California’s November election is shaping up to be consequential for taxpayers, businesses and the accounting profession, with ballot measures addressing everything from a proposed billionaire wealth tax to voter identification, housing affordability and environmental regulations.
Meanwhile, the state’s recently concluded legislative session produced significant developments in AI oversight and tax policy that could create new opportunities and challenges for CPAs.
CalCPA’s recent Capital Beat featured Jason Fox, CalCPA’s vice president of advocacy and public affairs, and Missy Johnson, director of government affairs at Nielsen Merksamer, who reviewed how California’s policy landscape is evolving rapidly, and the role CPAs play in shaping what comes next.
AI Oversight Creates Opportunities for CPAs
One of the legislative session’s most significant developments involved AI assurance and auditing. Following growing concerns about AI safety and the safeguards surrounding increasingly powerful systems, California enacted a package of bills establishing new oversight frameworks.
The legislation includes provisions for AI auditor registration, independent verification organizations to evaluate certain advanced AI systems, and safeguards governing interactions between AI chatbots and children and young adults.
For the accounting profession, the measures represent a potential expansion of assurance services. Regulators turned to the profession for guidance on existing CPA standards, including ethics, independence and internal controls, as policymakers developed the new frameworks.
CalCPA helped shape legislation intended to incorporate the profession’s established standards, and the conversation is expected to continue as lawmakers consider additional requirements for AI systems used in banking, financial services and other industries where automated decisions can significantly affect individuals.
Johnson noted that broader AI legislation remains unfinished business. A more expansive proposal addressing automated decision systems failed to advance, and lawmakers are expected to revisit the issue.
Tax Legislation Delivers a Win—and Leaves Questions
The legislative session also produced a notable victory for tax practitioners through AB 1519, a technical measure addressing California’s 20-year statute of limitations on tax liabilities. According to Fox, the existing language had allowed the Franchise Tax Board to interpret the limitation in ways that could effectively extend it indefinitely through additional interest, penalties and fees.
CalCPA supported efforts to clarify the statute, working alongside tax professionals who championed the change. The governor signed the bill, demonstrating how sustained professional advocacy can influence technical legislation with meaningful consequences for taxpayers and their advisers.
A more complicated development emerged from SB 122, part of the state budget package. The measure expanded sales-tax provisions affecting digital products and software-as-a-service (SaaS), while also limiting certain business tax credits.
The changes have generated questions across multiple industries. The original revenue estimate associated with the measure may significantly underestimate the amount ultimately collected, while the California Department of Tax and Fee Administration works through proposed regulations.
Johnson anticipates efforts to revisit aspects of the law, particularly its treatment of SaaS, research and development credits, and entertainment-industry incentives. CalCPA is encouraging members to share implementation concerns and practical examples that can inform future policy discussions.
The Wealth Tax Dominates the Ballot Debate
There’s no shortage of discussion on Proposition 40, a proposed one-time 5 percent tax on the net worth of Californians worth at least $1 billion. The measure’s proponents argue that the revenue would help offset federal funding reductions affecting health programs, including Medi-Cal.
Opposition, however, extends beyond the wealthy individuals who would pay the tax. Johnson described a coalition that includes prominent Democrats, labor organizations and other groups concerned about the proposal’s design and potential consequences.
Critics argue that a one-time revenue infusion would not resolve California’s underlying budget challenges. They also warn that wealthy residents could relocate, potentially reducing other state revenues. Questions about implementation, administration and whether the proceeds would necessarily be spent on their stated health-related purposes have added to the controversy.
CalCPA opposes Proposition 40, Fox explained, because of concerns about the tax framework and its practical implications for taxpayers, practitioners and tax administrators—not simply the question of whether wealthy individuals should pay more taxes.
The measure also intersects with Propositions 41 and 42. Proposition 41 would require performance audits of certain programs funded by special taxes, providing voters with more information about how public money is used. CalCPA supports that measure, citing its emphasis on accountability, transparency and efficient use of financial resources.
Proposition 42 would prohibit certain new taxes on personal property, including assets such as stocks and retirement accounts, and restrict specified retroactive taxes. Both measures contain provisions that could conflict with Proposition 40.
Fox explained that when ballot measures conflict, their relative vote totals can determine which provisions prevail. The resulting legal questions could leave the measures’ ultimate effects subject to court challenges, making this group of propositions particularly complex for voters.
Affordability, Development and Election Dynamics
Beyond the wealth-tax debate, the ballot features a range of policy questions that reflect California’s affordability concerns and competing views on government spending and regulation.
Proposition 37 would authorize additional bond funding for middle-income home loans, complementing earlier efforts to support housing affordability. Proposition 38 would authorize an $8 billion bond for immunology research, although there are questions about whether directing the funding to a single research entity represents the best use of public resources.
Other measures address voter identification, local tax approval thresholds, public campaign financing, health care clinic spending requirements and changes to the California Environmental Quality Act intended to affect development.
The number of propositions could create voter fatigue, Johnson cautioned, particularly when measures interact or contain complicated provisions. Campaign advertising, direct mail and social media messaging will further shape how voters understand the choices before them.
The governor’s race and the balance of power in Congress and the U.S. Senate also carry implications for California’s policy direction and the outcome could influence future debates over taxation, AI regulation and the state’s relationship with the federal government.
As the election season intensifies, Fox emphasized the importance of member engagement. CalCPA’s advocacy work depends on practitioners sharing their experiences, identifying unintended consequences and helping policymakers understand how proposed changes affect businesses and taxpayers.
As California confronts emerging technologies, evolving tax rules and difficult budget decisions, the profession can help ensure that public policy is informed by practical experience, sound standards and a clear understanding of its real-world effects.
Check out the full Capitol Beat by registering and accessing the event in your Activities. And be a part of the next conversation on Jan. 12.
