The Personal Income Tax Law allows various credits against the taxes imposed by that law.

This bill would, for taxable years beginning on or after January 1, 2016, and before January 1, 2021, allow a credit under the Personal Income Tax Law in an amount equal to 20% of the monetary contributions made to one or more qualified tuition programs, as defined, by a qualified taxpayer, as defined, during the taxable year, not to exceed $500. This bill would include findings and declarations regarding the intent of the Legislature to enact legislation to provide that the credit amount in excess of tax liability is refundable in those years in which an appropriation for that purpose is made by the Legislature.

This bill would take effect immediately as a tax levy.

The Personal Income Tax Law allows various credits against the taxes imposed by that law.

This bill would, for taxable years beginning on or after January 1, 2016, and before January 1, 2021, allow a credit under the Personal Income Tax Law in an amount equal to 20% of the monetary contributions made to one or more qualified tuition programs, as defined, by a qualified taxpayer, as defined, during the taxable year, not to exceed $500. This bill would provide that the credit amount in excess of tax liability is refundable in those years in which an appropriation for that purpose is made by the Legislature.

This bill would take effect immediately as a tax levy.

The Personal Income Tax Law and the Corporation Tax Law allow allows various credits against the taxes imposed by those laws. that law.

This bill would, for taxable years beginning on or after January 1, 2016, and before January 1, 2021, allow a credit under the Personal Income Tax Law in the an amount of equal to 20% of the monetary contributions made to a one or more qualified tuition program programs, as defined, by a qualified taxpayer, as defined, during the taxable year, not to exceed $500. This bill would provide for the payment of a credit amount in excess of tax liability upon an appropriation by the Legislature for that purpose. that the credit amount in excess of tax liability is refundable in those years in which an appropriation for that purpose is made by the Legislature.

This bill would take effect immediately as a tax levy.

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws.

This bill would, for taxable years beginning on or after January 1, 2016, and before January 1, 2021, allow a credit in the amount of 20% of the monetary contributions made to a qualified tuition program, as defined, by a qualified taxpayer, as defined, not to exceed $500. This bill would provide for the payment of a credit amount in excess of tax liability upon an appropriation by the Legislature for that purpose.

This bill would take effect immediately as a tax levy.

Date of Hearing: May 27, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

ABPCA Bill Id:AB 17

Author:(Bonilla) – As Amended Ver:May 21, 2015

Urgency: Yes State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill provides a tax credit, beginning on or after January 1, 2016, and before January 1, 2021, in the amount of 20% of the contributions made to a qualified tuition program, not to exceed $500 per return. Specifically, this bill:

1) Defines a "qualified tuition program" in the same manner as a qualified tuition program under Internal Revenue Code (IRC) Section 529.

2) Defines a "qualified taxpayer" as an individual who, on behalf of a beneficiary, contributes money to a qualified tuition program for which the individual is the account owner and has an adjusted gross income of either:

a) $75,000 or less if the qualified taxpayer files as single, married filing separately, or domestic registered partner filing separately; or,

b) $150,000 or less if the qualified taxpayer files as head of household, surviving spouse, married filing jointly, or domestic partner filing jointly.

3) Provides that when a qualified taxpayer receives a nonqualified withdrawal, in addition to any other tax, an additional tax shall be imposed in an amount that is the lesser of 10% of the nonqualified withdrawal or the total amount of credits received for the taxable year and for all prior taxable years that a qualified taxpayer was allowed a credit pursuant to this bill.

4) Declares the intent of the Legislature to enact future legislation to provide that the portion of the credit that is in excess of tax liability shall, upon an appropriation by the Legislature, be paid to the qualified taxpayer.

FISCAL EFFECT:

1) Potentially substantial costs to the Franchise Tax Board (FTB) to establish a refundable credit program and to develop processes and regulations to administer the program.

