CA’s Proposed Billionaire Tax: Key Planning Risks

Once again, California is at the center of a national tax debate and we are tuning in to gain a better perspective on what this means for high-net worth individuals. A proposed ballot initiative, commonly referred to as the “2026 Billionaire Tax Act,” has sparked significant concern among high-net worth individuals, family offices, and closely held business owners. While the measure is not yet law, its potential impact is serious enough that proactive planning is no longer optional.

What is being proposed

The initiative would impose a one-time tax on individuals and certain trusts with net-worth exceeding $1 billon, reportedly at a rate up to 5%. Unlike traditional income or capital gains taxes, this proposal targets wealth itself, including assets that may be difficult to value, such as business interests, real estate, or private investments.

Although marketed as a limited, one-time assessment, history shows that “temporary” taxes often become precedent for future expansion, in scope and frequency.

Why this matters before passage

From a legal and planning standpoint, the mere existence of the proposal creates risk. High-net worth taxpayers should be aware of several immediate concerns. Several immediate concerns may include residency and domicile scrutiny over perceived tax avoidance, valuation disputes over privately held assets, trust structures and asset ownership may come under closer review, and retroactivity concerns could trigger constitutional challenges and litigation. We believe it is important to get ahead of these concerns as waiting for clarity could be an expensive strategy.

Suggested tips

While it might be too early to take drastic action based solely on a proposal, it is an ideal time to meet with your trusted tax attorney, not just your preparer, to review your asset structures and trust planning, evaluate residency risk and documentation, identify audit vulnerabilities tied to asset reporting, valuations, and prior filings, stress-test valuations of significant holdings, and coordinate tax planning with legal, estate, and wealth advisors. Unlike CPA’s, a trusted tax attorney can advise on legal risk, audit defense, constitutional issues, and privilege-protected planning. When dealing with proposed taxes that raise questions about valuation disputes, retroactivity, and enforcement authority, legal strategy matters as much as tax math.

Concluding Remarks

Proposed tax laws often change, stall, or fail. However, now is not the time to ignore them which could be a costly mistake. California’s proposed billionaire tax highlights a broader trend toward aggressive state-level taxation of wealth. High-net worth individuals should stay informed, proactive, and well-advised. If you are concerned with how this proposal could affect you and/or your business, please reach out today and setup a consultation to discuss different strategies on how to properly plan for protection under the guidance of one of the firm’s trusted tax attorneys.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s)/tax liabilities or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.

CA’s Proposed Billionaire Tax: Key Planning Risks

Once again, California is at the center of a national tax debate and we are tuning in to gain a better perspective on what this means for high-net worth individuals. A proposed ballot initiative, commonly referred to as the “2026 Billionaire Tax Act,” has sparked significant concern among high-net worth individuals, family offices, and closely held business owners. While the measure is not yet law, its potential impact is serious enough that proactive planning is no longer optional.

What is being proposed?

The initiative would impose a one-time tax on individuals and certain trusts with net-worth exceeding $1 billon, reportedly at a rate up to 5%. Unlike traditional income or capital gains taxes, this proposal targets wealth itself, including assets that may be difficult to value, such as business interests, real estate, or private investments.

Although marketed as a limited, one-time assessment, history shows that “temporary” taxes often become precedent for future expansion, in scope and frequency.

Why this matters before passage?

From a legal and planning standpoint, the mere existence of the proposal creates risk. High-net worth taxpayers should be aware of several immediate concerns. Several immediate concerns may include residency and domicile scrutiny over perceived tax avoidance, valuation disputes over privately held assets, trust structures and asset ownership may come under closer review, and retroactivity concerns could trigger constitutional challenges and litigation. We believe it is important to get ahead of these concerns as waiting for clarity could be an expensive strategy.

Suggested tips

While it might be too early to take drastic action based solely on a proposal, it is an ideal time to meet with your trusted tax attorney, not just your preparer, to review your asset structures and trust planning, evaluate residency risk and documentation, identify audit vulnerabilities tied to asset reporting, valuations, and prior filings, stress-test valuations of significant holdings, and coordinate tax planning with legal, estate, and wealth advisors. Unlike CPA’s, a trusted tax attorney can advise on legal risk, audit defense, constitutional issues, and privilege-protected planning. When dealing with proposed taxes that raise questions about valuation disputes, retroactivity, and enforcement authority, legal strategy matters as much as tax math.

Concluding Remarks

Proposed tax laws often change, stall, or fail. However, now is not the time to ignore them which could be a costly mistake. California’s proposed billionaire tax highlights a broader trend toward aggressive state-level taxation of wealth. High-net worth individuals should stay informed, proactive, and well-advised. If you are concerned with how this proposal could affect you and/or your business, please reach out today and setup a consultation to discuss different strategies on how to properly plan for protection under the guidance of one of the firm’s trusted tax attorneys.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s)/tax liabilities or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.

