The California Business Roundtable says it would lead courtroom challenges if voters approve Proposition 40 in November. Chief Executive Officer Rob Lapsley said the group retained Elizabeth Prelogar - formerly the Biden administration's top Supreme Court lawyer and now a partner at Cooley - to help steer the effort. The Roundtable speaks for corporations across sectors such as tech and energy.
People familiar with the planning, who were not authorized to speak publicly, said coordination is underway alongside the billionaires who would be affected as the plan takes shape. Lapsley added that their strategy spans both campaigning and litigation, saying they intend to have papers ready to bring a court case immediately after the election if overturning the measure requires litigation.
The proposal would allow a one-time 5% levy on the full net worth of California billionaires. It would cover any member of that group who, at any time since Jan. 1, 2026, lived in California. The idea has split voters and drawn intense pushback, with some of the state's wealthiest residents committing close to $300 million to stop it. Through its political committee, the Roundtable has put up at least $700,000 to oppose the measure, campaign filings show.
Supporters are gearing up legally as well. Dave Regan, who leads the healthcare-workers union supporting the tax, said they have hired Supreme Court advocate Deepak Gupta. "There is nothing legally innovative about Proposition 40, it is based on a century of settled law," Regan said.
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"The only thing unique about it is that it taxes billionaires." A memo from Gupta Wessler reviewed by Bloomberg says any retroactive element is limited to determining residency and unrelated to how much would be owed, and that, in their view, constitutional objections are not likely to convince the courts. The firm did not respond to a message seeking comment.
Election lawyer Tom Hiltachk, who previously advised the measure's opponents, expects disputes over who counts as a resident and how to value and tax specific assets. He also anticipates wider constitutional arguments, including assertions that the measure applies retroactively and that imposing taxes on holdings beyond California violates interstate commerce protections.
Prelogar's track record hints at one lane of argument. As solicitor general under President Joe Biden, she defended the federal government's authority in Moore v. United States to tax certain foreign corporate earnings not distributed to U.S. shareholders. Opponents hoped that case would set limits on taxing unrealized gains, but the Supreme Court upheld the tax while declining a broad ruling that would reach wealth taxes.
If Proposition 40 passes, the Roundtable says it will be ready to file a challenge immediately after the election if needed. Expect litigation to focus on residency rules, valuation methods, and constitutional questions, which would shape timing and scope for any collections.
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