from calculation of a taxpayer’s worldwide net worth
line 40 shall be reported on the taxpayer’s annual return, along with any

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 AB 259 — 34 —

line 1 liabilities secured by or used for the benefit of directly held real
line 2 property. Liabilities secured by or used for the benefit of directly
line 3 held real property shall not be considered in determining worldwide
line 4 net worth of a taxpayer. At a minimum, a percentage of each
line 5 taxpayer’s overall liabilities, equal to the percentage the taxpayer’s
line 6 directly held real property interest bears to all of the taxpayer’s
line 7 worldwide assets, shall be excluded from the calculation of the
line 8 taxpayer’s worldwide net worth. The Franchise Tax Board may
line 9 adopt regulations for apportioning taxpayer’s overall liabilities to
line 10 exclude liabilities related to directly held real property.
line 11 50313. (a)  (1)  For purposes of this part, a taxpayer is
line 12 considered a resident for a given year, if that taxpayer is a resident
line 13 as that term is defined in Section 17014.
line 14 (2)   A taxpayer is a part-year resident for purposes of this part
line 15 if that taxpayer is a part-year resident as that term is defined in
line 16 Section 17015.5. Part-year residents shall be taxed on their
line 17 worldwide net worth according to this part, but for purposes of
line 18 calculating that tax, the taxpayer’s wealth tax liability shall be
line 19 multiplied by the percentage of days in the year such taxpayer was
line 20 present in the state. Any partial year of residence shall be included
line 21 in the special apportionment calculations described in subdivision
line 22 (b).
line 23 (3)  Temporary residents shall be taxed on their worldwide net
line 24 worth according to this part, but for purposes of calculating that
line 25 tax, the taxpayer’s wealth tax liability shall be multiplied by the
line 26 percentage of days in the year the taxpayer was present in the state.
line 27 Any partial year of residence shall be included in the special
line 28 apportionment calculations described in subdivision (b). A taxpayer
line 29 is a temporary resident if the taxpayer does not qualify as a resident
line 30 or part-year resident, and the taxpayer has substantial presence in
line 31 this state. For purposes of this paragraph, a person has substantial
line 32 presence in this state if they satisfy the rules of paragraph (3) of
line 33 subsection (b) of Section 7701 of the Internal Revenue Code as
line 34 modified by substituting “this state” for “the United States.”
line 35 (4)   A wealth-tax resident is a person with wealth sourced to
line 36 this state according to the rule of paragraph (3) of subdivision (b).
line 37 (b)  (1)  In general, the portion of a taxpayer’s wealth subject to
line 38 the tax imposed by this part shall be multiplied by a fraction, the
line 39 numerator of which shall be years of residence in California over
line 40 the last four years, and the denominator of which shall be 4. For

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 — 35 — AB 259

line 1 the purpose of calculating the numerator described in the previous

line 2 sentence, any partial year of residence as calculated under
line 3 paragraphs (2) and (3) of subdivision (a) shall be included in the
line 4 numerator.
line 5 (2)  For new residents who have never been a resident in a prior
line 6 year, the calculation of the numerator under paragraph (1) shall
line 7 be zero. For each subsequent year, the number one shall be added
line 8 until the numerator reaches four.
line 9 (3)  (A)  For a taxpayer who was subject to the Wealth Tax in
line 10 one of the preceding four years and is no longer a resident, and
line 11 does not have the reasonable expectation to return to the state, the
line 12 calculation of the numerator under paragraph (1) shall be as
line 13 follows:
line 14 (i)  For the first year the taxpayer is not a resident, the numerator
line 15 shall be a fraction between zero and one, based on the percentage
line 16 of days in the year the taxpayer was present in the state, plus the
line 17 years of residence over the three previous taxable years.
line 18 (ii)  For each subsequent year, the numerator shall be reduced
line 19 by one until the numerator reaches zero.
line 20 (B)  For any taxpayer who pays tax under this part as a former
line 21 resident, but then returns to California, the apportionment rule
line 22 shall be the general rule of paragraph (1) of subdivision (b).
line 23 (4)  If apportionment provisions of this section do not fairly
line 24 represent the extent of the benefit granted to the taxpayer to
line 25 accumulate extreme wealth in this state, then the taxpayer may
line 26 petition for, or the tax administrator may require, in respect to all
line 27 or any part of the taxpayer’s wealth, the use of an alternative
line 28 apportionment method.
line 29 (A)  In any proceeding for alternative apportionment, the burden
line 30 shall be on the petitioning party to demonstrate by clear and
line 31 convincing evidence that the standard method is unfair and that a
line 32 more fair and reasonable method is available.
line 33 (B)   (i)   In case of recurring fact patterns involving taxpayers,
line 34 the Franchise Tax Board may, in addition to the authority provided
line 35 in this part, adopt appropriate rules or regulations for determining
line 36 alternative apportionment methods for those taxpayers.
line 37 (ii)  For the avoidance of doubt, the Legislature expects that
line 38 full-time postsecondary students not engaged in more than de
line 39 minimis employment will not have any wealth deemed as
line 40 accumulated in California while students.

