Details of Public Law 119-21, section 70118 , One Big Beautiful Bill Act

The provision makes permanent the change under the Tax Cuts and Jobs Act (Public Law 115-97, section 11026), which granted combat zone tax benefits to the Sinai Peninsula of Egypt if, as of the date of enactment of the provision, any member of the Armed Forces of the United States is entitled to special pay under section 310 of title 37, United States Code (relating to special pay; duty subject to hostile fire or imminent danger), for services performed in such location. This benefit was scheduled to last only during the period such entitlement is in effect but not later than taxable years beginning before January 1, 2026.

The provision expands hazardous duty areas to include Kenya, Mail, Burkina Faso, and Chad.

The provision also removes the ending operative period and the withholding requirements, thereby providing permanent combat zone tax benefits not subject to withholding.

California conforms to the federal rules that treat a qualified hazardous duty area as if it were a combat zone for purposes of applying IRC section 2(a)(3), relating to a special rule where a deceased spouse was in missing status; IRC section 112, relating to certain combat zone compensation of members of the Armed Forces; IRC section 692, relating to income taxes of Armed Forces members upon death; and IRC section 7508, relating to time for performing certain acts postponed by reason of service in combat zone, as of the specified date of January 1, 2025. A qualified hazardous duty area is defined as Bosnia and Herzegovina, Croatia, or Macedonia if, as of March 20, 1996, any member of the Armed Forces of the United States is entitled to certain special pay provisions, relating to duty subject to hostile fire or imminent danger, for services performed in that country. However, California does not conform to the new federal provisions that define the Sinai Peninsula of Egypt, Kenya, Mali, Burkina Faso, and Chad as qualified hazardous duty areas.

California also does not conform to the estate tax provision applicable to members of the Armed Forces dying in a combat zone or by reason of combat-zone-incurred wounds, etc., under IRC section 2201, nor to allowing a joint return where an individual is in missing status, under IRC section 6013(f)(1).

The FTB does not administer excise taxes similar to the taxation of phone service originating from a combat zone from members of the Armed Forces under IRC section 4253(d).

The estimated revenue impact to conform to the above federal provisions would result in the following loss:

26/27 27/28 28/29 29/30 ($80,000) ($40,000) ($40,000) ($40,000)