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The California legislature is currently considering Assembly Bill 2088, which would be the nation’s first wealth tax. If passed, California residents whose worldwide net worth exceeds $30 million (or $15 million for married taxpayers filing separately) as of December 31 of each year would be subject to a 0.4% wealth tax.
- Resident Defined. A California resident is any individual who (1) is domiciled in California; (2) is in California for other than a temporary or transitory purpose; (3) is a resident of California for part of the year; (4) spends more than 60 days in California; or (5) was subject to the wealth tax in 1 of the preceding 10 years but is no longer a resident of the state.
- Calculation of Worldwide Net Worth. A taxpayer’s worldwide net worth would be calculated annually on December 31st. Generally, it will include all property owned by the taxpayer except for real property that the taxpayer directly owns in his or her name.
- Calculation of Tax. Generally, a taxpayer will owe a tax of $0.004 of every dollar that his worldwide net worth exceeds $30 million (or $15 million for married taxpayers filing separately) to California. However, this tax will be prorated for taxpayers who were residents of California for part of the year or have permanently moved away from California.
Two-thirds of both houses of California’s legislature must approve the bill in order for it to reach the governor’s desk for signature into law. If signed into law, it would go into effect immediately, and the Franchise Tax Board would be authorized to adopt regulations necessary to implement it. Therefore, the information contained in this update could change if this proposed wealth tax becomes law.
Please call Kemp Smith’s Tax Department at 915-533-4424 with any questions.
Please call Kemp Smith’s Tax Department at 915-533-4424 with any questions.
