State government: benefits.

Section 7300(b) previously contained a blanket exception stating 'This chapter shall not apply to a provider of health care' that exempted health care providers from all provisions of the chapter. This was removed. However, a narrower exclusion remains in the 'covered services' definition (Section 7300.1(c)(2)), which still excludes health care services provided under contract with a detention facility or immigration enforcement agency.

Section 7300(a) was restructured: exceptions for nonprofit sponsored venture tax credits and low-income housing tax credits were moved from being written inline in the main text of subsection (a) to being separate subparts (b)(1) and (b)(2). This is a drafting cleanup with no substantive policy change.

Sections 17137(d) and 23637(e) previously included language stating that the carryover period for credits not allowed due to ineligibility 'shall be increased by one taxable year, only for the first taxable year during which they are not allowed to claim the credit.' This one-year extension was removed. The remaining provision still allows a disqualified taxpayer to carry forward unclaimed credits to the following year if they are no longer disqualified.

The term 'operates' was added throughout the bill alongside 'owns' and 'manages,' expanding which entities are disqualified from state grants, loans, and tax credits. Entities that operate private detention facilities are now explicitly covered even if they do not own or manage them.

Senator Caballero was added as a coauthor alongside Senator Padilla, indicating additional Senate sponsorship for the bill.

The definition of 'covered services' (detention, transportation, custody, deportation services plus software, IT, surveillance, AI, weapons, etc.) was moved from Section 17137 into Section 7300.1 as a standalone chapter-level definition, making it available across all provisions of the bill rather than only in the tax code sections.

New carryover language was added to both Section 17137(d) and Section 23637(e): credits that could not be claimed because a taxpayer was disqualified may be carried over to reduce tax in the following year if the taxpayer is no longer disqualified, regardless of the normal carryover period for that credit type.

The low-income housing tax credit exception in both Section 17137 and Section 23637 was clarified to cover credits 'originally issued to a nonprofit housing sponsor or nonprofit sponsored venture' rather than credits 'directly or indirectly purchased from a nonprofit housing sponsor,' broadening the scope of protected credits.

New definition of 'disqualified taxpayer' with two prongs: (1) directly invested in, owns, or manages a private detention facility; or (2) is or is related to a publicly traded company with at least $150 billion market capitalization that contracts to provide 'covered services' to a private detention facility or immigration enforcement agency. Relatedness is determined under IRC Sections 267, 318, or 707.

New definition of 'covered services' meaning detention, transportation, custody, or deportation services, and including software, information technology, surveillance equipment, data analytics, artificial intelligence, applications, officer trainings, weapons, and digital systems specifically contracted to support immigration enforcement. Health care services are excluded.

New exception for custodial, fiduciary, or similar capacity holdings: 'invests in' does not include holdings where the entity lacks discretionary authority to select the issuer or direct the investment, including passive index-tracking strategies. Similarly, 'owns' does not include ownership interests held solely on behalf of clients in a custodial or fiduciary capacity.

The low-income housing tax credit exemption was broadened. Previously it applied to credits 'purchased from a nonprofit housing sponsor.' Now it applies to credits 'originally issued to a nonprofit housing sponsor or a nonprofit sponsored venture,' covering a wider range of transactions.

New provision in Section 23637 (personal income tax) prohibiting a taxpayer who is ineligible for a credit from assigning that credit to an eligible assignee under Section 23663, closing a potential workaround.

The 'profits from' language was removed from the disqualification criteria. The old text covered entities that 'directly invested in, owns, manages, or profits from or manages' a facility; the new text covers only those that 'directly invested in, owns, or manages' a facility.

The term 'business entity taxpayer' in Section 17137 was replaced with 'taxpayer' and the new 'disqualified taxpayer' defined term, aligning the corporate tax section's language with the broader framework introduced in this amendment.

The list of state-provided items from which ineligible entities are barred was narrowed from 'benefit, subsidy, grant, or loan, or any grant, loan, or tax credit' to just 'grant, loan, or tax credit as described in Section 17137 or 23637.' The screening requirement in Section 7300.2 was similarly narrowed to cover only grants and loans.

