(1)Existing state sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state. The Sales and Use Tax Law generally provides that the taxes are due and payable to the California Department of Tax and Fee Administration (CDTFA) quarterly on or before the last day of the month next succeeding each quarterly period and requires, for purposes of sales tax, a return to be filed by a seller that contains, among other information, the gross receipts of the seller during the preceding reporting period.

The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing laws authorize districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law. Amendments to the Sales and Use Tax Law are automatically incorporated into the local tax laws.

Existing law, with respect to specified vehicles sold at retail on and after January 1, 2021, by a licensed dealer, except a new motor vehicle dealer, requires the dealer to pay the applicable sales tax, or use tax pursuant to the Transactions and Use Tax Law, to the Department of Motor Vehicles (DMV) acting for and on behalf of CDTFA within 30 days from the date of the sale. Existing law authorizes the CDTFA to exempt a licensed dealer from the requirement to pay the applicable taxes to the DMV if specified requirements are met, and authorizes the CDTFA to revoke that exemption if it notifies the licensed dealer of the failure to satisfy those requirements, as provided.

This bill would authorize the CDTFA to reinstate the above-described exemption where specified requirements are met, and would require the CDTFA to notify the licensed dealer that the exemption is reinstated, as provided. The bill would also make nonsubstantive changes to the exemption provisions.

(2)Existing federal law, the Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 (ABLE Act), encourages and assists individuals and families to save private funds for the purpose of supporting persons with disabilities to maintain their health, independence, and quality of life by excluding from gross income distributions used for qualified disability expenses by a beneficiary of a qualified ABLE program established and maintained by a state, as specified.

Existing law establishes the Qualified ABLE Program, administered by the California ABLE Act Board, in this state for purposes of implementing the federal ABLE Act. That law, among other things, authorizes the contributions to an ABLE account during the taxable year if specified requirements are met.

The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax laws, generally defines gross income as income from whatever source derived, except as specifically excluded, and provides various exclusions from gross income. Those laws, for taxable years beginning on or after January 1, 2016, conform to the exclusions from gross income provided under federal income tax law provisions relating to the ABLE Act, as those exclusions read in specified federal law prior to the One Big Beautiful Bill Act.

This bill would also conform, for taxable years beginning on or after January 1, 2026, state tax law to those changes relating to qualified ABLE programs made by the One Big Beautiful Bill Act. The bill would also make conforming changes relating to the requirements for making contributions to an ABLE account.

(1)Existing state sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state. The Sales and Use Tax Law generally provides that the taxes are due and payable to the California Department of Tax and Fee Administration (CDTFA) quarterly on or before the last day of the month next succeeding each quarterly period and requires, for purposes of sales tax, a return to be filed by a seller that contains, among other information, the gross receipts of the seller during the preceding reporting period.

The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing laws authorize districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law. Amendments to the Sales and Use Tax Law are automatically incorporated into the local tax laws.

Existing law, with respect to specified vehicles sold at retail on and after January 1, 2021, by a licensed dealer, except a new motor vehicle dealer, requires the dealer to pay the applicable sales tax, or use tax pursuant to the Transactions and Use Tax Law, to the Department of Motor Vehicles (DMV) acting for and on behalf of CDTFA within 30 days from the date of the sale. Existing law authorizes the CDTFA to exempt a licensed dealer from the requirement to pay the applicable taxes to the DMV if specified requirements are met, and authorizes the CDTFA to revoke that exemption if it notifies the licensed dealer of the failure to satisfy those requirements, as provided.

This bill would authorize the CDTFA to reinstate the above-described exemption where specified requirements are met, and would require the CDTFA to notify the licensed dealer that the exemption is reinstated, as provided. The bill would also make nonsubstantive changes to the exemption provisions.

(2)Existing federal law, the Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 (ABLE Act), encourages and assists individuals and families to save private funds for the purpose of supporting persons with disabilities to maintain their health, independence, and quality of life by excluding from gross income distributions used for qualified disability expenses by a beneficiary of a qualified ABLE program established and maintained by a state, as specified.

Existing law establishes the Qualified ABLE Program, administered by the California ABLE Act Board, in this state for purposes of implementing the federal ABLE Act. That law, among other things, authorizes the contributions to an ABLE account during the taxable year if specified requirements are met.

The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax laws, generally defines gross income as income from whatever source derived, except as specifically excluded, and provides various exclusions from gross income. Those laws, for taxable years beginning on or after January 1, 2016, conform to the exclusions from gross income provided under federal income tax law provisions relating to the ABLE Act, as those exclusions read in specified federal law prior to the One Big Beautiful Bill Act.

This bill would also conform, for taxable years beginning on or after January 1, 2026, state tax law to those changes relating to qualified ABLE programs made by the One Big Beautiful Bill Act. The bill would also make conforming changes relating to the requirements for making contributions to an ABLE account.

(1)Existing state sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state. The Sales and Use Tax Law generally provides that the taxes are due and payable to the California Department of Tax and Fee Administration (CDTFA) quarterly on or before the last day of the month next succeeding each quarterly period and requires, for purposes of sales tax, a return to be filed by a seller that contains, among other information, the gross receipts of the seller during the preceding reporting period.

The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing laws authorize districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law. Amendments to the Sales and Use Tax Law are automatically incorporated into the local tax laws.

Existing law, with respect to specified vehicles sold at retail on and after January 1, 2021, by a licensed dealer, except a new motor vehicle dealer, requires the dealer to pay the applicable sales tax, or use tax pursuant to the Transactions and Use Tax Law, to the Department of Motor Vehicles (DMV) acting for and on behalf of CDTFA within 30 days from the date of the sale. Existing law authorizes the CDTFA to exempt a licensed dealer from the requirement to pay the applicable taxes to the DMV if specified requirements are met, and authorizes the CDTFA to revoke that exemption if it notifies the licensed dealer of the failure to satisfy those requirements, as provided.

This bill would authorize the CDTFA to reinstate the above-described exemption where specified requirements are met, and would require the CDTFA to notify the licensed dealer that the exemption is reinstated, as provided. The bill would also make nonsubstantive changes to the exemption provisions.

(2)Existing federal law, the Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 (ABLE Act), encourages and assists individuals and families to save private funds for the purpose of supporting persons with disabilities to maintain their health, independence, and quality of life by excluding from gross income distributions used for qualified disability expenses by a beneficiary of a qualified ABLE program established and maintained by a state, as specified.

Existing law establishes the Qualified ABLE Program, administered by the California ABLE Act Board, in this state for purposes of implementing the federal ABLE Act. That law, among other things, authorizes the contributions to an ABLE account during the taxable year if specified requirements are met.

The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax laws, generally defines gross income as income from whatever source derived, except as specifically excluded, and provides various exclusions from gross income. Those laws, for taxable years beginning on or after January 1, 2016, conform to the exclusions from gross income provided under federal income tax law provisions relating to the ABLE Act, as those exclusions read in specified federal law prior to the One Big Beautiful Bill Act.

This bill would also conform, for taxable years beginning on or after January 1, 2026, state tax law to those changes relating to qualified ABLE programs made by the One Big Beautiful Bill Act. The bill would also make conforming changes relating to the requirements for making contributions to an ABLE account.

