AB 441: Temporary food facilities: permitting: farmers’ markets and night markets.
- Session Year: 2023-2024
- House: Assembly
- Latest Version Date: 2023-08-16
Current Status:
Failed
(2024-02-01: From committee: Filed with the Chief Clerk pursuant to Joint Rule 56.)
Introduced
In Committee
First Chamber
In Committee
Second Chamber
Enacted
Existing law, the California Retail Food Code, establishes uniform health and sanitation standards for temporary food facilities, and defines a temporary food facility to mean a food facility approved by an enforcement officer to operate at a fixed location for the duration of a community event, as specified. Existing law defines a community event as an event conducted for not more than 25 consecutive or nonconsecutive days in a 90-day period and that is of a civic, political, public, or educational nature, including state and county fairs, city festivals, circuses, and other public gathering events approved by the local enforcement agency. Existing law prohibits a temporary food facility from being open for business without a valid permit. Existing law requires an enforcement agency to issue a permit when investigation has determined a proposed facility meets the specifications of approved plans or conforms to the requirements of the California Retail Food Code. Existing law provides that a permit is only valid for the person, location, type of food sales, or distribution activity and, unless suspended or revoked for cause, for the time period indicated. A violation of the California Retail Food Code is a misdemeanor.
This bill would include in the definition of a community event a farmers market or night market conducted for not more than 90 consecutive or nonconsecutive days in a 12-month period. The bill would require a permit issued for a temporary food facility that operates at a farmers market or night market to be valid for all locations of that community event. The bill would designate a permit issued pursuant to these provisions as a farmers market or night market temporary food facility permit. By creating a new type of permit to be issued, thereby imposing duties on local enforcement agencies, and by changing the definition of a crime, the bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that with regard to certain mandates no reimbursement is required by this act for a specified reason.
With regard to any other mandates, this bill would provide that, if the Commission on State Mandates determines that the bill contains costs so mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.
The Personal Income Tax Law, in modified conformity with federal income tax laws, allows an earned income tax credit against personal income tax and a payment from the continuously appropriated Tax Relief and Refund Account for an allowable credit in excess of tax liability to an eligible individual that is equal to that portion of the earned income tax credit allowed by federal law, as determined by the earned income tax credit adjustment factor, as specified. The Personal Income Tax Law also allows a young child tax credit and a foster youth tax credit against the taxes imposed by that law, and a payment from the Tax Relief and Refund Account for allowable credits in excess of tax liability to a qualified individual, as defined.This bill would require the Franchise Tax Board to establish a program for making periodic payments from the Tax Relief and Refund Account to qualified taxpayers, as defined. The bill would require the aggregate of these periodic payments in any calendar year to be equal to 80% of the estimated total amount allowed to the taxpayer as an earned income tax credit, a young child tax credit, and a foster youth tax credit. The bill would define qualified taxpayer for these purposes to mean a taxpayer that is eligible to receive an earned income tax credit, a young child tax credit, or a foster youth tax credit, but only if the combined total of those credits allowed to the taxpayer in the applicable year is $1,000 or more. The bill would reduce the amount allowed as an earned income tax credit, young child tax credit, or foster youth tax credit, but not below zero, to the extent the taxpayer received any periodic payments related to those credits. The bill would require the Franchise Tax Board to allow a qualified taxpayer to report changes to their income, household size, filing status, or any other personal information relevant to estimating the amount of any credit allowed to the taxpayer, and would authorize the Franchise Tax Board to modify the estimated value of credits allowed to the taxpayer. The bill would further allow the Franchise Tax Board to adjust the periodic payments, as necessary, to account for any modification to the estimated value of credits allowed to a qualified taxpayer. The bill would require the Franchise Tax Board, upon receiving a tax return from a qualified taxpayer, to compare the aggregate amount of periodic payments received during the relevant calendar year to the aggregate total of tax credits the taxpayer was allowed. In the case that the amount of the periodic payments received by the taxpayer exceeds the total of tax credits the taxpayer was allowed by more than $300, the bill would require the taxpayer to repay so much of the difference that exceeds $300. The bill would require the Controller to make transfers from the Personal Income Tax Fund to the Tax Relief and Refund Account as required to make the estimated payments. By authorizing additional payments from a continuously appropriated fund, this bill would make an appropriation.This bill would also require the Franchise Tax Board, in coordination with the State Department of Public Health, the State Department of Social Services, and any other relevant state agency, to request a waiver from any federal agency that administers specified benefits programs to exclude any amount paid in monthly advance payments authorized by the bill from income in determining eligibility for, or calculation of benefits under, those benefit programs. The bill would state its provisions would only become operative upon the enactment of federal legislation, promulgation of federal regulation, or similar guidance from federal agencies, that the advance payments authorized by the bill would be excluded from income for purposes of determining eligibility for, or the calculation of benefits under, those federal benefit programs.The Personal Income Tax Law, in modified conformity with federal income tax laws, allows an earned income tax credit against personal income tax and a payment from the continuously appropriated Tax Relief and Refund Account for an allowable credit in excess of tax liability to an eligible individual that is equal to that portion of the earned income tax credit allowed by federal law, as determined by the earned income tax credit adjustment factor, as specified. The Personal Income Tax Law also allows a young child tax credit and a foster youth tax credit against the taxes imposed by that law, and a payment from the Tax Relief and Refund Account for allowable credits in excess of tax liability to a qualified individual, as defined.
This bill would require the Franchise Tax Board to establish a program for making periodic payments from the Tax Relief and Refund Account to qualified taxpayers, as defined. The bill would require the aggregate of these periodic payments in any calendar year to be equal to 80% of the estimated total amount allowed to the taxpayer as an earned income tax credit, a young child tax credit, and a foster youth tax credit. The bill would define qualified taxpayer for these purposes to mean a taxpayer that is eligible to receive an earned income tax credit, a young child tax credit, or a foster youth tax credit, but only if the combined total of such those credits allowed to the taxpayer in the applicable year is $1,000 or more. The bill would reduce the amount allowed as an earned income tax credit, young child tax credit, or foster youth tax credit credit, but not below zero, to the extent the taxpayer received any periodic payments related to those credits. The bill would require the Franchise Tax Board to allow a qualified taxpayer to report changes to their income, household size, filing status, or any other personal information relevant to estimating the amount of any credit allowed to the taxpayer, and would authorize the Franchise Tax Board to modify the estimated value of credits allowed to the taxpayer. The bill would further allow the Franchise Tax Board to adjust the periodic payments, as necessary, to account for any modification to the estimated value of credits allowed to a qualified taxpayer. The bill would require the Franchise Tax Board, upon receiving a tax return from a qualified taxpayer, to compare the aggregate amount of periodic payments received during the relevant calendar year to the aggregate total of tax credits the taxpayer was allowed. In the case that the amount of the periodic payments received by the taxpayer exceeds the total of tax credits the taxpayer was allowed by more than $300, the bill would require the taxpayer to repay so much of the difference that exceeds $300. The bill would require the Controller to make transfers from the Personal Income Tax Fund to the Tax Relief and Refund Account as required to make the estimated payments. By authorizing additional payments from a continuously appropriated fund, this bill would make an appropriation.
This bill would also require the Franchise Tax Board, in coordination with the State Department of Public Health, the State Department of Social Services, and any other relevant state agency, to request a waiver from any federal agency that administers specified benefits programs to exclude any amount paid in monthly advance payments authorized by the bill from income in determining eligibility for, or calculation of benefits under, those benefit programs. The bill would state its provisions would only become operative upon the enactment of federal legislation, promulgation of federal regulation, or similar guidance from federal agencies, that the advance payments authorized by the bill would be excluded from income for purposes of determining eligibility for, or the calculation of benefits under, those federal benefit programs.
The Personal Income Tax Law, in modified conformity with federal income tax laws, allows an earned income tax credit against personal income tax and a payment from the continuously appropriated Tax Relief and Refund Account for an allowable credit in excess of tax liability to an eligible individual that is equal to that portion of the earned income tax credit allowed by federal law, as determined by the earned income tax credit adjustment factor, as specified. The Personal Income Tax Law also allows a young child tax credit and a foster youth tax credit against the taxes imposed by that law, and a payment from the Tax Relief and Refund Account for allowable credits in excess of tax liability to a qualified individual, as defined.
This bill would make nonsubstantive changes to the earned income tax credit.This bill would require the Franchise Tax Board to establish a program for making periodic payments from the Tax Relief and Refund Account to qualified taxpayers, as defined. The bill would require the aggregate of these periodic payments in any calendar year to be equal to 80% of the estimated total amount allowed to the taxpayer as an earned income tax credit, a young child tax credit, and a foster youth tax credit. The bill would define qualified taxpayer for these purposes to mean a taxpayer that is eligible to receive an earned income tax credit, a young child tax credit, or a foster youth tax credit, but only if the combined total of such credits allowed to the taxpayer in the applicable year is $1,000 or more. The bill would reduce the amount allowed as an earned income tax credit, young child tax credit, or foster youth tax credit to the extent the taxpayer received any periodic payments related to those credits. The bill would require the Franchise Tax Board to allow a qualified taxpayer to report changes to their income, household size, filing status, or any other personal information relevant to estimating the amount of any credit allowed to the taxpayer, and would authorize the Franchise Tax Board to modify the estimated value of credits allowed to the taxpayer. The bill would further allow the Franchise Tax Board to adjust the periodic payments, as necessary, to account for any modification to the estimated value of credits allowed to a qualified taxpayer. The bill would require the Controller to make transfers from the Personal Income Tax Fund to the Tax Relief and Refund Account as required to make the estimated payments. By authorizing additional payments from a continuously appropriated fund, this bill would make an appropriation.
The Personal Income Tax Law, in modified conformity with federal income tax laws, allows an earned income tax 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 that is equal to that portion of the earned income tax credit allowed by federal law, as determined by the earned income tax credit adjustment factor, as specified.
This bill would make nonsubstantive changes to the earned income tax credit.
Community event means an either of the following:
(a)An event conducted for not more than 25 consecutive or nonconsecutive days in a 90-day period and that is of a civic, political, public, or educational nature, including state and county fairs, city festivals, circuses, and other public gathering events approved by the local enforcement agency.
(b)A farmers market or night market conducted for not more than 90 consecutive or nonconsecutive days in a 12-month period.
SEC. 2.Section 114381 of the Health and Safety Code is amended to read:114381.(a)A food facility shall not be open for business without a valid permit.
(b)A permit shall be issued by the enforcement agency when investigation has determined that the proposed facility and its method of operation meets the specifications of the approved plans or conforms to the requirements of this part.
(c)(1)A permit, once issued, is nontransferable. A permit shall be valid only for the person, location, type of food sales, or distribution activity and, unless suspended or revoked for cause, for the time period indicated.
(2)Notwithstanding paragraph (1), a permit issued for a temporary food facility that operates at a community event, as defined in subdivision (b) of Section 113755, shall be valid for all locations of that community event. A permit issued pursuant to this paragraph shall be called a farmers market or night market temporary food facility permit.
(d)Any fee for the permit or registration or related services, including, but not limited to, the expenses of inspecting and impounding any utensil suspected of releasing lead or cadmium in violation of Section 108860 as authorized by Section 114393, review of HACCP plans, and alternative means of compliance shall be determined by the local governing body. Fees shall be sufficient to cover the actual expenses of administering and enforcing this part. The moneys collected as fees shall only be expended for the purpose of administering and enforcing this part.
(e)A permit shall be posted in a conspicuous place in the food facility or in the office of a vending machine business.
(f)Any person requesting the enforcement agency to undertake activity pursuant to Sections 114149.1 and 114419.3 shall pay the enforcement agencys costs incurred in undertaking the activity. The enforcement agencys services shall be assessed at the current hourly cost recovery rate.
SEC. 3.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution for certain costs that may be incurred by a local agency or school district because, in that regard, this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
However, if the Commission on State Mandates determines that this act contains other costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.