The phrase 'for the purpose of aiding in or furthering immigration enforcement' was removed from the contract-trigger language. This means any business entity that contracts with a private detention facility or agency engaging in immigration enforcement is now ineligible, regardless of the stated purpose of the contract.

A new exemption was added for providers of health care (as defined in Civil Code Section 56.05(p)) that contract with a private detention facility or immigration enforcement agency solely to provide health care services for injured or ill detained individuals. This appears in both the Government Code section and both Revenue and Taxation Code sections.

New tax credit exemptions were added for: (1) tax credits received by direct or indirect partners or members of a nonprofit sponsored venture to which the taxpayer made a loan or capital contribution, and (2) low-income housing tax credits under Sections 12206, 17058, or 23610.5 directly or indirectly purchased from a nonprofit housing sponsor.

Two new definitions were added: 'nonprofit housing sponsor' (defined by reference to Health and Safety Code Section 50091) and 'nonprofit sponsored venture' (a limited partnership or LLC where a nonprofit housing sponsor or its wholly owned entity serves as managing general partner or managing member).

The fund name was shortened from 'California Immigrant Resilience Due Process for All Fund' to 'Due Process for All Fund.' The tax credit sections now use 'business entity taxpayer' instead of 'business entity.' The word 'manages' was added after 'profits from' in the triggering language.

The definition of 'agency engaging in immigration enforcement' was expanded to explicitly include agencies that engage in arresting, detaining, transporting, or deporting individuals pursuant to federal immigration law, broadening which entities trigger the penalty.

A new definition for 'business entity' was added, cross-referencing Section 82005 of the Government Code, clarifying which types of business structures are subject to the bill's restrictions.

The tax credit penalty was expanded from barring only new credits in the current year to also barring carryover credits from prior years. An entity is now 'ineligible to claim any credit allowed, and shall be ineligible to claim any carryover for any credit previously allowed.'

A new provision gives a one-year extension on the carryover period for credits that cannot be claimed due to ineligibility, but only for the first taxable year of ineligibility. Credits not claimed within the extended period are lost and counted toward the fund estimate.

The California Immigrant Resilience Fund was renamed the 'California Immigrant Resilience Due Process for All Fund,' signaling a broader policy framing around due process protections for immigrants.

The chapter title was changed from 'Immigration Contractors No Taxpayer Dollars For Family Separation' to simply 'No Taxpayer Dollars For Family Separation,' removing the specific reference to contractors in the heading.

The ineligibility trigger was expanded beyond entities directly invested in or contracting with ICE/DHS to also include entities that contract with a private detention facility or any agency engaging in immigration enforcement for the purpose of aiding or furthering immigration enforcement.

A new definitions section (7300.1) establishes specific thresholds: 'invests in' and 'owns' mean at least 5 percent ownership of a private detention facility or operator; 'owns' also includes owning or leasing the building or land where a facility operates; 'manages' means being contracted to control daily operations.

The California Immigrant Resilience Fund is created in the State Treasury. The Controller must transfer from the General Fund an amount equal to tax collected attributable to entities being made ineligible for tax credits. Funds are available upon legislative appropriation for immigration-related services and programs, and cannot be used to supplant existing state funds.

New Revenue and Taxation Code sections 17137 and 23637 make ineligible entities lose all tax credits under Parts 131 (corporate) and 108.5 (individual) for taxable years beginning on or after January 1, 2027, with narrow exemptions for Section 19002 and Section 19023 credits.

State agencies administering benefit programs must screen applicants to determine whether they are ineligible entities. The Franchise Tax Board must require taxpayers to declare ineligibility status on a prescribed form, and must estimate and report annually (starting July 1, 2029) the amount of tax collected due to credit denials.

The voting requirement was changed from simple majority to two-thirds of each house because the bill now constitutes a tax increase under Article XIIIA, Section 3 of the California Constitution (denying credits effectively increases tax liability).

The Administrative Procedure Act is explicitly exempted from applying to any standards, procedures, or guidance issued by the Franchise Tax Board under the new tax credit sections.