An act to amend Section 26153 of the Business and Professions Code, relating to professions and vocations. An act to add and repeal Sections 17053.92 and 23692 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.
AB 895, titled the Quick-Service Restaurant Affordability Act of 2025, would create a temporary California tax credit for certain fast food restaurant operators. For taxable years beginning on or after January 1, 2026, and before January 1, 2031, the bill allows a $12,000 credit per qualified fast food restaurant to qualified taxpayers, defined as franchisees or independent operators with no more than 45 locations under common ownership in California. The credit would apply against both the Personal Income Tax Law and the Corporation Tax Law, and unused credit could be carried forward for up to three additional years.
To claim the credit, an employer would need to show annual compliance with applicable Labor Code provisions and maintain an active unemployment insurance account with the Employment Development Department. The Franchise Tax Board would be authorized to request information from the Department of Industrial Relations, issue guidance and regulations, and prevent improper claims. The bill also requires annual reporting to the Legislature beginning December 1, 2027, including the number of claimants and total credit amounts, and it sunsets the credit on December 1, 2031. The measure is designated as a tax levy and would take effect immediately.
The bill’s stated purpose is to provide financial relief to quick-service restaurant owners facing higher unemployment insurance costs tied to state-mandated minimum wage increases. Its findings cite a 35 percent average cost increase for quick-service restaurants in 2024, a 25 percent minimum wage increase for those workers, and an estimated additional $12,000 per location in unemployment insurance contributions for family-owned quick-service restaurants. In addition to the tax credit provisions, the bill makes a nonsubstantive change to an existing cannabis law exception in Business and Professions Code Section 26153.
The overall sentiment reflected in the bill text is supportive of fast food restaurant operators and framed around affordability, cost relief, and preserving business viability. Because there were no committee transcripts or recorded votes provided, there is no direct evidence of debate or opposition in the available materials. The bill’s structure, however, suggests an intent to balance relief with compliance oversight by limiting eligibility to smaller operators and tying the credit to labor-law compliance and unemployment insurance participation.
The main point of potential contention is the policy choice to provide a targeted tax subsidy to fast food franchisees and independent operators in response to labor-cost increases. Supporters would likely view the credit as a needed offset for rising operating costs, while critics could question whether the state should use the tax code to relieve costs associated with wage policy, whether the benefit is narrowly targeted enough, and whether the fiscal impact is justified. The cannabis-related amendment appears minor and nonsubstantive, so the tax credit is the central substantive issue in the bill.
AB 895 would add two new, temporary tax credit provisions to the Revenue and Taxation Code—one for personal income tax filers and one for corporate taxpayers—covering qualified fast food restaurant operators from 2026 through 2030, with repeal in 2031. It would also require annual compliance demonstrations, allow Franchise Tax Board administration and interagency information sharing, and impose annual reporting requirements tied to Section 41 tax expenditure accountability rules. Separately, it would make a nonsubstantive clarification to Business and Professions Code Section 26153 governing cannabis licensees’ promotional giveaways.
The bill is presented in a strongly supportive tone toward quick-service restaurant owners, emphasizing affordability, rising costs, and relief from state-driven labor expense increases. The available record contains no committee transcript or vote breakdown, so there is no documented floor or committee debate to indicate formal support or opposition beyond the bill’s own findings and purpose statement. Based on the text alone, the measure appears designed to appeal to small business and restaurant stakeholders while maintaining compliance safeguards.
The likely contention centers on whether the state should offset higher labor-related costs for fast food operators through a targeted tax credit, especially when the bill links those costs to a minimum wage increase. Potential critics may argue that the credit favors a specific industry, creates a new tax expenditure, and could reduce state revenues without clear evidence of effectiveness beyond the required reporting metrics. Supporters, by contrast, are likely to argue that the credit is narrowly tailored to smaller franchisees and independent operators, and that compliance requirements and sunset provisions limit abuse and fiscal exposure.