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AB 1606

Personal Income Tax Law: Corporation Tax Law: credits: cleanup costs.

2025-2026 Regular Session Introduced by Stephanie Nguyen

Creates a temporary California tax credit up to $20,000 per qualified business for specific cleanup costs related to encampments, dumping, or abandoned property (2027–2031; sunset

In committee: Set, second hearing. Referred to REV. & TAX. suspense file.
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WeVote Research Nonpartisan
Bill Summary · AB 1606

Summary of AB 1606 (2025-2026, California) — Personal Income Tax Law: Corporation Tax Law: credits: cleanup costs

1) Purpose and intent

  • Establishes a temporary state tax credit (sunset December 1, 2032) to assist qualified taxpayers with cleanup costs related to unauthorized encampments, illegal dumping, and abandoned property on commercial real property.
  • The credit is designed to provide targeted financial relief to business property owners or lessees addressing immediate cleanup needs, supplementing existing deductions.

2) Key provisions and changes

Applicable tax years and amount

  • The bill creates credits for taxable years beginning on or after January 1, 2027 and before January 1, 2032.
  • Credit amount: up to $20,000 per qualified taxpayer per taxable year.
  • The credit applies against the net tax (for individuals filing under Personal Income Tax Law) and against the tax (for entities under Corporation Tax Law).

Qualified cleanup expenses

  • Qualifying costs are directly related to:
    • One-time removal and disposal of unauthorized encampments, illegal dumping, and abandoned property on the taxpayer’s state property.
    • Costs must be paid or incurred within 60 days of discovery.
  • Eligible expense categories (examples):
    • Waste removal and disposal services.
    • Sanitization and restoration to pre-encampment condition.
    • Temporary security measures (e.g., fencing or gates) directly tied to cleanup (not ongoing security contracts or monitoring).
    • Repairs caused by encampments/dumping (excludes general improvements or upgrades).
    • Installation of passive deterrents to prevent reencampment (e.g., riprap) (excluding permanent construction or new structures).
  • Ineligible: ongoing maintenance, permanent security systems, capital improvements, employee/contractor compensation for normal employment.

Eligibility and documentation

  • “Qualified taxpayer” means a business entity (including sole proprietorships) that owns or leases commercial real property in California affected by encampments, dumping, or abandoned property.
  • Taxpayers must provide documentation upon request (prior condition of property; detailed invoices/receipts from cleanup contractors).
  • A perjury-certification is required, stating that the expenses were paid/incurred as a direct result of encampments/dumping/abandoned property and that the property address and ownership/lessee status are accurate; expenses must meet all criteria.

Coordination with other tax provisions

  • Any deduction taken for the same expenses must be reduced by the credit amount.
  • If multiple taxpayers claim the same expenses, the credit is only available to the taxpayer who directly incurred and paid for the expenses and maintains payment documentation.

Administrative and oversight requirements

  • Emergency regulations may be adopted by the Franchise Tax Board (FTB) to implement the section, effective immediately upon filing, and lasting until revised/repealed.
  • The bill requires a report to the Legislature by July 1, 2029 (and annually thereafter) detailing:
    • The number of taxpayers allowed a credit under this section and Section 23688.
    • The total dollar value of credits allowed.
  • The relationship with Section 41 (tax credits) is acknowledged in defining performance indicators.

Sunset and repeal

  • The credit provisions for both sections (17053.76 and 23688) are operative only until December 1, 2032, at which point they repeal.

Constitutional note

  • The act is enacted as a tax levy with immediate effect.
  • The bill includes standard language about no local reimbursement obligations (consistent with tax levy provisions).

3) Who would be affected

  • Qualified taxpayers: businesses owning or leasing commercial real property in California affected by unauthorized encampments, illegal dumping, or abandoned property.
  • Taxpayers who incur qualifying cleanup costs and meet documentation/perjury-certification requirements.
  • Franchise Tax Board: tasked with administering the credit, reviewing documentation, and producing annual reports to the Legislature.
  • Localities/property owners may experience indirect effects via reduced ongoing cleanup burdens, though local reimbursements are not mandated.

4) Procedural and timeline notes

  • Introduced January 20, 2026; referred to REV. & TAX.
  • In committee process: first and second hearings scheduled (as of the provided history, a hearing was canceled/set in past steps).
  • Effective date: immediate tax levy; credits available for 2027–2031 inclusive, with a sunset in 2032.
  • Emergency regulatory authority granted to implement the credit with immediate effect.

5) Financial and policy context

  • The bill explicitly cites a policy rationale linked to displacement of unhoused individuals and increased encampments on private property, arguing for targeted relief beyond standard business deductions.
  • It seeks to quantify performance through the number and total value of credits issued and to collect data for legislative oversight.

Note: This summary outlines the bill’s provisions as introduced and amended text indicates. For all final details, please refer to the enrolled bill and current California Revenue and Taxation Code as enacted.

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

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