Personal Income Tax Law: exclusions: guaranteed income pilot programs.

The amendment to Section 4987 of the Revenue and Taxation Code (property tax cancellation on tax-exempt property) was removed from the bill entirely, along with its reference in the bill title and digest.

A new provision amending Section 17131.12 of the Revenue and Taxation Code extends the exclusion from gross income for payments received by individuals from guaranteed income pilot programs or projects receiving grants under Section 18997 of the Welfare and Institutions Code, changing the inoperative date from July 1, 2026 to July 1, 2031 and the repeal date from January 1, 2027 to January 1, 2032.

A new section includes legislative findings required under Section 41 of the Revenue and Taxation Code for tax expenditures, stating the goal is to continue providing financial relief to vulnerable Californians and noting there is no available data to collect or report with respect to the exclusion.

New provision amending Section 23151 of the Revenue and Taxation Code imposes a tiered corporate franchise tax rate (7% to 13%) on publicly held corporations for taxable years beginning on or after January 1, 2026, replacing the flat 8.84% rate. Financial institutions face rates from 9% to 15%.

Vote requirement changed from majority to two-thirds of each house because the bill results in taxpayers paying a higher tax within the meaning of Section 3 of Article XIIIA of the California Constitution. Fiscal committee review also changed from 'no' to 'yes'.

Defines 'compensation ratio' as the CEO or highest-paid employee's compensation divided by the median compensation of all US employees of the taxpayer. For combined-report taxpayers, all entities in the group are treated as a single taxpayer for this calculation.

Publicly held corporations subject to the new rate must file a detailed compensation report with the Franchise Tax Board along with their timely filed original return.

If a taxpayer reduces its US full-time employees by more than 10% year-over-year while increasing contracted or foreign full-time employees, the applicable tax rate is increased by 50%. New entrants to the state market are treated as having zero prior-year employee counts.

The Franchise Tax Board is authorized to prescribe rules, guidelines, or procedures for carrying out the new provision, including guidelines on wages, average compensation, and compensation ratio. These rules are exempt from Government Code Chapter 3.5 (administrative procedure requirements).

The bill now takes effect immediately as a tax levy under Article IV of the California Constitution, meaning it generates revenue without waiting for the standard January 1 effective date.