SECTION 1.Section 17052 of the Revenue and Taxation Code is amended to read:17052.(a)(1)For each taxable year beginning on or after January 1, 2015, there shall be allowed against the net tax, as defined by Section 17039, an earned income tax credit in an amount equal to an amount determined in accordance with Section 32 of the Internal Revenue Code, relating to earned income, as applicable for federal income tax purposes for the taxable year, except as otherwise provided in this section.(2)(A)The amount of the credit determined under Section 32 of the Internal Revenue Code, relating to earned income, as modified by this section, shall be multiplied by the earned income tax credit adjustment factor for the taxable year.(B)Unless otherwise specified in the annual Budget Act, the earned income tax credit adjustment factor for a taxable year beginning on or after January 1, 2015, shall be 0 percent.(C)The earned income tax credit authorized by this section shall only be operative for taxable years for which resources are authorized in the annual Budget Act for the Franchise Tax Board to oversee and audit returns associated with the credit.(3)The amount of the credit allowed pursuant to this section shall be reduced, but not below zero dollars ($0), by any amount received by the eligible individual pursuant to Section 17052.3 that relates to an estimated allowance of a credit under this section.(b)(1)In lieu of the table prescribed in Section 32(b)(1) of the Internal Revenue Code, relating to percentages, the credit percentage and the phaseout percentage shall be determined as follows:In the case of an eligible individual with:The credit percentage is:The phaseout percentage is:No qualifying children7.65%7.65%1 qualifying child34%34%2 qualifying children40%40%3 or more qualifying children45%45%(2)(A)In lieu of the table prescribed in Section 32(b)(2)(A) of the Internal Revenue Code, the earned income amount and the phaseout amount shall be determined as follows:In the case of an eligible individual with:The earned income amount is:The phaseout amount is:No qualifying children$3,290$3,2901 qualifying child$4,940$4,9402 or more qualifying children$6,935$6,935(B)Section 32(b)(2)(B) of the Internal Revenue Code, relating to joint returns, shall not apply.(c)(1)Section 32(c)(1)(A)(ii)(I) of the Internal Revenue Code is modified by substituting this state for the United States.(2)For each taxable year beginning on or after January 1, 2018, Section 32(c)(1)(A)(ii)(II) of the Internal Revenue Code is modified by deleting 25 but not attained age 65 and inserting in lieu thereof the following: 18.(3)Section 32(c)(2)(A) of the Internal Revenue Code is modified as follows:(A)Section 32(c)(2)(A)(i) of the Internal Revenue Code is modified by deleting plus and inserting in lieu thereof the following: and only if such amounts are subject to withholding pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.(B)Section 32(c)(2)(A)(ii) of the Internal Revenue Code shall not apply.(4)For taxable years beginning on or after January 1, 2017, paragraph (3) shall not apply and in lieu thereof Section 32(c)(2)(A) of the Internal Revenue Code is modified as follows:(A)Section 32(c)(2)(A)(i) of the Internal Revenue Code is modified by deleting plus and inserting in lieu thereof the following: and only if such amounts are subject to withholding pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code, plus.(B)Section 32(c)(2)(A)(ii) of the Internal Revenue Code shall apply.(5)Section 32(c)(3)(C) of the Internal Revenue Code, relating to place of abode, is modified by substituting this state for the United States.(d)Section 32(i)(1) of the Internal Revenue Code is modified by substituting $3,400 for $2,200.(e)(1)In lieu of Section 32(j) of the Internal Revenue Code, relating to inflation adjustments, for taxable years beginning on or after January 1, 2016, the amounts specified in paragraph (2) of subdivision (b) and in subdivision (d) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.(2)For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, when recomputing the amounts referenced in paragraph (1), the percentage change in the California Consumer Price Index shall be deemed to be the greater of 3.1 percent or the percentage change in the California Consumer Price Index as calculated under subdivision (h) of Section 17041 for that taxable year.(3)For each taxable year beginning on or after January 1, 2019, and before January 1, 2020, when recomputing the amounts referenced in paragraph (1), the percentage change in the California Consumer Price Index shall be deemed to be the greater of 3.5 percent or the percentage change in the California Consumer Price Index as calculated under subdivision (h) of Section 17041 for that taxable year.(f)If the amount allowable as a credit under this section exceeds the tax liability computed under this part for the taxable year, the excess shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the taxpayer.(g)(1)The Franchise Tax Board may prescribe rules, guidelines, procedures, or other guidance to carry out the purposes of this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.(2)(A)The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section, including any regulations to prevent improper claims from being filed or improper payments from being made with respect to net earnings from self-employment.(B)The adoption of any regulations pursuant to subparagraph (A) may be adopted as emergency regulations in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) and shall be deemed an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare. Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, these emergency regulations shall not be subject to the review and approval of the Office of Administrative Law. The regulations shall become effective immediately upon filing with the Secretary of State, and shall remain in effect until revised or repealed by the Franchise Tax Board.(h)Notwithstanding any other law, amounts refunded pursuant to this section shall be treated in the same manner as the federal earned income refund for the purpose of determining eligibility to receive benefits under Division 9 (commencing with Section 10000) of the Welfare and Institutions Code or amounts of those benefits.(i)(1)For the purpose of implementing the credit allowed by this section for the 2015 taxable year, the Franchise Tax Board shall be exempt from the following:(A)Special Project Report requirements under State Administrative Manual Sections 4819.36, 4945, and 4945.2.(B)Special Project Report requirements under Statewide Information Management Manual Section 30.(C)Section 11.00 of the 2015 Budget Act.(D)Sections 12101, 12101.5, 12102, and 12102.1 of the Public Contract Code.(2)The Franchise Tax Board shall formally incorporate the scope, costs, and schedule changes associated with the implementation of the credit allowed by this section in its next anticipated Special Project Report for its Enterprise Data to Revenue Project.(j)(1)In accordance with Section 41, the purpose of the California Earned Income Tax Credit is to reduce poverty among Californias poorest working families and individuals. To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall annually prepare a written report on the following:(A)The number of tax returns claiming the credit.(B)The number of individuals represented on tax returns claiming the credit.(C)The average credit amount on tax returns claiming the credit.(D)The distribution of credits by number of dependents and income ranges. The income ranges shall encompass the phase-in and phaseout ranges of the credit.(E)Using data from tax returns claiming the credit, including an estimate of the federal tax credit determined under Section 32 of the Internal Revenue Code, an estimate of the number of families who are lifted out of deep poverty by the credit and an estimate of the number of families who are lifted out of deep poverty by the combination of the credit and the federal tax credit. For the purposes of this subdivision, a family is in deep poverty if the income of the family is less than 50 percent of the federal poverty threshold.(2)The Franchise Tax Board shall provide the written report to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, the Assembly Committee on Revenue and Taxation, and the Senate and Assembly Committees on Human Services.(k)The tax credit allowed by this section shall be known as the California Earned Income Tax Credit.(l)The amendments made to this section by Chapter 722 of the Statutes of 2016 shall apply to taxable years beginning on or after January 1, 2016.(m)(1)For each taxable year beginning on or after January 1, 2017, and before January 1, 2018, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred dollars ($100) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty dollars ($250) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:In the case of an eligible individual with:The credit percentage is:The phaseout percentage is:No qualifying children2.20%1.22%1 qualifying child3.10%2.29%2 qualifying children2.13%3.45%3 or more qualifying children2.12%3.49%(2)For each taxable year beginning on or after January 1, 2017, and before January 1, 2018, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred dollars ($100) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty dollars ($250) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows: In the case of an eligible individual with:The earned income amount is:The phaseout amount is:No qualifying children$5,354$5,3541 qualifying child$9,484$9,4842 qualifying children$13,794$13,7943 or more qualifying children$13,875$13,875(n)(1)For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred three dollars ($103) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty-eight dollars ($258) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:In the case of an eligible individual with:The credit percentage is:The phaseout percentage is:No qualifying children2.20%1.08%1 qualifying child3.10%2.00%2 qualifying children2.13%2.82%3 or more qualifying children2.12%2.85%(2)For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred three dollars ($103) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty-eight dollars ($258) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows: In the case of an eligible individual with:The earned income amount is:The phaseout amount is:No qualifying children$5,520$5,5201 qualifying child$9,778$9,7782 qualifying children$14,222$14,2223 or more qualifying children$14,305$14,305(o)(1)For each taxable year beginning on or after January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to two hundred dollars ($200) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to five hundred five dollars ($505) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:In the case of an eligible individual with:The credit percentage is:The phaseout percentage is:No qualifying children5.43%0.92%1 qualifying child6.33%2.88%2 qualifying children4.20%3.75%3 or more qualifying children4.15%3.78%(2)For each taxable year beginning on or after January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to two hundred dollars ($200) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to five hundred five dollars ($505) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows:In the case of an eligible individual with:The earned income amount is:The phaseout amount is:No qualifying children$4,334$4,3341 qualifying child$9,381$9,3812 qualifying children$14,137$14,1373 or more qualifying children$14,302$14,302(3)For taxable years beginning on or after January 1, 2020, and until and including the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, both of the following shall occur:(A)The amounts in paragraphs (1) and (2) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.(B)The phaseout percentage for each of the four categories of eligible individuals shall be recalculated by the Franchise Tax Board in such a manner that, for a taxpayer with an earned income of thirty thousand dollars ($30,000), the calculated amount of credit is equal to zero.(4)(A)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the amounts in paragraphs (1) and (2) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.(B)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the phaseout percentages for the prior taxable year, as recalculated under subparagraph (B) of paragraph (3), shall apply.(p)For each taxable year beginning on or after January 1, 2020, Section 32(m) of the Internal Revenue Code, relating to identification numbers, is modified as follows:(1)By deleting (other than a social security number issued pursuant to clause (II) (or that portion of clause (III) that relates to clause (II)) of section 205(c)(2)(B)(i) of the Social Security Act).(2)By substituting federal individual taxpayer identification number or a social security number for social security number.(q)An eligible individual, eligible individuals spouse, or qualifying child using a federal individual taxpayer identification number as authorized under subdivision (p) shall:(1)Upon request of the Franchise Tax Board, provide:(A)Identifying documents acceptable for purposes of obtaining a California drivers license or identification card as authorized by subdivisions (a), (b), and (c) of Section 12801.9 of the Vehicle Code and related regulations adopted for purposes of establishing documents acceptable to prove identity.(B)Identifying documents used to report earned income for the taxable year.(2)Upon receiving a valid social security number issued to that individual by the Social Security Administration, notify the Franchise Tax Board, in the time and manner prescribed by the Franchise Tax Board.(r)The Legislature finds and declares that, to the extent they are otherwise qualified for a credit under this section, undocumented persons are eligible for the tax credit authorized by this section within the meaning of subsection (d) of Section 1621 of Title 8 of the United States Code.SEC. 2.Section 17052.1 of the Revenue and Taxation Code is amended to read:17052.1.(a)(1)For each taxable year beginning on or after January 1, 2019, there shall be allowed against the net tax, as defined by Section 17039, a young child tax credit to a qualified taxpayer, in an amount as determined under paragraph (2).(2)(A)(i)The amount of the young child tax credit shall be equal to one thousand one hundred seventy-six dollars ($1,176), multiplied by the earned income tax credit adjustment factor for the taxable year as specified for in Section 17052.(ii)The amount of the young child tax credit specified under clause (i) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.(B)The young child tax credit allowable in any taxable year to any qualified taxpayer shall be limited to the maximum amount specified in clause (i) of subparagraph (A) as recomputed under clause (ii) of subparagraph (A).(C)(i)The young child tax credit shall be reduced by twenty dollars ($20) for each one hundred dollars ($100), or fraction thereof, by which the qualified taxpayers earned income, as defined in Section 17052, exceeds the threshold amount. For purposes of this section, the threshold amount shall be twenty-five thousand dollars ($25,000).(ii)(I)For each taxable year beginning on or after January 1, 2022, and before January 1, 2023, the twenty dollars ($20) in clause (i) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041, except that the resulting products shall be rounded off to the nearest cent.(II)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the amount calculated under subclause (I) shall substitute for the twenty dollars ($20) in clause (i).(iii)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the threshold amount in this subparagraph shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.(D)The young child tax credit authorized by this section shall only be operative for taxable years for which resources are authorized in the annual Budget Act for the Franchise Tax Board to oversee and audit returns associated with the credit allowed under Section 17052.(3)The amount of the credit allowed pursuant to this section shall be reduced, but not below zero dollars ($0), by any amount received by the qualified taxpayer pursuant to Section 17052.3 that relates to an estimated allowance of a credit under this section.(b)(1)Qualified taxpayer means an eligible individual who has at least one qualifying child and who satisfies either of the following:(A)Has been allowed a tax credit under Section 17052.(B)Meets all of the following requirements:(i)Would otherwise have been allowed a tax credit under Section 17052, but has earned income, as defined in Section 32(c)(2) of the Internal Revenue Code, as modified by Section 17052, of zero dollars ($0) or less.(ii)Does not have net losses in excess of thirty thousand dollars ($30,000) in the taxable year.(iii)Does not have wages, salaries, tips, and other employee compensation in excess of thirty thousand dollars ($30,000) in the taxable year.(2)For each taxable year beginning on or after January 1, 2022, the amounts specified under clauses (ii) and (iii) of subparagraph (B) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.(c)Qualifying child shall have the same meaning as under Section 17052, except that the child shall be younger than six years of age as of the last day of the taxable year.(d)(1)The Franchise Tax Board may prescribe rules, guidelines, procedures, or other guidance to carry out the purposes of this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.(2)(A)The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section, including any regulations to prevent improper claims from being filed or improper payments from being made with respect to net earnings from self-employment.(B)The adoption of any regulations pursuant to subparagraph (A) may be adopted as emergency regulations in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) and shall be deemed an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare. Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, these emergency regulations shall not be subject to the review and approval of the Office of Administrative Law. The regulations shall become effective immediately upon filing with the Secretary of State, and shall remain in effect until revised or repealed by the Franchise Tax Board.(e)If the amount allowable as a credit under this section exceeds the tax liability computed under this part for the taxable year, the excess shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer.(f)Notwithstanding any other law, amounts refunded pursuant to this section shall be treated in the same manner as the federal earned income refund for the purpose of determining eligibility to receive benefits under Division 9 (commencing with Section 10000) of the Welfare and Institutions Code or amounts of those benefits.(g)(1)In accordance with Section 41, the purpose of the Young Child Tax Credit is to reduce poverty among Californias poorest working families and young children. To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall annually prepare a written report on the following:(A)The number of tax returns claiming the credit.(B)The number of qualifying children represented on tax returns claiming the credit.(C)The average credit amount on tax returns claiming the credit.(2)The Franchise Tax Board shall provide the written report to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, the Assembly Committee on Revenue and Taxation, and the Senate and Assembly Committees on Human Services.(h)The Legislature finds and declares that, to the extent they are otherwise qualified for a credit under this section, undocumented persons are eligible for the tax credit authorized by this section within the meaning of subsection (d) of Section 1621 of Title 8 of the United States Code.(i)The amendments made to this section by the act adding this subdivision shall apply for taxable years beginning on or after January 1, 2022, except as provided in subparagraph (C) of paragraph (2) of subdivision (a).SEC. 3.Section 17052.2 of the Revenue and Taxation Code is amended to read:17052.2.(a)(1)For each taxable year beginning on or after January 1, 2022, there shall be allowed against the net tax, as defined by Section 17039, a foster youth tax credit to a qualified taxpayer, in an amount as determined under paragraph (2).(2)(A)The amount of the foster youth tax credit shall be equal to one thousand one hundred seventy-six dollars ($1,176), multiplied by the earned income tax credit adjustment factor for the taxable year, as specified in Section 17052.(B)For taxable years beginning on or after January 1, 2022, the amount in subparagraph (A) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.(C)(i)The foster youth tax credit shall be reduced by twenty dollars ($20) for each one hundred dollars ($100), or fraction thereof, by which the qualified taxpayers earned income, as defined in Section 17052, exceeds the threshold amount.(ii)(I)For taxable years beginning on or after January 1, 2022, and before January 1, 2023, the twenty dollars ($20) in clause (i) shall be recomputed in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041, except that for purposes of this clause, subparagraph (B) of paragraph (2) of subdivision (h) of Section 17041 shall be modified by substituting nearest cent for nearest one dollar ($1).(II)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the amount calculated under subclause (I) shall substitute for the twenty dollars ($20) in clause (i).(iii)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the threshold amount shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.(3)The amount of the credit allowed pursuant to this section shall be reduced, but not below zero dollars ($0), by any amount received by the qualified taxpayer pursuant to Section 17052.3 that relates to an estimated allowance of a credit under this section.(b)The foster youth tax credit authorized by this section shall only be operative for taxable years for which resources are authorized in the annual Budget Act for the Franchise Tax Board to oversee and audit returns associated with the earned income tax credit allowed under Section 17052.(c)For purposes of this section, the following definitions shall apply:(1)Qualified taxpayer, means an individual who satisfies all of the following:(A)Has been allowed a tax credit under Section 17052 for the taxable year.(B)Is 18 to 25 years of age, inclusive, as of the last day of the taxable year.(C)Was in foster care while 13 years of age or older in an AFDC-FC placement, as described in Section 11402 of the Welfare and Institutions Code, including a tribally approved home, as defined in subdivision (r) of Section 224.1 of the Welfare and Institutions Code, or Approved Relative Caregiver Funding Program eligible placement, as described in Article 6 (commencing with Section 11450) of Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions Code, by a Title IV-E agency, pursuant to a voluntary placement agreement or a juvenile court order.(2)Threshold amount shall be twenty-five thousand dollars ($25,000).(3)Title IV-E agency means either of the following:(A)A county child welfare agency or probation department that administers foster care placements under Title IV-E of the federal Social Security Act (Part E (commencing with Section 670) of Subchapter IV of Chapter 7 of Title 42 of the United States Code).(B)An Indian tribe, tribal organization, or tribal consortium located in California or with lands that extend into the state that has an agreement with the State Department of Social Services pursuant to Section 10553.1 of the Welfare and Institutions Code to administer foster care placement under Title IV-E of the federal Social Security Act (Part E (commencing with Section 670) of Subchapter IV of Chapter 7 of Title 42 of the United States Code).(d)(1)As provided for in Section 10850.8 of the Welfare and Institutions Code, and subject to federal approvals or waivers, the State Department of Social Services shall provide to the Franchise Tax Board the data regarding a qualified taxpayer placed by a Title IV-E agency that may be necessary to verify that an individual qualifies for the foster youth tax credit. The data provided shall remain confidential and shall be used only for purposes directly connected with the foster youth tax credit.