2) Estimated GF revenue decreases of $24 million, $48 million, and $55 million for FY 2015-16, FY 2016-17, and FY 2017-18, respectively. If the tax credit were made refundable pursuant to the intent language included in the bill, those GF revenue decreases would be $27 million, $55 million, and $65 million, respectively.

COMMENTS:

1) Purpose. According to the author, children with college savings accounts are seven times more likely to attend college. This bill is intended to increase the number of families saving for college as well as increase the amount of money being saved. The author claims California is one of only six states with personal income taxes that does not offer tax-advantaged savings with a 529 plan.

Proponents further argue student debt continues to rise and places a damper on the state's overall economic activity because debt holders have less disposable income with which to make other purchases. The author believes AB 17 will stimulate additional economic activity by providing college graduates with more disposable income.

2) Tax Incentives vs Investment in Education. Opponents argue K-12 education endured budget cuts of $20 billion during the recession years, and that additional revenues should be spent on restoring those budgets instead of being used for tax incentives. This may be particularly true for college savings plans, which may be used to fund college expenses out of state. The committee may wish to consider whether increased funding to existing programs would be a more efficient approach to achieving the policy goals of this bill.

3) Refundable Intention. Though this bill removed its refundability feature as part of the most recent amendments, it retains Legislative intent to restore this feature in the future. Opponents claim refundable tax credits create greater opportunities for fraud. An August 2013 report, by the US Treasury's inspector general for tax administration, estimated that 21% to 25% of federal earned income tax credit payments were improperly issued during 2012, amounting to approximately $11 billion in improper payments. California's two popular, formerly refundable credits – the renters' credit and the child and dependent care expenses credit – also had very high fraud rates.

This bill declares the refundable credit, if restored, would only be paid to taxpayers upon appropriation by the Legislature. As a result, taxpayers relying on the refundability of the credit may not ever receive the credit owed. Additionally, the bill is unclear as to whether the appropriated funds would apply to a single taxable year or to multiple years.

Without the refundability feature, however, this tax credit will primarily benefit taxpayers at the higher end of the eligible income spectrum, as low-income families will often not have sufficient tax liability to make use of the credit. Without refundability, the committee may wish to consider whether this credit targets the demographic with the highest need.

4) Is Section 41 Already Doomed? Tax credits are often used to encourage or influence socially beneficial behavior, and provide relief to taxpayers who incur expenses from desired behavior. Tax credits are often more appealing than tax deductions as the taxpayer may take the same credit regardless of income.

This bill ignores the requirements of Section 41 of the revenue and taxation code, authorized just last year in SB 1335 (Leno), Statutes of 2014, which requires tax credits to articulate specific goals, purposes, and objectives for the credit, as well as establish performance indicators to measure the credit's success in achieving those goals. While the policy goals of this bill may be laudable, there is no indication that 20% or $500 of qualified expenses is the appropriate credit to achieve the desired increase in education savings, and that taxpayers seeking the credit would not have made education fund contributions absent the credit. Indeed, federal tax law already provides significant incentives to save in 529 programs. In addition, there are no metrics proposed with which to evaluate whether the credit is achieving its aims of increasing savings or college enrollment. Ensuring the Legislature conducts some objective and dispassionate evaluation of tax credits was the goal of SB 1335, and the committee might wish to consider whether this is precisely the type of tax credit for which Section 41 ought to apply.

5) Prior Legislation. AB 1956 (Bonilla) of 2014 would have provided a refundable tax credit very similar to the one proposed here. AB 1956 was held on the Suspense File of this committee.

Analysis Prepared by: Joel Tashjian / APPR. / (916) 319-2081

Date of Hearing: May 18, 2015

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Philip Ting, Chair

ABPCA Bill Id:AB 17 (

Author:Bonilla) – As Amended Ver:May 7, 2015

SUSPENSE

Majority vote. Fiscal committee. Tax levy.

SUBJECT: Personal income taxes: credit: qualified tuition program.

