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.