Assembly BillFailedRevenue and Taxation
AB 1443: Personal income taxes: unemployment insurance: tips.
What AB 1443 does, verified December 7, 2025
The bill aims to modify the state's personal income tax law to exclude tips from gross income for taxable years 2026-2031. This exclusion would apply to both income tax purposes and unemployment insurance. The bill also makes changes to other provisions, including income tax withholding and employment training tax. Additionally, the bill requires more detailed information for any new tax expenditure, including specific goals and performance indicators.
Bill journey
✓IntroducedComplete
2In CommitteeCurrent
3First Chamber FloorPending
4Second ChamberPending
5GovernorPending
6ChapteredPending
Last action: From committee: Without further action pursuant to Joint Rule 62(a). (2025-06-05)Alert me
Author and sponsors
Full contact details, staff, and committees with Connect, $16/moUnlockRecent actions8 total · showing 5
| Jun. 05, 2025 | From committee: Without further action pursuant to Joint Rule 62(a). |
| Apr. 28, 2025 | In committee: Set, final hearing. Held under submission. |
| Apr. 21, 2025 | In committee: Set, second hearing. Referred to suspense file. |
| Apr. 07, 2025 | In committee: Set, first hearing. Hearing canceled at the request of author. |
| Mar. 17, 2025 | Referred to Com. on REV. & TAX. |
Latest bill textIntroduced version, February 21, 2025 · 8,109 words
CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION
Assembly Bill
No. 1443
| Introduced by Assembly Member Castillo |
February 21, 2025 |
An act to amend Sections 17215.1, 17551, 18631, 18663, and 19183 of, to add Section 17132.6 to, and to add and repeal Section 17131.18.5 of, the Revenue and Taxation Code, and to amend, repeal, and add Sections 940, 13009, and 13009.5 of, and to repeal and add Sections 927, 987.7, 13027, and 13055 of, the Unemployment Insurance Code, relating to taxation.
LEGISLATIVE COUNSEL'S DIGEST
AB 1443, as introduced, Castillo. Personal income taxes: unemployment insurance: tips.
The Personal Income Tax Law, in modified conformity with federal law, provides various exclusions from gross income in computing tax liability. Existing law requires employers to make specified payments and withholdings from wages paid for employment to, and to file reports of wages and make contributions for unemployment insurance and the employment training tax with, the Employment Development Department. The department is charged with administering the state’s payroll taxes.
This bill, for taxable years beginning on or after January 1, 2026, and before January 1, 2031, would exclude tips, as defined, from gross income for the purposes of the Personal Income Tax Law. The bill, on and after January 1, 2026, and until January 1, 2031, would also exclude tips from the definition of wages paid for employment for purposes of income tax withholding and for purposes of unemployment insurance and the employment training tax. This bill would also make related changes to other provisions.
Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
This bill would include additional information required for any bill authorizing a new tax expenditure.
The people of the State of California do enact as follows:
SECTION 1.
Section 17131.18.5 is added to the Revenue and Taxation Code, to read:17131.18.5.
(a) For taxable years beginning on or after January 1, 2026, gross income does not include tips.(b) For purposes of this section, “tips” includes any gratuity provided by a customer or client of the employer’s business.
(c) (1) For purposes of complying with Section 41, the Legislature finds and declares as follows:
(A) The goal of the exclusion provided by this section is to assist individuals with retaining more of their earnings.
(B) The performance indicators for the Legislature to use in determining whether the exclusion achieves its goal shall be the number of returns claiming the exemption.
(2) (A) The Franchise Tax Board, no later than December 1, 2036, shall provide a report to the Legislature, in compliance with Section 9795 of the Government Code, detailing, to the extent data is available, the number of returns claiming the exemption.
(B) The disclosure provisions of this paragraph shall be treated as an exception to Section 19542.
(C) The requirement for submitting a report imposed under subparagraph (A) shall become inoperative on December 1, 2040, pursuant to Section 10231.5 of the Government Code.
(d) This section shall remain in effect only until January 1, 2031, and as of that date is repealed, unless a later enacted statute that is enacted before January 1, 2031, deletes or extends that date.
SEC. 2.
Section 17132.6 is added to the Revenue and Taxation Code, to read:17132.6.
For taxable years beginning on or after January 1, 2026, and before January 1, 2031, Section 102(a) of the Internal Revenue Code is modified to treat tips as property transferred by gift.SEC. 3.
Section 17215.1 of the Revenue and Taxation Code is amended to read:17215.1.
(a) Section 220(f)(5) of the Internal Revenue Code, relating to rollover contributions, shall not apply.(b) For taxable years beginning on or after January 1, 2026, and before January 1, 2031, Section 220(b)(4)(A) of the Internal Revenue Code is modified to strike out “tips.”
SEC. 4.
Section 17551 of the Revenue and Taxation Code is amended to read:17551.
(a) Subchapter E of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to accounting periods and methods of accounting, shall apply, except as otherwise provided.(b) Section 444(c)(1) of the Internal Revenue Code, relating to effect of election, shall not apply.
