SB 1343 California Senate · 2025-2026 Regular Session

Income tax credit: sales and use tax paid: natural disasters.

Summary

Existing state sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state of, or on the storage, use, or other consumption in this state of, tangible personal property purchased from a retailer for storage, use, or other consumption in this state. The California Emergency Services Act authorizes the Governor to proclaim a state of emergency in an area affected, or likely to be affected, thereby if certain criteria are met, including there are conditions of disaster or of extreme peril to the safety of persons and property within the state caused by conditions such as air pollution, fire, flood, storm, epidemic, riot, drought, cyberterrorism, sudden and severe energy shortage, electromagnetic pulse attack, or plant or animal infestation or disease. The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws. This bill would allow, for taxable years beginning on or after January 1, 2027, and before January 1, 2032, a credit against those taxes to a qualified taxpayer, as defined, in an amount equal to qualified tax payments made during the taxable year, subject to certain limitations. The bill would define "qualified tax payment" to mean an unreimbursed sales or use tax payment paid or incurred by the qualified taxpayer in the taxable year for certain tangible personal property purchased proximate to the date upon which a natural disaster destroyed a qualified taxpayer's principal residence, major appliances, or residential furniture to replace those items, as specified. 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 also would include additional information required for any bill authorizing a new tax expenditure. This bill would take effect immediately as a tax levy.

Issues: ✓ Budget & Taxes

Bill status in committee 1 of 4 stages cleared

Introduction

Feb 2026

Committee Review

Floor Vote

Governor

Introduced Feb 20, 2026 Last action May 14, 2026

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What changed between versions

04/23/26 - Amended Senate → SB1343 · 8 edits

MODERATE

SB 1343 was revised to tighten eligibility by limiting the credit to 'qualified taxpayers' (those who received a property reassessment under Section 170), reduce the total per-disaster credit cap from $10,000 to $4,000, expand the definition of major appliances, add a new category for residential building supplies (capped at $500 per item), and introduce anti-double-dipping and clawback provisions. The covered period end date was also made more precise with three possible termination triggers.

ELIGIBILITY

Credit eligibility narrowed from any 'taxpayer' to a 'qualified taxpayer,' defined as one whose principal residence was damaged by a natural disaster and who received a property reassessment under Section 170 of the Revenue and Taxation Code.

FISCAL

The total credit cap per natural disaster was reduced from $10,000 to $4,000. The per-taxable-year cap of $4,000 was made explicit in the main credit provision.

DEFINITION

A new category called 'residential building supplies' was added as qualified tangible personal property, covering cleaning materials, construction tools and hardware, roofing shingles, drywall, insulation, paint, flooring, and other building materials, with a $500 per-item sales price limit.

The definition of 'major appliance' was expanded from a closed list to an open-ended definition ('including but not limited to'), adding trash compactor, ice maker, dehumidifier, residential portable furnace, and room air conditioner to the existing items.

REQUIREMENT

The covered period end date was changed from a simple three-year window to the earliest of three triggers: three years after damage or destruction ceases, three years after the state of emergency is closed, or December 31 of the last authorized tax year.

New anti-double-dipping provision (subdivision d) states the credit is in lieu of any other credit for the same amounts, and a new deduction-reduction rule (subdivision e) reduces any otherwise-allowed deduction by the amount of the credit claimed.

ENFORCEMENT

A clawback provision (subdivision f) was added requiring taxpayers who later receive insurance proceeds, grant funds, rebates, or other reimbursements for amounts used to compute the credit to have their tax increased by the portion of the credit attributable to the reimbursed amount.

The explicit regulatory authority provision allowing the Franchise Tax Board to adopt regulations was removed from the bill text, though FTB retains interpretive roles in determining qualifying building supplies and furniture.

02/20/26 - Introduced → 04/23/26 - Amended Senate · 14 edits · Apr 23, 2026

MAJOR

The Senate amendment significantly restructures SB 1343's natural disaster sales/use tax credit by adding income-based phase-outs, a new 'qualified taxpayer' eligibility requirement tied to property reassessment, reducing the per-disaster cap from $10,000 to $4,000, removing residential building supplies from eligible purchases, limiting carryover to five years, adding anti-double-dipping rules for insurance and other reimbursements, and extending the sunset date from 2031 to 2037. The changes narrow who qualifies and how much they can claim while adding accountability mechanisms.

