AB 43, as amended, Mark Stone. Personal income taxes: credit: earned income.
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.
This bill, for taxable years beginning on or after January 1, 2016, and before January 1, 2021, in modified conformity with federal income tax laws, would
begin delete allowend delete an earned income credit to an eligible individual that is equal to begin delete specifiedend delete percentages of the earned income tax credit allowed by federal begin delete law. The bill would provideend delete 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.
This bill would take effect immediately as a tax levy.end delete
Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
The Legislature finds and declares all of the
3(a) In its Supplemental Poverty Measure report for the year
42013, released in October 2014, the United States Census Bureau
5reported California’s rate of poverty to be 23.4 percent. This rate
6is the highest among all 50 states.
7(b) Using census data released in September 2014, the California
8Budget Project (CBP) reported that the economic recovery from
9the Great Recession has largely bypassed low- and middle-income
10Californians, with the bottom three-fifths of the income distribution
11experiencing stagnating income gains. This is contrasted with the
12top one-fifth of the income distribution experiencing gains of 52.4
14(c) A briefing on poverty released by the CBP in August 2014
15reports that 67 percent of families living in poverty were supported
16by one or more workers in 2012. Given that the majority of families
17living in poverty are working families in California, it is evident
18that poverty largely reflects low-paying jobs, not the absence of
20(d) In California, the Public Policy Institute of California (PPIC),
21in collaboration with the Stanford Center on Poverty and Inequality,
22has developed the California Poverty Measure (CPM), which
23underscores the role of California’s social safety net, amount which
P3 1includes the CalFresh Program, CalWORKs, and the federal Earned
2Income Tax Credit (EITC), in mitigating poverty.
3(e) Using data from 2011, a PPIC report on the CPM released
4in October 2013, reveals that 22 percent of Californians, 8.1 million
5people, lived in poverty. A comparison of CPM rates by county
6show that the three most populous counties, Los Angeles County,
7San Diego County, and Orange County, all had rates above the
8statewide CPM at 26.9 percent, 22.7 percent, and 24.3 percent,
10(f) 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
14(g) Without need-based safety net programs and resources, over
1530 percent of Californians would be living in poverty. According
16to the CPM, the absence of the safety net would increase the
17poverty rate among California’s children to 39 percent.
18(h) Refundable tax credits, including the federal EITC, reduced
19the poverty rate in California by 3.2 percent overall. Among
20children, the poverty rate reduction was 6 percent. This means that
21560,000 fewer children and 600,000 fewer working-age adults,
221.16 million people fewer in total, are living in poverty when
23refundable tax credits are accounted for in the CPM.
24(i) According to the National Conference of State Legislatures,
2525 states in the country and the District of Columbia, provide an
26EITC in addition to the federal EITC. California does not currently
27have a state EITC.
28(j) A Brookings Institution report issued in January 2003, shows
29that in addition to boosting the family incomes of families in
30poverty, state EITC refunds served as an important economic
31stimulus for the communities and regions of the families by
32magnifying the impact of the federal EITC overall.
Section 17052.1 is added to the Revenue and Taxation
34Code, to read:
For each taxable year beginning on or after January
361, 2016, and before January 1, 2021, there shall be allowed a credit
37against the “net tax,” as defined by Section 17039, for the taxable
38year, an amount determined in accordance with Section 32 of the
39Internal Revenue Code, as amended by Section 1002(a) of Public
40Law 111-5, as amended by Section 219(a)(2) of Public Law
P4 1111-226, as amended by Section 103(c) of Public Law 111-312,
2and as amended by Section 103(c) of Public Law 112-240, as
3amended by Section 206(a) of Public Law 113-295, relating to
4earned income, except as follows:
5(a) (1) For an eligible individual who has at least one qualifying
6child under five years of age, the credit amount shall be equal to
7the federal earned income credit amount multiplied by
begin delete 35 percentend delete
9(2) For an eligible individual who does not have a qualifying
10child, the credit amount shall be equal to the federal earned income
11credit amount multiplied by
begin delete 60 percentend delete.
13(3) For any other eligible individual who does not meet the
14requirements of paragraph (1) or (2), the credit amount shall be
15equal to the federal earned income credit amount multiplied by
begin delete 15 .
17(b) If the amount allowable as a credit under this section exceeds
18the tax liability computed under this part for the taxable year, the
19excess shall be credited against other amounts due, if any, and the
20balance, if any, shall, upon appropriation by the Legislature, be
21refunded to the qualified taxpayer.
22(c) Any amounts refunded to a taxpayer pursuant to this section
23shall not be included in income subject to tax under this part.
24(d) Notwithstanding any other law, amounts refunded pursuant
25to this section shall be treated in the same manner as the federal
26earned income refund for the purpose of determining eligibility to
27receive benefits under Division 9 (commencing with Section
2810000) of the Welfare and Institutions Code or amounts of those
30(e) This section is notwithstanding Section 41.end delete
34(f) This section shall remain in effect only until December 1,
352021, and as of that date is repealed.
This act provides for a tax levy within the meaning of
37Article IV of the Constitution and shall go into immediate effect.