Governor Gavin Newsom signed two California budget trailer bills on July 13, 2026, creating new planning opportunities for families, employers, growing businesses, and first-time electric vehicle buyers.
Senate Bill 180 generally conforms California to the federal tax treatment of Trump Accounts and extends the California Competes Tax Credit. Senate Bill 168 directs the state to establish an instant rebate program for Californians purchasing or leasing their first zero-emission vehicle.
Each provision has a different implementation timeline, so taxpayers should separate what is already effective from what still requires agency guidance.
California removes the state tax mismatch for Trump Accounts
Before SB 180, California did not recognize Trump Accounts as tax-deferred accounts. Families could face federal tax deferral while owing California tax annually on interest, dividends, and capital gains generated inside the account.
SB 180 generally conforms California to Internal Revenue Code Section 530A for taxable years beginning on or after January 1, 2026. Earnings can now grow without current California income tax and will generally become taxable when distributed.
The law also conforms California to:
- The IRC Section 128 exclusion for qualifying employer contributions to an employee’s Trump Account or an account belonging to the employee’s dependent.
- The exclusion for qualified contributions made by eligible governmental entities and charitable organizations.
- Certain rules permitting rollovers from Trump Accounts to ABLE accounts.
Under current federal Trump Account guidance, an employer may contribute up to $2,500 for an employee in 2026 through a qualifying employer program. That amount counts toward the account’s general $5,000 annual contribution limit.
California’s conformity is general rather than word-for-word. SB 180 retains several state-specific adjustments, including a 2.5% California additional tax (similar to the California early withdrawal penalty) in circumstances where the federal rules impose an additional tax. Families and employers should continue tracking contribution sources, basis, distributions, and payroll treatment rather than treating the account as administratively identical to a traditional IRA.
Families evaluating these accounts can also review our recent Trump Accounts update for planning considerations involving online elections, gift tax reporting, and employer contributions.
California Competes receives a five-year extension
SB 180 also extends the California Competes Tax Credit through taxable years beginning before January 1, 2035. Businesses may therefore continue receiving credits through the 2034 tax year.
The California Competes Tax Credit is not an automatic credit claimed simply because a company hires employees or invests in California. Businesses compete for an award and negotiate a written agreement with the Governor’s Office of Business and Economic Development, commonly known as GO-Biz.
Applications are evaluated using factors such as job creation, employee compensation, capital investment, project location, economic impact, and whether the credit will influence the company’s decision to expand or remain in California.
The first application period for the 2026-2027 fiscal year runs from July 20 through August 10, 2026. Companies considering an application should begin assembling headcount projections, wage data, investment budgets, location analysis, and documentation showing how the credit affects the proposed project. Award agreements include measurable commitments, and credits may be recaptured when a business does not meet them.
MyFirstEV will provide instant rebates at the dealership
SB 168 requires the California Air Resources Board to establish a point-of-sale incentive program for first-time zero-emission vehicle buyers. California will provide half of the incentive, with the other half funded by participating vehicle manufacturers.
According to the state’s MyFirstEV announcement, the anticipated rebates are:
- $3,500 for a new electric vehicle with a manufacturer’s suggested retail price of no more than $50,000.
- $1,750 for a used electric vehicle with a sales price of no more than $25,000.
The statute permits incentives for purchases or leases of new vehicles and purchases of used vehicles. It also contains an exception to the standard price limits for qualifying California-headquartered zero-emission vehicle companies.
The Governor’s office expects the program to become available later in summer 2026. Final rules have not yet been released regarding the launch date, participating manufacturers, eligible models, dealer procedures, or coordination with other incentive programs.
Buyers should not complete a transaction expecting the rebate to apply retroactively. When the rebate is material to the purchase decision, confirm that the program is active and that the vehicle, manufacturer, and dealer are participating before signing the purchase or lease agreement.
How Aura Advisors can help with new California laws
These changes create useful opportunities, but each requires a different planning response. Families should revisit the California treatment of 2026 Trump Account earnings and contributions. Employers should evaluate whether a formal contribution program fits their workforce and payroll structure. Businesses pursuing California Competes should prepare for a competitive application and support each proposed commitment with credible financial and operational data. EV buyers should preserve flexibility until the state publishes final MyFirstEV procedures.
Aura Advisors can help taxpayers model the federal and California consequences, identify documentation needs, evaluate available incentives, and build a defensible approach around the taxpayer’s actual facts and timing.
For More Reading:
- Trump Accounts Update: Online Elections, Gift Tax Reporting, and S-Corp Planning
- Introducing the Trump Savings Account: What Families Need to Know
- California’s 2026 Budget Tax Changes: What Businesses Should Know Beyond the SaaS Tax
Aura Advisors is a boutique tax consulting and compliance firm working with start-ups, emerging growth companies, and affluent individuals. Making it safer for good people and good companies to continue to do good things.