Scope change

The bill's scope is narrowed in several ways: eligibility now requires a property reassessment under Section 170 and a homeowners' exemption; residential building supplies are removed from eligible purchases; the per-disaster cap drops from $10,000 to $4,000; and an income phase-out reduces or eliminates the credit for higher-income taxpayers. The operational window is extended by six years (sunset moved from 2031 to 2037).

ELIGIBILITY

New 'qualified taxpayer' definition requires that the taxpayer's principal residence was damaged by a natural disaster AND received a property reassessment pursuant to Section 170 of the Revenue and Taxation Code. This is a new eligibility gate not present in the introduced version.

New 'principal residence' definition requires that a homeowners' exemption under Section 218 was granted to the taxpayer in the taxable year for which the credit is claimed.

Income phase-out: the maximum credit is reduced by $6 for every $100 of adjusted gross income above $250,000 (joint, head of household, surviving spouse) or $125,000 (single, married filing separately).

FISCAL

The total credit cap per natural disaster is reduced from $10,000 to $4,000. A new per-taxable-year cap of $4,000 is also added.

REQUIREMENT

Joint return rules: if two taxpayers file jointly, the total credit cannot exceed $4,000. If a taxpayer files separately when a joint return was possible, only one of the two may claim the credit.

Anti-double-dipping provisions: the credit is in lieu of any other credit under the same part for the same amounts; deductions for amounts on which the credit is based must be reduced by the credit amount; and if the taxpayer receives insurance proceeds, grant funds, rebates, or other reimbursement, the tax due is increased by the portion of the credit attributable to the reimbursed amount.

SCOPE

The definition of 'qualified tangible personal property' is narrowed to major appliances or residential furniture with a sales price of $3,500 or less (or per item for bundled purchases). Residential building supplies, which were eligible in the introduced version, are removed from the credit-eligible category.

TIMELINE

The 'covered period' is redefined. Previously it ran from the date of the disaster to three years later. Now it ends on the earliest of: (A) three years from when damage or destruction ceases, (B) three years from when the state of emergency is no longer open, or (C) December 31 of the last tax year the credit is authorized.

Credit carryover is now limited to not more than five succeeding taxable years, whereas the introduced version allowed carryover indefinitely until exhausted.

The sunset/repeal date is extended from December 1, 2031 to December 1, 2037, giving the credit a longer operational window.

ENFORCEMENT

New performance indicators and data collection requirements added for Section 41 compliance: the FTB must report annually (starting June 30, 2029) to the Legislature on the number of taxpayers claiming the credit and the aggregate dollar amount claimed. The Legislative Analyst's Office review deadline of January 1, 2029 is retained.

DEFINITION

The 'major appliance' definition is expanded to include trash compactor, ice maker, dehumidifier, residential portable furnace, and room air conditioner in addition to the original list.

The 'residential furniture' definition is expanded to explicitly list items including chair, sofa, loveseat, coffee table, end table, dining table, dining chair, bed frame, dresser, chest of drawers, bedside table, ottoman, lamp, and wall mirror.

New 'qualified tax payment' definition: an unreimbursed sales or use tax payment paid or incurred by the qualified taxpayer in the taxable year for qualified tangible personal property during the covered period. New 'tax payment' definition clarifies it means either a sales tax reimbursement paid to a retailer or a use tax paid.

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Full legislative history

Actions timeline

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Key actions

Committee

Amendments

May 14, 2026

Upper · Passed

May 14 hearing: Held in committee and under submission.

upper

Apr 23, 2026

Upper · Passed

Read second time and amended. Re-referred to Com. on APPR.

upper

Apr 22, 2026

Upper · Passed

From committee: Do pass as amended and re-refer to Com. on APPR. (Ayes 5. Noes 0. Page 4016.) (April 22).

upper

Mar 4, 2026

Committee

Referred to Com. on REV. & TAX.

upper

Feb 20, 2026

Introduced

Introduced. To Com. on RLS. for assignment. To print.

upper

1 primary · 7 co-sponsors