At a waterfront resort in Newport Beach, Calif., a tax lawyer took the stage in a conference room this week to deliver some advice.
A couple hundred wealth advisers had gathered over boneless short ribs and striped bass to learn about a suddenly hot topic among the uber-rich: a proposed tax on California billionaires.
“What’s the first way to avoid the tax?” said Andrew Katzenstein, the luncheon speaker.
“Get divorced.”
Laughter rang out as Mr. Katzenstein, a partner with the Holthouse Carlin Van Trigt accounting firm, explained that a married couple worth slightly more than $1 billion would be subject to the tax, but that neither spouse would have to pay it if they split up and divided their assets.
While some tech executives have tried to flee California, others in the three-comma club are hunting for ways to reduce their net worth while remaining in the state.
If they can bring their assets below $1 billion, they would not be subject to the proposed tax at all. Otherwise, they are looking for ways to shield as much of their wealth as they can.
“The first conversation was, ‘Well, are we leaving or are we not?’” Chris Mays, a partner at the Armanino accounting firm near Los Angeles, said in a phone interview. “And then the next conversation is, ‘OK, we’re staying. So how are we going to mitigate this?’”
Lawyers and wealth advisers are already drawing up plans even though the proposal may never become law. The health care workers union behind the idea needs to collect nearly 900,000 valid signatures by April just to put the proposal on the ballot, and then voters would need to approve it in November.
Backers hope to benefit from a populist wave, though they face opposition from Silicon Valley and Gov. Gavin Newsom alike. They say that the revenue, estimated in the tens of billions of dollars, would largely go toward health-care programs in the state that President Trump slashed last year with his signature policy bill.
The ultrawealthy routinely take steps to minimize their taxes, but the frantic preparations this year reflect the novelty of the current proposal, a one-time, 5 percent tax on the wealth of California residents worth at least $1.1 billion. (The tax is gradually reduced for people with between $1 billion and $1.1 billion.)
The richest Americans, who have long feared a tax on their paper net worth, may become even more aggressive in their California tax strategies this year.
“I don’t think we can be really confident about what will happen,” said Owen Zidar, a Princeton economist who studies taxes, “when we haven’t had a shock of this magnitude before.”
The architects of the tax proposal are confident that they have made it hard to maneuver around. Backers applied the tax to any billionaire who was a California resident as of Jan. 1, 2026. The proposal also attempts to tax unrealized gains, as well as wealth held in trusts, which the ultrawealthy have successfully used to reduce what they owe in federal estate tax.
No tax is airtight. Proponents expect that about 10 percent of the potential revenue would be lost to avoidance and evasion, which they see as a relatively low rate.
“Every tax has leakages, and especially every tax on the wealthy,” said David Gamage, a University of Missouri law professor who helped write the union’s tax proposal. “There’s lots of existing taxes where the leakage is much higher.”
The Franchise Tax Board, California’s tax agency, has a long history of investigating residency to determine if people owe taxes in California. These audits are known for being extensive and subjective — examining not only where a person has a driver’s license or is registered to vote, but also looking at social media posts, country club memberships, phone bills and travel records. Auditors have even been known to make unannounced visits to a person’s declared residence in Nevada to see if it appears lived-in.
A wealth tax would introduce a whole new dimension of California tax enforcement. Under the proposal, every California taxpayer would have to declare whether their assets, as of Dec. 31, 2026, were worth at least $1 billion.
And because the tax would only apply to about 200 households, the Franchise Tax Board could closely scrutinize every taxpayer potentially subject to it, Mr. Gamage said.
Billionaires would also have to state how much they owe under the new tax, based on their own appraisals of their taxable wealth at that time. Precisely determining net worth can be difficult, though, especially for affluent residents who derive wealth from assets that are not publicly-traded stocks or other easily-priced holdings.
“You get 15 valuation specialists in a room and say ‘Value this company,’ you’re going to say 15 different numbers, I guarantee that,” said Christopher Karachale, a San Francisco tax lawyer.
The law’s year-end determination of net worth also gives billionaires time to shift their wealth. Mr. Katzenstein focused on the remaining window during his presentation at the conference organized by the Society of Trust and Estate Practitioners of Orange County.
He advised reducing the insurance on fine jewelry because the tax measure says assets cannot be valued for less than they are insured. “You’d hate like heck to have a $200,000 necklace insured for $500,000 and have to include $500,000 in your net worth,” Mr. Katzenstein said.
He suggested moving valuable art work to homes in other states because the Billionaire Tax Act says personal property will not count toward net worth if it is outside of California for at least 270 days this year.
“So we have many clients whose Picassos that are hanging in their living rooms here in California might ultimately hang in the living room in the Aspen house,” he said.
And billionaires without an Aspen house might think about purchasing one this year, since personal real estate is exempt from net worth for wealth tax purposes, Mr. Katzenstein said. (Homes would still be subject to property taxes.)
Mr. Mays, of the Armanino accounting firm, said that he has begun discussing with clients whether to buy another luxury home to reduce their taxable wealth under the California proposal.
“I could see a scenario where $100 million homes all of a sudden become en vogue, because it’s like, ‘Hey, we can transfer $100 million out of our wealth calculation if we just buy this property,’” he said.
Mr. Gamage, who helped design the tax, said he thinks no more than a couple of people are close enough to the $1 billion threshold to avoid the tax with a few maneuvers.
Some lawyers at the Orange County conference, which included acocktail hour overlooking a harbor where a row of superyachts were docked, were less excited about the potential cat-and-mouse game with California auditors.
Matt Brown, a partner with the Brown & Streza law firm, said in an interview at the reception that the costs and complexity, along with the potential legal risk, would likely discourage some clients from being too aggressive this year.
He was skeptical of the advice to move expensive artwork out of state: “That would create some pause where clients are going, ‘Wait a minute. I don’t want to play games with this and subject myself to penalties.’”
If the measure does pass in November, he said, his firm would likely advise clients to file suit against the new tax on various constitutional grounds.
Others at the conference said they were helping clients move assets to trusts outside of California, feeling confident that they could prevail in court. The view from many of the lawyers, accountants and trust officers at the conference was that the proposed billionaire tax was just another set of rules that required careful scrutiny and proper planning.
For now, it remains a hypothetical. It is not clear that backers will collect enough signatures to qualify the measure for the ballot, nor survive the opposition of Mr. Newsom, a Democrat, or other leaders who fear it will drive innovators from the state and reduce revenues in the long term.
But the proposal has generated tremendous buzz by stirring up feelings about economic inequality. And talk of moving assets and using tax shields is foreign to most Americans, roughly 90 percent of whom have taken the standard deduction when filing their taxes in recent years.
At the same time the conference was wrapping up on Wednesday afternoon, Senator Bernie Sanders, independent of Vermont, had a call with reporters to discuss the California wealth tax before his appearance at a campaign rally in Los Angeles next week.
“We have got to deal with the greed, the extraordinary greed, of the billionaire class,” Mr. Sanders said, criticizing those who object to paying higher taxes to pay for health care for the most vulnerable. “These guys cannot have it all.”
Laurel Rosenhall is a Sacramento-based reporter covering California politics and government for The Times.
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