(c) (1) Notwithstanding the specified date contained in paragraph (1) of subdivision (a) of Section 17024.5, Section 457 of the Internal Revenue Code, relating to deferred compensation plans of state and local governments and tax-exempt organizations, shall apply, except as otherwise provided, without regard to taxable year to the same extent as applicable for federal income tax purposes.
(2) The maximum deferred compensation for the taxable year that may be excluded from gross income under Section 457 of the Internal Revenue Code, as applicable for state purposes, shall not exceed the amount of deferred compensation that may be excluded from gross income under Section 457 of the Internal Revenue Code, as in effect on January 1, 2010, including additional elective deferrals under Section 414(v) of the Internal Revenue Code, as in effect on January 1, 2010.
(d) (1) For taxable years beginning on or after January 1, 2002, the basis of any person in the plan shall be increased by the amount of compensation not allowed to be excluded under subdivision (a).
(2) Any basis described in paragraph (1) shall be recovered in the manner specified in Section 17085.
(e) Notwithstanding the limitations provided in subdivision (a), any income attributable to compensation deferred in a plan in taxable years beginning on or after January 1, 2002, in conformance with Section 457 of the Internal Revenue Code, as applicable for federal and state purposes, shall not be includable in the gross income of the individual for whose benefit the plan was established until distributed pursuant to the provisions of the plan or by operation of law.
(f) (1) Section 451(i) of the Internal Revenue Code, relating to special rule for sales or dispositions to implement Federal Energy Regulatory Commission or state electric restructuring policy, shall not apply.
(2) For taxable years beginning on or after January 1, 2026, and before January 1, 2031, Section 451(e) of the Internal Revenue Code, relating to special rule for employee tips, shall not apply.
(g) Section 457A of the Internal Revenue Code, relating to nonqualified deferred compensation from certain tax indifferent parties, shall not apply.
SEC. 5.
Section 18631 of the Revenue and Taxation Code is amended to read:18631.
(a) This article does not apply to any payment of interest obligations not taxable under Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001).(b) Except as otherwise provided, every person required to file an information return with the Secretary of the Treasury under any of the federal sections listed in subdivision (c) may be required to file a copy of the federal information return with the Franchise Tax Board at the time and in the manner as it may, by forms and instructions, require.
(c) Subdivision (b) shall apply to each of the following:
(1) Section 6034A of the Internal Revenue Code, relating to information to beneficiaries of estates and trusts.
(2) Section 6039 of the Internal Revenue Code, relating to returns required in connection with certain options.
(3) Section 6039C of the Internal Revenue Code, relating to returns with respect to foreign persons holding direct investments in United States real property interests, if that person holds a direct investment in a California real property as defined in Section 18662.
(4) Section 6041 of the Internal Revenue Code, relating to information at source.
(5) Section 6041A of the Internal Revenue Code, relating to returns regarding payments of remuneration for services and direct sales, except that no return or statement shall be required with respect to direct sales pursuant to Section 6041A(b) of the Internal Revenue Code.
(6) Section 6042 of the Internal Revenue Code, relating to returns regarding payments of dividends and corporate earnings and profits.
(7) Section 6045 of the Internal Revenue Code, relating to returns of brokers.
(8) Section 6049 of the Internal Revenue Code, relating to returns regarding payments of interest.
(9) Section 6050H of the Internal Revenue Code, relating to returns relating to mortgage interest received in trade or business from individuals.
(10) (A) Section 6050I of the Internal Revenue Code, relating to returns relating to cash received in trade or business, etc., except that Section 6050I(g) of the Internal Revenue Code, relating to cash received by criminal court, shall not apply.
(B) (i) The Attorney General shall, upon court order following a showing ex parte to a magistrate of an articulable suspicion that an individual or entity has committed a felony offense to which a federal information return is related, be provided a copy of a federal information return filed with the Franchise Tax Board under this paragraph. The Attorney General may make a return or information therefrom available to a district attorney subject to regulations promulgated by the Attorney General. The regulations shall require the district attorney seeking the return or information to specify in writing the specific reasons for believing that a felony offense has been committed to which the return or information is related.
(ii) Any information or return obtained by the Attorney General or a district attorney pursuant to this subparagraph shall be confidential and used only for investigative or prosecutorial purposes.
(11) Section 6050J of the Internal Revenue Code, relating to returns relating to foreclosures and abandonments of security.
(12) (A) Section 6050K of the Internal Revenue Code, relating to returns relating to exchanges of certain partnership interests.
(B) In addition to the general requirement under subparagraph (A), a transferor of a partnership interest shall be required to notify the partnership of that exchange in accordance with Section 6050K(c) of the Internal Revenue Code.
(13) Section 6050L of the Internal Revenue Code, relating to returns relating to certain donated property.
(14) Section 6050N of the Internal Revenue Code, relating to returns regarding payments of royalties.
(15) Section 6050P of the Internal Revenue Code, relating to returns relating to the cancellation of indebtedness by certain entities.
(16) Section 6050Q of the Internal Revenue Code, relating to certain long-term care benefits.
