Personal Income Tax Law: exclusions: military retirement pay: survivor benefit pay.
SB 1407
California Bills
20250SB__140797AMD INTRODUCED 2026-02-20 AMENDED_SENATE 2026-04-09 AMENDED_SENATE 2026-05-14 REVISED 2026-06-17 2025 SB AMD Introduced by Senator Archuleta (Principal coauthor: Assembly Member Schiavo) (Coauthor: Senator Choi)</caml:AuthorText>"?> (Coauthors: Senators Choi and Cervantes) (Coauthors: Assembly Members Davies and Jeff Gonzalez) LEAD_AUTHOR SENATE Archuleta PRINCIPAL_COAUTHOR ASSEMBLY Schiavo <caml:Contribution>COAUTHOR</caml:Contribution><caml:House>SENATE</caml:House><caml:Name>Choi</caml:Name></caml:Legislator>"?> COAUTHOR SENATE Choi COAUTHOR SENATE Cervantes COAUTHOR ASSEMBLY Davies COAUTHOR ASSEMBLY Jeff Gonzalez
An act to amend Sections 17132.9 and 17132.10 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy. taxation, to take effect immediately, tax levy Personal Income Tax Law: exclusions: military retirement pay: survivor benefit pay.
The Personal Income Tax Law, in conformity with federal income tax laws, defines “gross income” as income from whatever source derived, except as specifically excluded, and provides various exclusions from gross income, including, for taxable years beginning on or after January 1, 2025, and before January 1, 2030, an exclusion from gross income for retirement pay received by a qualified taxpayer, as defined, during the taxable year, not to exceed $20,000, from the federal government for service performed in the uniformed services, as defined, and an exclusion for income annuity payments received by a qualified taxpayer, as defined, not to exceed $20,000, pursuant to a United States Department of Defense Survivor Benefit Plan, as specified.
Existing law defines “qualified taxpayer” for the purpose of these exclusions to mean taxpayers that satisfy specified income limitations. This bill would amend the above-described exclusions to annually adjust the income limitations for taxpayers for inflation, as provided, and to increase the limitation on income eligible for exclusion to $40,000. The bill would also extend the exclusions until taxable years beginning before January 1, 2037.
Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals that the tax expenditure will achieve, detailed performance indicators, and data collection requirements. This bill also would include additional information required for any bill authorizing a new tax expenditure. This bill would take effect immediately as a tax levy. MAJORITY NO YES NO YES NO YES NO NO NO NO The people of the State of California do enact as follows:
SECTION
Section 17132.9 of the Revenue and Taxation Code is amended to read: 17132.9. (a)
(1) For taxable years beginning on or after January 1, 2025, and before January 1, 2026, gross income shall not include retirement pay received by a qualified taxpayer during the taxable year, not to exceed twenty thousand dollars ($20,000), from the federal government for service in the uniformed services.
(2) For taxable years beginning on or after January 1, 2026, and before January 1, 2037, gross income shall not include retirement pay received by a qualified taxpayer during the taxable year, not to exceed forty thousand dollars ($40,000), from the federal government for service in the uniformed services. (
b) For purposes of this section, the following
definitions apply: (1) “Qualified taxpayer” means a taxpayer that satisfies either of the following: (
A) In the case of a surviving spouse or spouses filing a joint return, adjusted gross income, as required to be shown on the federal tax return for the same taxable year, does not exceed two hundred fifty thousand dollars ($250,000). (
B) In the case of any other individual, adjusted gross income, as required to be shown on the federal tax return for the same taxable year, does not exceed one hundred twenty-five thousand dollars ($125,000). (2) “Uniformed services” means the Armed Forces of the United States, the Army National Guard and the Air National Guard when engaged in active duty for training, inactive duty training, or full-time National Guard duty, the commissioned corps of the United States Public Health Service, and the National Oceanic and Atmospheric Administration Commissioned Officer Corps. (
c) For taxable years beginning on or after January 1, 2027, the Franchise Tax Board shall recompute the adjusted gross income specified in subparagraphs (
A) and (
B) of paragraph (1) of subdivision (b), as follows:
(1) The Department of Industrial Relations shall transmit annually to the Franchise Tax Board the percentage change in the California Consumer Price Index for all items from June of the prior calendar year to June of the current calendar year, no later than August of the current calendar year.
