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California Taxpayers Association (CalTax) and California Business Properties Association (CBPA) are leading a fast-growing statewide coalition in strong opposition to Senate Bill 789 (Menjivar; D-Van Nuys), a just-unveiled proposal that would impose a $5-per-square-foot annual tax on vacant commercial properties. The bill, slated to take effect in 2028, also threatens a steep 75% penalty for reporting errors related to the tax.
“SB 789 would impose an unprecedented tax increase on property owners struggling with commercial vacancies. Approving an untested and onerous tax increase on Californians would continue to signal that California is not interested in truly supporting property owners,” CalTax President Robert Gutierrez said. “By punishing vacant properties with arbitrary taxes, this bill would ultimately drive commercial property values down, tighten local government budgets, and make California even less affordable for families and businesses alike. It’s a short-sighted approach that fails to address the root causes of vacancy.”
Vacancy rates remain elevated across California due to market forces, not property owner neglect, as commercial sectors like retail, office, and industrial work to recover from pandemic-driven disruptions and normal market fluctuation.
Industry leaders warn that SB 789 would further destabilize these already fragile markets, compounding economic uncertainty and undermining local revenues. Under California’s Prop 8 reassessment rules, declining property values from this tax could trigger permanent losses in funding for schools, cities, and essential services.
"California’s commercial property owners are still grappling with the aftermath of the pandemic, rising interest rates, corporate relocations, supply-chain issues, and inflation-driven construction and operational costs," said Matthew Hargrove, President and CEO of CBPA. "SB 789 piles on another punitive burden at exactly the wrong time, discouraging investment and jeopardizing the state’s economic recovery."
The growing coalition opposing SB 789 highlights the failure of similar vacancy taxes in cities like San Francisco, where such measures have not reduced vacancies, have backfired economically, and now face serious legal challenges. The coalition is urging lawmakers to pursue incentive-based solutions that actually promote revitalization and job creation, rather than doubling down on punitive, counterproductive policies.
The Senate Revenue and Taxation Committee is set to hear SB 789 on Wednesday, April 23, 2025, at 9:30 a.m.
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About CalTax: Founded in 1926, the California Taxpayers Association is the state’s oldest and largest organization representing taxpayers, advocating for sound tax policy and efficient government.
About CBPA: The California Business Properties Association represents the commercial, retail, and industrial real estate sector, advocating for responsible policies that promote economic growth and job creation for over 50 years.
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