(17) Section 6050R of the Internal Revenue Code, relating to returns relating to certain purchases of fish.
(18) Section 6050S of the Internal Revenue Code, relating to returns relating to higher education tuition and related expenses.
(19) Section 6052 of the Internal Revenue Code, relating to returns regarding payment of wages in the form of group-term life insurance.
(20) Section 6034(a) of the Internal Revenue Code, relating to returns of split-interest trusts.
(21) Section 6039I of the Internal Revenue Code, relating to returns and records with respect to employer-owned life insurance contracts.
(22) Section 6039J of the Internal Revenue Code, relating to information reporting with respect to commodity credit corporation transactions.
(23) Section 6050V of the Internal Revenue Code, relating to returns relating to applicable insurance contracts in which certain exempt organizations hold interests.
(24) Section 6050W of the Internal Revenue Code, relating to returns relating to payments made in settlement of payment card and third party network transactions.
(25) Any information return that is required to be filed with the Secretary of the Treasury pursuant to a provision of Part III of Subchapter A of Chapter 61 of Subtitle F (commencing with Section 6031) of the Internal Revenue Code that is added to the Internal Revenue Code by a public law enacted on or after January 1, 2009.
(d) Every person required to make a return under subdivision (b) shall also furnish a statement to each person whose name is required to be set forth in the return, as required to do so by the Internal Revenue Code.
(e) For taxable years beginning on or after January 1, 2026, and before January 1, 2031, Section 6041(e) of the Internal Revenue Code shall not apply.
SEC. 6.
Section 18663 of the Revenue and Taxation Code is amended to read:18663.
(a) (1) The Franchise Tax Board shall annually (or more often if necessary) prepare and make available to the Employment Development Department, wage withholding tables that shall be used by every employer making payment of any wages to a resident employee for services performed either within or without this state; or to a nonresident employee for services performed in this state, to deduct and withhold from those wages for each payroll period, a tax computed in a manner as to produce, so far as practicable, with due regard to the credits for personal exemptions allowable under Section 17054, a sum that is substantially equivalent to the amount of tax reasonably estimated to be due under Part 10 (commencing with Section 17001) resulting from the inclusion in the gross income of the employee the wages(2) For wages paid on or after November 1, 2009, wage withholding tables prepared by the Franchise Tax Board pursuant to this subdivision shall produce, so far as practicable, with due regard to the credits for personal exemptions allowable under Section 17054, a sum that will significantly prevent underwithholding by using an amount equal to 10 percent more than the sum described in paragraph (1).
(b) (1) (A) For supplemental wages paid on or after January 1, 1992, the rate of withholding that may be applied to supplemental wages in lieu of the wage withholding tables specified in subdivision (a) shall be 6 percent.
(B) For supplemental wages paid on or after November 1, 2009, the rate of withholding shall be 6.6 percent.
(2) For purposes of this subdivision:
(2)For purposes of this subdivision, “supplemental
(A) “Supplemental
wages” includes, but is not limited to, bonus payments, overtime payments, commissions, sales awards, back pay including retroactive wage increases, and reimbursements for nondeductible moving expenses that are paid for the same or a different period, or without regard to a particular period.(B) (i) For taxable years beginning on or after January 1, 2026, and before January 1, 2031, “supplemental wages” does not include tips.
(ii) For purposes of this subparagraph, “tips” means any gratuity provided by a customer or client of the employer’s business.
(c) (1) For stock options and bonus payments that constitute wages paid on or after January 1, 2002, the rate of withholding that may be applied to those stock options and bonus payments in lieu of the wage withholding tables specified in subdivision (a) shall, notwithstanding subdivision (b), be 9.3 percent.
(2) For stock options and bonus payments that constitute wages paid on or after November 1, 2009, the rate of withholding shall be 10.23 percent.
SEC. 7.
Section 19183 of the Revenue and Taxation Code is amended to read:19183.
(a) (1) A penalty shall be imposed for failure to file correct information returns, as required by this part, and that penalty shall be determined in accordance with Section 6721 of the Internal Revenue Code, relating to failure to file correct information returns.(2) Section 6721(e) of the Internal Revenue Code, relating to penalty in case of intentional disregard, is modified to the extent that the reference to Section 6041A(b) of the Internal Revenue Code, relating to direct sales of five thousand dollars ($5,000) or more, does not apply.
(3) Section 6721(f)(1) of the Internal Revenue Code is modified to substitute the phrase “For each fifth calendar year beginning after 2014” for the phrase “In the case of any failure relating to a return required to be filed in a calendar year beginning after 2014.”
(b) (1) A penalty shall be imposed for failure to furnish correct payee statements as required by this part, and that penalty shall be determined in accordance with Section 6722 of the Internal Revenue Code, relating to failure to furnish correct payee statements.
(2) Section 6722(c) of the Internal Revenue Code, relating to exception for de minimis failures, is modified to the extent that the references to Sections 6041A(b) and 6041A(e) of the Internal Revenue Code, relating to direct sales of five thousand dollars ($5,000) or more, and statements to be furnished to persons with respect to whom information is required to be furnished, does not apply.
