Key tax and policy developments from December include tax administration guidance, appellate rulings, employment mandates, and climate-compliance preparation.
Tax
California Office of Tax Appeals Rejects Interest Relief Claim
In a December opinion, the Office of Tax Appeals denied a request to refund more than $440,000 in interest. The tribunal held that interest continues accruing on an outstanding deficiency even when the state holds excess funds from overpayments applied to other tax years. The ruling underscores the tribunal’s narrow reading of interest-relief authority and highlights the financial exposure associated with unresolved assessments. (see Bloomberg Tax.)
California Court of Appeal Upholds Los Angeles Transfer Tax
An appellate panel upheld Los Angeles’ voter-approved transfer tax on high-value real estate transactions, rejecting procedural challenges to the initiative. The decision cements the durability of the local revenue measure and reinforces judicial deference to properly enacted ballot initiatives.
California Department of Tax and Fee Administration Clarifies Sales and Use Tax Appeals
The California Department of Tax and Fee Administration (CDTFA) issued detailed procedural guidance outlining the full sequence for disputing sales and use tax and special tax determinations. The publication addresses petitions for redetermination, appeals conferences, refund claims, settlement proposals, and escalation to the Office of Tax Appeals. The guidance emphasizes strict filing deadlines and documentation requirements. For taxpayers, the update reinforces that procedural compliance—timing, substantiation, and format—can be dispositive in audit disputes. (see Bloomberg Tax.)
Budgetary and Fiscal Issues
California State Auditor Report Intensifies Scrutiny
A California State Auditor report identified tens of billions of dollars in misused or insufficiently tracked public funds across multiple programs. While the report does not directly impose new compliance mandates, it is likely to influence legislative oversight, reporting standards, and audit practices—particularly for businesses receiving state funds or contracting with public agencies.
Employment and Workforce Regulation
2026 Employment Laws Take Effect
Reporting in late December highlighted the breadth of employment statutes taking effect January 1, 2026. The changes span pay transparency, paid leave requirements, restrictions on training-repayment agreements, wage-judgment enforcement, union protections, recordkeeping, and expanded employee notice mandates.
Some obligations stem from newly enacted laws, while others reflect inflation-indexed thresholds or delayed implementation timelines. For employers, the cumulative effect increases compliance complexity across payroll, human resources, and litigation risk management.