(1)Existing state sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state. The Sales and Use Tax Law generally provides that the taxes are due and payable to the California Department of Tax and Fee Administration (CDTFA) quarterly on or before the last day of the month next succeeding each quarterly period and requires, for purposes of sales tax, a return to be filed by a seller that contains, among other information, the gross receipts of the seller during the preceding reporting period.

The Bradley-Burns Uniform Local Sales and Use Tax Law authorizes counties and cities to impose local sales and use taxes in conformity with the Sales and Use Tax Law, and existing laws authorize districts, as specified, to impose transactions and use taxes in accordance with the Transactions and Use Tax Law, which generally conforms to the Sales and Use Tax Law. Amendments to the Sales and Use Tax Law are automatically incorporated into the local tax laws.

Existing law, with respect to specified vehicles sold at retail on and after January 1, 2021, by a licensed dealer, except a new motor vehicle dealer, requires the dealer to pay the applicable sales tax, or use tax pursuant to the Transactions and Use Tax Law, to the Department of Motor Vehicles (DMV) acting for and on behalf of CDTFA within 30 days from the date of the sale. Existing law authorizes the CDTFA to exempt a licensed dealer from the requirement to pay the applicable taxes to the DMV if specified requirements are met, and authorizes the CDTFA to revoke that exemption if it notifies the licensed dealer of the failure to satisfy those requirements, as provided.

This bill would authorize the CDTFA to reinstate the above-described exemption where specified requirements are met, and would require the CDTFA to notify the licensed dealer that the exemption is reinstated, as provided. The bill would also make nonsubstantive changes to the exemption provisions.

(2)Existing federal law, the Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014 (ABLE Act), encourages and assists individuals and families to save private funds for the purpose of supporting persons with disabilities to maintain their health, independence, and quality of life by excluding from gross income distributions used for qualified disability expenses by a beneficiary of a qualified ABLE program established and maintained by a state, as specified.

Existing law establishes the Qualified ABLE Program, administered by the California ABLE Act Board, in this state for purposes of implementing the federal ABLE Act. That law, among other things, authorizes the contributions to an ABLE account during the taxable year if specified requirements are met.

The Personal Income Tax Law and the Corporation Tax Law, in modified conformity with federal income tax laws, generally defines gross income as income from whatever source derived, except as specifically excluded, and provides various exclusions from gross income. Those laws, for taxable years beginning on or after January 1, 2016, conform to the exclusions from gross income provided under federal income tax law provisions relating to the ABLE Act, as those exclusions read in specified federal law prior to the One Big Beautiful Bill Act.

This bill would also conform, for taxable years beginning on or after January 1, 2026, state tax law to those changes relating to qualified ABLE programs made by the One Big Beautiful Bill Act. The bill would also make conforming changes relating to the requirements for making contributions to an ABLE account.

 UNFINISHED BUSINESS  

Bill No: SB 1436

Author: Committee on Revenue and Taxation

Amended: 8/10/26

Vote: 21

SENATE REVENUE AND TAXATION COMMITTEE: 5-0, 4/22/26

AYES: McNerney, Alvarado-Gil, Ashby, Becker, Grayson

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SENATE FLOOR: 36-0, 5/7/26 (Consent)

AYES: Allen, Archuleta, Arreguín, Ashby, Becker, Blakespear, Cabaldon, Caballero, Cervantes, Choi, Cortese, Dahle, Durazo, Grayson, Hurtado, Jones, Laird, Limón, McGuire, McNerney, Menjivar, Ochoa Bogh, Padilla, Pérez, Reyes, Richardson, Rubio, Seyarto, Smallwood-Cuevas, Stern, Strickland, Umberg, Valladares, Wahab, Weber Pierson, Wiener

NO VOTE RECORDED: Alvarado-Gil, Gonzalez, Grove, Niello

ASSEMBLY FLOOR: Passed, 8/24/26

SUBJECT: Qualified ABLE Program

SOURCE: Author & California State Treasurer

DIGEST:

This bill revises the definition of “good standing” under the accelerated remittance program exemption and authorizes the California Department of Tax and Fee Administration (CDTFA) to reinstate a revoked exemption; conforms state law to recent changes to IRC 529A pertaining to increased contributions to an Achieving and Better Life Experience (ABLE) account.

Assembly Amendments resolve a conflict with SB 180 (Committee on Budget and Fiscal Review, Chapter 85, Statutes of 2026) to prevent chaptering-out.

ANALYSIS:

Existing law:

1. Imposes the sales tax on every retailer “engaged in business in this state” that sells tangible personal property, and requires them to register with the CDTFA, as well as remit taxes collected from purchasers to CDTFA.
2. Applies the sales tax whenever a retail sale occurs, which is generally any sale other than one for resale in the regular course of business.
3. Provides that unless the purchaser pays the sales tax to the retailer, they are liable for the use tax, which is imposed on any person consuming tangible personal property in the state, and requires the purchaser to remit use tax to CDTFA.
4. Sets the state sales and use tax rate at 7.25% of the sales price of the property sold or used, of which 3.9375% flows to the state General Fund.
5. Requires used-car dealers to generally remit applicable sales or use tax to the Department of Motor Vehicles (DMV) within 30 days of each sale (also known as “the accelerated remittance program”) (AB 85, Committee on Budget, Chapter 8, Statutes of 2020).
6. Authorizes CDTFA, in consultation with DMV, to exempt from the accelerated remittance program any used car dealer that sold 1,000 or more vehicles at retail in the previous calendar year or in the current calendar year, provided that the dealer’s account is in good standing with CDTFA (SB 132, Committee on Budget & Fiscal Review, Chapter 17, Statutes of 2025).
7. Defines “good standing” as a dealer that has timely:
8. Filed all required sales and use tax returns for the 12 quarterly reporting periods immediately preceding issuance of the exemption; and
9. Remitted all payments applicable to those returns, including any required sales and use tax prepayments.
10. Authorizes CDTFA to revoke the exemption after 30 days from the date CDTFA provides notice to the dealer that they are no longer in good standing or when vehicle sales have decreased to below 1,000 in a calendar year.
11. Restricts CDTFA to look only to the 12 quarterly periods immediately preceding issuance of the exemption to determine good standing.
12. Does not authorize CDTFA to reinstate a revoked exemption.
13. Conforms to the federal tax treatment of Internal Revenue Code (IRC) 529, Achieving a Better Life Experience (ABLE) accounts, as of January 1st, 2015 (AB 449, Irwin, Chapter 774, Statutes of 2015; and SB 324, Pavley, Chapter 793, Statutes of 2015).
14. Has conformed to subsequent changes in federal law, including:
15. Eliminating differences in qualification criteria, increasing contribution limits made by designated beneficiaries to up to the federal poverty level, and allowing taxpayers to roll over IRC 529 plans to ABLE accounts (AB 91, Burke, Chapter 39, Statutes of 2019).
16. Federal ABLE account definitions (AB 2216, Irwin, Chapter 896, Statutes of 2022).
17. Increases the age, from 26 to 46, at which an individual’s blindness or disability must have begun to qualify for the program (AB 339, Irwin, Chapter 324, Statutes of 2023).
18. Authorizing tax-free rollovers from “Trump Accounts,” established pursuant to IRC 530A, to a beneficiary’s ABLE account (SB 180, Committee on Budget and Fiscal Review, Chapter 85, Statutes of 2026).
19. Has a specified date of conformity to the IRC of January 1, 2025.
20. Does not conform to changes to federal law made by Sections 70115(a)(1) and 70115(a)(2) of H.R. 1 (Public Law 119-21, One Big Beautiful Bill Act), pertaining to inflation-indexing contribution limits of ABLE accounts.

