Your Chamber is a member of the  California Manufacturing and Technology Association (CMTA). CMTA distributed an excellent summary of the key business elements negotiated during the budget discussion. Take a moment to review the potential impact on business in this budget. This summary has been edited for space.

In late June, the Governor and Legislature announced a final agreement on the 2026-27 State Budget, which balances the state's General Fund through fiscal years 2026-27 and 2027-28. The agreement relies on a combination of spending reductions, new revenues, reserve funding, and targeted investments while reducing the state's projected structural deficit.

The budget authorizes $351.7 billion in total expenditures, including $251.5 billion from the General Fund, and maintains a record $35.2 billion in state reserves.

Below is a summary of the budget provisions CMTA has been engaging/monitoring on:

• Permanent Business Tax Credit Limitation: The budget extends the current limitation on business tax credits through tax year 2029. Beginning in 2030, business tax credits will be permanently capped at the greater of $5 million or 70% of a taxpayer's liability.
• Sales Tax on Prewritten Software: The budget adopts the Governor's proposal to apply California sales tax to electronically delivered prewritten software, expanding the state's sales tax base and increasing costs for many businesses purchasing or licensing software.
• CalCompetes Tax Credit Extended: The budget provides a positive economic development outcome by extending the California Competes Tax Credit for an additional five years at $180 million annually, preserving an important incentive for business investment and expansion in California.
• Cap-and-Invest Funding Deferred: The Legislature deferred action on GGRF expenditures and associated budget trailer bills implementing the proposed Cap-and-Invest program changes (SB 840/AB 1207).
• Community Air Protection: The budget includes $150 million for CARB's Community Air Protection Program (AB 617 implementation), which may result in additional monitoring and regulatory activity affecting industrial facilities in impacted communities.
• Transportation and Ports: The final budget retains language prohibiting certain state transportation and infrastructure funds from being used to purchase or support fully automated cargo handling equipment at ports.