(3) Section 6722(f)(1) of the Internal Revenue Code is modified to substitute the phrase “For each fifth calendar year beginning after 2014” for the phrase “In the case of any failure relating to a return required to be filed in a calendar year beginning after 2014.”
(c) A penalty shall be imposed for failure to comply with other information reporting requirements under this part, and that penalty shall be determined in accordance with Section 6723 of the Internal Revenue Code, relating to failure to comply with other information reporting requirements.
(d) (1) The provisions of Section 6724 of the Internal Revenue Code, relating to waiver; definitions, and special rules, apply, except as otherwise provided.
(2) Section 6724(d)(1) of the Internal Revenue Code, relating to information return, is modified as follows:
(A) The following references are substituted:
(i) Subdivision (a) of Section 18640, in lieu of Section 6044(a)(1) of the Internal Revenue Code.
(ii) Subdivision (a) of Section 18644, in lieu of Section 6050A(a) of the Internal Revenue Code, relating to reports.
(B) References to Sections 4101(d), 6041(b), 6041A(b), 6045(d), 6051(d), and 6053(c)(1) of the Internal Revenue Code do not apply.
(C) The term “information return” also includes both of the following:
(i) The return required by paragraph (1) of subdivision (g) of Section 18662.
(ii) The return required by subdivision (a) of Section 18631.7.
(D) For taxable years beginning on or after January 1, 2026, and before January 1, 2031, Section 6724(d)(1)(B)(xvi) of the Internal Revenue Code shall not apply.
(3) Section 6724(d)(2) of the Internal Revenue Code, relating to payee statement, is modified as follows:
(A) The following references are substituted:
(i) Subdivision (b) of Section 18640, in lieu of Section 6044(e) of the Internal Revenue Code, relating to statements to be furnished to persons with respect to whom information is required.
(ii) Subdivision (b) of Section 18644, in lieu of Section 6050A(b) of the Internal Revenue Code, relating to written statement.
(B) References to Sections 6031(b), 6037(b), 6041A(e), 6045(d), 6051(d), 6053(b), and 6053(c) of the Internal Revenue Code shall not apply.
(C) The term “payee statement” shall also include the statement required by paragraph (2) of subdivision (g) of Section 18662.
(D) For taxable years beginning on or after January 1, 2026, and before January 1, 2031, Section 6724(d)(2)(X) of the Internal Revenue Code shall not apply.
(e) In the case of each failure to provide a written explanation as required by Section 402(f) of the Internal Revenue Code, relating to written explanation to recipients of distributions eligible for rollover treatment, at the time prescribed therefor, unless it is shown that the failure is due to reasonable cause and not to willful neglect, there shall be paid, on notice and demand of the Franchise Tax Board and in the same manner as tax, by the person failing to provide that written explanation, an amount equal to ten dollars ($10) for each failure, but the total amount imposed on that person for all those failures during any calendar year shall not exceed five thousand dollars ($5,000).
(f) Any penalty imposed by this part shall be paid on notice and demand by the Franchise Tax Board and in the same manner as tax.
(g) The amendments made to this section by Chapter 359 of the Statutes of 2015 apply to information returns required to be filed on or after January 1, 2016.
SEC. 8.
Section 927 of the Unemployment Insurance Code is repealed.“Wages” also means all tips which are received while performing services which constitute employment and included in a written statement furnished to the employer pursuant to Section 6053(a) of the Internal Revenue Code.
The changes in law made in this section by Chapter 1461 of the Statutes of 1985 shall apply with respect to wages earned on and after January 1, 1986, in conformity with the provisions of federal law.
SEC. 9.
Section 927 is added to the Unemployment Insurance Code, to read:927.
(a) “Wages” also means all tips received while performing services that constitute employment and that are included in a written statement furnished to the employer pursuant to Section 6053(a) of the Internal Revenue Code.(b) The changes in law made in this section by Chapter 1461 of the Statutes of 1985 shall apply with respect to wages earned on and after January 1, 1986, in conformity with the provisions of federal law.
(c) This section shall become operative on January 1, 2031.
SEC. 10.
Section 940 of the Unemployment Insurance Code is amended to read:940.
(a) For the purposes of this section, of Sections 977 and 977.5 to the extent specified by those sections, and of Sections 1026, 1088, 1280, 1281, 1282, 2652, 2654, 2655, and 2657, “wages” means taxable wages as well as wages(b) (1) On and after January 1, 2026, “wages” shall not include tips.
(2) For purposes of this subdivision, “tips” means any gratuity provided by a customer or client of the employer’s business.
(c) This section shall remain in effect only until January 1, 2031, and as of that date is repealed.
SEC. 11.
Section 940 is added to the Unemployment Insurance Code, to read:940.
(a) For the purposes of this section, of Sections 977 and 977.5 to the extent specified by those sections, and of Sections 1026, 1088, 1280, 1281, 1282, 2652, 2654, 2655, and 2657, “wages” means taxable wages as well as wages that would be taxable except for the limitations on taxable wages provided under Sections 930 and 985.(b) This section shall become operative on January 1, 2031.