This bill:

1. Revises the definition of “good standing” to look at the 12 quarterly reporting periods preceding reinstatement of the dealer’s exemption to the accelerated remittance program.
2. Allows CDTFA to reinstate a revoked exemption.
3. Conforms state law to H.R. 1’s change to inflation-indexing contribution limits in the Personal Income and Corporation Taxes.
4. Makes conforming changes to a provision in the Welfare and Institutions Code relating to ABLE accounts.

Background

SB 132 clean-up. Under SB 132, once CDTFA grants an exemption, a follow-up good standing determination must still be based on the periods immediately preceding issuance of the exemption. Accordingly, a taxpayer that receives an exemption but later fails to comply with the requirement to timely file and remit all applicable payments may argue that they cannot be subject to revocation because they were in good standing during the period immediately preceding issuance of the exemption. This bill remedies this by revising the definition of “good standing” to mean that the dealer has timely filed and remitted applicable payments, including applicable prepayments, for all required sales and use tax returns for the most recent 12 quarterly reporting periods.

Further, SB 132 did not authorize CDTFA to reinstate a revoked exemption after a dealer returns to good standing or reaches 1,000 or more vehicle sales in a calendar year following the revocation. Since the exemption enhances administrative efficiency and reduces compliance burdens, allowing CDTFA to reinstate a revoked exemption once the conditions for exemption are met should better accomplish the program’s intent.

ABLE Account Conformity. For calendar year 2026, federal law authorizes individual contributions up to $20,000 to an ABLE account in the name of a specified beneficiary, and the designated beneficiary may also make a contribution that exceeds that limit, subject to annual inflation indexing. State law does not generally automatically conform to changes in federal tax law. As a result, under current state law, for calendar year 2026, individual contributions would be limited to $19,000, and beneficiaries would not be allowed to make higher contributions. The bill will conform the state personal and corporate income tax laws to H.R. 1’s recent changes to contribution limits for ABLE accounts. This bill also makes conforming changes to the Welfare and Institutions Code, removing the sunset date of the higher contribution rule.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Assembly Appropriations Committee:

• Minor and absorbable costs to CDTFA to reinstate revoked Accelerated Remittance Program exemptions and notify affected licensed dealers.
• General Fund revenue loss of approximately $40,000 in fiscal year (FY) 2026-27, $20,000 in FY 2027-28, and $30,000 in FY 2028-29 by conforming state Personal Income Tax and Corporation Tax Law to recent federal ABLE Program changes. Additionally, minor and absorbable costs to the Franchise Tax Board to implement conformity provisions.

SUPPORT: (Verified 8/24/26)

California State Treasurer (Source)
California Taxpayers Association

OPPOSITION: (Verified 8/24/26)

None received

ARGUMENTS IN SUPPORT: According to the California Taxpayers Association, “California takes a selective approach to conforming to federal tax changes one provision at a time, allowing lawmakers to evaluate each amendment for its fiscal impact, equity implications, and alignment with the state’s economic priorities before deciding whether to adopt it. For the nation’s most populous and economically diverse state, this tailored approach preserves the flexibility to support key industries, protect low-income taxpayers, and maintain a stable revenue base rather than importing federal rules that may not suit California’s unique housing, labor, and environmental policies and the state’s economic growth needs. … SB 1436 [ensures] that California safeguards both its budget and its policy goals while giving taxpayers more consistency with federal rules.”

Prepared by: Haley Summers / REV. & TAX. / (916) 651-4117

8/24/26 17:55:27

**** END ****

SENATE THIRD READING

STR Bill Id:SB 1436

Author:(Committee on Revenue and Taxation)

As Amended Ver:August 10, 2026

Majority vote

SUMMARY

Makes technical changes to the collection of Sales and Use Tax (SUT) for certain used car dealers and updates state conformity with the federal Achieving a Better Life Experience (ABLE) Program.

Major Provisions

1. Allows the California Department of Tax and Fee Administration (CDTFA) to reinstate a used car dealer's exemption from the Accelerated Remittance Program (ARP) under which certain dealers remit the sales tax and any applicable district use tax to the Department of Motor Vehicles (DMV) rather than the CDTFA, if the CDTFA determines that the dealer has sold 1,000 or more vehicles at retail in the current or preceding calendar year and the dealer's account is in good standing with the CDTFA.
2. Revises, for purposes of the ARP, the period under which "good standing" is evaluated to the most recent 12 quarterly reporting periods instead of the 12 quarterly reporting periods immediately preceding exemption issuance.
3. Conforms, under the Personal Income Tax (PIT) Law and Corporation Tax (CT) Law for taxable years beginning on or after January 1, 2026, to recent changes in federal law relating to Achieving a Better Life Experience Accounts (ABLE accounts) as follows:
   1. Increases the limitation on contributions to ABLE accounts;
   2. Provides designated beneficiaries an increased limitation on their own contributions to their ABLE account; and,
   3. Applies a modified calculation for the cash contribution inflation adjustment.

COMMENTS

1. Used car sales tax gap: The ARP began as an effort to close the $30.89 million SUT gap primarily associated with noncompliant used car dealers. The CDTFA estimated the annual tax gap from used vehicle sales was around $30.89 million in 2019. Through the efforts of the CDTFA and the DMV, this tax gap has dropped to only $8.4 million by the end of 2025. Under the ARP, certain used motor vehicle dealers are required to pay the sales tax and any applicable district use tax on their retail sales of certain used vehicles directly to the DMV when they submit a vehicle registration application.

A dealer who sold 1,000 or more vehicles at retail in the current or preceding calendar year and whose account is in good standing with the CDTFA may be exempt from paying tax directly to the DMV. The account is considered to be in good standing if the dealer has timely filed and made applicable payments, including prepayments, for all required SUT returns for the 12 quarterly reporting periods immediately preceding the issuance of the exemption. Licensed new motor vehicle dealers are considered retailers and are not required to pay tax directly to the DMV, even if they also sell used vehicles.

This bill improves the CDTFA's operational efficiency by allowing the CDTFA to reinstate a dealer's status as in good standing. The CDTFA currently may exempt qualifying high‑volume, low‑risk dealers that are in good standing. However, if the exemption is revoked, existing law provides no mechanism to reinstate that exempt status once compliance is restored.

Additionally, this bill corrects a drafting error in R&TC Section 6295 that unintentionally limited the CDTFA's ability to reassess a dealer's good standing after the original exemption is issued. Under the existing language, the CDTFA must continue to assess good standing by referencing the 12 quarters preceding the original exemption, which provides no information regarding recent compliance. By redefining good standing to mean the dealer was compliant in the most recent 12 quarterly periods, the bill comports with legislative intent to allow an exemption from the ARP for compliant dealers.

1. ABLE accounts: In 2014, Congress enacted the ABLE Act, which provides individuals with a way to contribute to tax-advantaged accounts as an alternative to Special Needs and Supplemental Needs Trusts. To qualify, an individual must be entitled to Social Security Disability Insurance benefits or have a disability certificate on file with the Internal Revenue Service. States administer ABLE programs on behalf of the programs' beneficiaries, who must be either blind or disabled before age 46.

