California Residency Audits and the Billionaire Tax: What High-Net-Worth Residents Need to Know

California’s proposed billionaire tax has put the California residency audit back in the national spotlight, and made it the single most important issue for wealthy individuals who have recently left the state or are thinking about it.

As Proposition 40, the 2026 Billionaire Tax Act, heads toward a statewide vote, the California Franchise Tax Board (FTB) is preparing to scrutinize whether departing residents have truly cut ties with California or merely rearranged them on paper. If you have a substantial net worth and a California history, the question is no longer whether you moved — it is whether you can prove it.

Kugelman Law founder and managing attorney Alex Kugelman was quoted on exactly this issue in the Financial Times, in reporting that was subsequently picked up by the New York Post. His assessment of what is coming is blunt, and it is worth understanding before an audit notice ever arrives.

What the California Billionaire Tax (Proposition 40) Actually Proposes

As proposed, the 2026 California Billionaire Tax Act would impose a one-time 5% tax on the global net worth of individuals with wealth exceeding $1 billion, keyed to California residency as of January 1, 2026. The measure is headed to a statewide vote in November 2026, and its drafters of tax law academics advising the initiative have projected it could raise tens of billions of dollars earmarked largely for healthcare and education.

The detail that matters most for planning is the residency date. Because the tax is tied to residency as of the start of 2026, simply relocating afterward does not necessarily remove someone from its reach. That is precisely why the conversation has shifted from the tax itself to how California will decide who was, and who still is, a resident. (Proposition 40’s terms are as proposed and remain subject to voter approval and possible legal challenge. Anyone affected should get advice on their specific facts.)

Why Leaving California Doesn’t End the Tax Question

California is one of the most aggressive states in the country when it comes to residency, alongside New York. Leaving is not a one-time event the state simply accepts. When the financial stakes are high, the FTB opens a California residency audit to test whether a former resident genuinely abandoned California or kept a foot in the door.

Recent coverage has focused on three high-profile names said to be likely targets — Google co-founder Sergey Brin, venture capitalist and White House adviser David Sacks, and Uber co-founder Travis Kalanick — but the enforcement playbook that applies to them is the same one the FTB uses against far less famous taxpayers every year. The billionaire tax simply raises the dollar figures and the intensity.

How the FTB Decides Whether You Really Left

A California residency audit goes well beyond counting the days you spent in the state. According to the FTB’s own guidance, examiners look at whether a person “substantially severed” their California connections on departure — or whether they “maintained” California connections “in readiness for a return.” In practice, that means the FTB examines factors such as:

• Where your children are enrolled in school
• Where your vehicles are registered
• Where your doctors, dentists, and even veterinarians are located
• Where your bank accounts and financial relationships are maintained
• The location and relative value of your homes, and where you spend your time
• Where your professional, social, and family ties remain

The takeaway is that surface-level moves do not carry the day. As one law professor advising the initiative put it in the Financial Times, “Sending your assistant to get a driving license in Nevada, spending Christmas at your home in Miami and writing a mean tweet about California are only moves on paper.” Residency turns on the substance of your life, not the paperwork you generate around a move.

“These Fights Will Go All the Way” — Alex Kugelman in the Financial Times

Speaking to the Financial Times about how California is likely to pursue collection if the tax passes, Kugelman Law’s Alex Kugelman was direct:

“If the tax goes through, the [Franchise Tax Board] will not be afraid to try to collect it. And obviously people of that means will have the top tax litigators. These fights will go all the way.”

— Alex Kugelman, quoted in the Financial Times (and reported by the New York Post)

That is the reality high-net-worth Californians should plan around. The FTB is expected to treat these matters as worth pursuing, and taxpayers with the means to fight will do so — through the audit, through administrative appeals, and, where necessary, into court. Preparing for that reality is very different from hoping an audit never comes.