SUMMARY: Provides a tax credit in the amount of 20% of the monetary contributions made by a qualified taxpayer to a qualified tuition program, not to exceed $500. Specifically, this bill:

1. Provides, beginning on or after January 1, 2016, and before January 1, 2021, a refundable tax credit, as specified, against the "net tax" to a qualified taxpayer that contributes money to one or more qualified tuition programs.

2. Provides that the amount of the credit is the lesser of the following:

   1. 20% of the monetary contributions made by the qualified taxpayer to a qualified tuition program that the qualified taxpayer owns during the taxable year; or,

   2. $500.

3. Provides that the portion of the credit that is in excess of tax liability shall, upon an appropriation by the Legislature, be paid to the qualifying taxpayer.

4. Defines a "qualified tuition program" in the same manner as a qualified tuition program under Internal Revenue Code (IRC) Section 529.

5. Defines a "qualified taxpayer" as an individual who, on behalf of a beneficiary, contributes money to a qualified tuition program for which the individual is the account owner and has an adjusted gross income of either:

   1. $100,000 or less if the qualified taxpayer files as single, married filing separately, or registered partner filing separately; or,

   2. $200,000 or less if the qualified taxpayer files as head of household, surviving spouse, married filing jointly, or domestic partner filing jointly.

6. Allows, in the case of married taxpayer or domestic partners who file separate returns, the credit to be taken by either spouse or registered domestic partner, or divided equally between the spouses or registered domestic partners.

7. Defines "nonqualified withdrawal" as a payment or distribution from a qualified tuition program that is subject to additional tax as provided for by IRC Section 529(c)(6).

8. Provides that when a qualified taxpayer receives a nonqualified withdrawal, in addition to any other tax, an additional tax shall be imposed in an amount that is the lesser of 10% of the nonqualified withdrawal or the total amount of credits received for the taxable year and for all prior taxable years that a qualified taxpayer was allowed a credit pursuant to this bill.

9. Provides that the Franchise Tax Board (FTB) may proscribe rules, guidelines, or procedures necessary or appropriate to carry out the purpose of this section.

10. Takes effect immediately as a tax levy.

EXISTING LAW:

1. Provides tax-exempt status to qualified tuition programs. Qualified tuition programs are programs established and maintained by a state (or by an eligible education institution) under which a person may purchase tuition credit or make cash contributions to meet the qualified higher education expenses of a designated beneficiary. Contributions to a qualified tuition program cannot exceed the amount necessary to provide for the beneficiary's qualified higher education expenses. Distributions to a beneficiary are excluded from income. Contributions made to a qualified tuition program are not deductible.

2. Conforms to IRC Section 529 as of the "specified date" of January 1, 2009, with certain state modifications, including a modification to the 10% tax on excess distributions to instead be an additional tax of 2.5% for state purposes.

3. Provides its own IRC Section 529 qualified tuition program, known as the Golden State Scholarshare Trust (ScholarShare). ScholarShare enables taxpayers to save for college by putting money in tax-advantaged investments. After-tax contributions allow earnings to grow tax-deferred, and disbursements, when used for tuition and other qualified expenses, are federal and state tax-free. Distributions in excess of qualified higher education expenses incurred for the beneficiary, the portion of the excess that is treated as earnings generally is subject to income tax and an additional 2.5% tax for state purposes.

4. Limits the total amount of contributions to a beneficiary to $371,000. Accounts that have reached the limit may continue to accrue earnings.

5. Applies performance measurement standards to any new tax credit under either the Personal Income Tax (PIT) or Corporation Tax (CT) Law if enacted by a bill introduced on or after January 1, 2015. Specifically, existing law requires the all of the following:

   1. Specific goals, purposes, and objectives that the tax credit will achieve:

   2. Detailed performance indicators for the Legislature to use when measuring whether the tax credit meets the goals, purposes, and objectives stated in the bill; and,

   3. Data collection requirements to enable the Legislature to determine whether the tax credit is meeting, failing to meet, or exceeding those specific goals, purposes, and objectives, including a requirement to specify both of the following:

1. The baseline data, to be collected and remitted in each year the credit is effective, for the Legislature to measure the change in performance indicators; and,
   
   

2. The taxpayers, state agencies, or other entities required to collect and remit data.

FISCAL EFFECT: The FTB estimates General Fund revenue loss of $44 million in fiscal year (FY) 2015-16, $90 million in FY 2016-17, and $100 million in FY 2017-18.