ABLE accounts generally follow the same rules as Internal Revenue Code (IRC) Section 529 education savings accounts. Individuals can make non-deductible cash contributions to an account on behalf of the beneficiary, and earnings can grow tax-free. ABLE account distributions are excluded from the beneficiary's income if they are used to pay for qualified medical services of the beneficiary and do not exceed the cost of the services. The Legislature authorized California ABLE (CalABLE) accounts in 2015 under the administration of the State Treasurer's Office and conformed to the federal tax treatment of ABLE accounts as of January 1, 2015, with the passage of AB 449 (Irwin), Chapter 774, Statutes of 2015, and SB 324 (Pavley), Chapter 796, Statutes of 2015. The CalABLE program opened to the public on December 18, 2018.

Since then, the Legislature has conformed several times to federal changes to ABLE accounts, including eliminating differences in qualification criteria, increasing contribution limits made by designated beneficiaries to up to the federal poverty level, and allowing taxpayers to roll over IRC 529 contributions to ABLE accounts, among other changes (AB 91 (Burke), Chapter 39, Statutes of 2019). In 2022, the Legislature made clarifying changes to align CalABLE account definitions with federal law regarding ABLE accounts, among other changes (AB 2216 (Irwin), Chapter 896, Statutes of 2022). In 2023, the Legislature enacted AB 339 (Irwin), Chapter 324, Statutes of 2023, conforming state law to changes made by the Consolidated Appropriations Act of 2023 that increased the age prior to which an individual's blindness or disability must have begun to qualify for the program from 26 to 46.

a) Recent changes to ABLE Accounts: In 2025, Congress enacted H.R. 1 ("One Big Beautiful Bill Act" or "OBBBA"), which enacted several changes to the ABLE program. First, H.R. 1 amended the inflation-indexing cross-reference for contribution limits from 1997 to 1996, which would generally result in a higher annual contribution limit. Second, H.R. 1 made permanent the "ABLE-to-Work" provision, which was set to expire at the end of 2025. Under this provision, employed individuals with disabilities can contribute additional income to their own ABLE account(s) beyond the $19,000 annual limit if they are not contributing to a defined contribution retirement plan. California's current specified date of conformity to the IRC is January 1, 2025, pursuant to SB 711 (McNerney), Chapter 231, Statutes of 2025, so California does not conform to recent changes to ABLE accounts made by H.R. 1.

According to the Author

SB 1436 combines two noncontroversial provisions: one matter raised by CDTFA regarding the administration of exemptions to the accelerated remittance program, and one matter raised by the Treasurer's Office regarding ABLE account conformity with federal law. Moving individual proposals as separate bills, even if technical and noncontroversial, through the legislative process is less efficient than consolidating them into one measure. Committee staff distributed these proposals to affected parties for review before they were included in the bill. Should anyone object to an item in the bill, the Committee will remove said item.

Arguments in Support

This bill is supported by State Treasurer Fiona Ma, who notes, in part:

State law governing CalABLE contribution limits is outdated because federal law removed the ABLE to Work Act's sunset provisions. As a result, California no longer matches federal law. This mismatch could confuse current and potential account holders when distinguishing what is permitted at the national level and what is authorized within the state. Californians with disabilities who are working may not know whether they can make additional contributions, which could reduce participation in the program.

SB 1436 would remove the existing sunset clause on state 'ABLE to Work' contributions, thereby ensuring that California law remains aligned with the federal ABLE to Work Act. By eliminating this expiration, this bill would provide ongoing certainty and stability for working individuals with disabilities who rely on their CalABLE accounts to save for their future.

Arguments in Opposition

None on file.

FISCAL COMMENTS

According to the Assembly Committee on Appropriations:

1. Minor and absorbable costs to CDTFA to reinstate revoked ARP exemptions and notify affected licensed dealers.
2. General Fund revenue loss of approximately $40,000 in fiscal year (FY) 2026-27, $20,000 in FY 2027-28, and $30,000 in FY 2028-29 by conforming state Personal Income Tax (PIT) and Corporation Tax (CT) Law to recent federal ABLE Program changes. Additionally, minor and absorbable costs to the Franchise Tax Board to implement conformity provisions.

VOTES

SENATE FLOOR: 36-0-4

YES: Allen, Archuleta, Arreguín, Ashby, Becker, Blakespear, Cabaldon, Caballero, Cervantes, Choi, Cortese, Dahle, Durazo, Grayson, Hurtado, Jones, Laird, Limón, McGuire, McNerney, Menjivar, Ochoa Bogh, Padilla, Pérez, Reyes, Richardson, Rubio, Seyarto, Smallwood-Cuevas, Stern, Strickland, Umberg, Valladares, Wahab, Weber Pierson, Wiener

ABS, ABST OR NV: Alvarado-Gil, Gonzalez, Grove, Niello

ASM REVENUE AND TAXATION: 6-0-1

YES: Gipson, Carrillo, DeMaio, McKinnor, Quirk-Silva, Michelle Rodriguez

ABS, ABST OR NV: Sanchez

ASM APPROPRIATIONS: 15-0-0

YES: Wicks, Hoover, Arambula, Calderon, Caloza, Dixon, Fong, Mark González, Krell, Pacheco, Pellerin, Sharp-Collins, Solache, Ta, Tangipa

UPDATED

VERSION: August 10, 2026

CONSULTANT: Wesley Whitaker / REV. & TAX. / (916) 319-2098 FN: 0003411

Date of Hearing: August 5, 2026

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

SBPCA Bill Id:SB 1436

Author:(Committee on Revenue and Taxation) – As Introduced Ver:March 11, 2026

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill makes various changes to the Accelerated Remittance Program (ARP) and state conformity with the federal Achieving a Better Life Experience (ABLE) Program.

Specifically, this bill:

1. Allows the Department of Tax and Fee Administration (CDTFA) to reinstate the exemption of a licensed dealer from the ARP if certain conditions are met, after previously revoking the exemption because the dealer failed to meet certain requirements, and requires CDTFA to notify the dealer of such reinstatement.
2. For taxable years beginning on or after January 1, 2026, conforms state tax law to certain recent changes made to federal tax law regarding the ABLE Program.

FISCAL EFFECT:

1. Minor and absorbable costs to CDTFA to reinstate revoked ARP exemptions and notify affected licensed dealers.
2. General Fund revenue loss of approximately $40,000 in fiscal year (FY) 2026-27, $20,000 in FY 2027-28, and $30,000 in FY 2028-29 by conforming state Personal Income Tax (PIT) and Corporation Tax (CT) Law to recent federal ABLE Program changes. Additionally, minor and absorbable costs to the Franchise Tax Board to implement conformity provisions.

COMMENTS:

1. Purpose. According to the author, this bill “combines two noncontroversial provisions: one matter raised by CDTFA regarding the administration of exemptions to the [ARP], and one matter raised by the Treasurer’s Office regarding ABLE account conformity with federal law.” This bill is supported by State Treasurer Fiona Ma and the California Taxpayers Association.
2. Background. ARP. The ARP was implemented as an effort to close the sales and use tax (SUT) gap from non-compliant used car dealers. Under the ARP, certain used motor vehicle dealers are required to pay SUT on the dealer’s retail sales of certain used vehicles directly to the Department of Motor Vehicles (DMV), acting on behalf of CDTFA, within 30 days from the date of the sale when submitting the vehicle registration application. CDTFA may exempt a dealer from paying SUT directly to DMV if the dealer sells 1,000 or more vehicles in a calendar year and has an account in good standing, for which the dealer has timely filed and made applicable payments in the 12 preceding quarterly reporting periods. CDTFA may also revoke a dealer’s exemption if the dealer is no longer in good standing. However, existing law does not provide a mechanism for CDTFA to reinstate the revoked exemption once a dealer’s compliance is restored. This bill provides such a mechanism.

