February developments underscored the evolving tax, enforcement, and transaction landscape in California. A proposal to terminate the water’s-edge election beginning in 2028 could materially affect multinational tax modeling. Wealth-tax ballot efforts continued, local governments pursued new revenue streams, regulators announced the largest CCPA settlement to date, and a newly enacted state premerger notification law will expand deal-closing requirements starting in 2027.
Tax
State corporate income tax bill targets water’s-edge election starting in 2028
AB 1790, introduced on February 10, 2026, would terminate California’s water’s-edge election for taxable years beginning on or after January 1, 2028, shifting affected taxpayers toward mandatory worldwide combined reporting (unless another exception applies). For multinationals with California filing groups built around water’s-edge planning, this is a material model change (effective-tax-rate, provision, and cash-tax forecasting). Even if the bill does not advance quickly, it is an early signal for 2026 legislative risk that can affect transaction diligence and long-range tax planning.
Republicans expressed their opposition to the bill. “One problem is if that bill passes, we will be the only state in the union that gets rid of that Waters Edge feature,” Sen. Roger Niello, R-Fair Oaks, said. “This isn’t exactly a way to try to overcome our business-unfriendly environment. I think it would be very unwise.”
Los Angeles County sales tax headed to June ballot
Los Angeles County officials advanced a temporary half-cent general sales tax for the June 2026 ballot, with public estimates of roughly $1 billion per year in revenue to support health care services. One supervisor publicly opposed the measure on the grounds that local taxpayers should not backfill for federal funding reductions. If approved, the measure would add another layer to California’s already complex local rate environment and could affect point-of-sale systems, invoicing, and tax engines. Companies with significant taxable sales into Los Angeles County should flag potential rate changes and downstream pricing/contracting impacts (especially for long-term procurement where “tax change” clauses matter).
Ballot proposal to exempt seniors from property taxes approved for signature gathering
A ballot initiative on whether to exempt homeowners age 60 and older from paying property taxes on their primary residences is cleared to gather signatures in support.
Wealth tax debate continues
California Democrats are split over the Billionaire Tax Act, which would assess a 5% tax on the net worth of billionaires to fund health care programs.
Commentary and analysis
Jared Walczak, “California can learn from European countries that tried wealth taxes,” CalMatters, February 19, 2026.
Maureen Kennedy, “Relocation threats shouldn’t stop California from taxing billionaires,” The Hill, February 26, 2026.
Eliyahu Kamisher, “Even States With No Income Tax Are Flirting With Taxing the Rich,” Bloomberg, February 27, 2026.
Paris Barraza, “What is the California Billionaire Tax Act? Is it actually happening?,” USA TODAY, February 20, 2026
Steve Forbes, “California’s Proposed Wealth Tax Is A Result Of The Dollar’s Devaluation,” Forbes, February 11, 2026.
Consumer Privacy
California announces largest CCPA settlement to date
On February 11, Attorney General Rob Bonta announced a $2.75 million settlement with Disney tied to alleged failures to properly honor consumer opt-out signals across devices/services, positioning it as a major enforcement marker for cross-platform privacy controls.
Antitrust
California adopts state-level premerger notification law, effective in 2027
Governor Newsom signed SB 25, the California Uniform Antitrust Pre-Merger Notification Act, requiring certain parties that make federal HSR filings to submit a copy of their filing materials to the California Attorney General starting January 1, 2027.
California to review Paramount-Warner merger
State Attorney General Rob Bonta said California is already investigating the Paramount Skydance merger with Warner Bros. “As the epicenter of the entertainment industry, California has a special interest in protecting competition,” Bonta said in a social media post.
Budget and Fiscal Issues
Commentary and analysis
Dan Walters, “Here’s how Newsom’s spending binge outstripped revenues, creating California’s chronic deficit,” CalMatters, February 13, 2026.
Energy and Climate
New Bills Target a Range of Energy Issues, with a Focus on Affordability
Legislators introduced an array of new legislation in the 2026 legislative session. With the February 20 deadline for new bills, several policy themes begin to emerge with several areas continuing from the 2025 session. Read more at the California Energy Journal.
Bill Would Expand CARB Authority over Indirect Emissions Sources
California Assemblymember Robert Garcia introduced legislation to expand the state’s authority to regulate greenhouse gas (GHG) emissions. AB 1777 would empower the California Air Resources Board (CARB) to adopt regulations targeting emissions linked to “indirect sources,” which are facilities and land uses that attract significant mobile emissions but have historically fallen outside direct regulatory control by state authorities. Read more at the California Energy Journal.
Bill to Hold Oil Companies Liable for Climate Disasters Reintroduced
Senator Scott Wiener reintroduced legislation to authorize civil lawsuits against oil companies and other “responsible parties” for damages from climate change. SB 982, introduced on February 5, 2026, would authorize the state attorney general to bring a civil action against a responsible party for “climate-attributable damage.” SB 982 is a revised successor to SB 222, which was introduced in 2025. Read more at the California Energy Journal.
CARB adopts initial climate disclosure regulations
CARB approved a climate transparency regulation package tied to SB 253 and SB 261 at its February 26, 2026 board meeting, including a fee structure and setting August 10, 2026 as the first-year SB 253 reporting deadline (with initial-year reporting limited to Scope 1 and Scope 2, per CARB’s announcement).