California policymakers have explored several wealth tax proposals in recent years, some targeting net worth above $1 billion, others reaching lower thresholds. None have become law yet, but the conversation is active. Earlier versions have included multi-year residency lookback provisions, and some include apportionment rules that would let California tax a prorated share based on how many years a person lived in the state while their wealth grew.

The state already has the highest marginal income tax rate in the country at 13.3%. Whether a wealth tax is added on top of that is an open question, but if the structure passes at any level, adjusting the threshold later becomes straightforward.

One detail worth understanding: the proposals don't all use the same definition of value. Some have used a "book value plus earnings multiplier" approach, and others would factor in voting rights. For founders holding super-voting shares, that could mean the state values their stake based on voting control rather than economic interest, which may not match what the shares could actually be sold for.

These proposals would face legal challenges, and there's a real question about whether they'd hold up. That uncertainty cuts both ways, and it's one reason domicile planning has become a more common conversation for founders and early employees approaching a liquidity event.

California residency is determined by a facts-and-circumstances test, and the Franchise Tax Board looks at "closest connections." If your board meetings, primary doctor, and day-to-day life remain in California, buying a house in another state doesn't change your residency in the eyes of an auditor. For anyone considering a change, the facts supporting it need to be established well before an IPO or acquisition closes.

California offers real advantages for founders, including proximity to talent, investor networks, and infrastructure that's hard to replicate. Domicile is one factor in a broader decision, but for anyone holding significant unrealized gains in a company heading toward a liquidity event, it's worth understanding how the state tax picture is evolving.

For educational purposes only. Not tax, legal, or investment advice.