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 AB 259 — 36 —

line 1 (c)  For purposes of this part, a person shall only be considered

line 2 a resident, part-year resident, temporary resident, or wealth-tax
line 3 resident if they cannot be claimed as a dependent of another
line 4 taxpayer.
line 5 (d)  In the event any provision of this section, including, but not
line 6 limited to, paragraphs (2), (3), and (4) of subdivision (a), is found
line 7 by a court to be invalid, unconstitutional, or otherwise
line 8 unenforceable, that finding shall not affect the enforceability of
line 9 any other provision of this section.
line 10 50314. (a)  A taxpayer subject to the tax imposed under this
line 11 part with an understatement of tax for any taxable year shall be
line 12 subject to the penalty imposed under this section if that
line 13 understatement exceeds the greater of the following:
line 14 (1)  One million dollars ($1,000,000).
line 15 (2)  Twenty percent of the tax shown on an original return or
line 16 shown on an amended return filed on or before the original or
line 17 extended due date of the return for the taxable year.
line 18 (b)  (1)   The penalty under this section shall be an amount equal
line 19 to 20 percent of any understatement of tax. For purposes of this
line 20 section, “understatement of tax” means the amount by which the
line 21 tax imposed by this part exceeds the amount of tax shown on an
line 22 original return or shown on an amended return filed on or before
line 23 the original or extended due date of the return for the taxable year.
line 24 (2)  The penalty under this section shall be an amount equal to
line 25 40 percent of any understatement of tax if that understatement was
line 26 substantially the result of not reporting an asset required to be
line 27 separately listed under subdivision (c) of Section 50303 or pursuant
line 28 to regulations issued by the Franchise Tax Board.
line 29 (c)  The penalty imposed by this section shall be in addition to
line 30 any other penalty imposed under Part 10.2 (commencing with
line 31 Section 18401), or any other law.
line 32 (d)  A refund or credit for any amounts paid to satisfy a penalty
line 33 imposed under this section may be allowed only on the grounds
line 34 that the amount of the penalty is not properly computed by the
line 35 Franchise Tax Board.
line 36 (e)  No penalty shall be imposed under this section on any
line 37 understatement to the extent that the understatement is attributable
line 38 to any of the following:
line 39 (1)  A change in law that is enacted, adopted, issued, or becomes
line 40 final after the earlier of either of the following dates:

99
 — 37 — AB 259

line 1 (A)  The date the taxpayer files the return for the taxable year
line 2 for which the change is operative.
line 3 (B)  The extended due date for the return of the taxpayer for the
line 4 taxable year for which the change is operative.
line 5 (2)  For purposes of this subdivision, a “change of law” means
line 6 a statutory change or an interpretation of law or rule of law by
line 7 regulation, legal ruling of counsel, within the meaning of
line 8 subdivision (b) of Section 11340.9 of the Government Code, or a
line 9 published federal or California court decision.
line 10 (3)  The Franchise Tax Board shall implement this subdivision
line 11 in a reasonable manner.
line 12 (f)  No penalty shall be imposed under this section to the extent
line 13 that a taxpayer’s understatement is attributable to the taxpayer’s
line 14 reasonable reliance on written advice of the Franchise Tax Board,
line 15 but only if the written advice was a legal ruling by the chief
line 16 counsel, within the meaning of paragraph (1) of subdivision (a) of
line 17 Section 21012.
line 18 (g)  Notwithstanding any other provisions of law, the Franchise
line 19 Tax Board is authorized to hire and pay reasonable fees to any
line 20 outside experts or outside counsel as appropriate and to help fully
line 21 administer and collect the Wealth Tax.
line 22 50315. (a)  Pursuant to subdivision (f) of Section 12651 of the
line 23 Government Code, the False Claims Act (Article 9 (commencing
line 24 with Section 12650) of Chapter 6 of Part 2 of Division 3 of Title
line 25 2 of the Government Code) shall apply to claims, records, and
line 26 statements made under or pursuant to this part, but only if the
line 27 damages pleaded under that action exceed two hundred thousand
line 28 dollars ($200,000).
line 29 (b)  The False Claims Act and this section do not apply to claims,
line 30 records, or statements regarding assets of a person that have been
line 31 transferred to the Insurance Commissioner pursuant to Section
line 32 1011 of the Insurance Code.
line 33 (c)  With regard to any action brought pursuant to the False
line 34 Claims Act (Article 9 (commencing with Section 12650) of Chapter
line 35 6 of Part 2 of Division 3 of Title 2 of the Government Code), any
line 36 person is liable for damages, including consequential damages and
line 37 interest owed pursuant to the provisions of this part or of Part 10.2
line 38 (commencing with Section 18401), if that person does either of
line 39 the following:

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 AB 259 — 38 —

line 1 (1)  Makes, uses, or causes to be made or used, a false record or

line 2 statement material to their own obligation to pay money to the
line 3 state or a local government under this code, or an obligation of a
line 4 subsidiary, partnership, corporation, or entity that they control.
line 5 (2)  Conceals or improperly avoids or decreases their own
line 6 obligation to pay money to the state or a local government under
line 7 this code, or an obligation of a subsidiary, partnership, corporation,
line 8 or entity that they control.
line 9 (d)  Solely for the purpose of subdivision (c), a person shall be
line 10 liable for the damages specified in that subdivision regardless of
line 11 whether or not the person acted knowingly.
line 12 50316. (a)  The Wealth Tax Advisory Council is hereby
line 13 established.
line 14 (b)  (1)  The council shall determine an adequate level of annual
line 15 funding and staffing for the administration and collection of a
line 16 wealth tax enacted by the Legislature, including at the Franchise
line 17 Tax Board, Office of Tax Appeals, and the Department of Justice.
line 18 In determining the level of funding needed, the council will
line 19 consider the following:
line 20 (A)  The fair and efficient administration of the tax, with proper
line 21 consideration given both to the expense of compliance measures
line 22 and the potential size of uncollected tax liabilities.
line 23 (B)  The Franchise Tax Board’s ability to hire and pay reasonable
line 24 fees to any outside experts or outside counsel as appropriate to
line 25 fully administer and collect a wealth tax.
line 26 (2)  The council shall also make suggestions to the Legislature
line 27 as to modifying the Wealth Tax in order to improve its fairness
line 28 and efficiency.
line 29 (3)  The council shall develop objective metrics for determining
line 30 progress towards meeting the conditions of subdivision (b) of
line 31 Section 1 of Article XIII B of the California Constitution.
line 32 (A)  The council shall review the expenditure of wealth tax
line 33 revenues towards meeting these conditions, and develop an annual
line 34 report.
line 35 (B)  The council may hire consultants to help in the preparation
line 36 of the methodology and annual reports for purposes of this
line 37 paragraph.
line 38 (c)  There is hereby established in the State Treasury the
line 39 Franchise Tax Board Wealth Tax Administration Fund.

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line 1 (1)  All money deposited in the Franchise Tax Board Wealth