(2)In the event federal approval or waivers pursuant to paragraph (1) are not provided, the Franchise Tax Board and the State Department of Social Services shall explore alternative methods to verify foster care status for individuals described in paragraph (1) of subdivision (c) in a manner consistent with state and federal law.(3)The State Department of Social Services shall seek all appropriate federal waivers or approvals for the implementation of this subdivision as necessary. This subdivision shall be implemented only if necessary federal waivers or approvals are granted.(e)(1)The Franchise Tax Board may prescribe rules, guidelines, procedures, or other guidance to carry out the purposes of this section.(2)The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section, including any regulations to prevent improper claims from being filed or improper payments from being made with respect to net earnings from self-employment.(3)Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any regulation, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.(f)If the amount allowable as a credit under this section exceeds the tax liability computed under this part for the taxable year, the excess shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer.(g)Notwithstanding any other law, amounts refunded pursuant to this section shall be treated in the same manner as the federal earned income refund for the purpose of determining eligibility to receive benefits under Division 9 (commencing with Section 10000) of the Welfare and Institutions Code or amounts of those benefits.(h)Notwithstanding any other law, the payment authorized pursuant to this section shall not be taken into account as income, and shall not be taken into account as resources for a period of 12 months from receipt, for purposes of determining the eligibility of the individual, or any other individual, for benefits or assistance or the amount or extent of benefits or assistance under any state or local program not covered in subdivision (g). With respect to a state or local program, this subdivision shall only be implemented to the extent that it does not conflict with federal law relating to that program, and that any required federal approval or waiver is first obtained for that program.(i)The Legislature finds and declares that, to the extent they are otherwise qualified for a credit under this section, undocumented persons are eligible for the tax credit authorized by this section within the meaning of subsection (d) of Section 1621 of Title 8 of the United States Code.(j)(1)In accordance with Section 41, the purpose of the Foster Care Tax Credit is to reduce poverty among Californias young adults who have been in the foster care program. To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall annually prepare a written report on the following:(A)The number of tax returns claiming the credit.(B)The average credit amount on tax returns claiming the credit.(2)The Franchise Tax Board shall provide the written report, in compliance with Section 9795 of the Government Code, to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, the Assembly Committee on Revenue and Taxation, and the Senate and Assembly Committees on Human Services.(3)The disclosure provisions of this subdivision shall be treated as an exception to Section 19542 under Article 2 (commencing with 19542) of Chapter 7 of Part 10.2.SEC. 4.Section 17052.3 is added to the Revenue and Taxation Code, to read:17052.3.(a)For purposes of this section, the following definitions apply:(1)Annual advance amount means, with respect to a qualified taxpayer for any calendar year, the amount, if any, that the Franchise Tax Board estimates is equal to 80 percent of the aggregate amount allowed as a credit under Sections 17052, 17052.1, and 17052.2 for the qualified taxpayers taxable year that begins in that calendar year.(2)(A)Qualified taxpayer means an eligible individual, as that term is defined in Section 17052, or a qualified taxpayer as that term is defined in either Section 17052.1 or 17052.2.(B)Notwithstanding subparagraph (A), qualified taxpayer does not include a taxpayer if the combined total amount allowed as a credit to the taxpayer under Sections 17052, 17052.1, and 17052.2 is less than one thousand dollars ($1,000) for the applicable taxable year.(b)(1)The Franchise Tax Board shall establish a program for making periodic payments to qualified taxpayers from the Tax Relief and Refund Account.(2)The combined total of all periodic payments made to a qualified taxpayer during any calendar year shall equal the annual advance amount determined with respect to that taxpayer.(c)The Franchise Tax Board may modify the annual advance amount with respect to a qualified taxpayer for a calendar year to take into account information made available to the Franchise Tax Board that may lead to a change in the annual advance amount, including, but not limited to, a tax return filed by the qualified taxpayer. In the case of any modification of the annual advance amount pursuant to this subdivision, the Franchise Tax Board may adjust the amount of any periodic payment made after the date of the modification to properly adjust the amount by which any prior periodic payments were greater than or less than the amount the payment would have been based on the modified annual advance amount.(d)Upon receiving a tax return from a qualified taxpayer, the Franchise Tax Board shall determine the aggregate amount allowed to the taxpayer as a credit under Sections 17052, 17052.1, and 17052.2 for the taxable year.(1)In the event the advance monthly payments made to a qualified taxpayer exceed the aggregate amount allowed as determined by this subdivision by more than three hundred dollars ($300), the qualified taxpayer shall be liable to repay the portion of the difference that is in excess of three hundred dollars ($300). The qualified taxpayer shall repay that amount within three taxable years after receiving notice from the Franchise Tax Board of the excess payment.(2)In the event that the advance monthly payments already paid to a qualified taxpayer under this section exceed the qualified taxpayers calculated aggregate amount by less than three hundred dollars ($300), the taxpayer shall not be liable to repay that amount.(e)The Franchise Tax Board, through its internet website, shall allow a qualified taxpayer to report changes to their income, household size, filing status, or any other personal information that the Franchise Tax Board deems relevant to the calculation of the annual advance amount.(1)The Franchise Tax Board shall send at least two annual reminders to people likely to be qualified taxpayers to record any changes to relevant personal information.(2)Tax filers shall be allowed to decline participation in periodic payments at any time through the Franchise Tax Boards internet website.(f)(1)The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section, including any regulations to prevent improper claims from being filed or improper payments from being made.(2)The Franchise Tax Board may prescribe rules, guidelines, procedures, or other guidance to carry out the purposes of this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.(g)Notwithstanding any other law, amounts distributed pursuant to this section shall be treated in the same manner as the federal earned income refund for the purpose of determining eligibility to receive benefits under Division 9 (commencing with Section 10000) of the Welfare and Institutions Code or amounts of those benefits.(h)The Controller shall transfer, as needed, to the Tax Relief and Refund Account, from the Personal Income Tax Fund, an amount necessary to make the estimated payments provided for under subdivision (b).(i)The Franchise Tax Board, in coordination with the State Department of Public Health, the State Department of Social Services, and any other relevant state agency, shall request a waiver from any federal agency that administers benefits, for which eligibility, or calculation of which, is based on a recipients monthly income, to exclude from income any amount paid in monthly advance payments authorized under this section for purposes of determining eligibility for, or calculation of benefits under, those programs, including, but not limited to, the following:(1)Federal childcare assistance.(2)Federal housing assistance.(3)Low Income Home Energy Assistance Program (LIHEAP).(4)Medicaid.(5)Supplemental Nutrition Assistance Program (SNAP).(6)Supplemental Security Income.(7)Temporary Assistance for Needy Families (TANF).(8)The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC).(j)This section shall be operative for taxable years beginning on or after January 1 of the year that includes the date on which either of the following occurs:(1)The federal government enacts legislation declaring that periodic payments of specified state tax credits, including the credits allowed under Sections 17052, 17052.1, and 17052.2, shall be excluded from the definition of income for the purpose of determining eligibility for, or calculation of benefits under, any federal public assistance program, eligibility for which is dependent upon a recipients monthly income, including, but not limited to, federal childcare assistance, federal housing assistance, LIHEAP, Medicaid, SNAP, Supplemental Security Income, TANF, or WIC.(2)The publication of regulations, guidelines, memoranda, or letters to a state agency official by any relevant federal agency declaring that periodic payments of specified state tax credits, including the credits allowed under Sections 17052, 17052.1, and 17052.2, shall be excluded from the definition of income for the purpose of determining eligibility for, or calculation of benefits under, any federal public assistance program, including, but not limited to, federal childcare assistance, federal housing assistance, LIHEAP, Medicaid, SNAP, Supplemental Security Income, TANF, or WIC.(a)(1)For each taxable year beginning on or after January 1, 2015, there shall be allowed against the net tax, as defined by Section 17039, an earned income tax credit in an amount equal to an amount determined in accordance with Section 32 of the Internal Revenue Code, relating to earned income, as applicable for federal income tax purposes for the taxable year, except as otherwise provided in this section.
(2)(A)The amount of the credit determined under Section 32 of the Internal Revenue Code, relating to earned income, as modified by this section, shall be multiplied by the earned income tax credit adjustment factor for the taxable year.
(B)Unless otherwise specified in the annual Budget Act, the earned income tax credit adjustment factor for a taxable year beginning on or after January 1, 2015, shall be 0 percent.
(C)The earned income tax credit authorized by this section shall only be operative for taxable years for which resources are authorized in the annual Budget Act for the Franchise Tax Board to oversee and audit returns associated with the credit.
(3)The amount of the credit allowed pursuant to this section shall be reduced reduced, but not below zero dollars ($0), by any amount received by the eligible individual pursuant to Section 17052.3 that relates to an estimated allowance of a credit under this section.
(b)(1)In lieu of the table prescribed in Section 32(b)(1) of the Internal Revenue Code, relating to percentages, the credit percentage and the phaseout percentage shall be determined as follows:
In the case of an eligible individual with: | The credit percentage is: | The phaseout percentage is: |
No qualifying children | 7.65% | 7.65% |
1 qualifying child | 34% | 34% |
2 qualifying children | 40% | 40% |
3 or more qualifying children | 45% | 45% |
(2)(A)In lieu of the table prescribed in Section 32(b)(2)(A) of the Internal Revenue Code, the earned income amount and the phaseout amount shall be determined as follows:
In the case of an eligible individual with: | The earned income amount is: | The phaseout amount is: |
No qualifying children | $3,290 | $3,290 |
1 qualifying child | $4,940 | $4,940 |
2 or more qualifying children | $6,935 | $6,935 |
(B)Section 32(b)(2)(B) of the Internal Revenue Code, relating to joint returns, shall not apply.
(c)(1)Section 32(c)(1)(A)(ii)(I) of the Internal Revenue Code is modified by substituting this state for the United States.
(2)For each taxable year beginning on or after January 1, 2018, Section 32(c)(1)(A)(ii)(II) of the Internal Revenue Code is modified by deleting 25 but not attained age 65 and inserting in lieu thereof the following: 18.
(3)Section 32(c)(2)(A) of the Internal Revenue Code is modified as follows:
(A)Section 32(c)(2)(A)(i) of the Internal Revenue Code is modified by deleting plus and inserting in lieu thereof the following: and only if such amounts are subject to withholding pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.
(B)Section 32(c)(2)(A)(ii) of the Internal Revenue Code shall not apply.
(4)For taxable years beginning on or after January 1, 2017, paragraph (3) shall not apply and in lieu thereof Section 32(c)(2)(A) of the Internal Revenue Code is modified as follows:
(A)Section 32(c)(2)(A)(i) of the Internal Revenue Code is modified by deleting plus and inserting in lieu thereof the following: and only if such amounts are subject to withholding pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code, plus.
(B)Section 32(c)(2)(A)(ii) of the Internal Revenue Code shall apply.
(5)Section 32(c)(3)(C) of the Internal Revenue Code, relating to place of abode, is modified by substituting this state for the United States.
(d)Section 32(i)(1) of the Internal Revenue Code is modified by substituting $3,400 for $2,200.
(e)(1)In lieu of Section 32(j) of the Internal Revenue Code, relating to inflation adjustments, for taxable years beginning on or after January 1, 2016, the amounts specified in paragraph (2) of subdivision (b) and in subdivision (d) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(2)For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, when recomputing the amounts referenced in paragraph (1), the percentage change in the California Consumer Price Index shall be deemed to be the greater of 3.1 percent or the percentage change in the California Consumer Price Index as calculated under subdivision (h) of Section 17041 for that taxable year.
(3)For each taxable year beginning on or after January 1, 2019, and before January 1, 2020, when recomputing the amounts referenced in paragraph (1), the percentage change in the California Consumer Price Index shall be deemed to be the greater of 3.5 percent or the percentage change in the California Consumer Price Index as calculated under subdivision (h) of Section 17041 for that taxable year.
(f)If the amount allowable as a credit under this section exceeds the tax liability computed under this part for the taxable year, the excess shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the taxpayer.
(g)(1)The Franchise Tax Board may prescribe rules, guidelines, procedures, or other guidance to carry out the purposes of this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.
(2)(A)The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section, including any regulations to prevent improper claims from being filed or improper payments from being made with respect to net earnings from self-employment.
(B)The adoption of any regulations pursuant to subparagraph (A) may be adopted as emergency regulations in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) and shall be deemed an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare. Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, these emergency regulations shall not be subject to the review and approval of the Office of Administrative Law. The regulations shall become effective immediately upon filing with the Secretary of State, and shall remain in effect until revised or repealed by the Franchise Tax Board.
(h)Notwithstanding any other law, amounts refunded pursuant to this section shall be treated in the same manner as the federal earned income refund for the purpose of determining eligibility to receive benefits under Division 9 (commencing with Section 10000) of the Welfare and Institutions Code or amounts of those benefits.
(i)(1)For the purpose of implementing the credit allowed by this section for the 2015 taxable year, the Franchise Tax Board shall be exempt from the following:
(A)Special Project Report requirements under State Administrative Manual Sections 4819.36, 4945, and 4945.2.
(B)Special Project Report requirements under Statewide Information Management Manual Section 30.
(C)Section 11.00 of the 2015 Budget Act.
(D)Sections 12101, 12101.5, 12102, and 12102.1 of the Public Contract Code.
(2)The Franchise Tax Board shall formally incorporate the scope, costs, and schedule changes associated with the implementation of the credit allowed by this section in its next anticipated Special Project Report for its Enterprise Data to Revenue Project.
(j)(1)In accordance with Section 41, the purpose of the California Earned Income Tax Credit is to reduce poverty among Californias poorest working families and individuals. To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall annually prepare a written report on the following:
(A)The number of tax returns claiming the credit.
(B)The number of individuals represented on tax returns claiming the credit.
(C)The average credit amount on tax returns claiming the credit.
(D)The distribution of credits by number of dependents and income ranges. The income ranges shall encompass the phase-in and phaseout ranges of the credit.
(E)Using data from tax returns claiming the credit, including an estimate of the federal tax credit determined under Section 32 of the Internal Revenue Code, an estimate of the number of families who are lifted out of deep poverty by the credit and an estimate of the number of families who are lifted out of deep poverty by the combination of the credit and the federal tax credit. For the purposes of this subdivision, a family is in deep poverty if the income of the family is less than 50 percent of the federal poverty threshold.
(2)The Franchise Tax Board shall provide the written report to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, the Assembly Committee on Revenue and Taxation, and the Senate and Assembly Committees on Human Services.
(k)The tax credit allowed by this section shall be known as the California Earned Income Tax Credit.
(l)The amendments made to this section by Chapter 722 of the Statutes of 2016 shall apply to taxable years beginning on or after January 1, 2016.
(m)(1)For each taxable year beginning on or after January 1, 2017, and before January 1, 2018, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred dollars ($100) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty dollars ($250) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:
In the case of an eligible individual with: | The credit percentage is: | The phaseout percentage is: |
No qualifying children | 2.20% | 1.22% |
1 qualifying child | 3.10% | 2.29% |
2 qualifying children | 2.13% | 3.45% |
3 or more qualifying children | 2.12% | 3.49% |
(2)For each taxable year beginning on or after January 1, 2017, and before January 1, 2018, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred dollars ($100) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty dollars ($250) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows:
In the case of an eligible individual with: | The earned income amount is: | The phaseout amount is: |
No qualifying children | $5,354 | $5,354 |
1 qualifying child | $9,484 | $9,484 |
2 qualifying children | $13,794 | $13,794 |
3 or more qualifying children | $13,875 | $13,875 |
(n)(1)For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred three dollars ($103) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty-eight dollars ($258) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:
In the case of an eligible individual with: | The credit percentage is: | The phaseout percentage is: |
No qualifying children | 2.20% | 1.08% |
1 qualifying child | 3.10% | 2.00% |
2 qualifying children | 2.13% | 2.82% |
3 or more qualifying children | 2.12% | 2.85% |
(2)For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred three dollars ($103) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty-eight dollars ($258) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows:
In the case of an eligible individual with: | The earned income amount is: | The phaseout amount is: |
No qualifying children | $5,520 | $5,520 |
1 qualifying child | $9,778 | $9,778 |
2 qualifying children | $14,222 | $14,222 |
3 or more qualifying children | $14,305 | $14,305 |
(o)(1)For each taxable year beginning on or after January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to two hundred dollars ($200) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to five hundred five dollars ($505) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:
In the case of an eligible individual with: | The credit percentage is: | The phaseout percentage is: |
| No qualifying children | 5.43% | 0.92% |
1 qualifying child | 6.33% | 2.88% |
2 qualifying children | 4.20% | 3.75% |
3 or more qualifying children | 4.15% | 3.78% |
(2)For each taxable year beginning on or after January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to two hundred dollars ($200) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to five hundred five dollars ($505) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows:
In the case of an eligible individual with: | The earned income amount is: | The phaseout amount is: |
| No qualifying children | $4,334 | $4,334 |
1 qualifying child | $9,381 | $9,381 |
2 qualifying children | $14,137 | $14,137 |
3 or more qualifying children | $14,302 | $14,302 |
(3)For taxable years beginning on or after January 1, 2020, and until and including the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, both of the following shall occur:
(A)The amounts in paragraphs (1) and (2) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(B)The phaseout percentage for each of the four categories of eligible individuals shall be recalculated by the Franchise Tax Board in such a manner that, for a taxpayer with an earned income of thirty thousand dollars ($30,000), the calculated amount of credit is equal to zero.
(4)(A)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the amounts in paragraphs (1) and (2) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(B)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the phaseout percentages for the prior taxable year, as recalculated under subparagraph (B) of paragraph (3), shall apply.
(p)For each taxable year beginning on or after January 1, 2020, Section 32(m) of the Internal Revenue Code, relating to identification numbers, is modified as follows:
(1)By deleting (other than a social security number issued pursuant to clause (II) (or that portion of clause (III) that relates to clause (II)) of section 205(c)(2)(B)(i) of the Social Security Act).
(2)By substituting federal individual taxpayer identification number or a social security number for social security number.
(q)An eligible individual, eligible individuals spouse, or qualifying child using a federal individual taxpayer identification number as authorized under subdivision (p) shall:
(1)Upon request of the Franchise Tax Board, provide:
(A)Identifying documents acceptable for purposes of obtaining a California drivers license or identification card as authorized by subdivisions (a), (b), and (c) of Section 12801.9 of the Vehicle Code and related regulations adopted for purposes of establishing documents acceptable to prove identity.
(B)Identifying documents used to report earned income for the taxable year.
(2)Upon receiving a valid social security number issued to that individual by the Social Security Administration, notify the Franchise Tax Board, in the time and manner prescribed by the Franchise Tax Board.
(r)The Legislature finds and declares that, to the extent they are otherwise qualified for a credit under this section, undocumented persons are eligible for the tax credit authorized by this section within the meaning of subsection (d) of Section 1621 of Title 8 of the United States Code.
SEC. 2.Section 17052.1 of the Revenue and Taxation Code is amended to read:17052.1.(a)(1)For each taxable year beginning on or after January 1, 2019, there shall be allowed against the net tax, as defined by Section 17039, a young child tax credit to a qualified taxpayer, in an amount as determined under paragraph (2).