SEC. 12.
Section 987.7 of the Unemployment Insurance Code is repealed.(a)If the worker contributions required in any one month to be made because of the receipt of cash tips and cash gratuities exceed the wages of the worker under the control of the employer, the worker may furnish the employer, on or before the 10th day of the following month, or, if the amounts are estimated, on or before the last day of the month following the calendar quarter, an amount equal to the excess.
(b)If the worker contributions required by Section 984 with respect to cash tips and cash gratuities exceed the amount of worker contributions that can be collected by the employer from the wages of the worker, the excess shall be paid by the worker, except as provided by Section 1088.6. The worker shall pay the excess to the department within 30 days from his or her receipt of the written statement furnished by his or her employer pursuant to Section 1088.6. If the worker fails to pay the excess within the time required by this subdivision, the director may make an assessment for the excess and shall give the worker a written notice of the assessment. Article 8 (commencing with Section 1126) with respect to the assessment of contributions and Chapter 7 (commencing with Section 1701) with respect to the collection of contributions shall apply to the recovery of amounts under this subdivision.
(c)The director may offset amounts assessed pursuant to subdivision (b) against any refund payable to the worker under Section 1176.5 or against any amount of disability benefits to which he or she may become entitled under Part 2 (commencing with Section 2601) within any of the following periods:
(1)The current disability benefit period.
(2)One year from the beginning date of any disability benefit period that begins during the three-year period next succeeding the service of notice of the assessment.
SEC. 13.
Section 987.7 is added to the Unemployment Insurance Code, to read:987.7.
(a) If the worker contributions required in any one month to be made because of the receipt of cash tips and cash gratuities exceed the wages of the worker under the control of the employer, the worker may furnish the employer, on or before the 10th day of the following month, or, if the amounts are estimated, on or before the last day of the month following the calendar quarter, an amount equal to the excess.(b) If the worker contributions required by Section 984 with respect to cash tips and cash gratuities exceed the amount of worker contributions that can be collected by the employer from the wages of the worker, the excess shall be paid by the worker, except as provided by Section 1088.6. The worker shall pay the excess to the department within 30 days from receipt of the written statement furnished by their employer pursuant to Section 1088.6. If the worker fails to pay the excess within the time required by this subdivision, the director may make an assessment for the excess and shall give the worker a written notice of the assessment. Article 8 (commencing with Section 1126) with respect to the assessment of contributions and Chapter 7 (commencing with Section 1701) with respect to the collection of contributions shall apply to the recovery of amounts under this subdivision.
(c) The director may offset amounts assessed pursuant to subdivision (b) against any refund payable to the worker under Section 1176.5 or against any amount of disability benefits the worker may become entitled to under Part 2 (commencing with Section 2601) within any of the following periods:
(1) The current disability benefit period.
(2) One year from the beginning date of any disability benefit period that begins during the three-year period next succeeding the service of notice of the assessment.
(d) This section shall become operative on January 1, 2031.
SEC. 14.
Section 13009 of the Unemployment Insurance Code is amended to read:13009.
“Wages” means all remuneration, other than fees paid to a public official, for services performed by an employee for their employer, including all remuneration paid to a nonresident employee for services performed in this state, and the cash value of all remuneration paid in any medium other than cash, except as provided by this section. “Wages” includes“Wages” shall not include remuneration paid under any of the following conditions:
(a) For agricultural labor, as defined in subdivision (g) of Section 3121 of the Internal Revenue Code.
(b) For domestic service in a private home, local college club, or local chapter of a college fraternity or sorority.
(c) For service not in the course of the employer’s trade or business performed in any calendar quarter by an employee, unless the cash remuneration paid for that service is fifty dollars ($50) or more and the service is performed by an individual who is regularly employed by the employer to perform the service. For purposes of this subdivision, an individual shall be deemed to be regularly employed by an employer during a calendar quarter only if either of the following conditions is met:
(1) On each of some 24 days during the quarter, the individual performs for the employer for some portion of the day service not in the course of the employer’s trade or business.
(2) The individual was regularly employed, as determined under paragraph (1), by the employer in the performance of the service during the preceding calendar quarter.
(d) For services by a citizen or resident of the United States for a foreign government or an international organization.
(e) For services performed by a nonresident individual who is not a citizen or national of the United States as designated by regulations prescribed by the department.
(f) For services performed by a duly ordained, commissioned, or licensed minister of a church in the exercise of their ministry or by a member of a religious order in the exercise of duties required by the order.
(g) (1) For services performed by an individual under the age of 18 years in delivery or distribution of newspapers or shopping news, not including delivery or distribution to any point for subsequent delivery or distribution.
(2) For services performed by an individual in, and at the time of, the sale of newspapers or magazines to ultimate consumers, under an arrangement under which the newspapers or magazines are to be sold by the individual at a fixed price, the individual’s compensation being based on the retention of the excess of the price over the amount at which the newspapers or magazines are charged to the individual whether or not the individual is guaranteed a minimum amount of compensation for the services, or is entitled to be credited with the unsold newspapers or magazines turned back.