line 2 Tax Administration Fund is hereby continuously appropriated to
line 3 the Franchise Tax Board, without regard to fiscal year, and shall
line 4 be used solely for the purpose of administering and collecting a
line 5 wealth tax or that part of administering other taxes that substantially
line 6 advances the administration and collection of a wealth tax.
line 7 (2)  (A)  For each of the first four years for which a wealth tax
line 8 is collected, the greater of the following amounts shall be deposited
line 9 into the Franchise Tax Board Wealth Tax Administration Fund:
line 10 (i)  Three hundred million dollars ($300,000,000), adjusted the
line 11 second year for inflation using the California Consumer Price
line 12 Index.
line 13 (ii)  One percent of all projected revenues from the wealth tax
line 14 for the taxable year.
line 15 (B)  For each subsequent year for which a wealth tax is collected,
line 16 the greater of the following amounts shall be deposited into the
line 17 fund:
line 18 (i)  One hundred million dollars ($100,000,000), adjusted
line 19 annually for inflation using the California Consumer Price Index.
line 20 (ii)  One-half of 1 percent of all projected revenues from the
line 21 wealth tax for the taxable year.
line 22 (3)  No later than December 1, 2026, and every three years
line 23 thereafter, the task force shall prepare a detailed report of the
line 24 reasonable costs incurred by the Franchise Tax Board in
line 25 administering and collecting the wealth tax over the prior three
line 26 years. If the amount deposited into the Franchise Tax Board Wealth
line 27 Tax Administration Fund over the prior three years pursuant to
line 28 paragraph (2) is in excess of the reasonable costs incurred by the
line 29 Franchise Tax Board in administering and collecting the wealth
line 30 tax over those years, the excess shall be transferred from the fund
line 31 to the General Fund. If the reasonable costs incurred over those
line 32 years are in excess of the amount deposited into the fund pursuant
line 33 to subparagraph (2), the council shall present the report to the
line 34 Governor, and the excess shall be included in the Governor’s
line 35 budget proposal under subdivision (a) of Section 12 of Article IV
line 36 of the California Constitution for the following fiscal year.
line 37 (d)  There is hereby established in the State Treasury the
line 38 Department of Justice Wealth Tax Administration Fund.
line 39 (1)  All money deposited in the Department of Justice Wealth
line 40 Tax Administration Fund is hereby continuously appropriated to

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line 1 the Department of Justice, without regard to fiscal year, and shall
line 2 be used solely for the purpose of administering and collecting a
line 3 wealth tax.
line 4 (2)  (A)  For each of the first two years for which a wealth tax
line 5 is collected, the greater of the following amounts shall be deposited
line 6 into the Department of Justice Wealth Tax Administration Fund:
line 7 (i)  Twenty-five million dollars ($25,000,000), adjusted the
line 8 second year for inflation using the California Consumer Price
line 9 Index.
line 10 (ii)  One-half of 1 percent of all projected revenues from the
line 11 wealth tax.
line 12 (B)  For each subsequent year for which the wealth tax is
line 13 collected, the greater of the following amounts shall be deposited
line 14 into the fund:
line 15 (i)  Twelve million five hundred thousand dollars ($12,500,000),
line 16 adjusted annually for inflation using the California Consumer Price
line 17 Index.
line 18 (ii)  One-quarter of 1 percent of all projected revenues from the
line 19 wealth tax.
line 20 (3)  No later than December 31, 2026, and every three years
line 21 thereafter, the task force shall prepare a detailed report of the
line 22 reasonable costs incurred by the Department of Justice in
line 23 administering and collecting the wealth tax over the prior three
line 24 years. If the amount deposited into the Department of Justice
line 25 Wealth Tax Administration Fund over the prior three years,
line 26 pursuant to subparagraph (2), is in excess of the reasonable costs
line 27 incurred by the Department of Justice in administering and
line 28 collecting the wealth tax over those years, the excess shall be
line 29 transferred from the fund to the General Fund. If the reasonable
line 30 costs incurred over those years are in excess of the amount
line 31 deposited into the fund pursuant to subparagraph (2), the council
line 32 shall present the report to the Governor, and the excess shall be
line 33 included in the Governor’s budget proposal under subdivision (a)
line 34 of Section 12 of Article IV of the California Constitution for the
line 35 following fiscal year.
line 36 (e)  The Governor, the Treasurer, the Controller, the Legislature,
line 37 and the Executive Officer of the Franchise Tax Board shall each
line 38 appoint one member to the council from each of the following
line 39 three categories:
line 40 (1)  A current or retired California revenue official.

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line 1 (2)  A taxpayer representative.