(2)(A)(i)The amount of the young child tax credit shall be equal to one thousand one hundred seventy-six dollars ($1,176), multiplied by the earned income tax credit adjustment factor for the taxable year as specified for in Section 17052.
(ii)The amount of the young child tax credit specified under clause (i) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(B)The young child tax credit allowable in any taxable year to any qualified taxpayer shall be limited to the maximum amount specified in clause (i) of subparagraph (A) as recomputed under clause (ii) of subparagraph (A).
(C)(i)The young child tax credit shall be reduced by twenty dollars ($20) for each one hundred dollars ($100), or fraction thereof, by which the qualified taxpayers earned income, as defined in Section 17052, exceeds the threshold amount. For purposes of this section, the threshold amount shall be twenty-five thousand dollars ($25,000).
(ii)(I)For each taxable year beginning on or after January 1, 2022, and before January 1, 2023, the twenty dollars ($20) in clause (i) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041, except that the resulting products shall be rounded off to the nearest cent.
(II)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the amount calculated under subclause (I) shall substitute for the twenty dollars ($20) in clause (i).
(iii)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the threshold amount in this subparagraph shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(D)The young child tax credit authorized by this section shall only be operative for taxable years for which resources are authorized in the annual Budget Act for the Franchise Tax Board to oversee and audit returns associated with the credit allowed under Section 17052.
(3)The amount of the credit allowed pursuant to this section shall be reduced reduced, but not below zero dollars ($0), by any amount received by the qualified taxpayer pursuant to Section 17052.3 that relates to an estimated allowance of a credit under this section.
(b)(1)Qualified taxpayer means an eligible individual who has at least one qualifying child and who satisfies either of the following:
(A)Has been allowed a tax credit under Section 17052.
(B)Meets all of the following requirements:
(i)Would otherwise have been allowed a tax credit under Section 17052, but has earned income, as defined in Section 32(c)(2) of the Internal Revenue Code, as modified by Section 17052, of zero dollars ($0) or less.
(ii)Does not have net losses in excess of thirty thousand dollars ($30,000) in the taxable year.
(iii)Does not have wages, salaries, tips, and other employee compensation in excess of thirty thousand dollars ($30,000) in the taxable year.
(2)For each taxable year beginning on or after January 1, 2022, the amounts specified under clauses (ii) and (iii) of subparagraph (B) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(c)Qualifying child shall have the same meaning as under Section 17052, except that the child shall be younger than six years of age as of the last day of the taxable year.
(d)(1)The Franchise Tax Board may prescribe rules, guidelines, procedures, or other guidance to carry out the purposes of this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.
(2)(A)The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section, including any regulations to prevent improper claims from being filed or improper payments from being made with respect to net earnings from self-employment.
(B)The adoption of any regulations pursuant to subparagraph (A) may be adopted as emergency regulations in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) and shall be deemed an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare. Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, these emergency regulations shall not be subject to the review and approval of the Office of Administrative Law. The regulations shall become effective immediately upon filing with the Secretary of State, and shall remain in effect until revised or repealed by the Franchise Tax Board.
(e)If the amount allowable as a credit under this section exceeds the tax liability computed under this part for the taxable year, the excess shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer.
(f)Notwithstanding any other law, amounts refunded pursuant to this section shall be treated in the same manner as the federal earned income refund for the purpose of determining eligibility to receive benefits under Division 9 (commencing with Section 10000) of the Welfare and Institutions Code or amounts of those benefits.
(g)(1)In accordance with Section 41, the purpose of the Young Child Tax Credit is to reduce poverty among Californias poorest working families and young children. To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall annually prepare a written report on the following:
(A)The number of tax returns claiming the credit.
(B)The number of qualifying children represented on tax returns claiming the credit.
(C)The average credit amount on tax returns claiming the credit.
(2)The Franchise Tax Board shall provide the written report to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, the Assembly Committee on Revenue and Taxation, and the Senate and Assembly Committees on Human Services.
(h)The Legislature finds and declares that, to the extent they are otherwise qualified for a credit under this section, undocumented persons are eligible for the tax credit authorized by this section within the meaning of subsection (d) of Section 1621 of Title 8 of the United States Code.
(i)The amendments made to this section by the act adding this subdivision shall apply for taxable years beginning on or after January 1, 2022, except as provided in subparagraph (C) of paragraph (2) of subdivision (a).
SEC. 3.Section 17052.2 of the Revenue and Taxation Code is amended to read:17052.2.(a)(1)For each taxable year beginning on or after January 1, 2022, there shall be allowed against the net tax, as defined by Section 17039, a foster youth tax credit to a qualified taxpayer, in an amount as determined under paragraph (2).
(2)(A)The amount of the foster youth tax credit shall be equal to one thousand one hundred seventy-six dollars ($1,176), multiplied by the earned income tax credit adjustment factor for the taxable year, as specified in Section 17052.
(B)For taxable years beginning on or after January 1, 2022, the amount in subparagraph (A) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(C)(i)The foster youth tax credit shall be reduced by twenty dollars ($20) for each one hundred dollars ($100), or fraction thereof, by which the qualified taxpayers earned income, as defined in Section 17052, exceeds the threshold amount.
(ii)(I)For taxable years beginning on or after January 1, 2022, and before January 1, 2023, the twenty dollars ($20) in clause (i) shall be recomputed in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041, except that for purposes of this clause, subparagraph (B) of paragraph (2) of subdivision (h) of Section 17041 shall be modified by substituting nearest cent for nearest one dollar ($1).
(II)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the amount calculated under subclause (I) shall substitute for the twenty dollars ($20) in clause (i).
(iii)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the threshold amount shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(3)The amount of the credit allowed pursuant to this section shall be reduced reduced, but not below zero dollars ($0), by any amount received by the qualified taxpayer pursuant to Section 17052.3 that relates to an estimated allowance of a credit under this section.
(b)The foster youth tax credit authorized by this section shall only be operative for taxable years for which resources are authorized in the annual Budget Act for the Franchise Tax Board to oversee and audit returns associated with the earned income tax credit allowed under Section 17052.
(c)For purposes of this section, the following definitions shall apply:
(1)Qualified taxpayer, means an individual who satisfies all of the following:
(A)Has been allowed a tax credit under Section 17052 for the taxable year.
(B)Is 18 to 25 years of age, inclusive, as of the last day of the taxable year.
(C)Was in foster care while 13 years of age or older in an AFDC-FC placement, as described in Section 11402 of the Welfare and Institutions Code, including a tribally approved home, as defined in subdivision (r) of Section 224.1 of the Welfare and Institutions Code, or Approved Relative Caregiver Funding Program eligible placement, as described in Article 6 (commencing with Section 11450) of Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions Code, by a Title IV-E agency, pursuant to a voluntary placement agreement or a juvenile court order.
(2)Threshold amount shall be twenty-five thousand dollars ($25,000).
(3)Title IV-E agency means either of the following:
(A)A county child welfare agency or probation department that administers foster care placements under Title IV-E of the federal Social Security Act (Part E (commencing with Section 670) of Subchapter IV of Chapter 7 of Title 42 of the United States Code).
(B)An Indian tribe, tribal organization, or tribal consortium located in California or with lands that extend into the state that has an agreement with the State Department of Social Services pursuant to Section 10553.1 of the Welfare and Institutions Code to administer foster care placement under Title IV-E of the federal Social Security Act (Part E (commencing with Section 670) of Subchapter IV of Chapter 7 of Title 42 of the United States Code).
(d)(1)As provided for in Section 10850.8 of the Welfare and Institutions Code, and subject to federal approvals or waivers, the State Department of Social Services shall provide to the Franchise Tax Board the data regarding a qualified taxpayer placed by a Title IV-E agency that may be necessary to verify that an individual qualifies for the foster youth tax credit. The data provided shall remain confidential and shall be used only for purposes directly connected with the foster youth tax credit.
(2)In the event federal approval or waivers pursuant to paragraph (1) are not provided, the Franchise Tax Board and the State Department of Social Services shall explore alternative methods to verify foster care status for individuals described in paragraph (1) of subdivision (c) in a manner consistent with state and federal law.
(3)The State Department of Social Services shall seek all appropriate federal waivers or approvals for the implementation of this subdivision as necessary. This subdivision shall be implemented only if necessary federal waivers or approvals are granted.
(e)(1)The Franchise Tax Board may prescribe rules, guidelines, procedures, or other guidance to carry out the purposes of this section.
(2)The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section, including any regulations to prevent improper claims from being filed or improper payments from being made with respect to net earnings from self-employment.
(3)Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any regulation, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.
(f)If the amount allowable as a credit under this section exceeds the tax liability computed under this part for the taxable year, the excess shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer.
(g)Notwithstanding any other law, amounts refunded pursuant to this section shall be treated in the same manner as the federal earned income refund for the purpose of determining eligibility to receive benefits under Division 9 (commencing with Section 10000) of the Welfare and Institutions Code or amounts of those benefits.
(h)Notwithstanding any other law, the payment authorized pursuant to this section shall not be taken into account as income, and shall not be taken into account as resources for a period of 12 months from receipt, for purposes of determining the eligibility of such the individual, or any other individual, for benefits or assistance or the amount or extent of benefits or assistance under any state or local program not covered in subdivision (g). With respect to a state or local program, this subdivision shall only be implemented to the extent that it does not conflict with federal law relating to that program, and that any required federal approval or waiver is first obtained for that program.
(i)The Legislature finds and declares that, to the extent they are otherwise qualified for a credit under this section, undocumented persons are eligible for the tax credit authorized by this section within the meaning of subsection (d) of Section 1621 of Title 8 of the United States Code.
(j)(1)In accordance with Section 41, the purpose of the Foster Care Tax Credit is to reduce poverty among Californias young adults who have been in the foster care program. To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall annually prepare a written report on the following:
(A)The number of tax returns claiming the credit.
(B)The average credit amount on tax returns claiming the credit.
(2)The Franchise Tax Board shall provide the written report, in compliance with Section 9795 of the Government Code, to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, the Assembly Committee on Revenue and Taxation, and the Senate and Assembly Committees on Human Services.
(3)The disclosure provisions of this subdivision shall be treated as an exception to Section 19542 under Article 2 (commencing with 19542) of Chapter 7 of Part 10.2.
SEC. 4.Section 17052.3 is added to the Revenue and Taxation Code, to read:17052.3.(a)For purposes of this section, the following definitions apply:
(1)Annual advance amount means, with respect to a qualified taxpayer for any calendar year, the amount, if any, that the Franchise Tax Board estimates is equal to 80 percent of the aggregate amount allowed as a credit under Sections 17052, 17052.1, and 17052.2 for the qualified taxpayers taxable year that begins in that calendar year.
(2)(A)Qualified taxpayer means an eligible individual, as that term is defined in Section 17052, or a qualified taxpayer as that term is defined in either Section 17052.1 or 17052.2.
(B)Notwithstanding subparagraph (A), qualified taxpayer does not include a taxpayer if the combined total amount allowed as a credit to the taxpayer under Sections 17052, 17052.1, and 17052.2 is less than one thousand dollars ($1,000) for the applicable taxable year.
(b)(1)The Franchise Tax Board shall establish a program for making periodic payments to qualified taxpayers from the Tax Relief and Refund Account.
(2)The combined total of all periodic payments made to a qualified taxpayer during any calendar year shall equal the annual advance amount determined with respect to that taxpayer.
(c)The Franchise Tax Board may modify the annual advance amount with respect to a qualified taxpayer for a calendar year to take into account information made available to the Franchise Tax Board that may lead to a change in the annual advance amount, including, but not limited to, a tax return filed by the qualified taxpayer. In the case of any modification of the annual advance amount pursuant to this subdivision, the Franchise Tax Board may adjust the amount of any periodic payment made after the date of the modification to properly adjust the amount by which any prior periodic payments were greater than or less than the amount the payment would have been based on the modified annual advance amount.
(d)The Franchise Tax Board shall distribute periodic payments of the annual advance amount by direct deposit if possible or by debit card or paper check if direct deposit is not possible. Upon receiving a tax return from a qualified taxpayer, the Franchise Tax Board shall determine the aggregate amount allowed to the taxpayer as a credit under Sections 17052, 17052.1, and 17052.2 for the taxable year.
(1)In the event the advance monthly payments made to a qualified taxpayer exceed the aggregate amount allowed as determined by this subdivision by more than three hundred dollars ($300), the qualified taxpayer shall be liable to repay the portion of the difference that is in excess of three hundred dollars ($300). The qualified taxpayer shall repay that amount within three taxable years after receiving notice from the Franchise Tax Board of the excess payment.
(2)In the event that the advance monthly payments already paid to a qualified taxpayer under this section exceed the qualified taxpayers calculated aggregate amount by less than three hundred dollars ($300), the taxpayer shall not be liable to repay that amount.
(e)The Franchise Tax Board, through its internet website, shall allow a qualified taxpayer to report changes to their income, household size, filing status, or any other personal information that the Franchise Tax Board deems relevant to the calculation of the annual advance amount.
(1)The Franchise Tax Board shall send at least two annual reminders to people likely to be qualified taxpayers to record any changes to relevant personal information.
(2)Tax filers shall be allowed to decline participation in periodic payments at any time through the Franchise Tax Boards internet website.
(f)(1)The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section, including any regulations to prevent improper claims from being filed or improper payments from being made.
(2)The Franchise Tax Board may prescribe rules, guidelines, procedures, or other guidance to carry out the purposes of this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.
(g)Notwithstanding any other law, amounts distributed pursuant to this section shall be treated in the same manner as the federal earned income refund for the purpose of determining eligibility to receive benefits under Division 9 (commencing with Section 10000) of the Welfare and Institutions Code or amounts of those benefits.
(h)The Controller shall transfer, as needed, to the Tax Relief and Refund Account, from the Personal Income Tax Fund, an amount necessary to make the estimated payments provided for under subdivision (b).
(i)The Franchise Tax Board, in coordination with the State Department of Public Health, the State Department of Social Services, and any other relevant state agency, shall request a waiver from any federal agency that administers benefits, for which eligibility, or calculation of which, is based on a recipients monthly income, to exclude from income any amount paid in monthly advance payments authorized under this section for purposes of determining eligibility for, or calculation of benefits under, those programs, including, but not limited to, the following:
(1)Federal childcare assistance.
(2)Federal housing assistance.
(3)Low Income Home Energy Assistance Program (LIHEAP).
(4)Medicaid.
(5)Supplemental Nutrition Assistance Program (SNAP).
(6)Supplemental Security Income.
(7)Temporary Assistance for Needy Families (TANF).
(8)The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC).
(j)This section shall be operative for taxable years beginning on or after January 1 of the year that includes the date on which either of the following occurs:
(1)The federal government enacts legislation declaring that periodic payments of specified state tax credits, including the credits allowed under Sections 17052, 17052.1, and 17052.2, shall be excluded from the definition of income for the purpose of determining eligibility for, or calculation of benefits under, any federal public assistance program, eligibility for which is dependent upon a recipients monthly income, including, but not limited to, federal childcare assistance, federal housing assistance, LIHEAP, Medicaid, SNAP, Supplemental Security Income, TANF, or WIC.
(2)The publication of regulations, guidelines, memoranda, or letters to a state agency official by any relevant federal agency declaring that periodic payments of specified state tax credits, including the credits allowed under Sections 17052, 17052.1, and 17052.2, shall be excluded from the definition of income for the purpose of determining eligibility for, or calculation of benefits under, any federal public assistance program, including, but not limited to, federal childcare assistance, federal housing assistance, LIHEAP, Medicaid, SNAP, Supplemental Security Income, TANF, or WIC.
(a)(1)For each taxable year beginning on or after January 1, 2015, there shall be allowed against the net tax, as defined by Section 17039, an earned income tax credit in an amount equal amount to an amount determined in accordance with Section 32 of the Internal Revenue Code, relating to earned income, as applicable for federal income tax purposes for the taxable year, except as otherwise provided in this section.
(2)(A)The amount of the credit determined under Section 32 of the Internal Revenue Code, relating to earned income, as modified by this section, shall be multiplied by the earned income tax credit adjustment factor for the taxable year.
(B)Unless otherwise specified in the annual Budget Act, the earned income tax credit adjustment factor for a taxable year beginning on or after January 1, 2015, shall be 0 percent.
(C)The earned income tax credit authorized by this section shall only be operative for taxable years for which resources are authorized in the annual Budget Act for the Franchise Tax Board to oversee and audit returns associated with the credit.
(3)The amount of the credit allowed pursuant to this section shall be reduced by any amount received by the eligible individual pursuant to Section 17052.3 that relates to an estimated allowance of a credit under this section.
