California enacts 25% tax on private detention facility operators, starting in 2028

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The California State Capitol dome in Sacramento against a blue sky

California enacts 25% tax on private detention facility operators, starting in 2028

The final version is narrower than a May Assembly version that proposed taxing 50% of gross receipts starting in 2027, Bloomberg Tax reported.

By Alberto Zamudio | The Southbound 105 | Oct. 16, 2026

California has enacted a new annual tax on private detention facility operators, with the levy set at 25% of an operator's gross income and scheduled to begin in mid-2028.

What the law does

Gov. Gavin Newsom signed Assembly Bill 1633 on Sept. 29, 2026, and it took effect immediately as a tax levy, according to Bloomberg Tax and the bill's chaptered text. The measure, by Assemblymember Matt Haney, D-San Francisco, creates the Private Detention Facility Tax Law.

Beginning July 1, 2028, and every July 1 after that, the law imposes an annual tax on all private detention facility operators equal to 25% of the operator's gross income for the fiscal year, the text says. Bloomberg Tax described the base as California gross income. The California Department of Tax and Fee Administration is to administer and collect the tax.

Where the money would go

Revenue, less refunds and administrative costs, would go into a new Due Process for All Fund. Money in the fund could be spent, when appropriated by the Legislature, on immigration-related services, according to the bill's summary. The Governor's office described the package as one that "closes a loophole that previously allowed some facilities to claim tax-exempt status" and called the tax first in the nation.

How it changed

The law is narrower than what the Assembly passed in the spring. Bloomberg Tax reported that the version that cleared the Assembly in May would have taxed 50% of operators' gross receipts beginning in 2027. Private prison companies CoreCivic and GEO Group had warned investors about the earlier proposal, and GEO Group said the legislation could affect its operations and cash flow, Bloomberg Tax reported.

Private detention operators already pay California's general 8.84% tax on corporate net income, Bloomberg Tax noted. A companion bill, AB 1675, which would have broadly denied state tax breaks to companies contracting with the U.S. Department of Homeland Security, stalled in the Senate.

Why it matters

The law sets a new tax rate on an industry that contracts with government agencies, and it directs the money toward immigration-related services rather than the general fund. Under the law's schedule, no tax is due until July 1, 2028. Whether the tax will be challenged or how much it will raise has not been reported in the sources reviewed.

What's next

  • July 1, 2028: the first annual tax date set by the law.
  • Legislative appropriation: money in the Due Process for All Fund can be spent only when the Legislature appropriates it.
  • Implementation: the tax and fee agency is responsible for administering and collecting the tax.

Want more local news? Read more at The Southbound 105.

Cover photo: Photograph: Radomianin, Public domain, via Wikimedia Commons.

Sources

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