Personal Income Tax Law and Corporation Tax Law: federal conformity.

Taxes

Passed Legislature

This bill passed both chambers and reached final enrollment, even if later executive action is not shown here.

Sponsor: Committee on Revenue and Taxation (S) - (Senators McNerney (Chair), Alvarado-Gil, Ashby, Becker, and Grayson)
Last action: 2026-06-01
Official status: Referred to Com. on REV. & TAX.
Effective date: Not listed

Plain English Breakdown

The official source material does not provide specific details on how the updates will make the tax code clearer.

Updating State Taxes to Match Federal Laws

The bill updates California's personal income and corporation tax laws to match certain parts of the federal Internal Revenue Code, removes outdated references, and changes how business interest is treated for personal income taxes.

What This Bill Does

Updates state tax laws to follow recent changes in federal tax laws as of January 1, 2025.
Removes old references to federal tax rules that are no longer used.
Changes how much interest businesses can deduct from their taxes for personal income tax purposes starting in 2025.

Who It Names or Affects

People who pay California personal income tax.
Companies that pay California corporation tax.

Terms To Know

Internal Revenue Code: The main set of laws in the United States about federal taxes.
Taxable years: A period, usually a year, used to calculate how much tax someone owes.

Limits and Unknowns

It does not say exactly when this bill will start.
The bill only affects taxes for the future and does not change past taxes.

Bill History

2026-06-01 California Legislative Information
Referred to Com. on REV. & TAX.
2026-05-22 California Legislative Information
In Assembly. Read first time. Held at Desk.
2026-05-22 California Legislative Information
Read third time. Passed. (Ayes 33. Noes 0.) Ordered to the Assembly.
2026-05-20 California Legislative Information
Ordered to special consent calendar.
2026-05-14 California Legislative Information
Read second time. Ordered to third reading.
2026-05-14 California Legislative Information
From committee: Do pass. (Ayes 7. Noes 0.) (May 14).
2026-05-08 California Legislative Information
Set for hearing May 14.
2026-05-04 California Legislative Information
May 4 hearing: Placed on APPR. suspense file.
2026-04-28 California Legislative Information
Set for hearing May 4.
2026-04-23 California Legislative Information
Read second time and amended. Re-referred to Com. on APPR.
2026-04-22 California Legislative Information
From committee: Do pass as amended and re-refer to Com. on APPR. with recommendation: To consent calendar. (Ayes 5. Noes 0. Page 4016.) (April 22).
2026-04-09 California Legislative Information
Set for hearing April 22.
2026-03-18 California Legislative Information
Referred to Com. on REV. & TAX.
2026-03-12 California Legislative Information
From printer. May be acted upon on or after April 11.
2026-03-11 California Legislative Information
Introduced. Read first time. To Com. on RLS. for assignment. To print.

Official Summary Text

SB 1435, as amended, Committee on Revenue and Taxation.
Personal Income Tax Law and Corporation Tax Law: federal conformity.
Under the Personal Income Tax Law and the Corporation Tax Law, various provisions of the federal Internal Revenue Code, as enacted as of a specified date, are referenced in various sections of the Revenue and Taxation Code. Those laws provide that, for taxable years beginning on or after January 1, 2025, the specified date of those referenced Internal Revenue Code sections is January 1, 2025, unless otherwise specifically provided.
This bill would further update various references to the Internal Revenue Code for the purposes of the Personal Income Tax Law and the Corporation Tax Law, including by deleting outdated references to repealed provisions of federal income tax laws and updating references to the Internal Revenue Code to reduce confusion.
The Personal Income Tax Law
and the Corporation Tax Law, in modified conformity with federal income tax laws, provide a deduction from income for interest paid on indebtedness incurred in the ordinary course of a trade or business. Existing federal income tax law establishes a limit on the amount of interest that can be deducted based in part on the taxpayer’s adjusted taxable income, as defined. Existing law specifically does not conform to this limitation on deduction of business interest for purposes of the Corporation Tax Law.
This bill would, for taxable years beginning on or after January 1, 2025, provide that the limit on deductibility for business interest under federal income tax law does not apply for purposes of the Personal Income Tax Law.
This bill would take effect immediately as a tax levy.

Current Bill Text

Read the full stored bill text

Download Bill PDF