Two niche rule changes drive outsized “surprise tax” outcomes in 2026. If you advise individuals in divorce or manage global talent touching California, you should brief these now—before facts lock in.

1) Alimony / spousal support: the “date of instrument” now drives California tax treatment

Where California has been: California generally treated alimony as deductible to the payor and taxable to the recipient (even after federal changed).

What changes for 2026 divorces: SB 711’s amendments add a rule that certain alimony-related provisions won’t apply for:

divorce/separation instruments executed after December 31, 2025, and
instruments executed on/before December 31, 2025 that are later modified after that date under specified circumstances.

Practical meaning (what you tell clients)

If the divorce agreement is executed in 2026, don’t assume you’ll get the old California deduction/inclusion dynamic. The state is effectively moving to a new regime for post-2025 instruments.
If an older agreement is modified after 12/31/2025, the modification can be the tripwire. Treat modifications as a tax event that needs review, not “paperwork.”

“Do this now” checklist (divorce + post-divorce clients)

Pull the execution date of the divorce/separation instrument.
For any 2026 execution or post-2025 modification, run a CA impact memo as part of the negotiation package (not after).
Align the legal team + tax team: this is a drafting/timing issue as much as a tax issue.

2) AB 1518: nonresident alien group returns become permanent (and penalties get defanged)

This is a compliance and risk-management win for companies with international employees visiting/working in California who don’t have (or can’t easily obtain) SSNs/ITINs.

What AB 1518 does (effective 1/1/2026)

FTB’s bill analysis is clear AB 1518:

Removes the Jan 1, 2026 sunset and makes the group return election permanent for nonresident aliens.
Makes permanent the SSN/ITIN relief (FTB can’t require it for filing certain state documents).
Makes estimated payment penalties inapplicable for nonresident individuals electing into the group return, specifically operative for tax years beginning on/after Jan 1, 2026.

Practical meaning (what you tell HR/Global Mobility/Payroll)

Group returns are now a durable tool, not a temporary workaround.
If you’re running group returns, the “estimated tax penalty” risk drops materially for electors (starting with 2026 tax years).

“Do this now” checklist (mobility programs)

Confirm you have a group-return workflow owner (Tax / Payroll / Mobility) and a documented process.
Track days in CA, CA-source comp, and withholding at the individual level—even if you file group.
Coordinate with your agent/provider to ensure your 2026 policy reflects the now-permanent rules.

CTA

If a client is divorcing in 2026 or you manage global talent working in CA, this is a must-brief.