ABLE Program. Federal law authorizes each state to establish a program allowing individuals to contribute to an ABLE account to support “qualified disability expenses” of the account’s designated beneficiary, such as expenses for education, housing, transportation, employment training, assistive technology, health, financial management, and legal fees. After-tax contributions allow earnings to grow tax-deferred, and withdrawals, when used for qualified disability expenses, are federal and state tax-free. ABLE accounts also enable eligible individuals to build savings without impacting their eligibility for means-tested public benefits, such as Medicaid/Medi-Cal.

In accordance with federal law, the state Qualified ABLE (CalABLE) Program opened to the public on December 18, 2018. Since then, the Legislature has enacted several measures to conform to subsequent federal changes regarding ABLE accounts. Most recently, AB 339 (Irwin), Chapter 324, Statutes of 2023, conformed state law to changes made by the Consolidated Appropriations Act of 2023 that increased the age, from 26 to 46, prior to which an individual’s blindness or disability must have begun to qualify for the program.

In 2025, H.R. 1 modified the ABLE Program by: (a) amending the inflation-indexing cross-reference for contribution limits in a manner that generally results in a higher annual contribution limit, and (b) making “ABLE-to-Work” rules permanent, otherwise set to expire at the end of 2025, that allow an employed individual with disabilities to contribute additional income to their own ABLE account beyond the annual limit if the individual is not contributing to a defined contribution retirement plan. However, since state tax law generally conforms to federal tax law as of January 1, 2025, the changes related to ABLE accounts made by H.R. 1 do not apply in California. This bill provides such conformity to the increased contribution limits under federal law.

1. Related Legislation. SB 1435 (Committee on Revenue and Taxation) updates provisions of state tax law to further conform to federal tax law as a clean-up measure to SB 711 (McNerney), Chapter 231, Statutes of 2025, which enacted California’s current date-change conformity of January 1, 2025. SB 1435 is pending hearing by this committee.

Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081

Date of Hearing: June 15, 2026

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Mike Gipson, Chair

SBPCA Bill Id:SB 1436

Author:(Committee on Revenue and Taxation) – As Introduced Ver:March 11, 2026

Majority vote. Fiscal committee.

SENATE VOTE: 36-0

SUBJECT: Qualified ABLE Program

SUMMARY: Makes multiple technical and noncontroversial changes to the Sales and Use Tax (SUT) Law, Personal Income Tax (PIT) Law, and Corporation Tax (CT) Law. Specifically, this bill:

1. Allows the California Department of Tax and Fee Administration (CDTFA) to reinstate a used car dealer's exemption from the Accelerated Remittance Program (ARP) under which certain dealers remit the sales tax and any applicable district use tax to the Department of Motor Vehicles (DMV) rather than the CDTFA, if the CDTFA determines that the dealer has sold 1,000 or more vehicles at retail in the current or preceding calendar year and the dealer's account is in good standing with the CDTFA.
2. Revises, for purposes of the ARP, the period under which "good standing" is evaluated to the most recent 12 quarterly reporting periods instead of the 12 quarterly reporting periods immediately preceding exemption issuance.
3. Conforms, under the PIT Law and CT Law for taxable years beginning on or after January 1, 2026, to recent changes in federal law relating to Achieving a Better Life Experience Accounts (ABLE accounts) as follows:
   1. Increases the limitation on contributions to ABLE accounts;
   2. Provides designated beneficiaries an increased limitation on their own contributions to their ABLE account; and,
   3. Applies a modified calculation for the cash contribution inflation adjustment.

EXISTING LAW:

1. Imposes, subject to specified exemptions and exclusions, a sales tax on all retailers on the retail sale of tangible personal property (TPP) in California. If the sales tax does not apply, the SUT Law imposes a complimentary use tax on the storage, use, or other consumption in this state of TPP purchased from a retailer. (Revenue and Taxation Code (R&TC) Section 6001 et seq.)
2. Requires certain used motor vehicle dealers to pay the sales tax and any applicable district use tax, on their retail sales of certain used motor vehicles directly to the DMV when they submit a vehicle registration application. (R&TC Section 6295 and Vehicle Code Section 4456(a)(3).)
3. Provides that a vehicle registration application submitted to the DMV by a dealer is deemed a return filed with the CDTFA with respect to tax amounts reported to the DMV. (R&TC Section 6295.)
4. Defines "Federal ABLE Act" as the federal Stephen Beck, Jr., Achieving a Better Life Experience (ABLE) Act of 2014. (Welfare & Institutions Code (W&IC) Section 4875).
5. Defines a "CalABLE account" as an ABLE account that is established within the Qualified ABLE Program (Program) and administered by the California ABLE Act Board (Board). (Id.)
6. Establishes the Program, administered by the Board, in this state to implement the ABLE Act. (W&IC Section 4877.)
7. Conforms the PIT Law and CT Law to provisions in federal income tax law that provide an exclusion from gross income for disbursements from ABLE accounts for qualifying expenses. (R&TC Sections 17140.4 and 23711.4.)

FISCAL EFFECT: The CDTFA estimates that the ARP provisions result in no revenue impact. The FTB estimates General Fund revenue losses of $40,000 in fiscal year (FY) 2026-27, $20,000 in FY 2027-28, and $30,000 in FY 2028-29 resulting from the conformity changes.

COMMENTS:

1. The author has provided the following statement in support of this bill:

SB 1436 combines two noncontroversial provisions: one matter raised by CDTFA regarding the administration of exemptions to the accelerated remittance program, and one matter raised by the Treasurer's Office regarding ABLE account conformity with federal law. Moving individual proposals as separate bills, even if technical and noncontroversial, through the legislative process is less efficient than consolidating them into one measure. Committee staff distributed these proposals to affected parties for review before they were included in the bill. Should anyone object to an item in the bill, the Committee will remove said item.

1. This bill is supported by State Treasurer Fiona Ma, who notes, in part:

State law governing CalABLE contribution limits is outdated because federal law removed the ABLE to Work Act's sunset provisions. As a result, California no longer matches federal law. This mismatch could confuse current and potential account holders when distinguishing what is permitted at the national level and what is authorized within the state. Californians with disabilities who are working may not know whether they can make additional contributions, which could reduce participation in the program.

SB 1436 would remove the existing sunset clause on state 'ABLE to Work' contributions, thereby ensuring that California law remains aligned with the federal ABLE to Work Act. By eliminating this expiration, this bill would provide ongoing certainty and stability for working individuals with disabilities who rely on their CalABLE accounts to save for their future.

1. Committee Staff Comments:
   1. Collecting and remitting SUT: State law imposes the sales tax on every retailer selling TPP in California. Retailers must register with the CDTFA and remit sales tax amounts collected at sale to the CDTFA. If the purchaser does not pay the sales tax to the retailer, the purchaser is liable for paying use tax to the CDTFA. The use tax is imposed on any person using, storing, or consuming TPP in California and must be remitted on or before the last day of the month following the quarterly period in which the person made the purchase. The use tax rate is the same as the sales tax rate.
      
