AB 43, as amended, Mark Stone. Personal income taxes: credit: earned income.
The Personal Income Tax Law allows various credits against the taxes imposed by that law, including certain credits that are allowed in modified conformity to credits allowed by federal income tax laws. Federal income tax laws allow a refundable earned income tax credit for certain low-income individuals who have earned income and who meet certain other requirements.
This bill, for taxable years beginning on or after January 1, 2016, in modified conformity with federal income tax laws, would allow an earned income credit to an eligible individual that is equal to specified percentages of the earned income tax credit allowed by federal law. The bill would provide that in those years in which an appropriation is made by the Legislature, the credit would be refundable. The bill would also make findings and declarations.
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:
The Legislature finds and declares all of the
3(a) In its Supplemental Poverty Measure report for the year
42013, released in October 2014, the United States Census Bureau
5reported California’s rate of poverty to be 23.4 percent. This rate
6is the highest among all 50 states.
7(b) Using census data released in September 2014, the California
8Budget Project (CBP) reported that the economic recovery from
9the Great Recession has largely bypassed low- and middle-income
10Californians, with the bottom three-fifths of the income distribution
11experiencing stagnating income gains. This is contrasted with the
12top one-fifth of the income distribution experiencing gains of 52.4
14(c) A briefing on poverty released by the CBP in August 2014
15reports that 67 percent of families living in poverty were supported
16by one or more workers in 2012. Given that the majority of families
17living in poverty are working families in California, it is evident
18that poverty largely reflects low-paying jobs, not the absence of
20(d) In California, the Public Policy Institute of California (PPIC),
21in collaboration with the Stanford Center on Poverty and Inequality,
22has developed the California Poverty Measure (CPM), which
23underscores the role of California’s social safety net, amount which
24includes the CalFresh Program, CalWORKs, and the federal Earned
25Income Tax Credit (EITC), in mitigating poverty.
26(e) Using data from 2011, a PPIC report on the CPM released
27in October 2013, reveals that 22 percent of Californians, 8.1 million
28people, lived in poverty. A comparison of CPM rates by county
29show that the three most populous counties, Los Angeles County,
30San Diego County, and Orange County, all had rates above the
P3 1statewide CPM at 26.9 percent, 22.7 percent, and 24.3 percent,
3(f) The CPM rate for children statewide for children, those under
4the age of 18, was 25.1 percent, the highest rate of any age group.
5This amounts to 2.3 million of California’s children living in
7(g) Without need-based safety net programs and resources, over
830 percent of Californians would be living in poverty. According
9to the CPM, the absence of the safety net would increase the
10poverty rate among California’s children to 39
begin delete percent.end delete
11(h) Refundable tax credits, including the federal EITC, reduced
12the poverty rate in California by 3.2 percent overall. Among
13children, the poverty rate reduction was 6 percent. This means that
14560,000 fewer children and 600,000 fewer working-age adults,
151.16 million people fewer in total, are living in poverty when
16refundable tax credits are accounted for in the CPM.
17(i) According to the National Conference of State Legislatures,
1825 states in the country and the District of Columbia, provide an
19EITC in addition to the federal EITC. California does not currently
20have a state EITC.
21(j) A Brookings Institution report issued in January 2003, shows
22that in addition to boosting the family incomes of families in
23poverty, state EITC refunds served as an important economic
24stimulus for the communities and regions of the families by
25magnifying the impact of the federal EITC overall.
Section 17052.1 is added to the Revenue and Taxation
27Code, to read:
For each taxable year beginning on or after January
291, 2016, there shall be allowed a credit
30against the “net tax,” as defined by Section 17039, for the taxable
31year, an amount determined in accordance with Section 32 of the
32Internal Revenue Code, as amended by Section 1002(a) of Public
33Law 111-5, as amended by Section 219(a)(2) of Public Law
34111-226, as amended by Section 103(c) of Public Law 111-312,
35and as amended by Section 103(c) of Public Law 112-240, as
36amended by Section 206(a) of Public Law 113-295, relating to
37earned income, except as follows:
38(a) (1) For an eligible individual who has at least one
39child under five years of age, the credit amount shall be equal to
40the federal earned income credit amount multiplied by 35 percent.
P4 1(2) For an eligible individual who does not have a qualifying
2child, the credit amount shall be equal to the federal earned income
3credit amount multiplied by 60 percent.
4(3) For any other eligible individual who does not meet the
5requirements of paragraph (1) or (2), the credit amount shall be
6equal to the federal earned income credit amount multiplied by 15
8(b) If the amount allowable as a credit under this section exceeds
9the tax liability computed under this part for the taxable year, the
10excess shall be credited against other amounts due, if any, and the
11balance, if any, shall, upon appropriation by the Legislature, be
12refunded to the qualified taxpayer.
13(c) Any amounts refunded to a taxpayer pursuant to this section
14shall not be included in income subject to tax under this part.
15(d) Notwithstanding any other law, amounts refunded pursuant
16to this section shall be treated in the same manner as the federal
17earned income refund for the purpose of determining eligibility to
18receive benefits under Division 9 (commencing with Section
1910000) of the Welfare and Institutions Code or amounts of those
21(e) This section is notwithstanding Section 41.
This act provides for a tax levy within the meaning of
25Article IV of the Constitution and shall go into immediate effect.