AB 702
Personal income tax: exclusions: interest income: theft.
Vote required
Majority
Fiscal committee
No
Appropriation
No
Current location
Revenue and Taxation
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Sign in to take action- Introduced
- Passed Assembly
- Passed Senate
- To Governor
- Became Law
Bill overview
This bill creates an exclusion from California personal income tax for interest income that is stolen, sold, or otherwise transferred from a taxpayer without their consent. The exclusion applies to investment interest income generated during the taxable year. The law takes effect immediately. This provision aligns with federal tax law regarding investment interest deductions.
Key provisions
- Creates an exclusion for stolen investment interest income.
- The exclusion applies to interest generated on investments.
- The taxpayer must not have consented to the theft or transfer.
- The interest must be stolen, sold, or otherwise transferred against the taxpayer’s will.
- The exclusion applies to taxable years beginning January 1, 2026.
- A deduction for the excluded interest is not allowed.
- The law takes effect immediately.
Who is affected
- Taxpayers
- Investment account holders
- California residents
Notable changes
- Adds a new provision to the Revenue and Taxation Code.
- Introduces a specific exclusion for stolen investment interest income.
Fiscal impact
The bill will likely result in a reduction of tax revenue for the state due to the exclusion of interest income.
Arguments in favor
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AB702:v99#DOCUMENT
Bill Start
CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION
Assembly Bill
No. 702
| Introduced by Assembly Member Ta |
| February 14, 2025 |
An act to add Section 17133.2 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 702, as introduced, Ta. Personal income tax: exclusions: interest income: theft.
The Personal Income Tax Law, in conformity with federal income tax law, generally defines “gross income” as income from whatever source derived, except as specifically excluded, and provides various exclusions from gross income. Existing law, in modified conformity with federal income tax law, allows a deduction for specified investment interest, not to exceed the net investment income of the taxpayer for the taxable year, as provided.
This bill, for taxable years beginning on or after January 1, 2026, would provide an exclusion from gross income for any amount of interest income that a taxpayer generates on an investment during the taxable year and, without the qualified taxpayer’s consent and against the qualified taxpayer’s will, is stolen, sold, or otherwise transferred, as specified.
This bill would take effect immediately as a tax levy.
Digest Key
Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO
Bill Text
The people of the State of California do enact as follows:
SECTION 1.
Section 17133.2 is added to the Revenue and Taxation Code, to read:
17133.2.
(a) For taxable years beginning on or after January 1, 2026, gross income shall not include any amount of qualified investment interest income generated by a taxpayer.
(b) For purposes of this section, “qualified investment interest” means interest income that a taxpayer generates on an investment during the taxable year and, without the qualified taxpayer’s consent and against the qualified taxpayer’s will, is stolen, sold, or otherwise transferred during the taxable year so that the interest income is no longer under the possession or control of the taxpayer.
(c) A deduction shall not be allowed with respect to any amount that a taxpayer excludes from income pursuant to this section.
SEC. 2.
This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.