(h) For services not in the course of the employer’s trade or business, to the extent paid in any medium other than cash.
(i) To, or on behalf of, an employee or their beneficiary under any of the following situations:
(1) From or to a trust which that is exempt from tax under Section 17631 of the Revenue and Taxation Code at the time of payment, unless the payment is made to an employee of the trust as remuneration for services rendered as an employee and not as a beneficiary of the trust.
(2) Under or to an annuity plan which, that, at the time of payment, is a plan qualified pursuant to Chapter 5 (commencing with Section 17501) of Part 10 of Division 2 of the Revenue and Taxation Code.
(3) Under or to a bond purchase plan which, that, at the time of payment, is a bond purchase plan qualified pursuant to Chapter 5 (commencing with Section 17501) of Part 10 of Division 2 of the Revenue and Taxation Code.
(4) For a payment which that qualifies for deduction by an employee pursuant to Section 219 of the Internal Revenue Code if, at the time of payment, it is reasonable to believe that the employee will be entitled to a deduction under that section for payment.
(5) Under a cafeteria plan (within the meaning of Section 125 of the Internal Revenue Code).
(j) To a master, officer, or any other seaman who is a member of a crew on a vessel engaged in foreign, coastwise, intercoastal, interstate, or noncontiguous trade.
(k) Pursuant to any provision of law other than Section 5(c) of the Peace Corps Act (22 U.S.C. Sec. 2504(c)) or 6(1) of the Peace Corps Act (22 U.S.C. Sec. 2505(1)), (Public Law 87-293), for service performed as a volunteer or volunteer leader within the meaning of that act.
(l) In the form of group-term life insurance on the life of an employee.
(m) To or on behalf of an employee, and to the extent that, at the time of the payment of remuneration it is reasonable to believe that a corresponding deduction is allowable for moving expenses pursuant to Article 6 (commencing with Section 17201) of Chapter 3 of Part 10 of Division 2 of the Revenue and Taxation Code.
(n) (1)As tips in any medium other than cash. medium, including any gratuity provided by a customer or client of the employer’s business.
(2)As cash tips to an employee in any calendar month in the course of employment by an employer, unless the amount of the cash tips is twenty dollars ($20) or more.
(o) For service performed by an individual on a boat engaged in catching fish or other forms of aquatic animal life under an arrangement with the owner or operator of the boat pursuant to which all of the following apply:
(1) The individual does not receive any cash remuneration, other than as provided in paragraph (2).
(2) The individual receives a share of the boat’s (or the boats’ in the case of a fishing operation involving more than one boat) catch of fish or other forms of aquatic animal life or a share of the proceeds from the sale of the catch.
(3) The amount of the individual’s share depends on the amount of the boat’s (or the boats’ in the case of a fishing operation involving more than one boat) boat’s or boats’, as applicable, catch of fish or other forms of aquatic animal life.
This subdivision shall apply only where the operating crew of the boat (or each boat from which the individual receives a share in the case of a fishing operation involving more than one boat) boat, or each boat, as applicable, is normally made up of fewer than 10 individuals.
(p) For any medical care reimbursement made to, or for the benefit of, an employee under a self-insured medical reimbursement plan pursuant to Section 105(h)(6) of the Internal Revenue Code.
(q) To, or on behalf of, an employee to the extent not includable in gross income pursuant to Section 13006.
(r) For services to which Section 633 applies.
(s) This section shall remain in effect only until January 1, 2031, and as of that date is repealed.
SEC. 15.
Section 13009 is added to the Unemployment Insurance Code, to read:13009.
“Wages” means all remuneration, other than fees paid to a public official, for services performed by an employee for their employer, including all remuneration paid to a nonresident employee for services performed in this state, and the cash value of all remuneration paid in any medium other than cash, except as provided by this section. “Wages” includes tips received by an employee in the course of employment. The wages shall be deemed to be paid at the time a written statement including tips is furnished to the employer pursuant to Section 13055 or, if no statement including those tips is so furnished, at the time received. “Wages” includes compensation that is deductible under Section 162 of the Internal Revenue Code, paid to a member of a limited liability company filing a federal corporate income tax return.“Wages” shall not include remuneration paid under any of the following conditions:
(a) For agricultural labor, as defined in subdivision (g) of Section 3121 of the Internal Revenue Code.
(b) For domestic service in a private home, local college club, or local chapter of a college fraternity or sorority.
(c) For service not in the course of the employer’s trade or business performed in any calendar quarter by an employee, unless the cash remuneration paid for that service is fifty dollars ($50) or more and the service is performed by an individual who is regularly employed by the employer to perform the service. For purposes of this subdivision, an individual shall be deemed to be regularly employed by an employer during a calendar quarter only if either of the following conditions is met:
(1) On each of some 24 days during the quarter, the individual performs for the employer for some portion of the day service not in the course of the employer’s trade or business.
