BILL NUMBER: AB 85	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  MAY 2, 2007
	AMENDED IN ASSEMBLY  FEBRUARY 27, 2007

INTRODUCED BY   Assembly Member Nakanishi
   (Coauthors: Assembly Members Benoit, Gaines, Horton, Jeffries,
Maze, Smyth, and Tran)
   (Coauthors: Senators Ackerman, Harman, and Wyland)

                        DECEMBER 13, 2006

   An act to add and repeal Sections 17053.77 and 23677 of the
Revenue and Taxation Code, relating to taxation, to take effect
immediately, tax levy.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 85, as amended, Nakanishi. Income and corporation taxes:
credit: health savings account.
   The Personal Income Tax Law and the Corporation Tax Law authorize
various credits against the taxes imposed by those laws.
   This bill would authorize a credit against those taxes for each
taxable year beginning on or after January 1, 2008, and before
January 1, 2013, in an amount equal to 15% of the amount paid or
incurred by a qualified taxpayer, as defined, during the taxable year
for qualified health insurance, as defined, for specified employees
of the taxpayer. This bill would also require the Franchise Tax Board
and the Legislative Analyst to report on the usage and effectiveness
of the credit, as specified.
   This bill would take effect immediately as a tax levy.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 17053.77 is added to the Revenue and Taxation
Code, to read:
   17053.77.  (a) For each taxable year beginning on or after January
1, 2008, and before January 1, 2013, there shall be allowed as a
credit against the "net tax," as defined in Section 17039, an amount
equal to 15 percent of the amount paid or incurred by a qualified
taxpayer during the taxable year for qualified health insurance for
employees of the taxpayer who perform services in this state and who
pay income taxes to the state.
   (b) For purposes of this section:
   (1) "Qualified health insurance" means amounts paid on behalf of
employees to a high deductible health plan, as defined by Section 223
(c)(2) of the Internal Revenue Code, or to a health savings account,
as defined by Section 223(d) of the Internal Revenue Code.
   (2) "Qualified taxpayer" means any new small to medium size
employer, or any existing small to medium size employer that, during
any of the five taxable years immediately preceding the taxable year,
has not provided health insurance to employees employed by the
employer in this state.
   (3) For purposes of this paragraph:
   (A) "Small employer" means a person, as defined in Section 7701(a)
of the Internal Revenue Code, or a private entity employing, for
wages or salary, at least 2 but no more than 19 persons.
   (B) "Medium employer" means a person, as defined in Section 7701
(a) of the Internal Revenue Code, or a private entity employing, for
wages or salary, at least 20 but no more than 199 persons.
   (C) "New small to medium employer" means a small employer or a
medium employer  created   that began doing
business  on or after October 1, 2008.
   (c) The credit allowed by this section shall be in lieu of any
deduction to which the taxpayer otherwise may be entitled for
expenses on which a credit under this section is claimed.
   (d) On or before December 1, 2011, the Franchise Tax Board shall
report to the Legislature on the total number of employers using the
credit under this section, the total number of employees who have
enrolled in high deductible health plans since the inception of the
credit, and the total cost of this credit to the state.
   (e) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
in the following year, and succeeding years if necessary, until the
credit is exhausted.
   (f) A qualified taxpayer is only eligible for the credit allowed
by this section for the first year in which the credit is claimed and
for each of the two consecutive taxable years following the taxable
year in which the credit is first claimed.
   (g) This section shall remain in effect only until December 1,
2013, and as of that date is repealed, unless a later enacted statute
that is enacted before December 1, 2013, deletes or extends that
date.
  SEC. 2.  Section 23677 is added to the Revenue and Taxation Code,
to read:
   23677.  (a) For each taxable year beginning on or after January 1,
2008, and before January 1, 2013, there shall be allowed as a credit
against the "tax," as defined in Section 23036, an amount equal to
15 percent of the amount paid or incurred by a qualified taxpayer
during the taxable year for qualified health insurance for employees
of the taxpayer who perform services in this state and who pay income
taxes to the state.
   (b) For purposes of this section:
   (1)  "Qualified health insurance" means amounts paid on behalf of
employees to a high deductible health plan, as defined by Section 223
(c)(2) of the Internal Revenue Code, or to a health savings account,
as defined by Section 223(d) of the Internal Revenue Code.
   (2) "Qualified taxpayer" means any new small to medium size
employer, or any existing small to medium size employer that, during
any of the five taxable years immediately preceding the taxable year,
has not provided health insurance to employees employed by the
employer in this state.
   (3) For purposes of this paragraph:
   (A) "Small employer" means a person, as defined in Section 7701(a)
of the Internal Revenue Code, or a private entity employing, for
wages or salary, at least 2 but no more than 19 persons.
   (B) "Medium employer" means a person, as defined in Section 7701
(a) of the Internal Revenue Code, or a private entity employing, for
wages or salary, at least 20 but no more than 199 persons.
   (C) "New small to medium employer" means a small employer or a
medium employer  created   that began doing
business  on or after October 1, 2008.
   (c) The credit allowed by this section shall be in lieu of any
deduction to which the taxpayer otherwise may be entitled for
expenses on which a credit under this section is claimed.
   (d) On or before December 1, 2011, the Franchise Tax Board shall
report to the Legislature on the total number of employers using the
credit under this section, the total number of employees who have
enrolled in high deductible health plans since the inception of the
credit, and the total cost of this credit to the state.
   (e) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and succeeding years if necessary, until the credit
is exhausted.
   (f) A qualified taxpayer is only eligible for the credit allowed
by this section for the first year in which the credit is claimed and
for each of the two consecutive taxable years following the taxable
year in which the credit is first claimed.
   (g) This section shall remain in effect only until December 1,
2013, and as of that date is repealed, unless a later enacted statute
that is enacted before December 1, 2013, deletes or extends that
date.
  SEC. 3.  On or before March 1, 2012, the Legislative Analyst shall
report to the Legislature on the effectiveness of the tax credits
authorized by Sections 17053.77 and 23677 of the Revenue and Taxation
Code upon employed Californians' ability to meet deductible medical
expenses incurred under qualified health insurance plans.
  SEC. 4.  This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.