Risks Behind “My CPA Approved It”

One of the most common and most dangerous statements we have heard from California taxpayers who are being audited is: “My CPA said it was fine.”

While CPAs play a vital role in tax preparation and compliance, that statement does not provide legal protection when the Internal Revenue Service or the Franchise Tax Board challenge your filed tax returns.

Understanding the difference between tax preparation and tax defense can mean the difference between a manageable audit and a financially devasting outcome.

CPA Advise Does Not Equal Legal Protection

Auditors do not evaluate whether your CPA believed a position was reasonable. They evaluate whether the position complies with tax law. If it does not comply, liability rests with the taxpayer; not the tax preparer.

Many taxpayers are also surprised to learn that communications with a CPA are generally not protected by attorney-client privilege. In an audit or dispute, emails, notes, and explanations shared with a preparer may be requested and used as evidence against you.

“Good Faith Reliance” Does Not Stop Penalties

Another common misconception is that replying on a CPA automatically eliminates penalties. In reality, even when a CPA prepared a return, taxpayers may still face back taxes, interest, accuracy-related penalties, or negligence penalties. In California, these amounts can escalate quickly due to compounding interest and aggressive enforcement practices.

Audits Are Not About Preparation, They’re About Defense

Once an audit begins, the process becomes adversarial. Auditors are trained to identify unsupported deductions, residency and sourcing errors, misclassified income, or aggressive or inconsistent positions. At this stage, continuing without legal representation can expose taxpayers to unnecessary risk. How information is presented and how much is disclosed, matters.

Why a Tax Attorney Changes the Outcome

A trusted tax attorney’s role is not to re-prepare the tax return, but to defend it. This includes assessing legal exposure, controlling communication with taxing authorities, determining whether positions can be defended, negotiated, or mitigated, and preserving attorney-client privilege.

Bottom Line for California Taxpayers

CPAs are essential for compliance and planning. However, when an audit, notice, or dispute arises, CPA approval does not equate to legal protection.

The real question is not whether something was “fine” at the time; it is whether it can withstand scrutiny now. Early involvement of an experienced and trusted tax attorney can reduce penalties, limit exposure, and prevents small issues from becoming major financial liabilities.

Because in tax audits, what matters most is not who prepared the return, it is who knows how to defend it.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s)/tax liabilities or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.

AI Money. California Taxes. Big Stakes.

California’s economy is once again riding a powerful technology wave and this time fueled by artificial intelligence. From AI startups to publicly traded tech giants, innovation is accelerating, valuations are soaring and equity compensation is back in full force. As a result, California is experiencing a notable increase in personal income tax revenue tied to stock options, restricted stock units (RSUs), and capital events driven by the tech and AI sector.

According to recent analysis and state data, a meaningful portion of California’s income tax withholding now comes from technology-related compensation and this tends to be the case during favorable market conditions. While this surge is providing short-term market revenue stability for the state, it also introduces significant volatility which can translate into unexpected tax exposure if taxpayers are not properly planning for these fluctuations.

Why AI is Quietly Reshaping CA Taxes

AI is not just transforming how businesses operate; it is reshaping how income is earned and taxed. Many California employees and founders are compensated through complex equity structures rather than traditional wages. When AI companies grow quickly or go public, a single stock event may trigger large, one-time income recognition, state and federal tax misalignments, and California sourcing disputes for remote or relocating workers.

California’s tax system is highly sensitive to these events. The state relies heavily on high-income earners, which largely influence and impact market movement through revenue spikes (strong markets) and/or collections (market pull back). State agencies such as the California Department of Finance and California Franchise Tax Board, closely monitor this trend and individual taxpayers are often caught off guard by how quickly their tax landscape can change.

The Risks Without Tax Planning

AI-driven wealth is rarely simple. Equity compensation, multi-state residency issues, trust planning, and California’s frequent misalignment with Federal Laws, all create traps for the unwary. Many taxpayers assume their CPA or payroll withholding has everything covered and run into surprise tax bills, penalties and interest, residency audits, trust structures that don’t perform as expected under CA law. This is especially true for founders, executives, and high-net-worth individuals whose income can fluctuate dramatically year after year.

Why a Trusted California Tax Attorney Matters

This is where having a trusted tax attorney becomes critical. Unlike generic tax preparation, a trusted tax attorney evaluates the legal consequences of AI-driven income and helps clients proactively plan for proper structuring of equity, timing strategies around CA tax exposure, trust and estate planning that withstands CA scrutiny, and audit defense and controversy support if issues arise.

Concluding Remarks

The AI boom is real and creating extraordinary opportunities which are reshaping California’s tax landscape in ways that demand careful attention. As technology continues to drive wealth creation and tax uncertainty, working with a trusted tax attorney ensures you are not just reacting to the rules, but staying ahead of them. If your income, investments, or business are touched by AI, now is the time to make sure your tax strategy is built to keep up.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s)/tax liabilities or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.