COMMENTS:

1. Authors' Statement: The author has provided the following statement in support of this bill:

Children with college savings accounts are seven-times more likely to attend college. AB 17 will increase the number of families saving for college and also increase the amount of money they set aside for higher education. California is one of only six states with personal income taxes that do not offer any type of tax incentives for savings with a 529 plan. Californians have nearly $100 billion in student debt. It is estimated that this bill will decrease student debt by more than $700 million within 20 years. AB 17 will stimulate economic activity by providing college graduates with more disposable income to make major purchases such as buying a home or automobile.

2. Arguments in Support: The Financial Services Institute states that "[a]s educational expenses continue to rise, it becomes increasingly important that families engage in long-term planning and savings for their children's education. To help in this endeavor, 529 savings plans have been established in the Internal Revenue Code. This bill creates a modest tax break to help make such important savings more affordable. By creating this incentive, the State of California is clearly sending the message that education is a priority and that it values the importance of long-term planning for achieving educational goals."

3. Conformity Issues: As noted above, California conforms to IRC Section 529, with slight modifications. In general, state conformity with federal law promotes greater simplicity and eases administration of complex tax laws. The Federal Government does not provide a credit for contributions to a 529 plan. By providing a refundable credit for contributions made to qualified tuitions programs, this bill would bring California out of conformity with federal law.

4. Favoring Higher Income Earners: According to a report by the Government Accountability Office (GAO), less than 3% of families have 529 or Coverdell plans and those who do tend to be wealthier. (Higher Education: A Small Percentage of Families Save in 529 Plans, GAO, Dec. 2012.) Specifically, families with 529 and Coverdell plans had a median income of $142,000 per year and a median financial asset value of about $413,500. The report also stated that families with 529 plans tend to have higher levels of education, which may increase the likelihood that their children will attend college.

The report outlined several reasons why low-income families participate far less in 529 plans, such as a lack of awareness, confusion as to how the plan works, and differences among the various 529 plans. However, 68% of those surveyed stated a lack of money as the major reason for not participating. In the end, it is difficult to encourage families to save for college when they have little or no disposable income.

5. Low-Income Earners May Never See a Credit: This bill provides that the portion of the credit that is in excess of tax liability shall, upon an appropriation by the Legislature, be paid to the qualified taxpayer. By providing a refundable credit for contributions made to a qualified tuition program, this provision may encourage low-income families to save for college. However, this bill, as currently written, requires a subsequent appropriation of funds by the Legislature, which means certain taxpayers may not receive a credit despite making contributions. Additionally, this bill is unclear as to whether the appropriated funds would apply to a single taxable year or to multiple years. The fact that the refundability of the credit is not certain means that low-income families are less likely to participate.

6. High Cost of a Formal Education: State support for higher education has been dramatically reduced because of budget crises over the last 10 years. According to a study by the Public Policy Institute of California, in 2010-11, California spent $1.6 billion less in higher education than it did 10 years earlier, adjusted for inflation. (Hans Johnson, Defunding Higher Education: What are the Effects on College Enrollment, Public Policy Institute of California, May 2012.) The provisions of this bill are meant to counteract the skyrocketing costs of an education by providing a credit for contributions made to qualified tuition programs. Instead of forgoing General Fund revenues that predominantly favor higher income earners, these funds may be better utilized if directly appropriated to the state's University of California, California State University, and Community College system.

