Bill > AB1443

This bill proposes a significant change to how tips are treated for tax and unemployment insurance purposes in California from January 1, 2026, to January 1, 2031. The bill would exclude tips from gross income for personal income tax calculations and from the definition of wages for unemployment insurance and employment training tax purposes. Specifically, tips are defined as any gratuity provided by a customer or client of the employer's business. The bill requires the Franchise Tax Board to report on the number of tax returns claiming this tip exemption by December 1, 2036, with the report becoming inoperative on December 1, 2040. The goal of this tax expenditure is to help individuals retain more of their earnings, and the primary performance indicator will be the number of returns claiming the exemption. The bill includes provisions to modify various sections of the Revenue and Taxation Code and Unemployment Insurance Code to implement these changes, with the modifications set to expire on January 1, 2031, unless extended by subsequent legislation.

Budget and Finance

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