(2) The Franchise Tax Board shall do both of the following: (
A) Compute an inflation adjustment factor by adding percent to the percentage change figure that is furnished pursuant to paragraph (1) and dividing the result by 100. (
B) Multiply the income amounts for the preceding taxable year by the inflation adjustment factor determined in subparagraph (
A) and round off the resulting products to the nearest one dollar ($1). (
d) This
section shall remain in effect only until December 1, 2037, and as of that date is repealed.
SEC.
Section 17132.10 of the Revenue and Taxation Code is amended to read: 17132.10. (a)
(1) For taxable years beginning on or after January 1, 2025, and before January 1, 2026, gross income shall not include annuity payments received by a qualified taxpayer during the taxable year, not to exceed twenty thousand dollars ($20,000), pursuant to a United States Department of Defense Survivor Benefit Plan.
(2) For taxable years beginning on or after January 1, 2026, and before January 1, 2037, gross income shall not include retirement pay received by a qualified taxpayer during the taxable year, not to exceed forty thousand dollars ($40,000), from the federal government for service in the uniformed services. (
b) For purposes of this section, the following
definitions apply: (1) “Qualified taxpayer” means the surviving spouse or other named beneficiary of a plan who satisfies either of the following: (
A) In the case of a surviving spouse or spouses filing a joint return, adjusted gross income, as required to be shown on the federal tax return for the same taxable year, does not exceed two hundred fifty thousand dollars ($250,000). (
B) In the case of any other individual, adjusted gross income, as required to be shown on the federal tax return for the same taxable year, does not exceed one hundred twenty-five thousand dollars ($125,000). (2) “United States Department of Defense Survivor Benefit Plan” or “plan” means a survivor benefit plan established pursuant to Sections to 1455, inclusive, of Title of the United States Code. (
c) For taxable years beginning on or after January 1, 2027, the Franchise Tax Board shall recompute the adjusted gross income specified in subparagraphs (
A) and (
B) of paragraph (1) of subdivision (b), as follows:
(1) The Department of Industrial Relations shall transmit annually to the Franchise Tax Board the percentage change in the California Consumer Price Index for all items from June of the prior calendar year to June of the current calendar year, no later than August of the current calendar year.
(2) The Franchise Tax Board shall do both of the following: (
A) Compute an inflation adjustment factor by adding percent to the percentage change figure that is furnished pursuant to paragraph (1) and dividing the result by 100. (
B) Multiply the income amounts for the preceding taxable year by the inflation adjustment factor determined in subparagraph (
A) and round off the resulting products to the nearest one dollar ($1). (
d) This
section shall remain in effect only until December 1, 2037, and as of that date is repealed.
SEC. 3. (
a) For purposes of complying with the requirements of
Section of the Revenue and Taxation Code, with respect to the exclusions allowed by Sections 17132.9 and 17132.10 of the Revenue and Taxation Code, as extended by this act, hereafter known as “the exclusions,” the Legislature finds and declares the following:
(1) The specific goals of the exclusions are as follows: (
A) To recognize the loss and sacrifice of our military families and give them the support that our community owes them. (
B) To provide some financial relief to families that have experienced not only the loss of a loved one, but also often the loss of the sole income of the family, and who are now trying to make ends meet on a portion of that original income.
(2) There is no available data to collect or report with respect to the exclusions. (
b) This
section shall remain in effect only until December 1, 2037, and as of that date is repealed.
SEC. 4. This act provides for a tax levy within the meaning of