Amended in Assembly February 4, 2015

California Legislature—2015–16 Regular Session

Assembly BillNo. 43


Introduced by Assembly Member Mark Stone

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(Principal coauthor: Assembly Member Levine)

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December 1, 2014


begin deleteAn act relating to taxation. end deletebegin insertAn act to add Section 17052.1 to the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.end insert

LEGISLATIVE COUNSEL’S DIGEST

AB 43, as amended, Mark Stone. Personal incomebegin delete taxend deletebegin insert taxesend insert: credit: earned income.

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The Personal Income Tax Law allows various credits against the taxes imposed by that law, including certain credits that are allowed in modified conformity to credits allowed by federal income tax laws. Federal income tax laws allow a refundable earned income tax credit for certain low-income individuals who have earned income and who meet certain other requirements.

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This bill, for taxable years beginning on or after January 1, 2016, in modified conformity with federal income tax laws, would allow an earned income credit to an eligible individual that is equal to specified percentages of the earned income tax credit allowed by federal law. The bill would provide that in those years in which an appropriation is made by the Legislature, the credit would be refundable. The bill would also make findings and declarations.

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This bill would take effect immediately as a tax levy.

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The Personal Income Tax Law authorizes various credits against the taxes imposed by that law. The federal Internal Revenue Code authorizes a refundable earned income tax credit for certain low-income individuals who have earned income and who meet certain other requirements.

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This bill would state the intent of the Legislature to enact legislation that would create an refundable earned income tax credit for low-income individuals working in California. The bill would also make findings and declarations in this regard.

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Vote: majority. Appropriation: no. Fiscal committee: begin deleteno end deletebegin insertyesend insert. State-mandated local program: no.

The people of the State of California do enact as follows:

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SECTION 1.  

begin delete(a)end deletebegin deleteend deleteThe Legislature finds and declares all of the
2following:

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3(1)

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4begin insert(a)end insert In its Supplemental Poverty Measure report for the year
52013, released in October 2014, the United States Census Bureau
6reported California’s rate of poverty to be 23.4 percent. This rate
7is the highest among all 50 states.

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8(2)

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9begin insert(b)end insert Using census data released in September 2014, the California
10Budget Project (CBP) reported that the economic recovery from
11the Great Recession has largely bypassed low- and middle-income
12Californians, with the bottom three-fifths of the income distribution
13experiencing stagnating income gains. This is contrasted with the
14top one-fifth of the income distribution experiencing gains of 52.4
15percent.

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16(3)

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17begin insert(c)end insert A briefing on poverty released by the CBP in August 2014
18reports that 67 percent of families living in poverty were supported
19by one or more workers in 2012. Given that the majority of families
20living in poverty are working families in California, it is evident
21that poverty largely reflects low-paying jobs, not the absence of
22employment.

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23(4)

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24begin insert(d)end insert In California, the Public Policy Institute of California (PPIC),
25in collaboration with the Stanford Center on Poverty and Inequality,
26has developed the California Poverty Measure (CPM), which
27underscores the role of California’s social safety net, amount which
28includes the CalFresh Program, CalWORKs, and the federal Earned
29Income Tax Credit (EITC), in mitigating poverty.

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P3    1(5)

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2begin insert(e)end insert Using data from 2011, a PPIC report on the CPM released
3in October 2013, reveals that 22 percent of Californians, 8.1 million
4people, lived in poverty. A comparison of CPM rates by county
5show that the three most populous counties, Los Angeles County,
6San Diego County, and Orange County, all had rates above the
7statewide CPM at 26.9 percent, 22.7 percent, and 24.3 percent,
8respectively.

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9(6)

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10begin insert(f)end insert The CPM rate for children statewide for children, those under
11the age of 18, was 25.1 percent, the highest rate of any age group.
12This amounts to 2.3 million of California’s children living in
13poverty.

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14(7)

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15begin insert(g)end insert Without need-based safety net programs and resources, over
1630 percent of Californians would be living in poverty. The absence
17of the safety net would increase the poverty rate among California’s
18children to 39 percent according to the CPM.

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19(8)

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20begin insert(h)end insert Refundable tax credits, including the federal EITC, reduced
21the poverty rate in California by 3.2 percent overall. Among
22children, the poverty rate reduction was 6 percent. This means that
23560,000 fewer children and 600,000 fewer working-age adults,
241.16 million people fewer in total, are living in poverty when
25refundable tax credits are accounted for in the CPM.

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26(9)

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27begin insert(i)end insert According to the National Conference of State Legislatures,
2825 states in the country and the District of Columbia, provide an
29EITC in addition to the federal EITC. California does not currently
30have a state EITC.

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31(10)

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32begin insert(j)end insert A Brookings Institution report issued in January 2003, shows
33that in addition to boosting the family incomes of families in
34poverty, state EITC refunds served as an important economic
35stimulus for the communities and regions of the families by
36magnifying the impact of the federal EITC overall.

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37(b) Based on these findings and declarations, it is the intent of
38the Legislature to enact legislation that would create an refundable
39earned income tax credit for low-income individuals working in
40California.

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begin insertSEC. 2.end insert  

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begin insertSection 17052.1 is added to the end insertbegin insertRevenue and Taxation
2Code
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3

begin insert17052.1.end insert  

For each taxable year beginning on or after January
41, 2016, there shall be allowed a credit against the “net tax,” as
5defined by Section 17039, for the taxable year, an amount
6determined in accordance with Section 32 of the Internal Revenue
7Code, as amended by Section 1002(a) of Public Law 111-5, as
8amended by Section 219(a)(2) of Public Law 111-226, as amended
9by Section 103(c) of Public Law 111-312, and as amended by
10Section 103(c) of Public Law 112-240, as amended by Section
11206(a) of Public Law 113-295, relating to earned income, except
12as follows:

13(a) (1) For an eligible individual who has at least one qualifying
14child under five years of age, the credit amount shall be equal to
15the federal earned income credit amount multiplied by 35 percent.

16(2) For an eligible individual who does not have a qualifying
17child, the credit amount shall be equal to the federal earned income
18credit amount multiplied by 60 percent.

19(3) For any other eligible individual who does not meet the
20requirements of paragraph (1) or (2), the credit amount shall be
21equal to the federal earned income credit amount multiplied by
2215 percent.

23(b) If the amount allowable as a credit under this section exceeds
24the tax liability computed under this part for the taxable year, the
25excess shall be credited against other amounts due, if any, and the
26balance, if any, shall, upon appropriation by the Legislature, be
27refunded to the qualified taxpayer.

28(c) Any amounts refunded to a taxpayer pursuant to this section
29shall not be included in income subject to tax under this part.

30(d) Notwithstanding any other law, amounts refunded pursuant
31to this section shall be treated in the same manner as the federal
32earned income refund for the purpose of determining eligibility to
33receive benefits under Division 9 (commencing with Section 10000)
34of the Welfare and Institutions Code or amounts of those benefits.

35(e) This section is notwithstanding Section 41.

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36begin insert

begin insertSEC. 3.end insert  

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This act provides for a tax levy within the meaning of
37Article IV of the Constitution and shall go into immediate effect.

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