(b)(1)In lieu of the table prescribed in Section 32(b)(1) of the Internal Revenue Code, relating to percentages, the credit percentage and the phaseout percentage shall be determined as follows:
In the case of an eligible individual with: | The credit percentage is: | The phaseout percentage is: |
No qualifying children | 7.65% | 7.65% |
1 qualifying child | 34% | 34% |
2 qualifying children | 40% | 40% |
3 or more qualifying children | 45% | 45% |
(2)(A)In lieu of the table prescribed in Section 32(b)(2)(A) of the Internal Revenue Code, the earned income amount and the phaseout amount shall be determined as follows:
In the case of an eligible individual with: | The earned income amount is: | The phaseout amount is: |
No qualifying children | $3,290 | $3,290 |
1 qualifying child | $4,940 | $4,940 |
2 or more qualifying children | $6,935 | $6,935 |
(B)Section 32(b)(2)(B) of the Internal Revenue Code, relating to joint returns, shall not apply.
(c)(1)Section 32(c)(1)(A)(ii)(I) of the Internal Revenue Code is modified by substituting this state for the United States.
(2)For each taxable year beginning on or after January 1, 2018, Section 32(c)(1)(A)(ii)(II) of the Internal Revenue Code is modified by deleting 25 but not attained age 65 and inserting in lieu thereof the following: 18.
(3)Section 32(c)(2)(A) of the Internal Revenue Code is modified as follows:
(A)Section 32(c)(2)(A)(i) of the Internal Revenue Code is modified by deleting plus and inserting in lieu thereof the following: and only if such amounts are subject to withholding pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.
(B)Section 32(c)(2)(A)(ii) of the Internal Revenue Code shall not apply.
(4)For taxable years beginning on or after January 1, 2017, paragraph (3) shall not apply and in lieu thereof Section 32(c)(2)(A) of the Internal Revenue Code is modified as follows:
(A)Section 32(c)(2)(A)(i) of the Internal Revenue Code is modified by deleting plus and inserting in lieu thereof the following: and only if such amounts are subject to withholding pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code, plus.
(B)Section 32(c)(2)(A)(ii) of the Internal Revenue Code shall apply.
(5)Section 32(c)(3)(C) of the Internal Revenue Code, relating to place of abode, is modified by substituting this state for the United States.
(d)Section 32(i)(1) of the Internal Revenue Code is modified by substituting $3,400 for $2,200.
(e)(1)In lieu of Section 32(j) of the Internal Revenue Code, relating to inflation adjustments, for taxable years beginning on or after January 1, 2016, the amounts specified in paragraph (2) of subdivision (b) and in subdivision (d) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(2)For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, when recomputing the amounts referenced in paragraph (1), the percentage change in the California Consumer Price Index shall be deemed to be the greater of 3.1 percent or the percentage change in the California Consumer Price Index as calculated under subdivision (h) of Section 17041 for that taxable year.
(3)For each taxable year beginning on or after January 1, 2019, and before January 1, 2020, when recomputing the amounts referenced in paragraph (1), the percentage change in the California Consumer Price Index shall be deemed to be the greater of 3.5 percent or the percentage change in the California Consumer Price Index as calculated under subdivision (h) of Section 17041 for that taxable year.
(f)If the amount allowable as a credit under this section exceeds the tax liability computed under this part for the taxable year, the excess shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the taxpayer.
(g)(1)The Franchise Tax Board may prescribe rules, guidelines, procedures, or other guidance to carry out the purposes of this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.
(2)(A)The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section, including any regulations to prevent improper claims from being filed or improper payments from being made with respect to net earnings from self-employment.
(B)The adoption of any regulations pursuant to subparagraph (A) may be adopted as emergency regulations in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) and shall be deemed an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare. Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, these emergency regulations shall not be subject to the review and approval of the Office of Administrative Law. The regulations shall become effective immediately upon filing with the Secretary of State, and shall remain in effect until revised or repealed by the Franchise Tax Board.
(h)Notwithstanding any other law, amounts refunded pursuant to this section shall be treated in the same manner as the federal earned income refund for the purpose of determining eligibility to receive benefits under Division 9 (commencing with Section 10000) of the Welfare and Institutions Code or amounts of those benefits.
(i)(1)For the purpose of implementing the credit allowed by this section for the 2015 taxable year, the Franchise Tax Board shall be exempt from the following:
(A)Special Project Report requirements under State Administrative Manual Sections 4819.36, 4945, and 4945.2.
(B)Special Project Report requirements under Statewide Information Management Manual Section 30.
(C)Section 11.00 of the 2015 Budget Act.
(D)Sections 12101, 12101.5, 12102, and 12102.1 of the Public Contract Code.
(2)The Franchise Tax Board shall formally incorporate the scope, costs, and schedule changes associated with the implementation of the credit allowed by this section in its next anticipated Special Project Report for its Enterprise Data to Revenue Project.
(j)(1)In accordance with Section 41, the purpose of the California Earned Income Tax Credit is to reduce poverty among Californias poorest working families and individuals. To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall annually prepare a written report on the following:
(A)The number of tax returns claiming the credit.
(B)The number of individuals represented on tax returns claiming the credit.
(C)The average credit amount on tax returns claiming the credit.
(D)The distribution of credits by number of dependents and income ranges. The income ranges shall encompass the phase-in and phaseout ranges of the credit.
(E)Using data from tax returns claiming the credit, including an estimate of the federal tax credit determined under Section 32 of the Internal Revenue Code, an estimate of the number of families who are lifted out of deep poverty by the credit and an estimate of the number of families who are lifted out of deep poverty by the combination of the credit and the federal tax credit. For the purposes of this subdivision, a family is in deep poverty if the income of the family is less than 50 percent of the federal poverty threshold.
(2)The Franchise Tax Board shall provide the written report to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, the Assembly Committee on Revenue and Taxation, and the Senate and Assembly Committees on Human Services.
(k)The tax credit allowed by this section shall be known as the California Earned Income Tax Credit.
(l)The amendments made to this section by Chapter 722 of the Statutes of 2016 shall apply to taxable years beginning on or after January 1, 2016.
(m)(1)For each taxable year beginning on or after January 1, 2017, and before January 1, 2018, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred dollars ($100) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty dollars ($250) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:
In the case of an eligible individual with: | The credit percentage is: | The phaseout percentage is: |
No qualifying children | 2.20% | 1.22% |
1 qualifying child | 3.10% | 2.29% |
2 qualifying children | 2.13% | 3.45% |
3 or more qualifying children | 2.12% | 3.49% |
(2)For each taxable year beginning on or after January 1, 2017, and before January 1, 2018, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred dollars ($100) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty dollars ($250) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows:
In the case of an eligible individual with: | The earned income amount is: | The phaseout amount is: |
No qualifying children | $5,354 | $5,354 |
1 qualifying child | $9,484 | $9,484 |
2 qualifying children | $13,794 | $13,794 |
3 or more qualifying children | $13,875 | $13,875 |
(n)(1)For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred three dollars ($103) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty-eight dollars ($258) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:
In the case of an eligible individual with: | The credit percentage is: | The phaseout percentage is: |
No qualifying children | 2.20% | 1.08% |
1 qualifying child | 3.10% | 2.00% |
2 qualifying children | 2.13% | 2.82% |
3 or more qualifying children | 2.12% | 2.85% |
(2)For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred three dollars ($103) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty-eight dollars ($258) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows:
In the case of an eligible individual with: | The earned income amount is: | The phaseout amount is: |
No qualifying children | $5,520 | $5,520 |
1 qualifying child | $9,778 | $9,778 |
2 qualifying children | $14,222 | $14,222 |
3 or more qualifying children | $14,305 | $14,305 |
(o)(1)For each taxable year beginning on or after January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to two hundred dollars ($200) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to five hundred five dollars ($505) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:
In the case of an eligible individual with: | The credit percentage is: | The phaseout percentage is: |
| No qualifying children | 5.43% | 0.92% |
1 qualifying child | 6.33% | 2.88% |
2 qualifying children | 4.20% | 3.75% |
3 or more qualifying children | 4.15% | 3.78% |
(2)For each taxable year beginning on or after January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to two hundred dollars ($200) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to five hundred five dollars ($505) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows:
In the case of an eligible individual with: | The earned income amount is: | The phaseout amount is: |
| No qualifying children | $4,334 | $4,334 |
1 qualifying child | $9,381 | $9,381 |
2 qualifying children | $14,137 | $14,137 |
3 or more qualifying children | $14,302 | $14,302 |
(3)For taxable years beginning on or after January 1, 2020, and until and including the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, both of the following shall occur:
(A)The amounts in paragraphs (1) and (2) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(B)The phaseout percentage for each of the four categories of eligible individuals shall be recalculated by the Franchise Tax Board in such a manner that, for a taxpayer with an earned income of thirty thousand dollars ($30,000), the calculated amount of credit is equal to zero.
(4)(A)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the amounts in paragraphs (1) and (2) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(B)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the phaseout percentages for the prior taxable year, as recalculated under subparagraph (B) of paragraph (3), shall apply.
(p)For each taxable year beginning on or after January 1, 2020, Section 32(m) of the Internal Revenue Code, relating to identification numbers, is modified as follows:
(1)By deleting (other than a social security number issued pursuant to clause (II) (or that portion of clause (III) that relates to clause (II)) of section 205(c)(2)(B)(i) of the Social Security Act).
(2)By substituting federal individual taxpayer identification number or a social security number for social security number.
(q)An eligible individual, eligible individuals spouse, or qualifying child using a federal individual taxpayer identification number as authorized under subdivision (p) shall:
(1)Upon request of the Franchise Tax Board, provide:
(A)Identifying documents acceptable for purposes of obtaining a California drivers license or identification card as authorized by subdivisions (a), (b), and (c) of Section 12801.9 of the Vehicle Code and related regulations adopted for purposes of establishing documents acceptable to prove identity.
(B)Identifying documents used to report earned income for the taxable year.
(2)Upon receiving a valid social security number issued to that individual by the Social Security Administration, notify the Franchise Tax Board, in the time and manner prescribed by the Franchise Tax Board.
(r)The Legislature finds and declares that, to the extent they are otherwise qualified for a credit under this section, undocumented persons are eligible for the tax credit authorized by this section within the meaning of subsection (d) of Section 1621 of Title 8 of the United States Code.
SEC. 2.Section 17052.1 of the Revenue and Taxation Code is amended to read:17052.1.(a)(1)For each taxable year beginning on or after January 1, 2019, there shall be allowed against the net tax, as defined by Section 17039, a young child tax credit to a qualified taxpayer, in an amount as determined under paragraph (2).
(2)(A)(i)The amount of the young child tax credit shall be equal to one thousand one hundred seventy-six dollars ($1,176), multiplied by the earned income tax credit adjustment factor for the taxable year as specified for in Section 17052.
(ii)The amount of the young child tax credit specified under clause (i) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(B)The young child tax credit allowable in any taxable year to any qualified taxpayer shall be limited to the maximum amount specified in clause (i) of subparagraph (A) as recomputed under clause (ii) of subparagraph (A).
(C)(i)The young child tax credit shall be reduced by twenty dollars ($20) for each one hundred dollars ($100), or fraction thereof, by which the qualified taxpayers earned income, as defined in Section 17052, exceeds the threshold amount. For purposes of this section, the threshold amount shall be twenty-five thousand dollars ($25,000).
(ii)(I)For each taxable year beginning on or after January 1, 2022, and before January 1, 2023, the twenty dollars ($20) in clause (i) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041, except that the resulting products shall be rounded off to the nearest cent.
(II)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the amount calculated under subclause (I) shall substitute for the twenty dollars ($20) in clause (i).
(iii)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the threshold amount in this subparagraph shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(D)The young child tax credit authorized by this section shall only be operative for taxable years for which resources are authorized in the annual Budget Act for the Franchise Tax Board to oversee and audit returns associated with the credit allowed under Section 17052.
(3)The amount of the credit allowed pursuant to this section shall be reduced by any amount received by the qualified taxpayer pursuant to Section 17052.3 that relates to an estimated allowance of a credit under this section.
(b)(1)Qualified taxpayer means an eligible individual who has at least one qualifying child and who satisfies either of the following:
(A)Has been allowed a tax credit under Section 17052.
(B)Meets all of the following requirements:
(i)Would otherwise have been allowed a tax credit under Section 17052, but has earned income, as defined in Section 32(c)(2) of the Internal Revenue Code, as modified by Section 17052, of zero dollars ($0) or less.
(ii)Does not have net losses in excess of thirty thousand dollars ($30,000) in the taxable year.
(iii)Does not have wages, salaries, tips, and other employee compensation in excess of thirty thousand dollars ($30,000) in the taxable year.
(2)For each taxable year beginning on or after January 1, 2022, the amounts specified under clauses (ii) and (iii) of subparagraph(B) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(c)Qualifying child shall have the same meaning as under Section 17052, except that the child shall be younger than six years of age as of the last day of the taxable year.
(d)(1)The Franchise Tax Board may prescribe rules, guidelines, procedures, or other guidance to carry out the purposes of this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.
(2)(A)The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section, including any regulations to prevent improper claims from being filed or improper payments from being made with respect to net earnings from self-employment.
(B)The adoption of any regulations pursuant to subparagraph (A) may be adopted as emergency regulations in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) and shall be deemed an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare. Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, these emergency regulations shall not be subject to the review and approval of the Office of Administrative Law. The regulations shall become effective immediately upon filing with the Secretary of State, and shall remain in effect until revised or repealed by the Franchise Tax Board.
(e)If the amount allowable as a credit under this section exceeds the tax liability computed under this part for the taxable year, the excess shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer.
(f)Notwithstanding any other law, amounts refunded pursuant to this section shall be treated in the same manner as the federal earned income refund for the purpose of determining eligibility to receive benefits under Division 9 (commencing with Section 10000) of the Welfare and Institutions Code or amounts of those benefits.
(g)(1)In accordance with Section 41, the purpose of the Young Child Tax Credit is to reduce poverty among Californias poorest working families and young children. To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall annually prepare a written report on the following:
(A)The number of tax returns claiming the credit.
(B)The number of qualifying children represented on tax returns claiming the credit.
(C)The average credit amount on tax returns claiming the credit.
(2)The Franchise Tax Board shall provide the written report to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, the Assembly Committee on Revenue and Taxation, and the Senate and Assembly Committees on Human Services.
(h)The Legislature finds and declares that, to the extent they are otherwise qualified for a credit under this section, undocumented persons are eligible for the tax credit authorized by this section within the meaning of subsection (d) of Section 1621 of Title 8 of the United States Code.
(i)The amendments made to this section by the act adding this subdivision shall apply for taxable years beginning on or after January 1, 2022, except as provided in subparagraph (C) of paragraph (2) of subdivision (a).
SEC. 3.Section 17052.2 of the Revenue and Taxation Code is amended to read:17052.2.(a)(1)For each taxable year beginning on or after January 1, 2022, there shall be allowed against the net tax, as defined by Section 17039, a foster youth tax credit to a qualified taxpayer, in an amount as determined under paragraph (2).
(2)(A)The amount of the foster youth tax credit shall be equal to one thousand one hundred seventy-six dollars ($1,176), multiplied by the earned income tax credit adjustment factor for the taxable year, as specified in Section 17052.
(B)For taxable years beginning on or after January 1, 2022, the amount in subparagraph (A) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(C)(i)The foster youth tax credit shall be reduced by twenty dollars ($20) for each one hundred dollars ($100), or fraction thereof, by which the qualified taxpayers earned income, as defined in Section 17052, exceeds the threshold amount.
(ii)(I)For taxable years beginning on or after January 1, 2022, and before January 1, 2023, the twenty dollars ($20) in clause (i) shall be recomputed in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041, except that for purposes of this clause, subparagraph (B) of paragraph (2) of subdivision (h) of Section 17041 shall be modified by substituting nearest cent for nearest one dollar ($1).
(II)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the amount calculated under subclause (I) shall substitute for the twenty dollars ($20) in clause (i).
(iii)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the threshold amount shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(3)The amount of the credit allowed pursuant to this section shall be reduced by any amount received by the qualified taxpayer pursuant to Section 17052.3 that relates to an estimated allowance of a credit under this section.
(b)The foster youth tax credit authorized by this section shall only be operative for taxable years for which resources are authorized in the annual Budget Act for the Franchise Tax Board to oversee and audit returns associated with the earned income tax credit allowed under Section 17052.
(c)For purposes of this section, the following definitions shall apply:
(1)Qualified taxpayer, means an individual who satisfies all of the following:
(A)Has been allowed a tax credit under Section 17052 for the taxable year.
(B)Is 18 to 25 years of age, inclusive, as of the last day of the taxable year.
