Income taxes: exclusions: 2026 Garden Grove chemical leak.

In both Section 24309.7 (personal income tax) and Section 24309.8 (corporation tax), the qualified taxpayer definition was changed from 'received amounts from a settlement arising out of' to 'received amounts from a settlement entity arising out of.' This requires that payments come specifically from an entity that meets the bill's definition of a 'settlement entity,' rather than from any settlement arrangement.

In Section 24309.7(d)(1), the cross-reference 'Section 24309.9, 24309.8' was corrected to just 'Section 24309.8,' removing a reference to a section that does not exist in the bill.

The Franchise Tax Board report requirement in Section 24309.7(d)(2)(A) was made more specific, changing from 'the aggregate dollar amount of settlement payments arising out of the 2026 Garden Grove chemical leak' to 'the aggregate dollar amount of settlement payments received in settlement by qualified taxpayers from a settlement entity arising out of the 2026 Garden Grove chemical leak.'

The tax exclusion for settlement payments now applies to taxable years beginning on or after January 1, 2027 (previously January 1, 2026) and before January 1, 2032. This means individuals and businesses who received settlements during the 2026 tax year will no longer be eligible for the exclusion.

The sunset/repeal date for both Section 17138.9 (individual income tax) and Section 24309.8 (corporate franchise tax) was changed from December 1, 2031 to December 1, 2032, aligning the operative period with the end of the taxable year window.

The definition of 'settlement entity' was simplified from 'the entity deemed responsible or its subsidiary that is making the settlement payment' to simply 'an entity making a settlement payment of a qualified amount to a qualified taxpayer.' This removes the requirement that the paying entity be formally deemed responsible, potentially broadening which payers qualify.

The statement 'There is no available data to collect or report with respect to the exclusions' was removed from Section 17138.9(d), which previously contradicted the FTB reporting requirement in the same section.

Senator Umberg was added as a coauthor alongside Senator Choi, indicating additional Senate sponsorship of the bill.

All mobilehome park provisions were removed. This included the amendment to Civil Code Section 798.23 that would have exempted parks in disaster-affected areas from rental restrictions, allowing direct emergency rentals of up to 36 months, and the statewide concern finding that made the provision apply to charter cities.

The tax exclusion period was extended by one year. Taxable years now covered are those beginning on or after January 1, 2026, and before January 1, 2032 (previously before January 1, 2031). The sunset/repeal date moved from December 1, 2031 to December 1, 2032.

A new reporting requirement was added: by November 1, 2029, the Franchise Tax Board must deliver a written report to the Legislature stating the aggregate dollar amount of settlement payments arising from the chemical leak. This disclosure is treated as an exception to Section 19542 (tax confidentiality).

The definition of 'settlement entity' was broadened. Previously it meant 'the entity deemed responsible or its subsidiary that is making the settlement payment.' Now it simply means 'an entity making a settlement payment of a qualified amount to a qualified taxpayer,' removing the requirement that the payer be deemed responsible or a subsidiary.

The fiscal committee vote changed from 'no' to 'yes,' and additional coauthors were added (Assembly Members Chen, Davies, Dixon, Quirk-Silva, Sanchez; Senator Choi).

Entirely new tax exclusion added: Sections 17138.9 and 24309.8 of the Revenue and Taxation Code exclude settlement payments from the 2026 Garden Grove chemical leak from gross income for taxable years 2026 through 2030, sunsetting December 1, 2031.

The mobilehome park emergency exemption was narrowed: the local emergency trigger (Government Code Section 8630) was removed, leaving only a declared state of emergency as the qualifying condition. The post-emergency window was shortened from one year to six months.

Qualified taxpayers are defined as property owners, residents, or businesses in Orange County who paid or incurred expenses and received settlement amounts from the entity deemed responsible for the leak or its subsidiary.

The bill takes effect immediately as a tax levy under Article IV of the California Constitution. The fiscal committee designation changed from 'no' to 'yes,' indicating a new tax expenditure requiring fiscal review.

Settlement entities must provide documentation of payments to the Franchise Tax Board upon request, in the form and manner the Board specifies.

The emergency exemption now requires that the state or local emergency was caused by a disaster or conditions that resulted in housing units being damaged, destroyed, or rendered uninhabitable. Previously, any declared state of emergency or local emergency qualified regardless of cause.

The post-emergency window during which parks remain eligible for the exemption is shortened from one year to six months after the expiration of the declared emergency.

A new 36-month cap is added: the emergency tenancy cannot exceed 36 months from the expiration of the declared state of emergency. The original bill had no time limit beyond the duration of the tenancy.

The adjacent-city-or-county provision is narrowed. Previously, a park could qualify if adjacent to any city or county meeting conditions (A), (B), or (C) (including those within the post-emergency window). The amendment limits adjacency eligibility to only cities or counties currently under a qualifying emergency (conditions A or B), excluding those in the post-emergency period.

The legal framing shifts from a full exemption from rental restrictions to allowing direct rental 'on a limited emergency basis.' This changes the characterization from removing the restriction entirely to creating a bounded, temporary permission.