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    SB-376
    Budget & Economy

    Incomplete gift nongrantor trusts: Personal Income Tax Law.

    Enrolled
    CA
    ∙
    2025-2026 Regular Session
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    Key Takeaways

    • Excludes charitable remainder trusts from incomplete gift nongrantor trust status.
    • Clarifies the exclusion is declaratory of existing law.
    • Maintains grantor-level taxation for incomplete gift trusts unless exempt.
    • Franchise Tax Board may issue rules to implement the change.

    Summary

    Senator Valladares’s bill addresses California’s treatment of incomplete gift nongrantor trusts by expressly excluding those that qualify as charitable remainder trusts from that category, with a stated purpose of aligning the state’s tax rules in this area with the authorities governing charitable remainder arrangements. Under current law, the income of estates or trusts is taxed in a manner similar to individuals, and beginning in 2023 the income of an incomplete gift nongrantor trust is included in the grantor’s gross income to the extent it would be included if the trust were treated as a grantor trust; the bill’s findings contend that the amendments are declaratory of existing law rather than a change in policy.

    To qualify for the exclusion, the trust must be a nongrantor trust rather than a grantor trust, and the transfer to the trust must be treated as an incomplete gift. The fiduciary would file the California fiduciary income tax return and irrevocably elect to be taxed as a resident nongrantor trust, and the trust must be a nongrantor trust for tax purposes. In addition, ninety percent or more of the distributable net income of the trust must be distributed, or treated as distributed, to a charitable organization, as defined for these purposes. Finally, the trust would not be considered an incomplete gift nongrantor trust if it qualifies as a charitable remainder trust under the applicable federal provisions.

    Implementation provisions authorize regulatory and guidance authority for the Franchise Tax Board to carry out the bill’s purposes, and the bill defines the key terms related to incomplete gift nongrantor trusts and resident nongrantor trusts. The overall framework preserves the existing federal-versus-state treatment of grantor versus nongrantor arrangements while creating a specific carve-out for charitable remainder trusts, with the authors describing the change as declaratory of existing law rather than a substantive shift in policy or revenue impact.

    Key Dates

    Vote on Senate Floor
    Senate Floor
    Vote on Senate Floor
    Unfinished Business SB376 Valladares Concurrence
    Vote on Assembly Floor
    Assembly Floor
    Vote on Assembly Floor
    SB 376 Valladares Senate Third Reading By Quirk-Silva
    Assembly Revenue And Taxation Hearing
    Assembly Committee
    Assembly Revenue And Taxation Hearing
    Do pass as amended and be re-referred to the Committee on [Appropriations]
    Vote on Senate Floor
    Senate Floor
    Vote on Senate Floor
    Senate 3rd Reading SB376 Valladares
    Senate Revenue and Taxation Hearing
    Senate Committee
    Senate Revenue and Taxation Hearing
    Do pass, but first be re-referred to the Committee on [Appropriations]
    Introduced
    Senate Floor
    Introduced
    Introduced. Read first time. To Com. on RLS. for assignment. To print.

    Contacts

    Profile
    Suzette ValladaresR
    Senator
    Bill Author
    Not Contacted
    Not Contacted
    0 of 1 row(s) selected.
    Page 1 of 1
    Select All Legislators
    Profile
    Suzette ValladaresR
    Senator
    Bill Author

    Get Involved

    Act Now!

    Email the authors or create an email template to send to all relevant legislators.

    Introduced By

    Suzette Valladares
    Suzette ValladaresR
    California State Senator
    70% progression
    Bill has passed both houses in identical form and is being prepared for the Governor (9/11/2025)

    Latest Voting History

    View History
    September 11, 2025
    PASS
    Senate Floor
    Vote on Senate Floor
    AyesNoesNVRTotalResult
    400040PASS

    Key Takeaways

    • Excludes charitable remainder trusts from incomplete gift nongrantor trust status.
    • Clarifies the exclusion is declaratory of existing law.
    • Maintains grantor-level taxation for incomplete gift trusts unless exempt.
    • Franchise Tax Board may issue rules to implement the change.

    Get Involved

    Act Now!

    Email the authors or create an email template to send to all relevant legislators.

    Introduced By

    Suzette Valladares
    Suzette ValladaresR
    California State Senator

    Summary

    Senator Valladares’s bill addresses California’s treatment of incomplete gift nongrantor trusts by expressly excluding those that qualify as charitable remainder trusts from that category, with a stated purpose of aligning the state’s tax rules in this area with the authorities governing charitable remainder arrangements. Under current law, the income of estates or trusts is taxed in a manner similar to individuals, and beginning in 2023 the income of an incomplete gift nongrantor trust is included in the grantor’s gross income to the extent it would be included if the trust were treated as a grantor trust; the bill’s findings contend that the amendments are declaratory of existing law rather than a change in policy.

    To qualify for the exclusion, the trust must be a nongrantor trust rather than a grantor trust, and the transfer to the trust must be treated as an incomplete gift. The fiduciary would file the California fiduciary income tax return and irrevocably elect to be taxed as a resident nongrantor trust, and the trust must be a nongrantor trust for tax purposes. In addition, ninety percent or more of the distributable net income of the trust must be distributed, or treated as distributed, to a charitable organization, as defined for these purposes. Finally, the trust would not be considered an incomplete gift nongrantor trust if it qualifies as a charitable remainder trust under the applicable federal provisions.

    Implementation provisions authorize regulatory and guidance authority for the Franchise Tax Board to carry out the bill’s purposes, and the bill defines the key terms related to incomplete gift nongrantor trusts and resident nongrantor trusts. The overall framework preserves the existing federal-versus-state treatment of grantor versus nongrantor arrangements while creating a specific carve-out for charitable remainder trusts, with the authors describing the change as declaratory of existing law rather than a substantive shift in policy or revenue impact.

    70% progression
    Bill has passed both houses in identical form and is being prepared for the Governor (9/11/2025)

    Key Dates

    Vote on Senate Floor
    Senate Floor
    Vote on Senate Floor
    Unfinished Business SB376 Valladares Concurrence
    Vote on Assembly Floor
    Assembly Floor
    Vote on Assembly Floor
    SB 376 Valladares Senate Third Reading By Quirk-Silva
    Assembly Revenue And Taxation Hearing
    Assembly Committee
    Assembly Revenue And Taxation Hearing
    Do pass as amended and be re-referred to the Committee on [Appropriations]
    Vote on Senate Floor
    Senate Floor
    Vote on Senate Floor
    Senate 3rd Reading SB376 Valladares
    Senate Revenue and Taxation Hearing
    Senate Committee
    Senate Revenue and Taxation Hearing
    Do pass, but first be re-referred to the Committee on [Appropriations]
    Introduced
    Senate Floor
    Introduced
    Introduced. Read first time. To Com. on RLS. for assignment. To print.

    Latest Voting History

    View History
    September 11, 2025
    PASS
    Senate Floor
    Vote on Senate Floor
    AyesNoesNVRTotalResult
    400040PASS

    Contacts

    Profile
    Suzette ValladaresR
    Senator
    Bill Author
    Not Contacted
    Not Contacted
    0 of 1 row(s) selected.
    Page 1 of 1
    Select All Legislators
    Profile
    Suzette ValladaresR
    Senator
    Bill Author