What This Means If You’ve Moved — or Are Considering It

Whether you are a billionaire named in the headlines or a business owner, executive, or tech professional with a nine-figure or eight-figure net worth, the same principles apply. A defensible change of residency is built well before an audit begins, through a consistent, documented pattern showing that your life actually moved. The worst position to be in is discovering after a notice arrives that your day counts, filings, property use, and family ties tell an inconsistent story.

If the billionaire tax passes in November, expect residency scrutiny to intensify across the wealth spectrum, not just at the very top. And even if it does not pass, California’s existing residency rules and the FTB’s appetite for high-value tax audits are not going away.

How Kugelman Law Helps With California Residency Audits

Kugelman Law is a boutique tax controversy firm serving clients throughout California and nationwide from offices in San Rafael, San Francisco, and Irvine. We represent individuals and businesses facing high-stakes California residency audits and related matters, including:

• Tax audit defense, including FTB residency examinations
• Tax collection matters when the state moves to collect a disputed liability
• Tax litigation when a dispute cannot be resolved administratively
• General tax help for individuals and businesses navigating complex state and federal exposure

We do not offer free consultations. We offer paid, privileged consultations with Alex Kugelman that are fully protected by attorney-client privilege; the appropriate setting for discussing something as sensitive as your residency position and net worth.

Notable Results

Our tax controversy work has included reducing a $365,000 tax debt to a zero-dollar liability, resolving a multi-year audit and non-filing matter with a minimal payment, and successfully resolving ten years of unfiled returns. Results depend on specific facts. Past results do not guarantee future outcomes.

Frequently Asked Questions

What is a California residency audit?

A California residency audit is an examination by the Franchise Tax Board to determine whether you were a California resident for a given tax year and therefore taxable in California. It typically arises when a high-income or high-net-worth taxpayer claims to have left the state, and the FTB tests whether the departure was genuine and complete.

Can California tax me after I move away?

Potentially, yes. If the FTB concludes you remained a California resident or did not sufficiently sever your ties, it can assert that California income and, under the proposed billionaire tax, California-linked wealth remain within its reach. This is why the timing and substance of a move matter so much.

What factors does the FTB look at to decide residency?

The FTB weighs the totality of your connections: where you spend your time, where your home and family are, where your children attend school, where your vehicles are registered, where your doctors and financial accounts are, and where your professional and social life is centered. No single factor controls; the FTB looks at the overall pattern.

Is the California billionaire tax already law?

No. As of this writing, the 2026 Billionaire Tax Act (Proposition 40) is a proposed measure headed to a statewide vote in November 2026. Its terms are subject to voter approval and potential legal challenge. Even so, the residency-audit issues it highlights already exist under current California law.

Should I get advice before I move?

Ideally, yes. A defensible residency change is much easier to establish when it is planned and documented in advance than when it is reconstructed after an audit notice. If you have already moved, it is still worth reviewing your position before a dispute arises.

About the Author

Alex Kugelman is the founder and managing attorney of Kugelman Law, a boutique tax controversy and cryptocurrency tax firm serving clients throughout California and nationwide. Admitted to the California Bar in 2008 (No. 255463) and before the U.S. Supreme Court, he has nearly two decades of federal tax controversy experience, including litigation in the U.S. Tax Court and U.S. District Court. He served as San Francisco Chair of the Federal Bar Association Tax Division in 2018 and is a member of the Marin County Assessment Appeals Board. Alex is nationally recognized for his work on cryptocurrency tax matters and has been quoted in outlets including the Financial Times and the New York Post. He earned his J.D. from Chapman University Fowler School of Law.

Talk to a California Tax Attorney About Your Residency Position

If you have left California, are planning to, or have received notice of a residency audit, the time to build your position is now — not after the FTB opens a file. Schedule a paid, privileged consultation with Alex Kugelman to discuss your specific facts under the protection of attorney-client privilege.

Call (415) 968-1780 or contact Kugelman Law to schedule your consultation.

This article is provided for general informational purposes only and is not legal or tax advice. Results depend on specific facts. Past results do not guarantee future outcomes. Reading this article does not create an attorney-client relationship.