Key Takeaways
- California Gov. Gavin Newsom signed AB 1633 on September 29, 2026, making California the first state in the country to impose a dedicated tax on the for-profit companies that manage immigration detention facilities under federal contract, levying a 25% charge on gross receipts starting July 1, 2028.
- Revenue from the new tax will flow into the Due Process for All Fund to finance legal representation and wraparound services for people in immigration detention and their families, pending a legislative appropriation.
- The law is expected to face immediate legal challenges from private prison operators, who will likely argue it unconstitutionally interferes with federal immigration authority — a line of attack that has already derailed other California immigration measures in federal court.
California Gov. Gavin Newsom signed AB 1633 into law on September 29, 2026, positioning the state as the first in the nation to impose a dedicated tax on for-profit companies that manage immigration detention facilities under federal contract. The bill, carried by Assemblymember Matt Haney (D-San Francisco), places a 25% tax on the gross receipts of private detention operators — a rate significantly lower than the 50% written into the legislation when it was introduced in January 2026 but still without precedent anywhere in the United States.
A Financial Penalty Aimed at an Expanding Industry
The law formally establishes the Private Detention Facility Tax Law, though it will not take effect immediately. The 25% levy on gross receipts kicks in July 1, 2028, giving affected operators time to mount legal challenges or restructure their California footprint. Revenue generated under the law flows into the newly created Due Process for All Fund, which — subject to legislative appropriation — would pay for immigration legal services and support programs for detained individuals and their families.
The measure arrives as California's private detention infrastructure has expanded rapidly under the Trump administration's enforcement push. According to reporting that cites Department of Homeland Security data, the state now hosts eight ICE-contracted private immigration detention facilities — all operated by for-profit corporations with documented histories of dangerous conditions, inadequate medical care, and sustained regulatory failures.
Two Corporations, Eight Facilities, and a $1.5 Billion Complication
Two companies hold the largest share of California's private detention capacity. CoreCivic manages the 1,994-bed Otay Mesa Detention Center in San Diego County and the 2,560-bed California City Detention Facility in Kern County, the largest immigration detention complex in the state. Those two facilities, however, changed hands in July 2026: CoreCivic completed the sale of both properties to the U.S. Department of Homeland Security for a combined $1.5 billion, while retaining management contracts with ICE for both sites. The federal government now holds the underlying real estate — a development that raises unresolved questions about whether a state tax can constitutionally reach facilities the federal government itself owns, even when a private company manages day-to-day operations.
The GEO Group, meanwhile, operates the Adelanto ICE Processing Center in San Bernardino County's high desert — a facility that became central to legislative hearings on detention conditions following a federal lawsuit in January 2026 documenting patterns of neglect and abuse. Four people died at Adelanto between September 2025 and March 2026, according to a California Department of Justice report. A gross receipts tax — applied before expenses or deductions — could meaningfully compress margins for both GEO Group and CoreCivic on their California operations, regardless of whether a given facility performs well in any individual year.
The Push to Sign — and What Could Unravel It in Court
The California Immigrant Policy Center, the bill's lead sponsor, gathered more than 10,000 letters and postcards from residents across the state, pressing Newsom to act before the September 30 signing deadline. Faith communities, labor unions, and civil rights organizations held a Capitol rally during the final weeks of the session. Haney, in a signing statement, called the detention industry one "built on heartbreak" and said California had chosen to hold corporations financially accountable for the consequences their operations impose on immigrant families.
The law enters a legal environment shaped by recent defeats. In April 2026, the Ninth Circuit Court of Appeals issued an injunction blocking two California immigration laws: the "No Secret Police Act," which banned law enforcement officers — including ICE agents — from wearing face coverings, and a companion measure requiring agents to display visible identification. The court held that both laws unconstitutionally directed how the federal government could conduct its enforcement operations. Private prison companies are expected to mount analogous arguments against AB 1633 — that a state tax reaching federal contractors effectively obstructs a federal government function. California's attorneys will need a theory for why this tax survives constitutional scrutiny where those laws did not.
Part of a Broader Legislative Push
AB 1633 is one measure within a larger package. Newsom signed 21 immigration-related bills in the September 29 session. A companion bill, AB 2465, carried by Assemblymember Liz Ortega, bars businesses with financial ties to immigration detention and enforcement from accessing certain state tax credits, grants, and loans — a parallel financial restriction operating through a different mechanism in California's tax code.
Newsom also signed legislation banning electric shock gloves, prohibiting all law enforcement officers — including federal ICE agents operating in California — from using electroshock wearable devices until at least 2030. The move came in direct response to a $16.7 million federal contract ICE awarded to a Kentucky company for 6,000 pairs of the devices. The Department of Homeland Security has signaled it does not plan to comply with the ban, setting up another front in the state's ongoing confrontation with the administration.
Deaths, Conditions, and the Urgency Behind the Package
The political drive behind the legislative package draws on a grim body of evidence. More than 50 people died in ICE custody during Trump's second term — a figure that Human Rights Watch and Physicians for Human Rights characterize as the highest mortality rate recorded in federal immigration detention in over a decade. Inspections at Adelanto, cited repeatedly in legislative hearings, found conditions that California officials described as dangerous and inconsistent with basic standards of humane care.
Whether AB 1633 ultimately survives federal litigation will determine its real-world impact. But as the first law of its kind enacted in the United States, it creates a model that other Democratic-led states will likely examine — and marks California's most aggressive use of its tax code yet as a tool to shape a federal immigration enforcement system it has consistently sought to constrain.
