AB 225: Personal income taxes: earned income credit: earned income amount.

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 from specified sources and who meet certain other requirements.

The Personal Income Tax Law, for taxable years beginning on or after January 1, 2015, in modified conformity with federal income tax laws, allows an earned income credit against personal income tax, and a payment from the Tax Relief and Refund Account for an allowable credit in excess of tax liability, to an eligible individual in an amount determined in accordance with federal law as applicable for federal income tax purposes for the taxable year, multiplied by the earned income tax credit adjustment factor, as specified. Existing law creates the Tax Relief and Refund Account, which is continuously appropriated, and provides that required payments to be made to taxpayers or other persons from the Personal Income Tax Fund are to be paid from that account, including amounts allowable as an earned income credit in excess of any tax liability. The Personal Income Tax Law provides that the amount of the credit is calculated as a percentage of the eligible individuals earned income and is phased out above a specified amount as income increases.

This bill, for specified taxable years beginning on and after January 1, 2017, would increase the earned income threshold for which the phaseout begins, thereby increasing the amount of eligible taxpayers and the credit percentage for those eligible individuals for those taxable years beginning on and after January 1, 2017. The bill would suspend this increase under specified circumstances.

By increasing the allowable credit amount, this bill would authorize new payments from the Tax Relief and Refund Account for additional amounts in excess of personal income tax liabilities, thereby making an appropriation.