SB 17 California Senate · 2025-2026 Regular Session

Personal income taxes: deductions: tips.

Summary

The Personal Income Tax Law, in modified conformity with federal income tax laws, allows various deductions from gross income in calculating adjusted gross income. This bill, for taxable years beginning on or after January 1, 2026, and before January 1, 2036, would allow a deduction in determining adjusted gross income for an amount equal to the qualified tips, as defined, received by a qualified taxpayer, as defined, during the taxable year, not to exceed $20,000. 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 failed 1 of 4 stages cleared

Introduction

Dec 2024

Committee Review

Floor Vote

Governor

Introduced Dec 2, 2024 Last action Feb 2, 2026

Maddy AI version diff · 3 comparisons

What changed between versions

05/05/25 - Amended Senate → SB17 · 1 edit

MINOR

No substantive policy changes were made between these two versions of SB 17. The differences are entirely presentational: the bill text was reformatted from a traditional printed legislative document with line numbers into a web-based display format that includes navigation menus, search tools, and metadata elements. All operative provisions, definitions, dollar thresholds, and dates remain identical.

TECHNICAL

The bill was re-rendered from a traditional printed format (with line numbers and page headers) into a web-based layout that adds site navigation, search functionality, version tracking links, and metadata such as publication date. No changes to the actual legislative text.

12/02/24 - Introduced → 04/28/25 - Amended Senate · 7 edits · Apr 28, 2025

MODERATE

The Senate amendment fundamentally changes SB 17 from a full exclusion of tips from gross income to a capped annual deduction of up to $20,000 for qualified tips, available only to workers meeting specific eligibility criteria including income limits and occupation requirements. The bill also adds a 10-year sunset (expiring before January 1, 2036) and takes effect immediately as a tax levy. All previously included changes to unemployment insurance wage definitions, withholding rules, and information reporting provisions were removed.

SCOPE

Changed from excluding all tips from gross income entirely to allowing a deduction (not exclusion) of up to $20,000 per year for qualified tips. A deduction reduces adjusted gross income but is different from an exclusion which removes income before AGI is calculated.

Removed all provisions that would have excluded tips from gross income under Section 17131.18.5, treated tips as gifts under IRC Section 10(a), modified withholding rules to exclude tips from supplemental wages, removed tips from the unemployment insurance definition of wages, and repealed tip reporting requirements in the Unemployment Insurance Code.

ELIGIBILITY

Added a 'qualified taxpayer' definition requiring: (1) working in an occupation where the taxpayer regularly receives more than $20 per month in qualified tips, (2) not holding a professional license issued by the Department of Consumer Affairs (except State Board of Barbering and Cosmetology), and (3) having adjusted gross income not exceeding $250,000 for head of household/surviving spouse/married filing jointly, or $125,000 for all other filers.

DEFINITION

Added definition of 'qualified tips' as tips or voluntary monetary contributions received from a guest, patron, or customer for services rendered, that the taxpayer reports under IRC Section 6503 and the Federal Insurance Contributions Act.

TIMELINE

Added a 10-year sunset: the deduction applies only to taxable years beginning on or after January 1, 2026, and before January 1, 2036. The section is repealed as of December 1, 2036.

FISCAL

The bill now takes effect immediately as a tax levy under Article IV of the California Constitution, rather than taking effect on a future date.

ENFORCEMENT

Added a record-keeping requirement: qualified taxpayers must maintain adequate records to substantiate the deduction and provide them to the Franchise Tax Board upon request. The FTB may adopt regulations to carry out the section, and the Administrative Procedure Act does not apply to those regulations.

Floor votes

How they voted

No floor votes recorded yet.

Full legislative history

Actions timeline

Total actions

Key actions

Committee

Amendments

May 23, 2025

Upper · Passed

May 23 hearing: Held in committee and under submission.

upper

May 5, 2025

Upper · Passed

From committee with author's amendments. Read second time and amended. Re-referred to Com. on APPR.

upper

Apr 29, 2025

Committee

Re-referred to Com. on APPR.

upper

Apr 28, 2025

Upper · Passed

Read second time and amended. Re-referred to Com. on L., P.E. & R.

upper

Apr 24, 2025

Upper · Passed

From committee: Do pass as amended and re-refer to Com. on L., P.E. & R. (Ayes 5. Noes 0. Page 872.) (April 23).

upper

Jan 29, 2025

Committee

Referred to Coms. on REV. & TAX. and L., P.E. & R.

upper

Dec 2, 2024

Introduced

Introduced. Read first time. To Com. on RLS. for assignment. To print.

upper

1 primary · 4 co-sponsors