      A person located in California, who makes three or more sales of TPP (including vehicles) in a 12-month period, is a retailer. California law requires retailers to hold a seller's permit and to collect and remit SUT on their sales of TPP, unless an exemption applies. Automobiles are considered TPP and sales of these items result in significant revenues for both the State and local governments.
      
      The table below shows the incremental structure of the SUT at its current statewide rate of 7.25%. Additionally, cities and counties may increase the SUT rate up to 2% with voter approval for specific or general purposes pursuant to the California Constitution's vote requirements.

CDTFA collects sales taxes from sellers, deposits the state share in the General Fund, and then allocates the local share of the Bradley-Burns sales tax and any district tax to the appropriate local jurisdiction.

• 1. Used car sales tax gap: The ARP began as an effort to close the $30.89 million SUT gap primarily associated with noncompliant used car dealers. The CDTFA estimated the annual tax gap from used vehicle sales was around $30.89 million in 2019. Through the efforts of the CDTFA and the DMV, this tax gap has dropped to only $8.4 million by the end of 2025. Under the ARP, certain used motor vehicle dealers are required to pay the sales tax and any applicable district use tax on their retail sales of certain used vehicles directly to the DMV when they submit a vehicle registration application.
     
     A dealer who sold 1,000 or more vehicles at retail in the current or preceding calendar year and whose account is in good standing with the CDTFA may be exempt from paying tax directly to the DMV. The account is considered to be in good standing if the dealer has timely filed and made applicable payments, including prepayments, for all required SUT returns for the 12 quarterly reporting periods immediately preceding the issuance of the exemption. Licensed new motor vehicle dealers are considered retailers and are not required to pay tax directly to the DMV, even if they also sell used vehicles.
     
     This bill improves the CDTFA's operational efficiency by allowing the CDTFA to reinstate a dealer's status as in good standing. The CDTFA currently may exempt qualifying high‑volume, low‑risk dealers that are in good standing. However, if the exemption is revoked, existing law provides no mechanism to reinstate that exempt status once compliance is restored.
     
     Additionally, this bill corrects a drafting error in R&TC Section 6295 that unintentionally limited the CDTFA's ability to reassess a dealer's good standing after the original exemption is issued. Under the existing language, the CDTFA must continue to assess good standing by referencing the 12 quarters preceding the original exemption, which provides no information regarding recent compliance. By redefining good standing to mean the dealer was compliant in the most recent 12 quarterly periods, the bill comports with legislative intent to allow an exemption from the ARP for compliant dealers.
  2. ABLE accounts: In 2014, Congress enacted the ABLE Act, which provides individuals with a way to contribute to tax-advantaged accounts as an alternative to Special Needs and Supplemental Needs Trusts. To qualify, an individual must be entitled to Social Security Disability Insurance benefits or have a disability certificate on file with the Internal Revenue Service. States administer ABLE programs on behalf of the programs' beneficiaries, who must be either blind or disabled before age 46.

ABLE accounts generally follow the same rules as Internal Revenue Code (IRC) Section 529 education savings accounts. Individuals can make non-deductible cash contributions to an account on behalf of the beneficiary, and earnings can grow tax-free. ABLE account distributions are excluded from the beneficiary's income if they are used to pay for qualified medical services of the beneficiary and do not exceed the cost of the services. The Legislature authorized CalABLE accounts in 2015 under the administration of the State Treasurer's Office and conformed to the federal tax treatment of ABLE accounts as of January 1, 2015, with the passage of AB 449 (Irwin), Chapter 774, Statutes of 2015, and SB 324 (Pavley), Chapter 796, Statutes of 2015. The CalABLE program opened to the public on December 18, 2018.

Since then, the Legislature has conformed several times to federal changes to ABLE accounts, including eliminating differences in qualification criteria, increasing contribution limits made by designated beneficiaries to up to the federal poverty level, and allowing taxpayers to roll over IRC 529 contributions to ABLE accounts, among other changes (AB 91 (Burke), Chapter 39, Statutes of 2019). In 2022, the Legislature made clarifying changes to align CalABLE account definitions with federal law regarding ABLE accounts, among other changes (AB 2216 (Irwin), Chapter 896, Statutes of 2022). In 2023, the Legislature enacted AB 339 (Irwin), Chapter 324, Statutes of 2023, conforming state law to changes made by the Consolidated Appropriations Act of 2023 that increased the age prior to which an individual's blindness or disability must have begun to qualify for the program from 26 to 46.

• 1. Recent changes to ABLE Accounts: In 2025, Congress enacted H.R. 1 ("One Big Beautiful Bill Act" or "OBBBA"), which enacted several changes to the ABLE program. First, H.R. 1 amended the inflation-indexing cross-reference for contribution limits from 1997 to 1996, which would generally result in a higher annual contribution limit. Second, H.R. 1 made permanent the "ABLE-to-Work" provision, which was set to expire at the end of 2025. Under this provision, employed individuals with disabilities can contribute additional income to their own ABLE account(s) beyond the $19,000 annual limit if they are not contributing to a defined contribution retirement plan. California's current specified date of conformity to the IRC is January 1, 2025, pursuant to SB 711 (McNerney), Chapter 231, Statutes of 2025, so California does not conform to recent changes to ABLE accounts made by H.R. 1.
     
  2. Prior legislation:
     1. SB 132 (Committee on Budget and Fiscal Review), Chapter 17, Statutes of 2025, among other things, amended R&TC Section 6295 to authorize the CDTFA, in consultation with the DMV, to exempt from the ARP any used car dealer that sold 1,000 or more vehicles at retail in the previous calendar year or the current calendar year, provided that the dealer's account is in good standing with the CDTFA.
     2. SB 1528 (Committee on Revenue and Taxation), Chapter 499, Statutes of 2024, among other things, authorized the CDTFA to waive the SUT prepayment requirement under R&TC section 6471 for used car dealers that meet specified requirements, including that more than 75% of the taxpayer's gross receipts were from retail sales of motor vehicles required to be registered under the Vehicle Code during the prior calendar year.
     3. SB 1496 (Committee on Governance and Finance), Chapter 474, Statutes of 2022, among other things, authorized the CDTFA, in consultation with the DMV, to postpone from January 1, 2023, to January 1, 2026, the date for specified used car dealers that made more than 300 retail vehicle sales in the previous calendar year and to remit applicable SUT to the DMV within 30 days of sale.
     4. AB 176 (Committee on Budget), Chapter 256, Statutes of 2021, a follow-up to AB 85 and AB 82, among other things, provided that a vehicle dealer shall pay the applicable use tax imposed under the Transactions and Use Tax Law. AB 176 also authorized the DMV to establish a compliance schedule based on operational needs to effectively enforce tax collection.
     5. AB 85 (Committee on Budget), Chapter 8, Statutes of 2020, and AB 82 (Committee on Budget), Chapter 14, Statutes of 2020, included a requirement that licensed used vehicle dealers pay the applicable SUT on their retail vehicle sales directly to the DMV at the same time a vehicle registration application is submitted.