7. Performance Measurement Standards: Existing law requires any bill, introduced on or after January 1, 2015, that would authorize a new credit under either the PIT Law or the CT Law to provide performance measurement standards. According to legislative findings and declarations, tax preferences represent a major exercise of government power, but face less oversight than the spending side of the budget. As a way of ensuring transparency and accountability when investing public dollars through tax credit programs, the Legislature decided to apply performance measurement standards as a way of reviewing tax credits with the same level of scrutiny as spending programs. Unfortunately, this bill was introduced on December 1, 2014, and is therefore not required to abide by the standards under Revenue and Taxation Code (RTC) Section 41. However, in order to maintain the Legislature's intent of providing oversight for new tax credit programs, the author may wish to include performance measurement standards to this bill.

8. Prior Legislation:

   1. AB 1956 (Bonilla), of the 2013-14 Legislative Session, would have provided a tax credit in the amount of 20% of the monetary contributions made by a qualified taxpayer to a qualified tuition program, not to exceed $500. AB 1956 was held on the Assembly Appropriations Committee's Suspense File.

   2. AB 675 (Gilmore), of the 2009-10 Legislation Session, would have allowed a deduction for contributions made to a qualified tuition program. AB 675 was held in this Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

Treasurer, State of California (Sponsor)

California Association of Private School Organizations

California Catholic Charities

California Communities United Institute

Contra Costa County Office of Education

Early Edge California

Financial Services Institute

Greenlining Institute

National Association of Insurance and Financial Advisors – California

Parent Institute for Quality Education

Pleasanton Unified School District

President, John F. Kennedy University

Securities Industry and Financial Markets Association

State Farm Mutual Automobile Insurance Company's

United Way California Capital Region

Urban League of San Diego County

Opposition

California Taxpayers Association

California Tax Reform Association

Analysis Prepared by: Carlos Anguiano / REV. & TAX. / (916) 319-2098

Date of Hearing: April 13, 2015

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Philip Ting, Chair

ABPCA Bill Id:AB 17

Author:(Bonilla) – As Introduced Ver:December 1, 2014

Majority vote. Fiscal committee. Tax levy.

SUBJECT: Personal income tax: credit: qualified tuition program

SUMMARY: Provides a tax credit in the amount of 20% of the monetary contributions made by a qualified taxpayer to a qualified tuition program, not to exceed $500. Specifically, this bill:

1. Provides, beginning on or after January 1, 2016, and before January 1, 2021, a refundable tax credit, as specified, against the "net tax" to a qualified taxpayer that contributes money to one or more qualified tuition programs.

2. Provides that the amount of the credit is the lesser of the following:

   1. 20% of the monetary contributions made by the qualified taxpayer to a qualified tuition program that the qualified taxpayer owns during the taxable year; or,

   2. $500.

3. Provides that the portion of the credit that is in excess of tax liability shall, upon an appropriation by the Legislature, be paid to the qualifying taxpayer.

4. Defines a "qualified tuition program" in the same manner as a qualified tuition program under Internal Revenue Code (IRC) Section 529.

5. Defines a "qualified taxpayer" as an individual who, on behalf of a beneficiary, contributes money to a qualified tuition program for which the individual is the account owner and has an adjusted gross income of either:

   1. $100,000 or less if the qualified taxpayer files as single, married filing separately, or registered partner filing separately; or,

   2. $200,000 or less if the qualified taxpayer files as head of household, surviving spouse, married filing jointly, or domestic partner filing jointly.

6. Allows, in the case of married taxpayer or domestic partners who file separate returns, the credit to be taken by either spouse or registered domestic partner, or divided equally between the spouses or registered domestic partners.

7. Defines "nonqualified withdrawal" as any payment or distribution from a qualified tuition program that is subject to additional tax as provided for by IRC Section 529(c)(6).

8. Provides that when a qualified taxpayer receives a nonqualified withdrawal, in addition to any other tax, an additional tax shall be imposed in an amount that is the lesser of 10% of the nonqualified withdrawal or the total amount of credits received for the taxable year and for all prior taxable years that a qualified taxpayer was allowed a credit pursuant to this bill.

