California has argued about “split roll” property taxes for years, but the topic is back in the spotlight because of Tom Steyer’s renewed push in the 2026 governor’s race.
In late February 2026, multiple reports said Steyer has been floating a 2027 special election plan that would raise corporate taxes and revive a split roll approach to Proposition 13—meaning commercial property would be treated differently than residential property for tax assessment purposes.
That idea immediately triggers a familiar business question: if California looks like it might raise commercial property taxes again, will more companies “split” their footprint—moving headquarters, shifting new investment, or expanding elsewhere—rather than staying all-in?
The realistic answer is nuanced. A split roll campaign can change the calculus for certain property-heavy businesses and for commercial real estate owners. But the evidence suggests it would be only one factor among many, and it may affect “where new growth goes” more than it causes a sudden mass exit.
What Steyer’s “split roll” threat actually means
“Split roll” is shorthand for changing California’s property tax rules so that commercial and industrial property is reassessed more often (typically to market value), while most residential property keeps the current Proposition 13 framework.
The immediate reason businesses pay attention is not just the potential tax increase. It’s the uncertainty.
Even if a policy targets “large commercial property owners,” the impact can spread through leases, rents, and project economics. And the period when a ballot measure is being developed, negotiated and campaigned can be almost as disruptive as the measure itself—because companies must model risk without knowing how the final rules will look.
Prop 13 and split roll in plain English
California’s Proposition 13 generally limits property taxes by capping the property tax rate at roughly 1% of assessed value, plus local add-on votes, and restricting annual increases in assessed value—usually described as up to 2% a year. Instead, properties generally have to be reassessed when they change ownership.
Split roll proponents keep most of that structure for homes, but lessen or do away with those provisions for many commercial properties by making them get reassessed more frequently.
That difference really matters for older commercial properties that have seen big market-value increases over several decades. Under a split roll regime, those properties could face much steeper increases in assessed value and thus property tax bills.
A recent real-world test: Proposition 15 (2020)
The biggest recent attempt at split roll was Proposition 15 in November 2020.
In general terms, Prop 15 would have substantially increased property taxes on a lot of commercial and industrial properties by reassessing most of them more regularly, at market level.
It would apply mainly to commercial holdings above a ceiling (commonly cited as more than $3 million).
Exempt certain types (most notably agricultural land).
Redirect new revenues to local governments and schools, less administration costs.
Advocates cast Prop 15 as modernization and fairness—the local commercial property owner should have to pay for public services based on decades-old valuations.
Opponents painted it as a tax hike that would make its way to tenants, consumers, and jobs, especially for businesses operating on already-thin margins.
Prop 15 ultimately lost, but it was close enough to foreshadow both that split roll is not a fringe issue, and that any future campaign would be intense and expensive.
Why some businesses care more than others
Not all businesses are exposed to split roll in the same way.
Property owners and property-heavy industries are the most exposed
The most direct exposure is for companies that own large commercial real estate in California, especially if they’ve held it for a long time.
Sectors that tend to be more sensitive include:
Warehousing, logistics, and distribution (large footprints, long-term sites)
Retail chains that own rather than lease prime sites
Hospitality and entertainment venues with significant owned real estate
Manufacturing and industrial operators with specialized facilities
For these firms, a property tax jump is not just a line item. It can make the difference between a site remaining competitive versus moving the green field to another state.
Tenants can feel it too, depending on lease terms
Many commercial leases push some or all property tax changes through to tenants. Triple-net (NNN) structures are the classical example, but pass-throughs exist on a sliding scale.
That means even a company that doesn’t own the building could still be exposed, especially upon renewal when landlords look to reprice risk.
Commercial real estate is the transmission system
A split roll doesn’t land into a vacuum. It lands in the middle of the assessment process across commercially-valued real estate.
If there is a discernible tax rise in certain asset classes – property values can adjust downwards, cap rates can move, project feasibility can change.
That affects:
· New construction economics
· Redevelopment decisions
· Retail and office leasing dynamics
· The financing of commercial projects
· Even businesses that are not ideologically resolved about taxes will react if their landlord pushes costs, or their redevelopment option no longer pencils, or their next expansion site looks more costly compared relative to other locales.
Will this cause “more businesses to leave,” or “more businesses to hedge”?
This is a key distinction.
A split roll threat is more likely to influence marginal decisions – where the next factory goes, where the next office hub expands, where the next warehouse is built – rather than summoning the dramatic immediate wave.
Relocation is costly and operationally disruptive and not occasioned by a single policy signal, barring the business already on a tipping point.
What the relocation data suggests about scale
The relocation of prominent HQs is trumpeted, but the wide data shows smaller net effects than the public narrative would imply.
A Public Policy Institute of California analysis of headquarters relocations shows the share of HQs leaving California in net terms over a ten-year period is comparatively small (in the single digit percentages and net measures lower even), even if a trend is politically salient and sectoral.
