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California voters may soon be asked to decide on The Billionaire Tax Act, commonly referred to as the “Billionaire Tax.” Now that the measure achieved the signatures required to qualify for the ballot on November 3, 2026, the measure could have a meaningful impact on certain high net‑worth California residents.
Below is a practical overview of the proposal, where it stands, and the key issues we are discussing with clients.
WHAT IS THE BILLIONAIRE TAX?
The Billionaire Tax is a proposed one‑time 5% tax on the net worth of certain California residents with a net worth in excess of $1 billion.
Key points include:
- Applies to individuals who are California residents as of January 1, 2026.
- Net worth measured as of December 31, 2026.
- Married couples are treated as a single taxpayer.
- Includes worldwide assets, not just those located in California.
- Net worth may be inflated under The Billionaire Tax Act relative to traditional valuation methods. Accordingly, individuals worth substantially less than $1 billion using traditional valuation methods may be subject to tax.
HOW DOES THE BILLIONAIRE TAX ACT CALCULATE NET WORTH?
The proposal uses special valuation rules that differ from traditional tax planning concepts intended to limit discretion and subjective valuation methodology, including but not limited to:
- No valuation discounts.
- Business interests valued using book value plus a profit multiple.
- Recent fundraising rounds may establish minimum values.
- Insured assets valued at no less than the insured amount.
- Voting control may outweigh economic ownership.
These rules may significantly increase reported net worth for founders and closely held business owners.
BALLOT QUALIFICATION
The proposal has met the signature requirement to qualify for the November 3, 2026 ballot (supporters gathered more than the approximately 874,000 valid signatures needed from registered California voters by the June 24, 2026 deadline). The proposal now needs only final certification by the California Secretary of State to qualify for the ballot.
The measure will require a simple majority vote in November to be enacted. Given the level of public support demonstrated during the signature‑gathering campaign, high‑net‑worth Californians should treat this proposal with urgency.
HOW DOES THE BILLIONAIRE TAX ACT TREAT TRUSTS?
Grantor trust assets are generally included in the grantor’s net worth. Trust assets may also be included in a beneficiary’s net worth if amounts are distributable to such beneficiary.
Gifting assets to trusts (including non-grantor trusts) in 2026 will not reduce an individual’s net worth for purposes of the Billionaire Tax.
ARE ANY ASSETS EXCLUDED?
Certain exclusions may apply, including:
- Real property owned directly or through a revocable living trust.
- Certain retirement accounts up to applicable limits.
- Tangible personal property located outside California for most of 2026.
Real estate held through entities (including single-member LLCs) may not qualify for an exclusion.
CAN MOVING OUT OF CALIFORNIA AVOID THE TAX?
The proposal is structured such that relocating out of California in 2026 will not avoid the tax. Residency is determined as of January 1, 2026, while net worth is measured as of December 31, 2026, meaning a mid‑year move would not change California’s residency determination.
BOTTOM LINE
With ballot qualification now secured, the Billionaire Tax proposal presents novel and complex issues that high‑net‑worth Californians should begin promptly evaluating.
If you have questions or would like assistance evaluating how this proposal could impact you or your existing planning, please contact us. The JMM tax and private wealth team is actively advising clients on potential strategies ahead of the November vote.
