SB 565: Taxation: filing.

The Personal Income Tax Law requires an individual taxable under that law to make a return to the Franchise Tax Board stating specifically the items of the individuals gross income from all sources and the deductions and credits allowable, as prescribed. Existing law requires the Franchise Tax Board to notify all potential eligible individuals of available paperless filing options offered through the Franchise Tax Board, including the CalFile program and free tax preparation services.

Existing law requires the State Department of Social Services (SDSS) and the State Department of Health Care Services (DHCS) to exchange data with the Franchise Tax Board upon request, including specified personal information of a program participant, as defined. For taxable years beginning January 1, 2020, and before January 1, 2026, existing law authorizes the Franchise Tax Board to disclose, upon request, specified return information to SDSS and DHCS. Existing law requires all data provided to remain confidential and be used only for specified purposes, including informing individuals of the availability of the Volunteer Income Tax Assistance, CalFile, the federal Earned Income Tax Credit, the California Earned Income Tax Credit, and other federal and state antipoverty tax credits.

This bill, for taxable years beginning on or after January 1, 2025, and before January 1, 2031, would require the Franchise Tax Board to provide a free tax return preparation program that utilizes the prepopulation of data for qualified individuals to complete and e-file their California personal income tax returns. The bill would define a qualified individual for this purpose to mean an individual who, among other things, received an invitation from the Franchise Tax Board to participate in the free tax return preparation program, is eligible to use CalFile in that taxable year, and is eligible for the California Earned Income Tax Credit, the young child tax credit, or the foster youth tax credit in that taxable year. The bill would authorize the Franchise Tax Board to utilize CalFile as the free tax return preparation program.

This bill would allow SDSS and DHCS to exchange data with the Franchise Tax Board for purposes of the free tax return preparation program. The bill would also authorize the use of information provided by the Franchise Tax Board to SDSS and DHCS for purposes of implementing the free tax return preparation program.

This bill would incorporate additional changes to Section 19551.3 of the Revenue and Taxation Code proposed by AB 1002 to be operative only if this bill and AB 1002 are enacted and this bill is enacted last.