Personal income taxes: unemployment insurance: fitness benefit., the official text

An act to amend Section 17072 of, and to add Section 17206 to, the Revenue and Taxation Code, and to add Section 938.6 to the Unemployment Insurance Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL'S DIGEST

The Personal Income Tax Law, in modified conformity with federal income tax law, allows various deductions from gross income in calculating adjusted gross income.
This bill, for taxable years beginning on or after January 1, 2026, would allow a deduction from gross income for any qualified fitness benefit provided by an employer to an employee, as specified. The bill would define “qualified fitness benefit” as a uniform stipend amount to all full-time employees for fees or dues for membership in a fitness center, health club, or gym, except as specified.
Existing law requires specified employers to contribute to the Unemployment Fund based on wages paid for employment. Existing law defines “wages” for this purpose, as provided, and excludes from that definition, among other things, remuneration in excess of $7,000 paid to an individual by an employer during any calendar year, with respect to employment.
This bill would additionally exclude from that definition of wages any qualified fitness benefit provided by an employer to an employee, up to $600 per year, as specified.
Existing law requires a bill authorizing a new tax expenditure to contain, among other things, specific goals the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
This bill would include additional information required for any bill authorizing a new tax expenditure.
This bill would take effect immediately as a tax levy.

The people of the State of California do enact as follows:

SECTION 1.
The Legislature finds and declares all of the following:
(a) Physical inactivity is a leading contributor to chronic disease and rising health care costs in the State of California.
(b) Workplace wellness programs have proven effective in increasing employee productivity and reducing absenteeism.
(c) Providing a tax incentive for employers to offer fitness benefits encourages a healthier workforce without imposing a mandate on businesses.
(d) It is the intent of the Legislature to exclude employer-provided fitness and physical activity benefits from an employee’s gross income for state personal income tax purposes.

SEC. 2.
Section 17072 of the Revenue and Taxation Code is amended to read:
17072.
(a) Section 62 of the Internal Revenue Code, relating to adjusted gross income defined, shall apply, except as otherwise provided.
(b) Section 62(a)(2)(D) of the Internal Revenue Code, relating to certain expenses of elementary and secondary school teachers, shall not apply.
(c) Section 62(a)(21) of the Internal Revenue Code, relating to attorneys fees relating to awards to whistleblowers, shall not apply.
(d) For each taxable year beginning on or after January 1, 2026, Section 62(a) of the Internal Revenue Code, relating to the general rule, is modified to provide that the deduction under Section 17206 shall be allowed in determining adjusted gross income.

SEC. 3.
Section 17206 is added to the Revenue and Taxation Code, to read:
17206.
(a) For taxable years beginning on or after January 1, 2026, there shall be allowed as a deduction in determining adjusted gross income for a “qualified fitness benefit” provided by an employer to an employee.
(b) For purposes of this section, “qualified fitness benefit” means a uniform stipend amount to all full-time employees for fees or dues for membership in a fitness center, health club, or gym.
(c) The deduction provided by this section shall not apply to any of the following:
(1) Memberships in any club where the primary purpose is social, athletic, or sporting, such as a country club or golf club.
(2) Expenses for travel, meals, or lodging associated with fitness activities.
(3) A stipend amount for fees or dues for membership in a fitness center, health club, or gym provided to highly compensated employees that exceeds the amount provided to any other full-time employee.
(d) The deduction under this section shall apply regardless of whether the benefit is provided through a direct payment to a third party or as a reimbursement to the employee upon proof of payment.
(e) For purposes of complying with Section 41 as it relates to the tax deduction provided by this section, the Legislature finds and declares the following:
(1) The specific goal, purpose, and objective of the tax deduction is to assist California residents in affording the cost of a “qualified fitness benefit,” which can increase an employee’s tax liability if provided through an employer-sponsored wellness program. Workplace wellness programs have proven effective in increasing employee productivity, reducing absenteeism, and reducing chronic disease and rising health care costs in the state.
(2) The performance indicators for the Legislature to use in determining whether the deduction achieves the stated objective shall be the number of California taxpayers that receive the deduction pursuant to this section.
(3) (A) Notwithstanding Section 10231.5 of the Government Code, no later than June 30, 2029, and each June 30 thereafter, the Franchise Tax Board shall submit a report to the Legislature, in accordance with Section 9795 of the Government Code, detailing the number of taxpayers that claimed the tax deduction pursuant to this section for the most recent taxable year.
(B) The disclosure requirements of this paragraph shall be treated as an exception to Section 19542.

SEC. 4.
Section 938.6 is added to the Unemployment Insurance Code, to read:
938.6.
“Wages” does not include any qualified fitness benefit provided by an employer to an employee, up to six hundred dollars ($600) per year, provided the qualified fitness benefit meets the requirements of Section 17206 of the Revenue and Taxation Code.

SEC. 5.
This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.