(C)Was in foster care while 13 years of age or older in an AFDC-FC placement, as described in Section 11402 of the Welfare and Institutions Code, including a tribally approved home, as defined in subdivision (r) of Section 224.1 of the Welfare and Institutions Code, or Approved Relative Caregiver Funding Program eligible placement, as described in Article 6 (commencing with Section 11450) of Chapter 2 of Part 3 of Division 9 of the Welfare and Institutions Code, by a Title IV-E agency, pursuant to a voluntary placement agreement or a juvenile court order.
(2)Threshold amount shall be twenty-five thousand dollars ($25,000).
(3)Title IV-E agency means either of the following:
(A)A county child welfare agency or probation department that administers foster care placements under Title IV-E of the federal Social Security Act (Part E (commencing with Section 670) of Subchapter IV of Chapter 7 of Title 42 of the United States Code).
(B)An Indian tribe, tribal organization, or tribal consortium located in California or with lands that extend into the state that has an agreement with the State Department of Social Services pursuant to Section 10553.1 of the Welfare and Institutions Code to administer foster care placement under Title IV-E of the federal Social Security Act (Part E (commencing with Section 670) of Subchapter IV of Chapter 7 of Title 42 of the United States Code).
(d)(1)As provided for in Section 10850.8 of the Welfare and Institutions Code, and subject to federal approvals or waivers, the State Department of Social Services shall provide to the Franchise Tax Board the data regarding a qualified taxpayer placed by a Title IV-E agency that may be necessary to verify that an individual qualifies for the foster youth tax credit. The data provided shall remain confidential and shall be used only for purposes directly connected with the foster youth tax credit.
(2)In the event federal approval or waivers pursuant to paragraph (1) are not provided, the Franchise Tax Board and the State Department of Social Services shall explore alternative methods to verify foster care status for individuals described in paragraph (1) of subdivision (c) in a manner consistent with state and federal law.
(3)The State Department of Social Services shall seek all appropriate federal waivers or approvals for the implementation of this subdivision as necessary. This subdivision shall be implemented only if necessary federal waivers or approvals are granted.
(e)(1)The Franchise Tax Board may prescribe rules, guidelines, procedures, or other guidance to carry out the purposes of this section.
(2)The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section, including any regulations to prevent improper claims from being filed or improper payments from being made with respect to net earnings from self-employment.
(3)Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any regulation, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.
(f)If the amount allowable as a credit under this section exceeds the tax liability computed under this part for the taxable year, the excess shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer.
(g)Notwithstanding any other law, amounts refunded pursuant to this section shall be treated in the same manner as the federal earned income refund for the purpose of determining eligibility to receive benefits under Division 9 (commencing with Section 10000) of the Welfare and Institutions Code or amounts of those benefits.
(h)Notwithstanding any other law, the payment authorized pursuant to this section shall not be taken into account as income, and shall not be taken into account as resources for a period of 12 months from receipt, for purposes of determining the eligibility of such individual, or any other individual, for benefits or assistance or the amount or extent of benefits or assistance under any state or local program not covered in subdivision (g). With respect to a state or local program, this subdivision shall only be implemented to the extent that it does not conflict with federal law relating to that program, and that any required federal approval or waiver is first obtained for that program.
(i)The Legislature finds and declares that, to the extent they are otherwise qualified for a credit under this section, undocumented persons are eligible for the tax credit authorized by this section within the meaning of subsection (d) of Section 1621 of Title 8 of the United States Code.
(j)(1)In accordance with Section 41, the purpose of the Foster Care Tax Credit is to reduce poverty among Californias young adults who have been in the foster care program. To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall annually prepare a written report on the following:
(A)The number of tax returns claiming the credit.
(B)The average credit amount on tax returns claiming the credit.
(2)The Franchise Tax Board shall provide the written report, in compliance with Section 9795 of the Government Code, to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, the Assembly Committee on Revenue and Taxation, and the Senate and Assembly Committees on Human Services.
(3)The disclosure provisions of this subdivision shall be treated as an exception to Section 19542 under Article 2 (commencing with 19542) of Chapter 7 of Part 10.2.
SEC. 4.Section 17052.3 is added to the Revenue and Taxation Code, to read:17052.3.(a)For purposes of this section, the following definitions apply:
(1)Annual advance amount means, with respect to a qualified taxpayer for any calendar year, the amount, if any, that the Franchise Tax Board estimates is equal to 80 percent of the aggregate amount allowed as a credit under Sections 17052, 17052.1, and 17052.2 for the qualified taxpayers taxable year that begins in that calendar year.
(2)(A)Qualified taxpayer means an eligible individual, as that term is defined in Section 17052, or a qualified taxpayer as that term is defined in either Section 17052.1 or 17052.2.
(B)Notwithstanding subparagraph (A), qualified taxpayer does not include a taxpayer if the combined total amount allowed as a credit to the taxpayer under Sections 17052, 17052.1, and 17052.2 is less than one thousand dollars ($1,000) for the applicable taxable year.
(b)(1)The Franchise Tax Board shall establish a program for making periodic payments to qualified taxpayers from the Tax Relief and Refund Account.
(2)The combined total of all periodic payments made to a qualified taxpayer during any calendar year shall equal the annual advance amount determined with respect to that taxpayer.
(c)The Franchise Tax Board may modify the annual advance amount with respect to a qualified taxpayer for a calendar year to take into account information made available to the Franchise Tax Board that may lead to a change in the annual advance amount, including, but not limited to, a tax return filed by the qualified taxpayer. In the case of any modification of the annual advance amount pursuant to this subdivision, the Franchise Tax Board may adjust the amount of any periodic payment made after the date of the modification to properly adjust the amount by which any prior periodic payments were greater than or less than the amount the payment would have been based on the modified annual advance amount.
(d)The Franchise Tax Board shall distribute periodic payments of the annual advance amount by direct deposit if possible or by debit card or paper check if direct deposit is not possible.
(e)The Franchise Tax Board, through its internet website, shall allow a qualified taxpayer to report changes to their income, household size, filing status, or any other personal information that the Franchise Tax Board deems relevant to the calculation of the annual advance amount.
(1)The Franchise Tax Board shall send at least two annual reminders to people likely to be qualified taxpayers to record any changes to relevant personal information.
(2)Tax filers shall be allowed to decline participation in periodic payments at any time through the Franchise Tax Boards internet website.
(f)(1)The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section, including any regulations to prevent improper claims from being filed or improper payments from being made.
(2)The Franchise Tax Board may prescribe rules, guidelines, procedures, or other guidance to carry out the purposes of this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.
(g)Notwithstanding any other law, amounts distributed pursuant to this section shall be treated in the same manner as the federal earned income refund for the purpose of determining eligibility to receive benefits under Division 9 (commencing with Section 10000) of the Welfare and Institutions Code or amounts of those benefits.
(h)The Controller shall transfer, as needed, to the Tax Relief and Refund Account, from the Personal Income Tax Fund, an amount necessary to make the estimated payments provided for under subdivision (b).
(a)(1)For each taxable year beginning on or after January 1, 2015, there shall be allowed against the net tax, as defined by Section 17039, an earned income tax credit in an amount equal amount to an amount determined in accordance with Section 32 of the Internal Revenue Code, relating to earned income, as applicable for federal income tax purposes for the taxable year, except as otherwise provided in this section.
(2)(A)The amount of the credit determined under Section 32 of the Internal Revenue Code, relating to earned income, as modified by this section, shall be multiplied by the earned income tax credit adjustment factor for the taxable year.
(B)Unless otherwise specified in the annual Budget Act, the earned income tax credit adjustment factor for a taxable year beginning on or after January 1, 2015, shall be 0 percent.
(C)The earned income tax credit authorized by this section shall only be operative for taxable years for which resources are authorized in the annual Budget Act for the Franchise Tax Board to oversee and audit returns associated with the credit.
(b)(1)In lieu of the table prescribed in Section 32(b)(1) of the Internal Revenue Code, relating to percentages, the credit percentage and the phaseout percentage shall be determined as follows:
In the case of an eligible individual with: | The credit percentage is: | The phaseout percentage is: |
No qualifying children | 7.65% | 7.65% |
1 qualifying child | 34% | 34% |
2 qualifying children | 40% | 40% |
3 or more qualifying children | 45% | 45% |
(2)(A)In lieu of the table prescribed in Section 32(b)(2)(A) of the Internal Revenue Code, the earned income amount and the phaseout amount shall be determined as follows:
In the case of an eligible individual with: | The earned income amount is: | The phaseout amount is: |
No qualifying children | $3,290 | $3,290 |
1 qualifying child | $4,940 | $4,940 |
2 or more qualifying children | $6,935 | $6,935 |
(B)Section 32(b)(2)(B) of the Internal Revenue Code, relating to joint returns, shall not apply.
(c)(1)Section 32(c)(1)(A)(ii)(I) of the Internal Revenue Code is modified by substituting this state for the United States.
(2)For each taxable year beginning on or after January 1, 2018, Section 32(c)(1)(A)(ii)(II) of the Internal Revenue Code is modified by deleting 25 but not attained age 65 and inserting in lieu thereof the following: 18.
(3)Section 32(c)(2)(A) of the Internal Revenue Code is modified as follows:
(A)Section 32(c)(2)(A)(i) of the Internal Revenue Code is modified by deleting plus and inserting in lieu thereof the following: and only if such amounts are subject to withholding pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.
(B)Section 32(c)(2)(A)(ii) of the Internal Revenue Code shall not apply.
(4)For taxable years beginning on or after January 1, 2017, paragraph (3) shall not apply and in lieu thereof Section 32(c)(2)(A) of the Internal Revenue Code is modified as follows:
(A)Section 32(c)(2)(A)(i) of the Internal Revenue Code is modified by deleting plus and inserting in lieu thereof the following: and only if such amounts are subject to withholding pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code, plus.
(B)Section 32(c)(2)(A)(ii) of the Internal Revenue Code shall apply.
(5)Section 32(c)(3)(C) of the Internal Revenue Code, relating to place of abode, is modified by substituting this state for the United States.
(d)Section 32(i)(1) of the Internal Revenue Code is modified by substituting $3,400 for $2,200.
(e)(1)In lieu of Section 32(j) of the Internal Revenue Code, relating to inflation adjustments, for taxable years beginning on or after January 1, 2016, the amounts specified in paragraph (2) of subdivision (b) and in subdivision (d) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(2)For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, when recomputing the amounts referenced in paragraph (1), the percentage change in the California Consumer Price Index shall be deemed to be the greater of 3.1 percent or the percentage change in the California Consumer Price Index as calculated under subdivision (h) of Section 17041 for that taxable year.
(3)For each taxable year beginning on or after January 1, 2019, and before January 1, 2020, when recomputing the amounts referenced in paragraph (1), the percentage change in the California Consumer Price Index shall be deemed to be the greater of 3.5 percent or the percentage change in the California Consumer Price Index as calculated under subdivision (h) of Section 17041 for that taxable year.
(f)If the amount allowable as a credit under this section exceeds the tax liability computed under this part for the taxable year, the excess shall be credited against other amounts due, if any, and the balance, if any, shall be paid from the Tax Relief and Refund Account and refunded to the taxpayer.
(g)(1)The Franchise Tax Board may prescribe rules, guidelines, procedures, or other guidance to carry out the purposes of this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.
(2)(A)The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section, including any regulations to prevent improper claims from being filed or improper payments from being made with respect to net earnings from self-employment.
(B)The adoption of any regulations pursuant to subparagraph (A) may be adopted as emergency regulations in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) and shall be deemed an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare. Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, these emergency regulations shall not be subject to the review and approval of the Office of Administrative Law. The regulations shall become effective immediately upon filing with the Secretary of State, and shall remain in effect until revised or repealed by the Franchise Tax Board.
(h)Notwithstanding any other law, amounts refunded pursuant to this section shall be treated in the same manner as the federal earned income refund for the purpose of determining eligibility to receive benefits under Division 9 (commencing with Section 10000) of the Welfare and Institutions Code or amounts of those benefits.
(i)(1)For the purpose of implementing the credit allowed by this section for the 2015 taxable year, the Franchise Tax Board shall be exempt from the following:
(A)Special Project Report requirements under State Administrative Manual Sections 4819.36, 4945, and 4945.2.
(B)Special Project Report requirements under Statewide Information Management Manual Section 30.
(C)Section 11.00 of the 2015 Budget Act.
(D)Sections 12101, 12101.5, 12102, and 12102.1 of the Public Contract Code.
(2)The Franchise Tax Board shall formally incorporate the scope, costs, and schedule changes associated with the implementation of the credit allowed by this section in its next anticipated Special Project Report for its Enterprise Data to Revenue Project.
(j)(1)In accordance with Section 41 of the Revenue and Taxation Code, 41, the purpose of the California Earned Income Tax Credit is to reduce poverty among Californias poorest working families and individuals. To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall annually prepare a written report on the following:
(A)The number of tax returns claiming the credit.
(B)The number of individuals represented on tax returns claiming the credit.
(C)The average credit amount on tax returns claiming the credit.
(D)The distribution of credits by number of dependents and income ranges. The income ranges shall encompass the phase-in and phaseout ranges of the credit.
(E)Using data from tax returns claiming the credit, including an estimate of the federal tax credit determined under Section 32 of the Internal Revenue Code, an estimate of the number of families who are lifted out of deep poverty by the credit and an estimate of the number of families who are lifted out of deep poverty by the combination of the credit and the federal tax credit. For the purposes of this subdivision, a family is in deep poverty if the income of the family is less than 50 percent of the federal poverty threshold.
(2)The Franchise Tax Board shall provide the written report to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, the Assembly Committee on Revenue and Taxation, and the Senate and Assembly Committees on Human Services.
(k)The tax credit allowed by this section shall be known as the California Earned Income Tax Credit.
(l)The amendments made to this section by Chapter 722 of the Statutes of 2016 shall apply to taxable years beginning on or after January 1, 2016.
(m)(1)For each taxable year beginning on or after January 1, 2017, and before January 1, 2018, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred dollars ($100) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty dollars ($250) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:
In the case of an eligible individual with: | The credit percentage is: | The phaseout percentage is: |
No qualifying children | 2.20% | 1.22% |
1 qualifying child | 3.10% | 2.29% |
2 qualifying children | 2.13% | 3.45% |
3 or more qualifying children | 2.12% | 3.49% |
(2)For each taxable year beginning on or after January 1, 2017, and before January 1, 2018, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred dollars ($100) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty dollars ($250) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows:
In the case of an eligible individual with: | The earned income amount is: | The phaseout amount is: |
No qualifying children | $5,354 | $5,354 |
1 qualifying child | $9,484 | $9,484 |
2 qualifying children | $13,794 | $13,794 |
3 or more qualifying children | $13,875 | $13,875 |
(n)(1)For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred three dollars ($103) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty-eight dollars ($258) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:
In the case of an eligible individual with: | The credit percentage is: | The phaseout percentage is: |
No qualifying children | 2.20% | 1.08% |
1 qualifying child | 3.10% | 2.00% |
2 qualifying children | 2.13% | 2.82% |
3 or more qualifying children | 2.12% | 2.85% |
(2)For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred three dollars ($103) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty-eight dollars ($258) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows:
In the case of an eligible individual with: | The earned income amount is: | The phaseout amount is: |
No qualifying children | $5,520 | $5,520 |
1 qualifying child | $9,778 | $9,778 |
2 qualifying children | $14,222 | $14,222 |
3 or more qualifying children | $14,305 | $14,305 |
(o)(1)For each taxable year beginning on or after January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to two hundred dollars ($200) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to five hundred five dollars ($505) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:
In the case of an eligible individual with: | The credit percentage is: | The phaseout percentage is: |
| No qualifying children | 5.43% | 0.92% |
1 qualifying child | 6.33% | 2.88% |
2 qualifying children | 4.20% | 3.75% |
3 or more qualifying children | 4.15% | 3.78% |
(2)For each taxable year beginning on or after January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to two hundred dollars ($200) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to five hundred five dollars ($505) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows:
In the case of an eligible individual with: | The earned income amount is: | The phaseout amount is: |
| No qualifying children | $4,334 | $4,334 |
1 qualifying child | $9,381 | $9,381 |
2 qualifying children | $14,137 | $14,137 |
3 or more qualifying children | $14,302 | $14,302 |
(3)For taxable years beginning on or after January 1, 2020, and until and including the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, both of the following shall occur:
(A)The amounts in paragraphs (1) and (2) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(B)The phaseout percentage for each of the four categories of eligible individuals shall be recalculated by the Franchise Tax Board in such a manner that, for a taxpayer with an earned income of thirty thousand dollars ($30,000), the calculated amount of credit is equal to zero.
