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AB 781

Charges: health savings accounts: electricity.

2025-2026 Regular Session Introduced by Carl DeMaio

AB 781 would temporarily conform California to federal rules to allow HSA deductions for tax years 2026-2030, boosting HSA use and reducing state revenue.

From committee: Filed with the Chief Clerk pursuant to Joint Rule 56.
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Bill Summary · AB 781

AB 781 — Charges: health savings accounts: electricity (Stop Taxing Us Act of 2025)

Status: Introduced Feb 18, 2025. Referred to Revenue & Taxation and Utilities & Energy committees; set for first hearing but hearing canceled at author's request (4/21/2025).

Purpose / Intent

AB 781 contains two primary components: (1) changes to electricity rate and low‑income assistance rules administered by the California Public Utilities Commission (CPUC), and (2) temporary state tax conformity for health savings accounts (HSAs). The bill also expresses the Legislature’s intent to pursue additional measures to eliminate, reduce, or restrict certain taxes and fees. The act is titled the "Stop Taxing Us Act of 2025."

Key provisions

1. Electricity rate design and low‑income program (Public Utilities Code)

  • Repeals specified existing statutory provisions that (a) authorized the CPUC to adopt or expand fixed charges for residential electricity customers, (b) allowed fixed charges for any residential rate schedule, and (c) required the CPUC to authorize an income‑graduated fixed charge for default residential rates by July 1, 2024, along with rules about phase‑ins of rate increases dating to before Jan 1, 2014.
  • Amends Section 739.1 (CARE — California Alternate Rates for Energy) to clarify program rules for low‑income electricity and gas customers:
    • Eligibility is based on household income up to 200% of federal poverty guidelines (one‑person households referenced to two‑person guideline).
    • For electrical corporations with ≥100,000 California accounts, the average effective CARE discount must be between 30% and 35% of revenues that would otherwise be billed to non‑CARE customers; discounts must be reflected as a reduction in the overall bill and calculated as a weighted average.
    • Limits on annual reductions to CARE discounts if the utility provided a higher discount as of Jan 1, 2013.
    • Directs CPUC actions on outreach, enrollment, administrative cost recovery, and categorical eligibility coordination with other public assistance programs.

2. State tax conformity for Health Savings Accounts (Personal Income Tax Law)

  • For taxable years beginning on or after Jan 1, 2026 and before Jan 1, 2031, California would allow a deduction in computing adjusted gross income for contributions to HSAs in modified conformity with federal rules:
    • Deduction equals aggregate cash contributions made during the taxable year by or on behalf of an eligible individual to that individual’s HSA (subject to federal eligibility and limits).
    • Conforms to federal law regarding allowable rollovers from Archer MSAs, health flexible spending arrangements (FSAs), and health reimbursement arrangements (HRAs) into HSAs, and associated penalties/conformity rules.

3. Legislative intent

  • Expresses intent to pursue subsequent legislation to eliminate, reduce, or restrict taxes and fees.

Who is affected

  • Residential electricity customers, especially low‑income households eligible for CARE.
  • Electrical corporations (utilities), particularly those with 100,000+ accounts, whose rate design, cost recovery, and CARE obligations are affected.
  • Taxpayers with HSAs (or those eligible for rollovers) for tax years 2026–2030.
  • State tax revenues and administering agencies (Franchise Tax Board, CDTFA) because of potential reduced income tax receipts and conformity changes.

Procedural / Timing notes

  • HSA deduction/conformity applies to taxable years beginning between Jan 1, 2026 and Dec 31, 2030 (statutory end date Jan 1, 2031).
  • The bill is in committee; the first hearing was set but canceled at the request of the author (latest action 4/21/2025).
  • Digest indicates majority vote required; no appropriation specified.

Potential impacts / considerations

  • Removing statutory authorization for fixed residential charges could limit CPUC’s use of fixed monthly charges as a rate‑design tool and affect how utilities recover fixed costs (potentially shifting costs across usage tiers or customer classes).
  • Specified CARE discount floors/ceilings and calculation methods may change subsidy levels and cost allocation between CARE and non‑CARE customers.
  • Temporary state tax conformity for HSAs likely reduces state income tax revenue modestly and encourages HSA use and rollovers during 2026–2030.
  • Implementation would require administrative actions by CPUC and tax agencies to align regulations, billing, and tax forms.

Compiled from official sources — confirm details with the bill’s official record.

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