9. Provides that the Franchise Tax Board (FTB) may proscribe rules, guidelines, or procedures necessary or appropriate to carry out the purpose of this section.

10. Takes effect immediately as a tax levy.

EXISTING LAW:

1. Provides tax-exempt status to qualified tuition programs. Qualified tuition programs are programs established and maintained by a state (or by an eligible education institution) under which a person may purchase tuition credit or make cash contributions to meet the qualified higher education expenses of a designated beneficiary. Contributions to a qualified tuition program cannot exceed the amount necessary to provide for the beneficiary's qualified higher education expenses. Distributions to a beneficiary are excluded from income. Contributions made to a qualified tuition program are not deductible.

2. Conforms to IRC Section 529 as of the "specified date" of January 1, 2009, with certain state modifications, including a modification to the 10% tax on excess distributions to instead be an additional tax of 2.5% for state purposes.

3. Provides its own IRC Section 529 qualified tuition program, known as the Golden State Scholarshare Trust (ScholarShare). ScholarShare enables taxpayers to save for college by putting money in tax-advantaged investments. After-tax contributions allow earnings to grow tax-deferred, and disbursements, when used for tuition and other qualified expenses, are federal and state tax-free. Distributions in excess of qualified higher education expenses incurred for the beneficiary, the portion of the excess that is treated as earnings generally is subject to income tax and an additional 2.5% tax for state purposes.

4. Limits the total amount of contributions to a beneficiary to $371,000. Accounts that have reached the limit may continue to accrue earnings.

5. Applies performance measurement standards to any new tax credit under either the Personal Income Tax (PIT) or Corporation Tax (CT) Law if enacted by a bill introduced on or after January 1, 2015. Specifically, existing law requires the all of the following:

   1. Specific goals, purposes, and objectives that the tax credit will achieve:

   2. Detailed performance indicators for the Legislature to use when measuring whether the tax credit meets the goals, purposes, and objectives stated in the bill; and,

   3. Data collection requirements to enable the Legislature to determine whether the tax credit is meeting, failing to meet, or exceeding those specific goals, purposes, and objectives, including a requirement to specify both of the following:

1. The baseline data, to be collected and remitted in each year the credit is effective, for the Legislature to measure the change in performance indicators; and,
   
   

2. The taxpayers, state agencies, or other entities required to collect and remit data.

FISCAL EFFECT: The FTB estimates General Fund revenue loss of $44 million in fiscal year (FY) 2015-16, $90 million in FY 2016-17, and $100 million in FY 2017-18.

COMMENTS:

1. Authors' Statement: The author has provided the following statement in support of this bill:

Children with college savings accounts are seven-times more likely to attend college. AB 17 will increase the number of families saving for college and also increase the amount of money they set aside for higher education. California is one of only six states with personal income taxes that do not offer any type of tax incentives for savings with a 529 plan. Californians have nearly $100 billion in student debt. It is estimated that this bill will decrease student debt by more than $700 million within 20 years. AB 17 will stimulate economic activity by providing college graduates with more disposable income to make major purchases such as buying a home or automobile.

2. Arguments in Support: The Financial Services Institute states that "[a]s educational expenses continue to rise, it becomes increasingly important that families engage in long-term planning and savings for their children's education. To help in this endeavor, 529 savings plans have been established in the Internal Revenue Code. This bill creates a modest tax break to help make such important savings more affordable. By creating this incentive, the State of California is clearly sending the message that education is a priority and that it values the importance of long-term planning for achieving educational goals."

3. Conformity Issues: As noted above, California conforms to IRC Section 529, with slight modifications. In general, state conformity with federal law promotes greater simplicity and eases administration of complex tax laws. The Federal Government does not provide a credit for contributions to a 529 plan. By providing a refundable credit for contributions made to qualified tuitions programs, this bill would bring California out of conformity with federal law.