(4)(A)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the amounts in paragraphs (1) and (2) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(B)For taxable years beginning after the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the phaseout percentages for the prior taxable year, as recalculated under subparagraph (B) of paragraph (3), shall apply.
(p)For each taxable year beginning on or after January 1, 2020, Section 32(m) of the Internal Revenue Code, relating to identification numbers, is modified as follows:
(1)By deleting (other than a social security number issued pursuant to clause (II) (or that portion of clause (III) that relates to clause (II)) of section 205(c)(2)(B)(i) of the Social Security Act).
(2)By substituting federal individual taxpayer identification number or a social security number for social security number.
(q)An eligible individual, eligible individuals spouse, or qualifying child using a federal individual taxpayer identification number as authorized under subdivision (p) shall:
(1)Upon request of the Franchise Tax Board, provide:
(A)Identifying documents acceptable for purposes of obtaining a California drivers license or identification card as authorized by subdivisions (a), (b), and (c) of Section 12801.9 of the Vehicle Code and related regulations adopted for purposes of establishing documents acceptable to prove identity.
(B)Identifying documents used to report earned income for the taxable year.
(2)Upon receiving a valid social security number issued to that individual by the Social Security Administration, notify the Franchise Tax Board, in the time and manner prescribed by the Franchise Tax Board.
(r)The Legislature finds and declares that, to the extent they are otherwise qualified for a credit under this section, undocumented persons are eligible for the tax credit authorized by this section within the meaning of subsection (d) of Section 1621 of Title 8 of the United States Code.
|
Date
|
Status
|
|---|---|
| Feb 1, 2024 | From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. |
| Jan 31, 2024 | Died pursuant to Art. IV, Sec. 10(c) of the Constitution. |
| Jan 3, 2024 | Re-referred to Com. on RLS. pursuant to Assembly Rule 96. |
| Aug 17, 2023 | Re-referred to Com. on REV. & TAX. |
| Aug 16, 2023 | From committee chair, with author's amendments: Amend, and re-refer to Com. on REV. & TAX. Read second time and amended. |
| Apr 24, 2023 | In committee: Set, second hearing. Hearing canceled at the request of author. |
| Apr 11, 2023 | In committee: Set, first hearing. Referred to REV. & TAX. suspense file. |
| Mar 30, 2023 | Re-referred to Com. on REV. & TAX. |
| Mar 29, 2023 | From committee chair, with author's amendments: Amend, and re-refer to Com. on REV. & TAX. Read second time and amended. |
| Mar 13, 2023 | Re-referred to Com. on REV. & TAX. |
| Mar 9, 2023 | From committee chair, with author's amendments: Amend, and re-refer to Com. on REV. & TAX. Read second time and amended. |
| Mar 9, 2023 | Referred to Com. on REV. & TAX. |
| Feb 7, 2023 | From printer. May be heard in committee March 9. |
| Feb 6, 2023 | Read first time. To print. |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| Aclu California Action | ** Support | |
| All Home | ** Support | |
| Bay Area LISC | ** Support | |
| California Catholic Conference | ** Support | |
| California Housing Consortium | * Support | Apr 12, 2023 |
| Community Financial Resources | ** Support | |
| Destination: Home | ** Support | |
| East Bay Housing Organizations | ** Support | |
| Economic Security Project Action | ** Support | |
| End Poverty in California | ** Support | |
| Ending Poverty in California | * Support | Apr 10, 2023 |
| Grace Institute - End Child Poverty in Ca | ** Support | |
| Housing Leadership Council of San Mateo County | ** Support | |
| JobTrain | ** Support | |
| John Burton Advocates for Youth | * Support | Apr 10, 2023 |
| Larkin Street Youth Services | ** Support | |
| MidPen Housing Corporation | ** Support | |
| Monument Impact | ** Support | |
| My New Red Shoes | ** Support | |
| Non Profit Housing Association of Northern California | * Support | Apr 10, 2023 |
| Non-Profit Housing Association of Northern California | ** Support | |
| Opportunity House | * Support | Apr 10, 2023 |
| Resources for Community Development | ** Support | |
| Roberts Enterprise Development Fund | ** Support | |
| San Francisco Bay Area Planning and Urban Research Association | ** Support | |
| San Mateo County Economic Development Association | ** Support | |
| Third Sector Capital Partners | ** Support | |
| United Parents and Students | ** Support | |
| United Ways Of California | ** Support | |
| Universal Income Project | ** Support | |
| Young Invincibles | ** Support |
Date of Hearing: April 24, 2023
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Jacqui Irwin, Chair
ABPCA Bill Id:AB 441 (
Author:Haney) – As Amended Ver:March 29, 2023
SUSPENSE
2/3 vote. Fiscal committee.
SUBJECT: Earned Income Tax Credit: young child tax credit: foster youth tax credit: periodic payments
SUMMARY: Requires the Franchise Tax Board (FTB) to establish a program to make advance periodic payments of the California Earned Income Tax Credit (CalEITC), the Young Child Tax Credit (YCTC), and the Foster Youth Tax Credit (FYTC) to "qualified taxpayers." Specifically, this bill:
- Requires the FTB to make periodic payments to "qualified taxpayers" from the Tax Relief and Refund Account, the aggregate amount of which shall equal the "annual advance amount" for any "qualified taxpayer" during a calendar year.
- Defines a "qualified taxpayer" as an individual eligible for the CalEITC, the YCTC, and the FYTC, if the combined total amount of credit allowed under those programs is $1,000 or more for the corresponding taxable year.
- Defines an "annual advance amount" as 80% of the aggregate amount the FTB estimates a qualified taxpayer is allowed under the CalEITC, the YCTC, and the FYTC for the taxable year that begins with that calendar year.
- Authorizes the FTB to modify the annual advance amount, and any future periodic payments, for that calendar year to account for information made available to the FTB that may cause a modification to the annual advance amount, including a tax return filed by the qualified taxpayer.
- Requires the FTB to determine the aggregate amount allowed under the CalEITC, the YCTC, and the FYTC upon receiving a tax return from a qualified taxpayer for the taxable year and requires a qualified taxpayer to repay advance monthly payments that exceed $300 of that amount. A qualified taxpayer is not liable to repay amounts that are less than $300 in excess of the aggregate amount determined by the FTB upon receiving a qualified taxpayer's return.
- Requires the FTB to allow a qualified taxpayer to report on the FTB's website changes in income, household size, filing status, or any other personal information that the FTB deems relevant to the calculation of the annual amount. The FTB must send at least two annual reminders to likely qualified taxpayers to record these changes and must allow filers to decline participation in periodic payments on the FTB's website.
- Requires the FTB, in coordination with the California Department of Public Health, California Department of Social Services, and any other relevant state agency, to request a waiver from any federal agency that administers benefits for which eligibility, or calculation of eligibility, is based on a recipient's monthly income, to exclude from income any amount paid in monthly advance payments authorizes by this bill. Programs for which a waiver shall be request include, but are not limited to:
- Federal childcare assistance;
- Federal housing assistance;
- Low Income Home Energy Assistance Program (LIHEAP);
- Medicaid;
- Supplemental Nutrition Assistance Program (SNAP);
- Supplemental Security Income (SSI);
- Temporary Assistance to Needy Families (TANF); and,
- The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC).
- Makes this bill's provisions operative for taxable years beginning on or after January 1 of the year on which the federal government enacts legislation or publishes regulations, as specified, to exclude periodic payments pursuant to this bill from determining eligibility, or calculating benefits, under any federal public assistance program for which eligibility is predicated upon a recipient's monthly income.
EXISTING FEDERAL LAW:
- Authorizes a refundable earned income tax credit to eligible taxpayers. The amount of this credit varies based on the taxpayer's adjusted gross income (AGI) and the number of dependents that the taxpayer may claim on their tax return, among other eligibility requirements. The credit is reduced as a taxpayer's AGI increases until it is phased out after surpassing a certain threshold. (26 U.S. Code § 32.)
- Authorizes a Child Tax Credit (CTC) based on the number of qualifying dependents a taxpayer may claim on their return. The maximum CTC amount may be claimed by families with modified AGI of up to $200,000, or $400,000 if married filing jointly, and reduces for modified AGI's above that threshold until it is phased out. The amount of credit has been modified in recent years. For the 2022 taxable year, families were eligible for $2,000 per qualifying child. (26 U.S. Code § 24.)
- Authorizes various programs that support low-income individuals, including SSI, SNAP, TANF, WIC, LIHEAP, among others. These programs are generally income restricted.
- Provides that the monthly payment of any refund or advance payment of a federal credit shall not impact the eligibility determination for federally funded, means-tested assistance programs. (26 USC § 6409.)
EXISTING STATE LAW conforms, with certain modifications, to the federal EITC, which is referred to as the California EITC (CalEITC) and authorizes an EITC under the Personal Income Tax Law. The CalEITC focuses on a smaller subset of taxpayers than the federal EITC by targeting the state credit to taxpayers with the lowest incomes. (Revenue and Taxation Code Section 17052.)
FISCAL EFFECT: The FTB has not provided a definitive revenue impact, but notes this bill could result a revenue loss in the millions.
COMMENTS:
- The author has provided the following statement in support of this bill:
Many low-income families experience destabilizing swings in income from month to month, creating economic hardships for families just trying to pay rent and keep food on the table. In some cases they may even be forced to turn to high-risk pay-day loan shops just to get by. A few hundred dollars a month can make a tremendous difference to families struggling to pay their bills and stay housed.
Studies have shown that paying tax credits monthly can cut poverty one-third more than the same amount of money paid out in a onetime refund. Currently, low-income Californians do not have the option to receive their tax credits through monthly payouts. AB 441 will allow low-income Californians to receive a consistent source of cash each month, by requiring the Franchise Tax Board to distribute annual tax credit payouts of $1,000 or more on a monthly basis.
- A coalition of working families, housing rights, and poverty remediation advocates, writing in support of this bill, state, in part:
AB 441 would increase income stability by providing tax credits as advance payments on a monthly basis instead of as an annual lump sum, helping families as needs come up throughout the year. AB 441 maximizes the impact of California's existing tax credit programs, which provide millions of dollars to low-income working people across the state every year. Monthly payments of federal tax credits have been shown to lift one-third more children above the poverty line each month (compared to the same credit amount paid out only once a year), dramatically reduce food insecurity and difficulty meeting expenses, and help parents pay for child care. Homelessness prevention programs also show that a few hundred dollars a month can make the difference between staying housed or being evicted.
- Committee Staff Comments:
- CalEITC: In 2015, the Legislature enacted SB 80 (Committee on Budget and Fiscal Review), which established the CalEITC. The CalEITC is a refundable PIT credit allowed to eligible individuals determined in accordance with the federal EITC, except as modified for California. The state credit is only operative in taxable years in which the Budget Act allocates resources for the FTB to oversee and audit returns associated with the credit. To be eligible, a taxpayer must have earned income of at least $1.00, but no more than $30,000 for that taxable year. The amount of credit varies based on a taxpayer's AGI and the number of dependents a taxpayer may claim on their return, among other factors. The state credit calculation begins with a taxpayers federal AGI and additional information, like number of dependents and filing status, is submitted via Form 3514 when filing a return. Generally speaking, lower income and a higher number of dependents a taxpayer may claim results in increased amounts of credit.
- Previous efforts at advanced EITC payments: Providing advanced payments of the EITC is not a new concept. Congress, after the enactment of the federal EITC in 1975, authorized an advance payment of the EITC starting in 1979. This program required a qualified employee to file a form W-5 with their employer, indicating the qualified employee would like to participate in the advanced payment program. The employer would pay these amounts to the employee in their paycheck by reducing income tax withholding. The employee would then report the amount on their tax return, reconciling any over or under payment of the advance amount. The Government Accountability Office (GAO) undertook two studies related to the advanced EITC payment program, once in 1992, and again in 2007. GAO's 1992 report noted a 0.5% participation rate, citing that this rate could be the result of employers and employees being unaware of the program, a lack of significant outreach by the Internal Revenue Service (IRS) on the program, and a preference by taxpayers to receive the lump sum payment upon filing a return. In 2007, the GAO reported a 3% participation rate and noted the low rate was associated with a taxpayer preference of a lump sum and concerns about overpayment.
A more successful program was a joint, one-time study by the City of Chicago and the Center for Economic Progress (CEP). This program was highly targeted, being offered to 343 pre-selected families, and provided the option to receive 50% of the total credit amount in quarterly payments. Throughout this study, the CEP worked closely with families to keep them informed of the process and provide assistance. The bounds for the credit payment were $80 and $500 and just 1.7% of participants received payments in excess of the entire credit amount reported on the federal return. However, this study also found that 60% of participants were not able to estimate their annual income within 10% of their actual income and nearly 40% did not pay the advance payment back to CEP after receiving their actual refund from the IRS, despite being required to do so
- Advanced payment of the CTC: In 2021, President Biden signed the American Rescue Plan Act (ARPA). Among other provisions, the ARPA increased the CTC from $2,000 per qualifying child ages 16 and under, to a maximum of $3,600, if the child was under the age of six, and $3,000, if the child was ages six to 17. The credit amount would begin to reduce as modified AGI rose above $200,000, or $400,000 if married and filing jointly, until a family would no longer be eligible. Additionally, eligible taxpayers could claim up to half of their CTC amount as an advance monthly payment beginning in July, 2021. This program determined eligibility for the advanced payment amount by referencing a taxpayer's 2019 or 2020 return. If a taxpayer had not filed a return, they could participate if they signed up using the IRS' non-filer tool. The total amount of CTC amounts paid in 2021 were $94 billion that supported nearly 62 million children.
A study released by the Brookings Institute in April of 2022 underscores the positive impact of these payments. According to the report, titled "The Impacts of the 2021 Expanded CTC on Family Employment, Nutrition, and Financial Well-Being," the advanced payments allowed families to cover routine expenses, like housing, food, utilities, clothing, and other essential items for children. The study further emphasized that these amounts lowered eligible families' food insecurity and helped households pay down credit card debt, lowered eviction risks, and reduced reliance on high-cost loan products.
- The whole apple: This bill would require the FTB to establish a program to offer up to 80% of an eligible taxpayer's aggregate CalEITC, YCTC, and FYTC amount as an advanced periodic payment if that total amount is $1,000 or more. Overpayments of more than $300 are subject to recapture by the FTB, but a taxpayer is not liable for overpayments below that amount. As noted previously, recent efforts at advanced payments provided no more than 50% of the amount a taxpayer was eligible to receive.
In order to provide an advance payment amount, the FTB necessarily needs to estimate how much CalEITC, YCTC, and FYTC a taxpayer is entitled to in the coming year. This may seem like a simple task at face value, but would require significant effort by the FTB. For instance, as the calculation of the state credit begins with a taxpayer's federal AGI, the FTB generally relies on taxpayer's reporting that information to the FTB when they file a return. Given that a taxpayer's return for that taxable year is filed in the following calendar year, should this bill be enacted, it is unclear how the FTB would determine this amount. If the FTB is reliant upon the IRS for this information, it may not come in a timely manner. Would the state be liable for not complying with law, even if that noncompliance was of no fault attributable to the FTB?
Essentially, this bill requires the FTB to provide advance payments to taxpayers for whom it would be most difficult to calculate their eligible credit amounts. Pursuant to this bill, by definition, qualified taxpayers will generally be families, as taxpayers would not exceed the threshold amount of $1,000 unless they have children. Under existing law, a taxpayer provides the FTB information on the number of dependents and the filing status of the taxpayer. If the FTB is required to provide advance payments of these credits, the FTB may not have the appropriate information for that taxable year. Children age, partners marry and separate, and dependents may be eligible to be claimed by different taxpayers in any given year. These variables all impact the calculation of the credit, and create uncertainty regarding an appropriate estimate to varying degrees.
While the positive impacts to families for advanced CTC payments has been substantiated, this may come at a cost to FTB that outweighs the benefits. The FTB is currently undergoing a systems update, the Enterprise Data to Revenue (EDR) project. The EDR project is currently in its second of three phases and is intended to modernize the information technology systems and processes across the agency. This project is updating systems that date back to the 1980s, and any changes to practices require integration with the EDR project. This bill could interrupt that process, potentially costing millions of dollars to implement.
