California Billionaire Tax: AB 259, Net Worth, and Exit Rules

California does not currently have a billionaire tax. Assembly Bill 259, the most detailed wealth tax proposal the state has produced, died in committee in February 2024 without a floor vote. A separate ballot initiative filed in 2025, the California Billionaire Tax Act, proposes a one-time 5% levy on the wealth of California-resident billionaires and is under review by the Legislative Analyst’s Office. Neither is law, and neither can take effect without also amending the state constitution.

Where Things Stand Now

Two separate proposals matter here, and they work very differently.

AB 259 was introduced during the 2023–2024 legislative session alongside Assembly Constitutional Amendment 3, which would have changed the state constitution to permit the new tax. The bill was filed with the Chief Clerk in February 2024 under Joint Rule 56, meaning it failed to advance out of committee and took no further action that session. Neither the bill nor the constitutional amendment became law.

In 2025, backers took a different route. The California Billionaire Tax Act was filed as a ballot initiative rather than a legislative bill. The Legislative Analyst’s Office reviewed it under Elections Code Section 9005 and confirmed it proposes a one-time tax on the wealth of billionaires who were California residents as of January 1, 2026, measured as of December 31, 2026.¹

The 2025 Ballot Initiative

The ballot initiative is narrow in scope but steep in rate. It would apply only to billionaires — people with net worth above $1 billion — and it would apply only once rather than every year. The rate is 5%.¹

Residency is measured as of January 1, 2026, and net worth as of December 31, 2026. For the initiative to reach a ballot, it must still qualify through signature gathering, and for it to take effect after that, voters must approve it. If it does pass, it operates under its own rules, not the AB 259 framework described below.

AB 259: The Legislative Blueprint

AB 259 remains the most detailed picture of what a recurring California wealth tax could look like. It set two tiers based on global net worth.

The first tier captured residents with net worth above $50 million. For married taxpayers filing separately, the threshold dropped to $25 million. The second tier applied to residents with net worth above $1 billion, or $500 million for married taxpayers filing separately.²

The rates would have phased in. For 2024 and 2025, only the billionaire tier applied, at a flat 1.5% on worldwide net worth above $1 billion. Starting in 2026, a broader base kicked in:

1% on net worth above $50 million (or $25 million for married filing separately)
An additional 0.5% on net worth above $1 billion (or $500 million for married filing separately)

The rates are marginal. They apply only to wealth above each threshold, not to total net worth from dollar one. A resident with $100 million in net worth would owe 1% on the $50 million above the threshold — a $500,000 annual bill. A billionaire with $2 billion would owe 1% on $1.95 billion plus an additional 0.5% on $1 billion, totaling $24.5 million.²

What Would Count Toward Your Net Worth

Under AB 259, worldwide net worth pulls in most of what you’d expect: stocks, bonds, and other financial instruments, business interests in private companies, intellectual property like patents and trademarks, interests held in trusts, and liquid assets such as bank balances and brokerage accounts. Intangible wealth is where most of the taxable value would concentrate for ultra-high-net-worth individuals.

Two categories are excluded. Directly held real property is excluded from the calculation, along with mortgages and other liabilities secured by that real property. Tangible personal property located outside California and held directly by the taxpayer is also excluded.²

The exclusion disappears once those assets are held indirectly through a corporation, partnership, LLC, or trust. Own a $30 million home in your own name, and it stays out of the calculation. Transfer that same home into an LLC, and it gets pulled back in. The bill states that indirect holdings are included “except to the extent that such inclusion is prohibited by the United States Constitution or other governing federal law.”³

Excluded from the tax base is not the same as excluded from the return. Directly held real property and out-of-state tangible personal property still have to be listed separately on the return.

If You Leave California

AB 259 does not let residents avoid the tax simply by moving. It applies a four-year lookback formula. The taxable portion of a former resident’s wealth is multiplied by a fraction: years of California residency over the preceding four tax years, divided by four. Partial years count proportionally.³

For someone who lived in California for all four prior years and then leaves, the numerator drops by one each subsequent year. That resident would still owe roughly 75% of the wealth tax in the first year after departing, 50% in the second year, 25% in the third, and nothing by the fourth. If a former resident returns to California during the phase-out, the general apportionment rule snaps back into effect immediately.³

Part-year residents owe a prorated amount based on days spent in the state.

Why Neither Can Take Effect Without a Constitutional Change

California’s constitution caps the tax rate on intangible personal property at 0.04% and requires all property to be assessed at the same percentage of fair market value. A 1%, 1.5%, or 5% wealth tax exceeds both limits. That is why AB 259 was paired with ACA 3, a constitutional amendment that would have removed those limits for the wealth tax specifically.

Without the constitutional amendment, a wealth tax cannot legally take effect even if a bill passes both chambers and is signed by the governor. ACA 3 would have needed a two-thirds supermajority in both the Assembly and Senate, followed by voter approval on a statewide ballot. The 2025 ballot initiative skips the legislature, but it still must amend the constitution through voters to override the same restrictions.

Federal constitutional questions also loom. The dormant Commerce Clause generally prohibits state taxes that result in the same value being taxed by multiple states. A California wealth tax reaching assets located in other states, particularly intangibles like stock in a Delaware corporation owned by someone who recently moved to Texas, could face fair-apportionment challenges. Courts have recognized that states can tax residents on worldwide income, but applying that principle to accumulated wealth is untested territory.

Penalties and Valuation Burden

AB 259’s penalty structure is heavier than what most taxpayers see on income tax returns. An understatement penalty applies when the understatement exceeds the greater of $1 million or 20% of the tax shown on the return. Once that threshold is crossed, the penalty is 20% of the understatement.³

The penalty doubles to 40% if the understatement results from failing to report an asset that was required to be separately listed on the return. Omitting an asset costs twice as much as undervaluing one you did disclose.³

Compliance would also mean serious valuation work. Publicly traded stocks and bonds are straightforward: closing prices on the measurement date establish value. Everything else requires more. Closely held business interests need formal valuations from qualified third-party appraisers. Private equity stakes, derivatives, and intellectual property lack market prices, can involve contractual transfer restrictions, and swing in value based on assumptions. Anyone holding significant amounts of these assets would need to invest in professional appraisals and detailed documentation, and expect the Franchise Tax Board to scrutinize the results.

1
Legislative Analyst’s Office. New Tax on the Wealth of Billionaires [Ballot]
2
California Legislative Information. AB-259 Wealth Tax: False Claims Act
3
LegiScan. Bill Text CA AB259 2023-2024 Regular Session Introduced