INSIGHT

California’s Proposed Billionaire Tax: What High-Net-Worth Individuals Need to Know Now

Edmond Zhou • May 21, 2026

Services: Tax

---

California voters could see a new billionaire wealth tax — Initiative No. 25-0024 — on the November 2026 ballot. If enacted, this ballot initiative would impose a one-time wealth tax at a rate up to 5% on individuals and applicable trusts with net worth exceeding $1 billion. The tax is estimated to generate $100 billion in state revenue. It’s not law yet, and it faces notable opposition. But if your net worth is anywhere near that threshold, waiting to see how things unfold isn’t a strategy.

Here’s what you need to know about the initiative, what makes it so complex, and where to focus your attention right now.

What the Proposed Tax Would Actually Do

The 2026 Billionaire Tax Act (Initiative No. 25-0024) is currently a proposed statewide ballot initiative. If it qualifies for the November 2026 ballot and wins voter approval, it would impose a one-time California wealth tax of up to 5% on certain individuals and trusts with covered assets valued at $1 billion or more.

A few critical mechanics to understand:

Who it targets: Generally, California residents with net worth of $1 billion or more. The calculation includes the worldwide assets of both the taxpayer and their spouse, regardless of where the spouse resides.

Key dates: Residency is determined as of January 1, 2026; net worth is measured as of December 31, 2026.

The phase-out: The 5% rate phases out between $1 billion and $1.1 billion, decreasing by 0.1 percentage point for every $2 million net worth below the $1.1 billion threshold.

Payment options: The tax would be reported with your 2026 California income tax return. You could pay in full at filing or elect to pay annually in five equal installments commencing with the original due date. However, installments beyond the first year carry a non-deductible 7.5% annual deferral charge on the remaining unpaid balance.

One important note: this is not a tax only on amounts above $1 billion. The calculation applies to your entire net worth above the threshold, which significantly amplifies the potential liability.

What Is Included in Net Worth (and What Isn’t)

Virtually all forms of financial wealth and personal property are included: stocks, bonds, publicly traded funds, crypto assets, intellectual property interests, cash and cash equivalents, and investments in private company equity, debt, carried interest, and other contractual or profit-participation rights. Assets held in grantor trusts are also included.

Directly held real property is excluded from the calculation. However, if you hold real estate through an entity rather than directly, those interests could still be captured under the business interest rules.

Why Valuation Is the Most Complex Part

If the dollar figure alone seems straightforward, the valuation methodology is anything but. How the initiative proposes to calculate the value of certain assets, particularly private business interests, is where things get genuinely complicated.

Valuing Private Business Interests

For ownership stakes in non-public business entities, the initiative does not simply use fair market value as most taxpayers would understand it. Instead, the proposed formula calculates value as the book value of the entity under generally accepted accounting principles, plus a present value multiplier equal to 7.5 times the entity’s average annual book profits over the current year and the two preceding years, multiplied by your ownership percentage.

If you hold voting or other direct control rights in an entity, the rules become even more nuanced. The initiative presumes that your ownership percentage is not less than your percentage of voting or control rights, not just your economic interest. In structures where voting rights and equity ownership are separated, you could be attributed a larger share of the entity’s value than your economic stake alone would suggest.

The good news: taxpayers and the tax authority can each submit a “certified appraisal” to establish a materially different fair market value, which would replace the value computed by formula. For business owners with complex or unconventional equity structures, this pathway may matter a great deal.

Charitable Pledges No Longer Help

If you’ve made, or are planning to make, a pledge to a charitable or philanthropic organization, be aware that any pledges made after October 15, 2025, would not reduce your net worth for purposes of this tax. The initiative effectively closes the door on using pledges as a planning tool, though completed charitable contributions before December 31, 2026, can reduce net worth.

Where Things Stand

The initiative is still working through the qualification process. Proponents need 874,641 valid signatures by June 24, 2026, to place the measure on the November ballot. As of May 2026, supporters reportedly collected over 1.6 million signatures, far exceeding the required number.

The political landscape is notable. Governor Gavin Newsom expressed opposition the day after the initiative was submitted, and the California Chamber of Commerce formally voted to oppose it in December 2025. Historically, California tax increase initiatives have struggled when they face well-funded, organized opposition, and opposition is already taking shape here. That said, the initiative has strong labor support and significant public attention. If it appears on the November 2026 ballot, the initiative will require a simple majority to pass.

The bottom line: it is too early to know whether this measure will qualify for the ballot, let alone pass. But the uncertainty itself is a reason to prepare.

What You Should Be Doing Right Now

Regardless of where this initiative ultimately lands, the planning questions it raises are worth addressing today. Waiting until the initiative qualifies, or until voters decide, compresses your preparation time significantly, especially given that the valuation date is December 31, 2026.

If your net worth is near or above the $1 billion threshold, consider prioritizing these steps:

Conduct a comprehensive asset inventory. Understand what you own, how it’s held, and how each asset class would likely be treated under the proposed rules.

Evaluate your private business interests. The proposed valuation methodology may produce values that differ substantially from your expectations or prior appraisals. Identifying that gap early gives you time to respond.

Review trust structures and charitable arrangements. The initiative includes specific rules around trusts and excludes charitable pledges made after October 15, 2025, while allowing a deduction for charitable contributions made before December 31, 2026. Your current estate planning documents may need to be revisited in light of these provisions.

Model your potential exposure. If the tax were to apply, how would it affect your liquidity? Do you have assets that are difficult to value or monetize quickly? Understanding your exposure informs both your planning options and any payment strategy.

Stay engaged with the initiative’s progress. Key milestones in the coming months, and any subsequent amendments, could change the calculus significantly.

The Broader Takeaway for California’s Wealthiest Residents

The 2026 Billionaire Tax Act may or may not become law. But it represents a clear signal: California’s appetite for taxing wealth is not diminishing. Whether this initiative succeeds or not, it’s likely to inspire future proposals, and the planning challenges it surfaces around valuation complexity, trust structures, charitable strategies, and liquidity are real regardless of the outcome.

This is the kind of environment where proactive, coordinated planning across tax, legal, and wealth management disciplines pays off. The earlier you start, the more options you have.

Talk to BPM About Your Exposure

BPM’s state and local tax professionals work with high-net-worth individuals, family offices, and closely held business owners to navigate complex California tax developments. BPM’s tax services span the full range of federal, state, and local needs, with deep expertise serving clients in the San Francisco area and across California. If you want to understand how the proposed Billionaire Tax Act could affect your net worth calculation, your business interests, or your broader wealth planning strategy, we’re ready to help you think through all that.