REGISTERED SUPPORT / OPPOSITION:
Support
ACLU California Action
All Home
Bay Area LISC
California Catholic Conference
Community Financial Resources
Destination: Home
East Bay Housing Organizations
Economic Security Project Action
End Poverty in California (EPIC)
Housing Leadership Council of San Mateo County
Jobtrain
Larkin Street Youth Services
Midpen Housing Corporation
Monument Impact
My New Red Shoes
Non-profit Housing Association of Northern California (NPH)
Resources for Community Development
Roberts Enterprise Development Fund (REDF)
San Francisco Bay Area Planning and Urban Research Association (SPUR)
San Mateo County Economic Development Association (SAMCEDA)
Third Sector Capital Partners
United Parents and Students
Universal Income Project
Young Invincibles
1 Individual
Support If Amended
Grace Institute - End Child Poverty in CA
United Ways of California (UWCA)
Opposition
None on file
Analysis Prepared by: Harrison Bowlby / REV. & TAX. / (916) 319-2098
Date of Hearing: April 10, 2023
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Jacqui Irwin, Chair
ABPCA Bill Id:AB 441 (
Author:Haney) – As Amended Ver:March 29, 2023
2/3 vote. Fiscal committee.
SUBJECT: Earned Income Tax Credit: young child tax credit: foster youth tax credit: periodic payments
SUMMARY: Requires the Franchise Tax Board (FTB) to establish a program to make advance periodic payments of the California Earned Income Tax Credit (CalEITC), the Young Child Tax Credit (YCTC), and the Foster Youth Tax Credit (FYTC) to "qualified taxpayers." Specifically, this bill:
- Requires the FTB to make periodic payments to "qualified taxpayers" from the Tax Relief and Refund Account, the aggregate amount of which shall equal the "annual advance amount" for any "qualified taxpayer" during a calendar year.
- Defines a "qualified taxpayer" as an individual eligible for the CalEITC, the YCTC, and the FYTC, if the combined total amount of credit allowed under those programs is $1,000 or more for the corresponding taxable year.
- Defines an "annual advance amount" as 80% of the aggregate amount the FTB estimates a qualified taxpayer is allowed under the CalEITC, the YCTC, and the FYTC for the taxable year that begins with that calendar year.
- Authorizes the FTB to modify the annual advance amount, and any future periodic payments, for that calendar year to account for information made available to the FTB that may cause a modification to the annual advance amount, including a tax return filed by the qualified taxpayer.
- Requires the FTB to determine the aggregate amount allowed under the CalEITC, the YCTC, and the FYTC upon receiving a tax return from a qualified taxpayer for the taxable year and requires a qualified taxpayer to repay advance monthly payments that exceed $300 of that amount. A qualified taxpayer is not liable to repay amounts that are less than $300 in excess of the aggregate amount determined by the FTB upon receiving a qualified taxpayer's return.
- Requires the FTB to allow a qualified taxpayer to report on the FTB's website changes in income, household size, filing status, or any other personal information that the FTB deems relevant to the calculation of the annual amount. The FTB must send at least two annual reminders to likely qualified taxpayers to record these changes and must allow filers to decline participation in periodic payments on the FTB's website.
- Requires the FTB, in coordination with the California Department of Public Health, California Department of Social Services, and any other relevant state agency, to request a waiver from any federal agency that administers benefits for which eligibility, or calculation of eligibility, is based on a recipient's monthly income, to exclude from income any amount paid in monthly advance payments authorized by this bill. Programs for which a waiver shall be requested include, but are not limited to:
- Federal childcare assistance;
- Federal housing assistance;
- Low Income Home Energy Assistance Program (LIHEAP);
- Medicaid;
- Supplemental Nutrition Assistance Program (SNAP);
- Supplemental Security Income (SSI);
- Temporary Assistance to Needy Families (TANF); and,
- The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC).
- Makes this bill's provisions operative for taxable years beginning on or after January 1 of the year on which the federal government enacts legislation or publishes regulations, as specified, to exclude periodic payments pursuant to this bill from determining eligibility, or calculating benefits, under any federal public assistance program for which eligibility is predicated upon a recipient's monthly income.
- Requires the State Controller to make transfers from the Personal Income Tax (PIT) Fund to the Tax Relief and Refund Account, a continuously appropriated fund, thereby making an appropriation.
EXISTING FEDERAL LAW:
- Authorizes a refundable earned income tax credit to eligible taxpayers. The amount of this credit varies based on the taxpayer's adjusted gross income (AGI) and the number of dependents that the taxpayer may claim on their tax return, among other eligibility requirements. The credit is reduced as a taxpayer's AGI increases until it is phased out after surpassing a certain threshold. (26 U.S. Code § 32.)
- Authorizes a Child Tax Credit (CTC) based on the number of qualifying dependents a taxpayer may claim on their return. The maximum CTC amount may be claimed by families with modified AGI of up to $200,000, or $400,000 if married filing jointly, and the CTC reduces for modified AGIs above that threshold until it is phased out. The amount of credit has been modified in recent years. For the 2022 taxable year, families were eligible for $2,000 per qualifying child. (26 U.S. Code § 24.)
- Authorizes various programs that support low-income individuals, including SSI, SNAP, TANF, WIC, LIHEAP, among others. These programs are generally income restricted.
- Provides that the monthly payment of any refund or advance payment of a federal credit shall not impact the eligibility determination for federally funded, means-tested assistance programs. (26 USC § 6409.)
EXISTING STATE LAW:
- Conforms, with certain modifications, to the federal EITC, by authorizing CalEITC under the PIT Law. The CalEITC focuses on a smaller subset of taxpayers than the federal EITC by targeting the state credit to taxpayers with the lowest incomes. (Revenue and Taxation Code (R&TC) Section 17052.)
- Provides, for taxable years beginning on or after January 1, 2019, a refundable credit under the PIT Law equal to $1,176, multiplied by the EITC adjustment factor, per qualifying child under the age of six, as specified. The amount of the credit is adjusted for inflation. To be eligible for this credit, a taxpayer must have received a CalEITC in that taxable year. (R&TC Section 17052.1.)
- Provides, for taxable years beginning on or after January 1, 2022, a refundable credit under the PIT Law equal to $1,176 , multiplied by the EITC adjustment factor, to a taxpayer aged 18 through 25 that was formerly in a foster youth program while age 13 or older. The amount of the credit is adjusted for inflation. To be eligible for this credit, a taxpayer must have received a CalEITC in that taxable year. (R&TC Section 17052.1.)
FISCAL EFFECT: FTB is still researching the ability to calculate a potential revenue loss associated with overpayments of annual advances that are subject to the safe harbor rule or that are ultimately uncollectible. FTB notes that this revenue loss is likely to be substantial, and will exceed the $150,000 suspense file threshold.
COMMENTS:
- The author has provided the following statement in support of this bill:
Many low-income families experience destabilizing swings in income from month to month, creating economic hardships for families just trying to pay rent and keep food on the table. In some cases they may even be forced to turn to high-risk pay-day loan shops just to get by. A few hundred dollars a month can make a tremendous difference to families struggling to pay their bills and stay housed.
Studies have shown that paying tax credits monthly can cut poverty one-third more than the same amount of money paid out in a onetime refund. Currently, low-income Californians do not have the option to receive their tax credits through monthly payouts. AB 441 will allow low-income Californians to receive a consistent source of cash each month, by requiring the Franchise Tax Board to distribute annual tax credit payouts of $1,000 or more on a monthly basis.
- A coalition of working families, housing rights, and poverty remediation advocates, writing in support of this bill, state, in part:
AB 441 would increase income stability by providing tax credits as advance payments on a monthly basis instead of as an annual lump sum, helping families as needs come up throughout the year. AB 441 maximizes the impact of California's existing tax credit programs, which provide millions of dollars to low-income working people across the state every year. Monthly payments of federal tax credits have been shown to lift one-third more children above the poverty line each month (compared to the same credit amount paid out only once a year), dramatically reduce food insecurity and difficulty meeting expenses, and help parents pay for child care. Homelessness prevention programs also show that a few hundred dollars a month can make the difference between staying housed or being evicted.
- Committee Staff Comments:
- CalEITC: In 2015, the Legislature enacted SB 80 (Committee on Budget and Fiscal Review), Chapter 21, Statutes of 2015, which established the CalEITC. The CalEITC is a refundable PIT credit allowed to eligible individuals determined in accordance with the federal EITC, except as modified for California. The state credit is only operative in taxable years in which the Budget Act allocates resources for the FTB to oversee and audit returns associated with the credit. To be eligible, a taxpayer must have earned income of at least $1.00, but no more than $30,000 for that taxable year. The amount of credit varies based on a taxpayer's AGI, the number of dependents a taxpayer may claim on their return, and filing status, among other factors. The state credit calculation begins when a taxpayer's federal AGI and additional information, such as number of dependents, is submitted via Form 3514 when filing a return. Generally speaking, eligible taxpayers with lower incomes and a higher number of dependents receive increased amounts of credit.
- Previous efforts at advanced EITC payments: Providing advanced payments of the EITC is not a new concept. Congress, after the enactment of the federal EITC in 1975, authorized an advance payment of the EITC starting in 1979. This program required a qualified employee to file a form W-5 with their employer opting-in to the advanced payment program. The employer would pay these amounts to the employee in their paycheck by reducing income tax withholding. The employee would then report the amount on their tax return, reconciling any over or under payment of the advance amount. The Government Accountability Office (GAO) undertook two studies related to the advanced EITC payment program - once in 1992 and again in 2007. GAO's 1992 report noted a 0.5% participation rate, citing that this rate could be the result of employers and employees being unaware of the program, a lack of significant outreach by the Internal Revenue Service (IRS) on the program, and a preference by taxpayers to receive the lump sum payment upon filing a return. In 2007, the GAO reported a 3% participation rate and noted the low rate was associated with a taxpayer preference for a lump sum and concerns about overpayment.
A more successful program was a joint, one-time study by the City of Chicago and the Center for Economic Progress (CEP). This program was highly targeted, being offered to 343 pre-selected families, and provided the option to receive 50% of the total credit amount in quarterly payments. Throughout this study, the CEP worked closely with families to keep them informed of the process and provide assistance. The bounds for the credit payment were $80 and $500 and just 1.7% of participants received payments in excess of the entire credit amount reported on the federal return. However, this study also found that 60% of participants were not able to estimate their annual income within 10% of their actual income and nearly 40% did not pay the advance payment back to CEP or did not provide required information regarding filing status and return information.
- Advanced payment of the CTC: In 2021, President Biden signed the American Rescue Plan Act (ARPA). Among other provisions, the ARPA increased the CTC from $2,000 per qualifying child age 16 and under, to a maximum of $3,600 if the child was under the age of six and $3,000 if the child was age six to 17. The credit amount would begin to reduce as modified AGI rose above $200,000, or $400,000 if married and filing jointly, until a family would no longer be eligible. Additionally, eligible taxpayers could claim up to one-half of their CTC amount as an advance monthly payment beginning in July 2021. This program determined eligibility for the advanced payment amount by referencing a taxpayer's 2019 or 2020 return. If a taxpayer had not filed a return, they could participate if they signed up using the IRS' non-filer tool. The total amount of CTC paid in 2021 was $94 billion, which supported nearly 62 million children.
A study released by the Brookings Institute in April 2022 underscores the positive impact of these payments. According to the report, titled "The Impacts of the 2021 Expanded CTC on Family Employment, Nutrition, and Financial Well-Being," the advanced payments allowed families to cover routine expenses, such as housing, food, utilities, clothing, and other essential items for children. The study further emphasized that these amounts lowered eligible families' food insecurity and helped households pay down credit card debt, lowered eviction risks, and reduced reliance on high-cost loan products.
- The whole apple: This bill would require the FTB to establish a program to offer up to 80% of an eligible taxpayer's aggregate CalEITC, YCTC, and FYTC amount as an advanced periodic payment if that total amount is $1,000 or more. Overpayments of more than $300 are subject to recapture by the FTB, but a taxpayer is not liable for overpayments below that amount. As noted previously, recent efforts at advanced payments provided no more than 50% of the amount a taxpayer was eligible to receive.
In order to provide an advance payment amount, the FTB necessarily needs to estimate how much CalEITC, YCTC, and FYTC a taxpayer is entitled to in the coming year. This may seem like a simple task at face value, but would require significant effort by the FTB. Existing law requires that a CalEITC-eligible individual must file a tax return to claim the credit. The calculation of the state credit begins with a taxpayer's federal AGI, and the filing of a return provides this information to the FTB. Given that a taxpayer's return for that taxable year is filed in the following calendar year, should this bill be enacted it is unclear how the FTB would determine this amount. If the FTB is reliant upon the IRS for this information, that information may not come in a timely manner. Would the state be liable for not complying with this bill's provisions, even if that noncompliance was of no fault attributable to the FTB?
Essentially, this bill requires the FTB to provide advance payments to taxpayers for whom it would be most difficult to calculate their eligible credit amounts. Pursuant to this bill, by definition, qualified taxpayers will generally be families, as taxpayers would likely not exceed the threshold amount of $1,000 unless they have children. Under existing law, a taxpayer provides the FTB information on the number of dependents and the filing status of the taxpayer. If the FTB is required to provide advance payments of these credits, the FTB may not have the appropriate information for that taxable year. Children age, partners marry and separate, and dependents may be eligible to be claimed by different taxpayers in any given year. These variables all impact the calculation of the credit, and create uncertainty regarding an appropriate estimate to varying degrees.
While the positive impacts to families for advanced CTC payments has been substantiated, this may come at a cost to FTB that outweighs the benefits. The FTB is currently undergoing a systems update, the Enterprise Data to Revenue (EDR) project. The EDR project is in its second of three phases, and is intended to modernize the information technology systems and processes across the agency. This project is updating systems that date back to the 1980s, and any change to existing practices likely will require integration with the EDR project. This bill could interrupt that project, potentially requiring a significant expenditure to implement.
The CalEITC is available for taxpayers with an AGI of $30,000. Taxpayers with such low incomes are generally part-time or part-year workers. Even minor changes in a taxpayer's work schedule, and corresponding income, can significantly change the credit calculation or whether a taxpayer is even eligible to receive the credit. Given this variability, this bill attempts to protect a taxpayer from penalization should they receive overpayments of advanced credit amounts by only requiring repayment for overpayments of more than $300. Taxpayers are not liable for amounts less than $300. In other words, as drafted, this bill would permit taxpayers to receive a credit for which they may not be eligible.
This bill does not provide for a reconciliation process of advance payments with a final determination on the amount a taxpayer is eligible to receive. Thus, there is no requirement that a taxpayer reconcile with FTB the advance payment amounts they received. Even if this bill were to include such a provision, it is unclear whether taxpayers would abide by this requirement as exemplified by the reconciliation rate in the joint study by the City of Chicago and the CEP.
Given this bill requires that advanced payments be provided to eligible individuals, should the FTB erroneously calculate an estimate and determine that a taxpayer is not eligible for an advanced payment, this could present legal challenges. Furthermore, those advanced payment programs of federal credits by an entity other than the IRS had the most success when narrowly tailored and there was significant engagement with participants.
Finally, this bill delays implementation of its provisions until January 1 of the year in which the federal government modifies statute or provides regulatory clarification that advance periodic payments would not impact eligibility determination for federally funded, means-tested assistance programs. Existing federal law excludes advance payments of federal credits from impacting these eligibility determinations. Federal law, however, does not provide the same treatment for advance payments of state credits. This bill's implementation provisions are intended to prevent potential recipients of an advanced payment from being made ineligible for those programs as a result of this bill. It is unclear, however, if this mechanism would be triggered upon a change in federal law for one of those federally funded programs, or if it would need to occur for all of them. Moreover, should this bill pass, and if the federal government amends those provisions of federal law regarding the treatment of advanced payments of state credits shortly after this bill's enactment, such as early next year, the FTB would be required to implement this bill's program for the 2024 taxable year. This would likely provide FTB with insufficient lead-time to establish this program and may not be feasible.
REGISTERED SUPPORT / OPPOSITION:
Support
All Home
California Catholic Conference
Community Financial Resources
Destination: Home
Economic Security Project Action
End Poverty in California
Housing Leadership Council of San Mateo County
Jobtrain
Larkin Street Youth Services
Midpen Housing Corporation
Monument Impact
My New Red Shoes
Non-Profit Housing Association of Northern California
Resources for Community Development
San Francisco Bay Area Planning and Urban Research Association
San Mateo County Economic Development Association
Third Sector Capital Partners
United Parents and Students
Universal Income Project
Young Invincibles
Opposition
None on file
Analysis Prepared by: Harrison Bowlby / REV. & TAX. / (916) 319-2098
Discussed in Hearing
2MIN
Assembly Standing Committee on Housing and Community Development
10MIN
Assembly Standing Committee on Revenue and Taxation
Bill Author
Bill Co-Author(s):
