Selected Developments in Business Law: Organizing Corporations in California (January 2026 Update)

Courtesy of CEB, we are bringing you selected legal developments in areas of California business law that are covered by CEB’s publications. This month’s feature is from the January 2026 updates to Organizing Corporations in California and Secured Transactions in California Commercial Law Practice. References are to each respective book’s section numbers. Legal developments covered include the One Big Beautiful Bill Act (OBBBA), the Corporate Transparency Act (CTA), the California Combating Auto Retail Scams Act (CARS Act), and more.

The One Big Beautiful Bill Act (OBBBA) (Pub L 119–21, 139 Stat 72) will influence entrepreneurs’ decisions on whether to incorporate their businesses. Notably, §70105 made permanent the 20-percent qualified business income deduction, also known as the §199A deduction; §70101 made permanent the flat 21-percent tax on corporations; and §70431 increased the excludable amount of qualified small business stock (QSBS) gain for shareholders and established a tiered QSBS gain exclusion system based on the taxpayer’s holding period. Additionally, the OBBBA §70120 temporarily increased the SALT deduction cap from $10,000 to $40,000. The SALT deduction cap rises by an additional 1 percent annually from 2026 through 2029 when it will revert to $10,000 in 2030. See §§1.35, 1.49, 1.57, 2A.29, 6.41.

In Alliance for Fair Bd. Recruitment v SEC (5th Cir 2024) 125 F4th 159, the Fifth Circuit Court of Appeals vacated the SEC’s order approving NASDAQ’s board diversity rules. See §2.113A.

The Financial Crimes Enforcement Network (FinCEN) used its rulemaking authority to significantly narrow the scope of the Corporate Transparency Act (CTA) (Pub L 116–283, 134 Stat 4604). On March 26, 2025, FinCEN issued an Interim Final Rule that exempts domestic entities from their CTA obligations and exempts U.S. persons from having to provide beneficial ownership information to the foreign entities for which they are a beneficial owner. 90 Fed Reg 2764 (Mar. 26, 2025). FinCEN intends to issue a final rule in 2025. Additionally, the U.S. Supreme Court in McHenry v Texas Top Cop Shop, Inc. (2025) ___ US ___, 145 S Ct 1, granted the federal government’s request to be allowed to enforce the Interim Final Rule while the government’s appeal moves forward in the Fifth Circuit in Texas Top Cop Shop, Inc. v Garland (ED Tex, Dec. 5, 2024, No. 4:24–CV–478) 2024 US Dist Lexis 218294. See §2B.7.

In the case EpicentRx, Inc. v Superior Court (2025) 18 C5th 58, the California Supreme Court held that though California law prohibits pre-trial jury waivers for intra-corporate disputes, parties can achieve the same result by agreeing to a forum selection clause that selects an out-of-state forum where such waivers are allowed. See §5.83A.

In Hohenshelt v Superior Court (2025) 18 C5th 310, the California Supreme Court upheld a law (CCP §1281.98) that allows a company to forfeit its right to enforce an arbitration agreement if it is more than 30 days late on an arbitration payment. See §7.50.

We updated chapter 9 with regard to recent amendments of the Delaware General Corporation Law and the Nevada Revised Statutes. The amendments are intended to reduce litigation risks for corporations and their boards, allow pre-dispute jury trial waivers, provide safe harbors for director and officers in interested transactions, and create guardrails for stockholder books and records requests. See §§9.7–9.7A, 9.24A, 9.52A, 9.56, 9.72, 9.88.