BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 242
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          Date of Hearing:   April 6, 2011

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

           AB 242 (Committee on Revenue and Taxation) - As Amended:  March 
                                      14, 2011 

          Policy Committee:                              Revenue and 
          Taxation     Vote:                            8-0

          Urgency:     No                   State Mandated Local Program: 
          No     Reimbursable:              

           SUMMARY  

          Conforms provisions of the personal income tax law to specified 
          provisions of the federal Patient Protection and Affordable Care 
          Act of 2010 (PPACA) and the Health Care and Education 
          Reconciliation Act of 2010 (HCERA).  Specifically, this bill:

        1) Conforms state tax law to changes in federal law for seven 
             specific areas:

               a)        Health professional student loan repayment.
               b)        Adoption assistance.
               c)        Indian tribal government health benefits.
               d)        Small employer cafeteria plans.
               e)        Hospital insurance tax deduction.
               f)        Free choice vouchers.
               g)        Exclusion of specified grants.

          2)Takes effect immediately as a tax levy. 

           FISCAL EFFECT  

          The Franchise Tax Board estimates this bill will result in an 
          annual General Fund loss of approximately $4 million in 2010-11, 
          $3 million in 2011-12, $461,000 in 2012-13, and $55.5 million in 
          2013-14. 

           COMMENTS  

            1) Rationale.   The general purpose of conforming to changes in 
             federal law is to simplify both the preparation of California 








                                                                  AB 242
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             income tax returns and the administration of California 
             income tax laws. 
              
            2) Conformity with federal tax  .  This bill is a tax conformity 
             bill that makes the mandated implementation of health care 
             reform an easier transition.   When changes are made to the 
             federal income tax law, California does not automatically 
             adopt such provisions.  Instead, state legislation is needed 
             to conform to most of those changes.  Conformity legislation 
             is introduced either as individual tax bills to conform to 
             specific federal changes or as one omnibus bill to conform to 
             the federal law as of a certain date, with specified 
             exceptions.


            3) Related legislation  . AB 36 (Perea), awaiting action by the 
             governor conforms state tax law to existing federal tax law 
             that excludes from the gross income of a parent any health 
             care benefits and medical care expenses provided by the 
             parent's employer to an adult child 26 years or younger.  


           Analysis Prepared by  :    Roger Dunstan / APPR. / (916) 319-2081