REGISTERED SUPPORT / OPPOSITION:

Support

California State Treasurer Fiona Ma
California Taxpayers Association

Opposition

None on file

Analysis Prepared by: Wesley Whitaker / REV. & TAX. / (916) 319-2098

 CONSENT  

Bill No: SB 1436

Author: Committee on Revenue and Taxation

Introduced: 3/11/26

Vote: 21

SENATE REVENUE AND TAXATION COMMITTEE: 5-0, 4/22/26

AYES: McNerney, Alvarado-Gil, Ashby, Becker, Grayson

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SUBJECT: Qualified ABLE Program

SOURCE: California Department of Tax and Fee Administration; Office of the State Treasurer

DIGEST:

This bill revises the definition of “good standing” under the accelerated remittance program exemption and authorizes CDTFA to reinstate a revoked exemption; conforms state law to recent changes to IRC 529A pertaining to increased contributions to an ABLE account.

ANALYSIS:

Existing law:

1. Imposes the sales tax on every retailer “engaged in business in this state” that sells tangible personal property, and requires them to register with the California Department of Tax and Fee Administration (CDTFA), as well as remit taxes collected from purchasers to CDTFA.
2. Applies the sales tax whenever a retail sale occurs, which is generally any sale other than one for resale in the regular course of business.
3. Provides that unless the purchaser pays the sales tax to the retailer, they are liable for the use tax, which is imposed on any person consuming tangible personal property in the state, and requires the purchaser to remit use tax to CDTFA.
4. Sets the state sales and use tax rate at 7.25% of the sales price of the property sold or used, of which 3.9375% flows to the state General Fund.
5. Requires used-car dealers to generally remit applicable sales or use tax to the Department of Motor Vehicles (DMV) within 30 days of each sale (also known as “the accelerated remittance program”) (AB 85, Committee on Budget, Chapter 8, Statutes of 2020).
6. Authorizes CDTFA, in consultation with DMV, to exempt from the accelerated remittance program any used car dealer that sold 1,000 or more vehicles at retail in the previous calendar year or in the current calendar year, provided that the dealer’s account is in good standing with CDTFA (SB 132, Committee on Budget & Fiscal Review, Chapter 17, Statutes of 2025).
7. Defines “good standing” as a dealer that has timely:
8. Filed all required sales and use tax returns for the 12 quarterly reporting periods immediately preceding issuance of the exemption; and
9. Remitted all payments applicable to those returns, including any required sales and use tax prepayments.
10. Authorizes CDTFA to revoke the exemption after 30 days from the date CDTFA provides notice to the dealer that they are no longer in good standing or when vehicle sales have decreased to below 1,000 in a calendar year.
11. Restricts CDTFA to look only to the 12 quarterly periods immediately preceding issuance of the exemption to determine good standing.
12. Does not authorize CDTFA to reinstate a revoked exemption.
13. Conforms to the federal tax treatment of Internal Revenue Code (IRC) 529, Achieving a Better Life Experience (ABLE), accounts as of January 1st, 2015 (AB 449, Irwin, Chapter 774, Statutes of 2015; and SB 324, Pavley, Chapter 793, Statutes of 2015).
14. Has conformed to subsequent changes in federal law, including:
15. Eliminating differences in qualification criteria, increasing contribution limits made by designated beneficiaries to up to the federal poverty level, and allowing taxpayers to roll over IRC 529 plans to ABLE accounts (AB 91, Burke, Chapter 39, Statutes of 2019).
16. Federal ABLE account definitions (AB 2216, Irwin, Chapter 896, Statutes of 2022).
17. Increases the age, from 26 to 46, at which an individual’s blindness or disability must have begun to qualify for the program (AB 339, Irwin, Chapter 324, Statutes of 2023).
18. Has a specified date of conformity to the IRC of January 1, 2025.
19. Does not conform to changes to federal law made by H.R. 1 (Public Law 119-21, One Big Beautiful Bill Act), to the ABLE program.

This bill:

1. Revises the definition of “good standing” to look at the 12 quarterly reporting periods preceding reinstatement of the dealer’s exemption to the accelerated remittance program.
2. Allows CDTFA to reinstate a revoked exemption.
3. Conforms state law to H.R. 1’s change to inflation-indexing contribution limits in the Personal Income and Corporation Taxes.
4. Makes conforming changes to a provision in the Welfare and Institutions Code relating to ABLE accounts.

Background

SB 132 clean-up. Under SB 132, once CDTFA grants an exemption, a follow-up good standing determination must still be based on the periods immediately preceding issuance of the exemption. Accordingly, a taxpayer that receives an exemption but later fails to comply with the requirement to timely file and remit all applicable payments may argue that they cannot be subject to revocation because they were in good standing during the period immediately preceding issuance of the exemption. This bill remedies this by revising the definition of “good standing” to mean that the dealer has timely filed and remitted applicable payments, including applicable prepayments, for all required sales and use tax returns for the most recent 12 quarterly reporting periods.

Further, SB 132 did not authorize CDTFA to reinstate a revoked exemption after a dealer returns to good standing or reaches 1,000 or more vehicle sales in a calendar year following the revocation. Since the exemption enhances administrative efficiency and reduces compliance burdens, allowing CDTFA to reinstate a revoked exemption once the conditions for exemption are met should better accomplish the program’s intent.

ABLE Account Conformity. For calendar year 2026, federal law authorizes individual contributions up to $20,000 to an ABLE account in the name of a specified beneficiary, and the designated beneficiary may also make a contribution that exceeds that limit, subject to annual inflation indexing. State law does not generally automatically conform to changes in federal tax law. As a result, under current state law, for calendar year 2026, individual contributions would be limited to $19,000, and beneficiaries would not be allowed to make higher contributions. The bill will conform the state personal and corporate income tax laws to H.R. 1’s recent changes to contribution limits for ABLE accounts. This bill also makes conforming changes to the Welfare and Institutions Code, removing the sunset date of the higher contribution rule.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 5/4/2026)

California Taxpayers Association

OPPOSITION: (Verified 5/4/2026)

None received

ARGUMENTS IN SUPPORT: According to the California Taxpayers Association, “California takes a selective approach to conforming to federal tax changes one provision at a time, allowing lawmakers to evaluate each amendment for its fiscal impact, equity implications, and alignment with the state’s economic priorities before deciding whether to adopt it. For the nation’s most populous and economically diverse state, this tailored approach preserves the flexibility to support key industries, protect low-income taxpayers, and maintain a stable revenue base rather than importing federal rules that may not suit California’s unique housing, labor, and environmental policies and the state’s economic growth needs. … SB 1436 [ensures] that California safeguards both its budget and its policy goals while giving taxpayers more consistency with federal rules.”

Prepared by: Haley Summers / REV. & TAX. / (916) 651-4117

5/5/26 15:55:54

**** END ****

SENATE COMMITTEE ON REVENUE AND TAXATION

Senator Jerry McNerney, Chair

2025 - 2026 Regular

Qualified ABLE Program

Revises the definition of “good standing” under the accelerated remittance program exemption and authorizes CDTFA to reinstate a revoked exemption; conforms state law to recent changes to IRC 529A pertaining to increased contributions to an ABLE account.

Background

Sales and use tax (SUT). State law imposes the sales tax on every retailer selling tangible personal property in this state. Retailers must register with the California Department of Tax and Fee Administration (CDTFA) and remit sales tax amounts collected at sale to CDTFA. If the purchaser does not pay the sales tax to the retailer, the purchaser is liable for paying use tax to CDTFA. The use tax is imposed on any person consuming tangible personal property in the state and must be remitted on or before the last day of the month following the quarterly period in which the person made the purchase. The use tax rate is the same as the sales tax rate.

The table below shows the incremental structure of the sales and use tax at its current statewide rate of 7.25%. Additionally, cities and counties may increase the sales and use tax rate up to 2% with voter approval for specific or general purposes pursuant to the California Constitution’s vote requirements.