4. Favoring Higher Income Earners: According to a report by the Government Accountability Office (GAO), less than 3% of families have 529 or Coverdell plans and those who do tend to be wealthier. (Higher Education: A Small Percentage of Families Save in 529 Plans, GAO, Dec. 2012.) Specifically, families with 529 and Coverdell plans had a median income of $142,000 per year and a median financial asset value of about $413,500. The report also stated that families with 529 plans tend to have higher levels of education, which may increase the likelihood that their children will attend college.

The report outlined several reasons why low-income families participate far less in 529 plans, such as a lack of awareness, confusion as to how the plan works, and differences among the various 529 plans. However, 68% of those surveyed stated a lack of money as the major reason for not participating. In the end, it is difficult to encourage families to save for college when they have little or no disposable income.

5. Low-Income Earners May Never See a Credit: This bill provides that the portion of the credit that is in excess of tax liability shall, upon an appropriation by the Legislature, be paid to the qualified taxpayer. By providing a refundable credit for contributions made to a qualified tuition program, this provision may encourage low-income families to save for college. However, this bill, as currently written, requires a subsequent appropriation of funds by the Legislature, which means certain taxpayers may not receive a credit despite making contributions. Additionally, this bill is unclear as to whether the appropriated funds would apply to a single taxable year or to multiple years. The fact that the refundability of the credit is not certain means that low-income families are less likely to participate.

6. High Cost of a Formal Education: State support for higher education has been dramatically reduced because of budget crises over the last 10 years. According to a study by the Public Policy Institute of California, in 2010-11, California spent $1.6 billion less in higher education than it did 10 years earlier, adjusted for inflation. (Hans Johnson, Defunding Higher Education: What are the Effects on College Enrollment, Public Policy Institute of California, May 2012.) The provisions of this bill are meant to counteract the skyrocketing costs of an education by providing a credit for contributions made to qualified tuition programs. Instead of forgoing General Fund revenues that predominantly favor higher income earners, these funds may be better utilized if directly appropriated to the state's University of California, California State University, and Community College system.

7. Performance Measurement Standards: Existing law requires any bill, introduced on or after January 1, 2015, that would authorize a new credit under either the PIT Law or the CT Law to provide performance measurement standards. According to legislative findings and declarations, tax preferences represent a major exercise of government power, but face less oversight than the spending side of the budget. As a way of ensuring transparency and accountability when investing public dollars through tax credit programs, the Legislature decided to apply performance measurement standards as a way of reviewing tax credits with the same level of scrutiny as spending programs. Unfortunately, this bill was introduced on December 1, 2014, and is therefore not required to abide by the standards under Revenue and Taxation Code (RTC) Section 41. However, in order to maintain the Legislature's intent of providing oversight for new tax credit programs, the author may wish to include performance measurement standards to this bill.

8. Prior Legislation:

   1. AB 1956 (Bonilla), of the 2013-14 Legislative Session, would have provided a tax credit in the amount of 20% of the monetary contributions made by a qualified taxpayer to a qualified tuition program, not to exceed $500. AB 1956 was held on the Assembly Appropriations Committee's Suspense File.

   2. AB 675 (Gilmore), of the 2009-10 Legislation Session, would have allowed a deduction for contributions made to a qualified tuition program. AB 675 was held in this Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

Treasurer, State of California (Sponsor)

California Association of Private School Organizations

California Catholic Charities

California Communities United Institute

Contra Costa County Office of Education

Early Edge California

Financial Services Institute

Greenlining Institute

National Association of Insurance and Financial Advisors – California

Parent Institute for Quality Education

Pleasanton Unified School District

President, John F. Kennedy University

Securities Industry and Financial Markets Association

State Farm Mutual Automobile Insurance Company's

United Way California Capital Region

Urban League of San Diego County

Opposition

California Tax Reform Association

Analysis Prepared by: Carlos Anguiano / REV. & TAX. / (916) 319-2098