A California Assembly budget subcommittee on May 20 heard a proposal to make permanent a temporary cap on business tax credits, a move the Department of Finance said would raise $850 million in 2026-27 and $1.6 billion in 2027-28.
Under the proposal, the cap would limit business tax credits to the greater of $5 million per corporation or 50% of pre-credit liability, according to the committee materials and hearing summary. The existing temporary limitation now in place from 2024 through 2026 would be continued in modified form, and the proposal would not apply to low-income housing credits or personal income tax credits.
The hearing summary and related entity extract show that public comment split sharply. Sam Wilkinson, speaking on behalf of Grace, the Child Poverty in California Coalition, the Western Center on Law and Poverty and John Burton Advocates for Youth, supported the change. Claire Conlin of Biocom, Jennifer Snyder of California Life Sciences and John Winger of AdvaMed opposed it, saying the cap could affect biotech, life sciences and medical technology firms.
The Legislative Analyst’s Office, through Rowan Isaacs, also discussed the item during the hearing. The hearing materials say most of the fiscal effect would flow through the research and development tax credit, and they note that the California Competes Tax Credit could also be affected. The committee did not take a vote in the material reviewed; it simply heard and closed the item.
The proposal is part of a broader set of May Revision tax and budget changes the subcommittee considered, including software tax administration, LLC fee changes and CalFile realignment.