line 2 (3)  A policy analyst or academic.
line 3 (f)  (1)  All appointments shall be made within 40 days of the
line 4 effective date of this act. In the event that any of the appointments
line 5 are not completed within the permitted time frame, the task force
line 6 shall proceed to operate with the appointments that are in place,
line 7 provided that at least 60 percent of the appointments have been
line 8 made.
line 9 (2)  Forty-five days after the effective date of this act, the
line 10 Executive Officer of the Franchise Tax Board shall convene a
line 11 meeting of the appointed members of the task force to elect a
line 12 chairperson and vice chairperson from among the individuals
line 13 nominated by the constitutional officers pursuant to subdivision
line 14 (b).
line 15 (3)  The members shall serve eight-year terms. Members shall
line 16 serve a maximum of two terms, unless removed earlier pursuant
line 17 to paragraph (6).
line 18 (4)  If a vacancy occurs within a term, the appointing authority
line 19 shall appoint a replacement member within 90 days to serve the
line 20 remainder of the term.
line 21 (5)  When a term expires, the appointing authority shall appoint
line 22 a member within 90 days. Task force members shall continue to
line 23 serve until their replacements are appointed.
line 24 (6)  Notwithstanding paragraph (3), the appointing authority
line 25 may replace a member, other than the chairperson or vice
line 26 chairperson, who has served, as of the effective date of the act
line 27 adding this paragraph, at least one-half of the member’s current
line 28 term, by appointing a new member, who shall be eligible to serve
line 29 a full term.
line 30 (7)  The task force may, by a vote of 60 percent of a quorum,
line 31 recommend the removal of a member by the member’s appointing
line 32 authority, or in the case of the chairperson and the vice chairperson,
line 33 the nominating authority or nominating authorities, if more than
line 34 one constitutional officer nominated the chairperson or vice
line 35 chairperson. The appointing authority or nominating authority or
line 36 authorities, in the case of the chairperson and vice chairperson,
line 37 shall have the authority to remove the member, chairperson, or
line 38 vice chairperson, respectively, upon receipt of the task force’s
line 39 recommendation. If more than one constitutional officer nominated

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line 1 the chairperson or vice chairperson, each of them must agree in

line 2 order to remove the chairperson or vice chairperson.
line 3 (8)  Actions of the task force may be taken only by a majority
line 4 vote of a quorum of the task force.
line 5 50317. (a)  The Franchise Tax Board may adopt any and all
line 6 regulations that are helpful and appropriate for implementing any
line 7 provision in this part.
line 8 (b)  Until January 1, 2026, the rulemaking provisions of the
line 9 Administrative Procedure Act (Chapter 3.5 (commencing with
line 10 Section 11340) of Part 1 of Division 3 of Title 2 of the Government
line 11 Code) shall not apply to any regulation, standard, criterion,
line 12 procedure, determination, rule, notice, guideline, or any other
line 13 guidance established or issued by the Franchise Tax Board pursuant
line 14 to this part.
line 15 (c)  Notwithstanding Section 19057 or any other law, every
line 16 notice of a proposed deficiency assessment under this part in
line 17 regards to taxable years beginning on or after January 1, 2024, and
line 18 before January 1, 2026, shall be mailed to the taxpayer within ten
line 19 years after the return was filed.
line 20 (d)  Not withstanding Section 50309 or any other law, the
line 21 Franchise Tax Board is not required to adopt any information
line 22 reporting forms in connection with this part until January 1, 2026.
line 23 (e)  Within six months after enactment, the Franchise Tax Board
line 24 shall promulgate the forms required for taxpayers to pay the tax
line 25 imposed by subdivision (a) of Section 50305. Those forms may
line 26 provide for taxpayer attachments demonstrating compliance.
line 27 50318. The provisions of this part shall be liberally construed
line 28 to effectuate its purposes.
line 29 SEC. 5. The provisions of this act adding Part 27 (commencing
line 30 with Section 50300) to Division 2 of the Revenue and Taxation
line 31 Code shall only become operative if Assembly Constitutional
line 32 Amendment __ of the 2023–24 Regular Session is approved by
line 33 the voters and takes effect.
line 34 SEC. 6. The Legislature finds and declares that Section 1 of
line 35 this act, which amends Sections 12651 of the Government Code,
line 36 imposes a limitation on the public’s right of access to the meetings
line 37 of public bodies or the writings of public officials and agencies
line 38 within the meaning of Section 3 of Article I of the California
line 39 Constitution. Pursuant to that constitutional provision, the

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line 1 Legislature makes the following findings to demonstrate the interest

line 2 protected by this limitation and the need for protecting that interest:
line 3 Sensitive information of California taxpayers should be
line 4 adequately protected from disclosure during the process of the
line 5 assessment and collection of taxes to protect privacy and increase
line 6 compliance.
line 7 SEC. 7. No reimbursement is required by this act pursuant to
line 8 Section 6 of Article XIIIB of the California Constitution because
line 9 the only costs that may be incurred by a local agency or school
line 10 district will be incurred because this act creates a new crime or
line 11 infraction, eliminates a crime or infraction, or changes the penalty
line 12 for a crime or infraction, within the meaning of Section 17556 of
line 13 the Government Code, or changes the definition of a crime within
line 14 the meaning of Section 6 of Article XIII B of the California
line 15 Constitution.

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