CaliforniaCalifornia updates federal tax references and removes a business-interest limit
California now updates federal tax references in personal and corporate tax laws and removes the federal business-interest deduction limit for personal taxpayers.
What it does
California updates federal tax references in its personal and corporate income tax laws, including by removing references to repealed federal provisions.
People filing California personal income taxes may deduct business interest without the federal limit for tax years beginning in 2025 and later; the corporate rule is unchanged by this provision.
Argument forPersonal tax filers with qualifying business debt could owe less California tax because the federal cap would not limit their interest deduction.
Argument againstTaxpayers may need separate state and federal calculations because California would not apply the federal business-interest limit to personal income tax.
More detail
California updates federal tax references in its personal and corporate income tax laws. The changes cover California’s Personal Income Tax Law and Corporation Tax Law, including references to the federal Internal Revenue Code. The bill deletes outdated references to repealed federal income tax provisions and updates other references. The bill generally keeps California’s existing modifications to federal tax rules unless a provision specifically provides otherwise. Except where the bill provides a different date, these changes apply to taxable years beginning on or after January 1, 2025. The act takes effect immediately as a tax levy.
Personal income taxpayers may deduct business interest without applying the federal business-interest limit. This applies to interest on debt incurred in the ordinary course of a trade or business for taxpayers subject to California personal income tax. The change applies only for California personal income tax purposes. The existing corporate tax rule that does not follow this federal limit remains described as existing law. Other California rules for claiming the business-interest deduction still apply. The change applies to taxable years beginning on or after January 1, 2025.
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Where it stands
- Introduced
- Passed Senate
- Passed Assembly
- To Governor
- Became Law
Looking ahead
No hearings or votes scheduled.
History
- 2026
- Sep 14Chaptered by Secretary of State. Chapter 236, Statutes of 2026.Latest
- Sep 14Approved by the Governor Gavin Newsom.Became Law
- Sep 4Enrolled and presented to the Governor at 2 p.m.To Governor
- Aug 27Assembly amendments concurred in. (Ayes 40. Noes 0. Page 5988.) Ordered to engrossing and enrolling.Major
- Vote recorded Special Consent SB1435 REV. & TAX. Result: pass.Upper
- Aug 26Ordered to special consent calendar.
- Aug 24In Senate. Concurrence in Assembly amendments pending.
- Vote recorded SB 1435 Revenue and Taxation Senate Third Reading By GIPSON. Result: pass.Lower
- Aug 24Read third time. Passed. (Ayes 77. Noes 0. Page 6427.) Ordered to the Senate.Passed Assembly
- Aug 13Read second time. Ordered to third reading.Minor
- Vote recorded Do pass. Result: pass.Lower
- Aug 13From committee: Do pass. (Ayes 15. Noes 0.) (August 13).Minor
- Aug 13Assembly Rule 63 suspended.
- Aug 5August 5 set for first hearing. Placed on suspense file.
- Jun 30From committee: Do pass and re-refer to Com. on APPR. (Ayes 7. Noes 0.) (June 29). Re-referred to Com. on APPR.Minor
- Jun 30June 29 set for first hearing. Placed on suspense file.
- Jun 29
- Vote recorded Do pass and be re-referred to the Committee on [Appropriations]. Result: pass.Lower
- Jun 22From committee with author's amendments. Read second time and amended. Re-referred to Com. on REV. & TAX.Major
- Jun 1Referred to Com. on REV. & TAX.Minor
- May 22In Assembly. Read first time. Held at Desk.Minor
- Vote recorded Special Consent SB1435 REV. & TAX. Result: pass.Upper
- May 22Read third time. Passed. (Ayes 33. Noes 0. Page 4422.) Ordered to the Assembly.Passed Senate
- May 20Ordered to special consent calendar.
- May 14Read second time. Ordered to third reading.Minor
- Vote recorded Do pass. Result: pass.Upper
- May 14From committee: Do pass. (Ayes 7. Noes 0. Page 4277.) (May 14).Minor
- May 8Set for hearing May 14.
- May 4May 4 hearing: Placed on APPR. suspense file.
- Vote recorded Placed on suspense file. Result: pass.Upper
- Apr 28Set for hearing May 4.
- Apr 23Read second time and amended. Re-referred to Com. on APPR.Major
- Apr 22From committee: Do pass as amended and re-refer to Com. on APPR. with recommendation: To consent calendar. (Ayes 5. Noes 0. Page 4016.) (April 22).Major
- Vote recorded Do pass as amended, but first amend, and re-refer to the Committee on [Appropriations] with the recommendation: To Consent Calendar. Result: pass.Upper
- Apr 9Set for hearing April 22.
- Mar 18Referred to Com. on REV. & TAX.Minor
- Mar 12From printer. May be acted upon on or after April 11.
- Mar 11Introduced. Read first time. To Com. on RLS. for assignment. To print.Introduced
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