CDTFA collects sales taxes from retailers, deposits the state share in the General Fund, and then allocates the local share of the Bradley-Burns sales tax and any district tax to the appropriate jurisdiction.

Accelerated remittance program exemption. Normally, retailers remit sales tax to CDTFA. However, used-car dealers must generally remit applicable sales or use tax to the Department of Motor Vehicles (DMV) within 30 days of each sale (AB 85, Committee on Budget, 2020). This requirement seeks to reduce noncompliance with sales tax remission and is informally referred to as “the accelerated remittance program.”

To enhance CDTFA’s operational efficiency, SB 132 (Committee on Budget & Fiscal Review, 2025) authorizes the CDTFA, in consultation with DMV, to exempt from the accelerated remittance program any used car dealer that sold 1,000 or more vehicles at retail in the previous calendar year or in the current calendar year, provided that the dealer’s account is in good standing with CDTFA. SB 132 defines “good standing” as a dealer that has timely:

• Filed all required sales and use tax returns for the 12 quarterly reporting periods immediately preceding issuance of the exemption; and
• Remitted all payments applicable to those returns, including any required sales and use tax prepayments.

SB 132 also:

• Authorizes CDTFA to revoke the exemption after 30 days from the date CDTFA provides notice to the dealer that they are no longer in good standing or when vehicle sales have decreased to below 1,000 in a calendar year.
• Restricts CDTFA to look only to the 12 quarterly periods immediately preceding issuance of the exemption to determine good standing.
• Did not authorize CDTFA to reinstate a revoked exemption.

ABLE accounts. In 2014, Congress enacted the Stephen Beck Jr. Achieving a Better Life Experience (ABLE) Act (PL 113-295), which provides individuals with a way to contribute to tax-advantaged accounts as an alternative to Special Needs and Supplemental Needs Trusts. The individual must be entitled to Social Security Disability Insurance benefits or have a disability certificate on file with the Internal Revenue Service. States administer ABLE programs on behalf of the programs’ beneficiaries, who must be either blind or disabled before age 46.

ABLE accounts generally follow the same rules as IRC 529 education savings accounts. Individuals can make non-deductible cash contributions to an account on behalf of the beneficiary, and earnings can grow tax-free. ABLE account distributions are excluded from the beneficiary’s income if they’re used to pay for qualified medical services of the beneficiary and do not exceed the cost of the services. The Legislature authorized California ABLE (CalABLE) accounts in 2015 under the administration of the State Treasurer’s Office and conformed to the federal tax treatment of ABLE accounts as of January 1st, 2015 (AB 449, Irwin, and SB 324, Pavley, 2015). The CalABLE program opened to the public on December 18, 2018.

Since then, the Legislature has conformed several times to federal changes to ABLE accounts, including eliminating differences in qualification criteria, increasing contribution limits made by designated beneficiaries to up to the federal poverty level, and allowing taxpayers to roll over IRC 529 plans to ABLE accounts, among other changes (AB 91, Burke, 2019). In 2022, the Legislature made clarifying changes to align CalABLE account definitions with federal law regarding ABLE accounts, among other changes (AB 2216, Irwin). In 2023, the Legislature enacted AB 339 (Irwin), conforming state law to changes made by the Consolidated Appropriations Act of 2023 that increased the age prior to which an individual’s blindness or disability must have begun to qualify for the program from 26 to 46.

In 2025, Congress enacted H.R. 1, which enacted several changes to the ABLE program (Public Law 119-21, One Big Beautiful Bill Act, or “OBBBA”). In Section 70115 of H.R. 1, two changes were made to ABLE Accounts in IRC 529A. First, it amended the inflation-indexing cross-reference for contribution limits from 1997 to 1996, which would generally result in a higher annual contribution limit. Second, H.R. 1 made permanent the higher contribution limit for contributions made by designated beneficiaries, which would have expired in 2025. The state’s current specified date of conformity in the RTC to the IRC is January 1, 2025 (SB 711, 2025, McNerney), so it does not conform to H.R 1’s changes to ABLE accounts.

CDTFA wants to revise the definition of “good standing” under the accelerated remittance program exemption and authorize CDTFA to reinstate a revoked exemption. The Treasurer’s Office wants to conform state tax law to the H.R. 1 provisions that allow a beneficiary to make increased contributions to an ABLE account permanent.

Proposed Law

Senate Bill 1436 makes two changes:

• Revises the definition of “good standing” to look at the 12 quarterly reporting periods preceding reinstatement of the dealer’s exemption to the accelerated remittance program; and allows CDTFA to reinstate a revoked exemption.
• Conforms state law to H.R. 1’s change to inflation-indexing contribution limits in the Personal Income and Corporation Taxes and makes conforming changes to a provision in the Welfare and Institutions Code relating to ABLE accounts.

State Revenue Impact

According to the CDTFA, the accelerated remittance exemption provisions of SB 1436 will result in no fiscal impact; and, according to the Franchise Tax Board, the ABLE account provision of SB 1436 will result in a revenue loss of $40,000 in fiscal year (FY) 2026-2027, $20,000 in FY 2027-2028, and $30,000 in FY 2028-2029.

Comments

1. Purpose of the bill. SB 1436 combines two noncontroversial provisions: one matter raised by CDTFA regarding the administration of exemptions to the accelerated remittance program, and one matter raised by the Treasurer’s Office regarding ABLE account conformity with federal law. Moving individual proposals as separate bills, even if technical and noncontroversial, through the legislative process is less efficient than consolidating them into one measure. Committee staff distributed these proposals to affected parties for review before they were included in the bill. Should anyone object to an item in the bill, the Committee will remove said item.

2. Good standing. Under SB 132, once CDTFA grants the exemption, a follow-up good standing determination must still be based on the periods immediately preceding issuance of the exemption. Accordingly, a taxpayer that receives an exemption but later fails to comply with the requirement to timely file and remit all applicable payments may argue that they cannot be subject to revocation because they were in good standing during the period immediately preceding issuance of the exemption. This bill remedies this by revising the definition of “good standing” to mean that the dealer has timely filed and remitted applicable payments, including applicable prepayments, for all required sales and use tax returns for the most recent 12 quarterly reporting periods.

3. Reinstating a revoked exemption. SB 132 did not authorize CDTFA to reinstate a revoked exemption after a dealer returns to good standing or reaches 1,000 or more vehicle sales in a calendar year following the revocation. Since the exemption enhances administrative efficiency and reduces compliance burdens, allowing CDTFA to reinstate a revoked exemption once the conditions for exemption are met should better accomplish the program’s intent.

4. Conformity. For calendar year 2026, federal law authorizes individual contributions up to $20,000 to an ABLE account in the name of a specified beneficiary, and the designated beneficiary may also make a contribution that exceeds that limit, subject to annual inflation indexing. State law does not generally automatically conform to changes in federal tax law. As a result, under current state law, for calendar year 2026, individual contributions would be limited to $19,000, and beneficiaries would not be allowed to make higher contributions. The bill will conform the state personal and corporate income tax laws to H.R. 1’s recent changes to contribution limits for ABLE accounts. This bill also makes conforming changes to the Welfare and Institutions Code, removing the sunset date of the higher contribution rule.

Support and Opposition

(4/16/26)

Support: California Taxpayers Association

Opposition: None received.

-- END --