That still doesn’t mean the businesses climate is imaginary, ” Dion says.
“It means that the base rate for pick up and moves is a lower rate than our perception is driven by the few companies that are the news headlights.”
Population Switchups and Business Sentiment Don’t Always Meet
U-Haul’s 2025 migration index again rated California last for net one-way move registrations, continuing a multi-year trend.
The movement of people can impact the labor market and thus consumer sentiment towards business and reinforces business mood/time dislocations- but it’s not a clean proxy for corporate relocation.
Many companies still need to be in. the same place where their customers, talent and ecosystems are-even if all the people there are leaving.
Why “splitting” As The Outcome Is The Realistic Outcome
When businesses adjust because of uncertainty they often do not default to a binary of “stay vs leave”.
They pick portfolio strategies.
Here’s what that looks like in practice.
1) Keep CA, Place next incremental growth in Nevada, Arizona, Texas, a place with cost certainty.
2) Move the HQ, Retain the Workers
Some firms move corporate domicile, executive offices, or the formal address of the headquarters, keeping the people still in California.
This can reduce costs, or say something to investors about being business first, and avoid an operational exit.
3) Split ownership structure for real estate vs operations
Some larger firms keep real estate in separate entities (REIT-like structures, dedicated property subsidiaries, etc).
If your split roll plan has certain types of ownership or certain separations of owned vs leased properties baked into the design, businesses may respond by reorganizing their holdings, selling owned real estate and leasing back or changing how they allocate capital in state.
This doesn’t erase any costs, but it is a common policy/response to tax design.
The politics of a 2027 special election matters to business behavior
Businesses model policy risk partly on timing.
A 2027 special election, should it happen, alters the calendar:
It compresses uncertainty into an off-cycle vote
It can create a fast layered legislative and campaign environment
It forces businesses who might need to vote to react to decisions at a time earlier than the expected normal planning for 2028/2030 that many capital projects make.
That timing factor can be as big a factor as the tax details.
The more a company has to factor a projected outcome into pricing at five or ten years out, the more the company is going to favor a jurisdiction with predictable rules.
This is what would determine whether the “threat” becomes a real business trigger
That’s far into the weeds, but if you’re trying to forecast whether more businesses will split from California, the details that matter most are design details.
Thresholds and definitions
A split roll system can be designed to hit a narrow slice of very large commercial holdings, or it can reach broadly into mid-sized business property.
Thresholds (and how they aggregate across holdings) determine who feels immediate pressure.
Treatment of small businesses and mixed-use properties
Exemptions are politically politically popular but complex to administer.
Mixed-use buildings, owner-occupied small businesses, and beautifully architected multi-parcel holdings are edge cases that make compliance expensive and unpredictable—that’s another thing a business doesn’t like, even when the change in their net tax bill is manageable!
How often reassessment happens, how disputes are handled, how long will it take appeals to settle (will it be 5 years, 16 years, or…) can influence volatility.
Businesses can cope with higher costs; they cannot cope with unstable costs.
Interaction with the commercial real estate cycle
If California commercial real estate is already under stress (vacancy, refinance pressure, weak demand in segments of interest), some kind of major tax change can “heavy up” what’s becoming difficult.
“In a strong cycle the market can absorb that,” as the popular children put it.
A realistic outlook: who might “split,” and who probably won’t
A renewed split roll push is most likely to be felt broadly:
“Split” (hit hard, hedged against)
Large commercial property owners and developers
Property heavy operators with long-held real estate
Businesses that are stuck choosing between exploitable capacity in multiple states
It’s less likely to “force” immediate exits among:
Companies whose cost base is composed exhaustively of labor and product strategy rather than real estate (product game played in Europe, $40M office expense in Silicon Valley, lender risk)
Firms deeply anchored to California-specific ecosystems (tech clusters, ports, entertainment infrastructure, specialized research networks)
Businesses whose customers and supply chains are so thoroughly concentrated in California it becomes 80% of their model.
For a lot of companies the result isn’t “we’re leaving.”
It’s “we’re diversifying.”
Bottom line
Tom Steyer’s split roll signaling is meaningful because it means something about reopening the policy fight around a change that shifts costs from commercial real estate to tenants, and because the wheels could be turning to accelerate that fight into a ballot measure in the near future.
But “more businesses splitting from California” isn’t a story that shows up in a move manifest.
It’s more likely to show up as a gradual shift in new investment and expansion decisions.
If the debate were to turn concrete – it over to a ballot measure with wide coverage, aggressive reassessment rules, or high uncertainty what it’s going to do, the incentive to hedge goes up quickly.
If it sticks as a campaign message and the market perceives there’s no viable path to a measure to pass before 2030, et cetera, and so forth, we’ll just keep focusing on labor, housing cost, regulation, energy reliability, logistics and sending customers somewhere elifand somewhere else.
