California imposes 25% tax on private ICE detention centers, closing charity loopholes

Key points

• Newsom signed AB 1633, imposing a 25% tax on the gross income of private detention centers operating in California, effective July 1, 2028.
• The tax applies to all eight ICE detention centers in California, which are privately operated by companies including GEO Group and CoreCivic.
• Newsom also signed SB 420, prohibiting detention centers from claiming the 'Welfare Exemption' charitable property tax break, effective January 1, 2027.
• SB 420 follows a KPBS investigation revealing the Brawley Community Foundation avoided at least $6 million in property taxes for the Imperial Regional Detention Facility.
• Revenue from the new tax will fund a 'Due Process for All Fund' for immigration-related services.
• Jones analyst Jason Weaver maintains Buy ratings on CoreCivic and GEO Group, predicting the tax will not survive a federal Department of Justice challenge.

Background

This legislation is part of a broader package of over 20 bills signed by Newsom in late September 2026, which also included bans on electric shock gloves and restrictions on using state property for ICE operations. The move follows earlier state efforts to regulate federal immigration enforcement within California borders.

How outlets are covering it

Fox News frames the 25% tax as a punitive measure against federal immigration policy, citing Hans von Spakovsky of Advancing American Freedom, who argues the tax aims to force the federal government to use less suitable alternative sites or move operations to neighboring states like Arizona and Nevada. In contrast, KPBS and Imperial Valley Press emphasize the closure of a tax loophole, highlighting that the Brawley Community Foundation had avoided $6 million in property taxes by claiming charitable status for a for-profit detention operation. TipRanks reports that financial analysts view the tax as legally vulnerable, with Jones analyst Jason Weaver assigning high odds to a federal challenge succeeding, assuming no tax accrual for private operators. While Fox News focuses on the operational impact on ICE capacity, local outlets focus on the financial integrity of the tax code and community impact.

Why it matters

The legislation represents a significant state-level attempt to financially constrain federal immigration enforcement infrastructure. If the tax survives legal challenges, it could force private operators to exit California or shift operations to other states, potentially altering the logistics of federal detention. Conversely, if struck down, it highlights the ongoing legal friction between state and federal authority regarding immigration enforcement and tax policy.

What to watch

The 25% tax is scheduled to take effect on July 1, 2028, while the charitable exemption ban takes effect on January 1, 2027. The federal government is expected to challenge the tax in court, with analysts predicting preliminary relief for private operators. Private companies like CoreCivic and GEO Group may begin evaluating alternative locations or contract terminations before the tax implementation date.