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SB 1435CALIFORNIASession 20252026

California SB 1435 exempts business interest deductions from federal limits for personal income tax

Original title: Personal Income Tax Law and Corporation Tax Law: federal conformity.

September 4, 2026

Taxes State Law Business Regulation Federal Conformity PersonalIncomeTaxLawandCorporationTaxLaw federalconformity

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Where This Stands

Currently Unknown. The next step in the legislative lifecycle is Introduced.

Last action

Set for hearing May 14.May 8, 2026

Version history & redline

3 versions on file

Official version history is partial: 3 linked texts are unavailable or incomplete. Source links remain available below.

Comparing 03/11/26 - Introduced → 04/23/26 - Amended Senate

removed addedOfficial text

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Redline computed from the official version text (record lane).View this version →

The Frame

What this does

This change simplifies tax filing for California business owners by aligning state personal income tax rules with a more flexible standard than the current federal limit on business interest deductions.

Who is mentioned in the record

Potentially affected actors named in the source documents. Mention is not a position.

Personal income tax filers

Taxpayers will be able to deduct business interest without applying federal deduction limits starting in 2025.

Business owners

Business owners filing under the Personal Income Tax Law will see a change in how they calculate deductible business interest.

What changed

Last recorded activity September 4, 2026.

What's next

Introduced.

Summary

This bill allows taxpayers to deduct business interest expenses on their personal income tax returns without being subject to federal interest deduction caps, starting with the 2025 tax year. It also cleans up state tax codes by removing references to outdated or repealed federal tax laws.

Key Facts

You don't have to trust us. Each fact below is taken straight from the official document - click any one to see the exact passage, highlighted in the original.

Why It Matters

Frequently Asked Questions

How does this change my personal income tax return?

Starting in 2025, you will not be restricted by federal limits on how much business interest you can deduct from your personal income tax, provided you are filing under California's Personal Income Tax Law.

Does this bill affect corporate taxes?

The bill specifically mentions updating references for both Personal Income Tax Law and Corporation Tax Law, but the specific exemption for business interest deduction limits is explicitly applied to the Personal Income Tax Law.

News Coverage

No news coverage found yet. Articles are indexed twice daily.

Discoveries

Patterns POLISCOPE noticed across the record. These are observations to investigate, not conclusions.

policy shift90% confidence

Decoupling from Federal Interest Limits

The bill explicitly moves California's personal income tax policy away from federal limitations on business interest deductions, creating a state-specific tax treatment.

Personal Income Tax Law

Connected Entities

otherInternal Revenue Code“The federal tax code that California state law references for tax calculations.”Map →

otherPersonal Income Tax Law“The state tax law governing individual income tax filings.”Map →

otherCorporation Tax Law“The state tax law governing corporate income tax filings.”Map →

Sources

Open source document

openstates.org

Analysis Score

0–100

Significance65
How much this matters to a regular citizen
Controversy15
Intensity of disagreement among stakeholders
Entertainment5
Compellingness for a non-policy-wonk reader
Buzz20
Current news / social attention level

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