(2) The individual was regularly employed, as determined under paragraph (1), by the employer in the performance of the service during the preceding calendar quarter.
(d) For services by a citizen or resident of the United States for a foreign government or an international organization.
(e) For services performed by a nonresident individual who is not a citizen or national of the United States as designated by regulations prescribed by the department.
(f) For services performed by a duly ordained, commissioned, or licensed minister of a church in the exercise of their ministry or by a member of a religious order in the exercise of duties required by the order.
(g) (1) For services performed by an individual under the age of 18 years in delivery or distribution of newspapers or shopping news, not including delivery or distribution to any point for subsequent delivery or distribution.
(2) For services performed by an individual in, and at the time of, the sale of newspapers or magazines to ultimate consumers, under an arrangement under which the newspapers or magazines are to be sold by the individual at a fixed price, the individual’s compensation being based on the retention of the excess of the price over the amount at which the newspapers or magazines are charged to the individual whether or not the individual is guaranteed a minimum amount of compensation for the services, or is entitled to be credited with the unsold newspapers or magazines turned back.
(h) For services not in the course of the employer’s trade or business, to the extent paid in any medium other than cash.
(i) To, or on behalf of, an employee or their beneficiary under any of the following situations:
(1) From or to a trust that is exempt from tax under Section 17631 of the Revenue and Taxation Code at the time of payment, unless the payment is made to an employee of the trust as remuneration for services rendered as an employee and not as a beneficiary of the trust.
(2) Under or to an annuity plan that, at the time of payment, is a plan qualified pursuant to Chapter 5 (commencing with Section 17501) of Part 10 of Division 2 of the Revenue and Taxation Code.
(3) Under or to a bond purchase plan that, at the time of payment, is a bond purchase plan qualified pursuant to Chapter 5 (commencing with Section 17501) of Part 10 of Division 2 of the Revenue and Taxation Code.
(4) For a payment that qualifies for deduction by an employee pursuant to Section 219 of the Internal Revenue Code if, at the time of payment, it is reasonable to believe that the employee will be entitled to a deduction under that section for payment.
(5) Under a cafeteria plan (within the meaning of Section 125 of the Internal Revenue Code).
(j) To a master, officer, or any other seaman who is a member of a crew on a vessel engaged in foreign, coastwise, intercoastal, interstate, or noncontiguous trade.
(k) Pursuant to any provision of law other than Section 5(c) or 6(1) of the Peace Corps Act (Public Law 87-293), for service performed as a volunteer or volunteer leader within the meaning of that act.
(l) In the form of group-term life insurance on the life of an employee.
(m) To or on behalf of an employee, and to the extent that, at the time of the payment of remuneration, it is reasonable to believe that a corresponding deduction is allowable for moving expenses pursuant to Article 6 (commencing with Section 17201) of Chapter 3 of Part 10 of Division 2 of the Revenue and Taxation Code.
(n) (1) As tips in any medium other than cash.
(2) As cash tips to an employee in any calendar month in the course of employment by an employer, unless the amount of the cash tips is twenty dollars ($20) or more.
(o) For service performed by an individual on a boat engaged in catching fish or other forms of aquatic animal life under an arrangement with the owner or operator of the boat pursuant to which all of the following apply:
(1) The individual does not receive any cash remuneration, other than as provided in paragraph (2).
(2) The individual receives a share of the boat’s (or the boats’ in the case of a fishing operation involving more than one boat) catch of fish or other forms of aquatic animal life or a share of the proceeds from the sale of the catch.
(3) The amount of the individual’s share depends on the amount of the boat’s or boats’, as applicable, catch of fish or other forms of aquatic animal life.
This subdivision shall apply only where the operating crew of the boat, or each boat, as applicable, is normally made up of fewer than 10 individuals.
(p) For any medical care reimbursement made to, or for the benefit of, an employee under a self-insured medical reimbursement plan pursuant to Section 105(h)(6) of the Internal Revenue Code.
(q) To, or on behalf of, an employee to the extent not includable in gross income pursuant to Section 13006.
(r) For services to which Section 633 applies.
(s) This section shall become operative on January 1, 2031.
SEC. 16.
Section 13009.5 of the Unemployment Insurance Code is amended to read:13009.5.
(a) For purposes of the report required by subdivision (a) of Section 1088 and the statement required by Section 13050, “wages subject to personal income tax” means all of the following:(1) Remuneration defined as wages by Section 13009, except that in the case of tips received by an employee in the course of his or her employment, the amounts shall include only those tips included in statements furnished to the employer, pursuant to Section 13055. 13009.
(2) Remuneration described in subdivisions (a), (b), (f), and (l) of Section 13009, to the extent included in gross income.
(3) Payments made by a third party for sick pay as specified in Section 931.5.
(A) Any employer who receives a report of wages from a third-party payer as provided for in subdivisions (a) and (b) of Section 931.5 shall report those wages to the department as required under paragraph (2) of subdivision (a) of Section 1088.
(B) Any third-party payer described in Section 931.5 who fails to report wages to an employer as provided for in that section shall report those wages to the department as required under paragraph (2) of subdivision (a) of Section 1088.
