California voters could see a new billionaire wealth tax initiative on the November 2026 ballot. If enacted, the statewide ballot initiative – Initiative No.25-0024 – would impose a one‑time wealth tax on California residents with at least $1 billion in net worth. While the measure faces political and legal headwinds, impacted taxpayers and their advisors should continue monitoring the initiative’s progress, to not be caught unprepared should it be enacted. For advisors and taxpayers outside of California, the 2026 Billionaire Tax deserves attention, as it may inspire similar legislation in other jurisdictions.
2026 Billionaire Tax at a Glance
- Who is taxed. California resident individuals and applicable trusts with net worth of at least $1 billion.
- Tax rate and character. A one‑time excise taxon net worth. The tax is imposed at a rate of 5% of the net worth of such individual or trust. For individuals with a net worth between $1.1 billion and $1 billion, the tax will be reduced by 0.1 percentage point for each $2 million by which such person’s net worth falls below $1.1 billion.
- Measurement dates. Residency is determined as of January 1, 2026; net worth is measured as of December 31, 2026.
- Tax base and exclusions. The tax would apply to virtually all forms of personal property and wealth, including public and private securities and other financial interests, while excluding directly held real property.
- Use of proceeds. Revenue would be deposited into a new 2026 Billionaire Tax Reserve Fund, allocated 90% to a Billionaire Tax Health Account and 10% to a Billionaire Tax Education and Food Assistance Account.
- Scope of affected taxpayers. Proponents estimate around 200 California residents could be subject to the tax, with such taxpayers holding approximately $2 trillion in net worth.
- Charitable pledge rule. A pledge to contribute to charity made after October 15, 2025 would not reduce net worth for purposes of the tax; however, completed charitable gifts made before December 31, 2026 can reduce net worth for purposes of the tax.
Ballot Path and Political Landscape
The measure must secure roughly 875,000 valid signatures by June 24, 2026 to qualify. If the measure secures sufficient signatures, it will appear on the November 2026 ballot and require a simple majority to pass. Early polling indicates support hovering below 50% and softening after voters hear arguments from both sides. Public figures are split: some high‑profile politicians have expressed support for the measure, while state leadership, including Governor Newsom, and business groups have voiced concerns that the tax could harm California’s competitive edge.
Determining Residency and Net Worth
The initiative sets two fixed dates that drive exposure:
- Residency Determination Date – January 1, 2026. Whether an individual is treated as a California resident for purposes of the proposed tax will depend on their residency status as of January 1, 2026. This bright‑line rule is unusual compared to income tax residency analysis, which often evaluates domicile and time‑spent factors over a longer period. Given the one‑day snapshot, taxpayers who were California residents at any point in 2025 or 2026 should assume close scrutiny of their status as of New Year’s Day 2026.
- Net Worth Determination Date – December 31, 2026. The tax base is valued at year‑end 2026, capturing market movement and liquidity events through that date. This separation of residency and valuation dates creates planning and compliance complexities for people who change residence during 2026.
What Counts Toward Net Worth
The measure targets personal property and financial wealth broadly, including:
- Publicly traded stocks, bonds, and funds.
- Private company equity and debt, carried interests, and other contractual or profit‑participation rights.
- Cash and cash equivalents, crypto assets, and intellectual property interests.
- Assets held in grantor trusts.
The proposal would exclude directly held real property. However, interests in entities that own real estate remain within scope and must be valued at the entity level under the measure’s rules.
Certain liabilities may be considered in computing net worth, but the mechanics of allowable offsets and documentation requirements will be central to compliance and potential disputes.
Valuation of Closely Held and Illiquid Interests
For ownership in any non‑public business entity (including partnership and LLC interests, private corporate stock, and possibly profit‑sharing or debt‑like instruments), the measure adopts a default valuation method intended to approximate enterprise value without bespoke modeling:
- Default formula. Fair market value equals the entity’s GAAP book value plus a present value multiplier of 7.5 times the entity’s average annual book profits over the current year and the two preceding years, multiplied by the taxpayer’s percentage ownership.
- Control presumption. Where the taxpayer holds voting or other direct control rights, the owned percentage is presumed to be no less than the voting/control percentage, potentially attributing value above the taxpayer’s economic percentage if control rights exceed equity share.
- Certified appraisal override. Either the taxpayer or the tax authority may submit a certified appraisal showing a materially different fair market value, in which case the appraisal can replace the formula value.
Impacted taxpayers should anticipate a need for comprehensive, contemporaneous valuations and robust support for discounts (or the absence thereof), along with detailed reconciliation to GAAP financials. The control presumption will be especially salient where governance structures or special voting shares amplify influence relative to economic ownership.
Special Considerations for Trustees
Trustees of non-grantor trusts should consider whether the trust is an “applicable trust” for purposes of the tax. Applicable trusts include any non-grantor trust (other than a tax-exempt trust), whether or not such trust is a California resident, if the trust received assets from a still living individual who was (1) a California resident as of January 1, 2026, and (2) with a net worth of $1 billion.
Practical Planning Considerations Now
- Residency Assessment. Non-California residents who spend time in California should confirm and document domicile and physical presence through the January 1, 2026 residency date. Small factual differences can be outcome‑determinative as to residency status.
- Evaluate Current Assets. Impacted taxpayers should prepare a complete asset inventory, including items that would be includable in net worth for purposes of the
- Liquidity. Model potential cash needs under varying valuation scenarios, stress‑testing for late‑2026 market volatility that could swing the tax base.
- Entity and Governance Review. Revisit control rights and capital structures that might inflate value under the default formula or trigger the control presumption.
What Comes Next
The initiative must complete the signature collection phase before the Secretary of State can certify it for the November 2026 ballot. If the 2026 Billionaire Tax Act qualifies and passes, the state will need to stand up an administrative infrastructure to issue guidance, design returns, and adjudicate valuation disputes on a compressed timeline tied to the 2026 measurement dates. Given the novelty and scale of the proposed tax, expect intense rulemaking, and potential legislative cleanup if voters approve the measure. Opponents of the initiative are already questioning its constitutional legitimacy, so litigation is all but certain post-enactment.
Ripples Beyond California
If the 2026 Billionaire Tax Act is enacted in California, and if upheld as constitutional, it could pave the way for other states to consider enacting their own wealth taxes. With other jurisdictions facing short-term budget crises, a one-time wealth tax could be an attractive solution to avoid raising other state and local taxes. Moreover, a successful enactment of the 2026 Billionaire Tax could reignite calls for a federal wealth tax, particularly if California can demonstrate a framework for enactment, regulation, and administration.
Bottom Line
The 2026 Billionaire Tax Act would — if enacted — impose a one‑time wealth levy on a narrow group of California residents based on end‑of‑2026 net worth. While the measure’s political fate is uncertain, impacted taxpayers and their advisors should continue to monitor the situation and begin preparing for its potential enactment.