(b) (1) A person or entity shall not be required to register with the Employment Development Department solely for the purpose of reporting wages subject to personal income tax pursuant to Section 1088 unless that registration is otherwise required by this code.
(2) A person or entity shall not be required to withhold any tax under Section 13020 for wages, as defined by this section, unless that person or entity is required to withhold tax for those wages as defined by Section 13009.
(c) This section shall remain in effect only until January 1, 2031, and as of that date is repealed.
SEC. 17.
Section 13009.5 is added to the Unemployment Insurance Code, to read:13009.5.
(a) For purposes of the report required by subdivision (a) of Section 1088 and the statement required by Section 13050, “wages subject to personal income tax” means all of the following:(1) Remuneration defined as wages by Section 13009, except that in the case of tips received by an employee in the course employment, the amounts shall include only those tips included in statements furnished to the employer, pursuant to Section 13055.
(2) Remuneration described in subdivisions (a), (b), (f), and (l) of Section 13009, to the extent included in gross income.
(3) Payments made by a third party for sick pay as specified in Section 931.5.
(A) Any employer who receives a report of wages from a third-party payer as provided for in subdivisions (a) and (b) of Section 931.5 shall report those wages to the department as required under paragraph (2) of subdivision (a) of Section 1088.
(B) Any third-party payer described in Section 931.5 who fails to report wages to an employer as provided for in that section shall report those wages to the department as required under paragraph (2) of subdivision (a) of Section 1088.
(b) (1) A person or entity shall not be required to register with the Employment Development Department solely for the purpose of reporting wages subject to personal income tax pursuant to Section 1088 unless that registration is otherwise required by this code.
(2) A person or entity shall not be required to withhold any tax under Section 13020 for wages, as defined by this section, unless that person or entity is required to withhold tax for those wages as defined by Section 13009.
(c) This section shall become operative on January 1, 2031.
SEC. 18.
Section 13027 of the Unemployment Insurance Code is repealed.In the case of tips which constitute wages, subdivision (a) of Section 13020 shall be applicable only to such tips as are included in a written statement furnished to the employer pursuant to Section 13055, and only to the extent that the tax can be deducted and withheld by the employer, at or after the time such statement is so furnished and before the close of the calendar year in which such statement is furnished, from such wages of the employee (excluding tips, but including funds turned over by the employee to the employer for the purpose of such deduction and withholding) as are under the control of the employer. An employer who is furnished by an employee a written statement of tips (received in a calendar month) pursuant to Section 13055 to which paragraph (2) of subdivision (n) of Section 13009 is applicable may deduct and withhold the tax with respect to such tips from any wages of the employee (excluding tips) under his or her control, even though at the time such statement is furnished the total amount of the tips included in statements furnished to the employer as having been received by the employee in such calendar month in the course of his or her employment by the employer is less than twenty dollars ($20). Such tax shall not at any time be deducted and withheld in any amount which exceeds the aggregate of such wages and funds.
SEC. 19.
Section 13027 is added to the Unemployment Insurance Code, to read:13027.
(a) In the case of tips that constitute wages, subdivision (a) of Section 13020 shall be applicable only to those tips included in a written statement furnished to the employer pursuant to Section 13055, and only to the extent that the tax can be deducted and withheld by the employer, at or after the time the statement is furnished and before the close of the calendar year in which the statement is furnished, from those wages of the employee, excluding tips, but including funds turned over by the employee to the employer for the purpose of deduction and withholding, that are under the control of the employer. An employer who is furnished by an employee a written statement of tips received in a calendar month pursuant to Section 13055 to which paragraph (2) of subdivision (n) of Section 13009 is applicable may deduct and withhold the tax with respect to those tips from any wages of the employee, excluding tips, under the employer’s control, even though at the time the statement is furnished the total amount of the tips included in statements furnished to the employer as having been received by the employee in the calendar month in the course of employment by the employer is less than twenty dollars ($20). Such tax shall not at any time be deducted and withheld in any amount that exceeds the aggregate of those wages and funds.(b) This section shall become operative on January 1, 2031.
SEC. 20.
Section 13055 of the Unemployment Insurance Code is repealed.Every employee who, in the course of his or her employment by an employer, receives in any calendar month tips which are wages shall report all such tips in one or more written statements furnished to his or her employer on or before the 10th day following such month. Such statements shall be furnished by the employee under such authorized regulations, at such other times before such 10th day, and in such form and manner as may be prescribed by the department.
SEC. 21.
Section 13055 is added to the Unemployment Insurance Code, to read:13055.
(a) Every employee who, in the course of employment by an employer, receives in any calendar month tips that are wages shall report all those tips in one or more written statements furnished to the employee’s employer on or before the 10th day following that month. The statements shall be furnished by the employee in accordance with applicable regulations, at such other times before such 10th day, and in the form and manner prescribed by the department.(b) This section shall become operative on January 1, 2031.
Text of AB 1443 as introduced, from the official record. Connect Plus keeps every version and highlights what changed.Compare versions