Amended in Senate July 2, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 1161

Introduced by Assembly Members Olsen and Atkins

(Principal coauthor: Assembly Member Steinorth)

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(Principal coauthor: Senator Hertzberg)

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(Coauthors: Assembly Members Chávez, Dodd, Gipson, Holden, and Waldron)

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(Coauthor: Senator Huff)

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February 27, 2015

An act to amend Section 41202 of, and to add and repeal Article 7.5 (commencing with Section 8239.5) of Chapter 2 of Part 6 of Division 1 of Title 1 of, the Education Code, and to add and repeal Sections 17053.87 and 23687 of the Revenue and Taxation Code, relating to preschool funding.

LEGISLATIVE COUNSEL’S DIGEST

AB 1161, as amended, Olsen. Preschool: privately funded pilot program: tax credits.

Existing law, the Child Care and Development Services Act, administered by the State Department of Education, requires the Superintendent of Public Instruction to administer child care and development programs that offer a full range of services for eligible children from infancy to 13 years of age. Existing law requires the Superintendent to administer all California state preschool programs, including, but not limited to, part-day and full-day age and developmentally appropriate programs for 3- and 4-year-old children.

This bill would, until January 1, 2021, authorize the department, as part of a pilot program, to accept monetary contributions made to the California Preschool Investment Fund, which this bill would create, by a person for purposes of preschool education, as provided. The bill would require the money in the fund to be used to, among other things, fund state preschools part of the California state preschool program located in one of the 5 begin delete participating counties, end delete begin insert counties participating in the pilot program, end insert as provided. The bill would require participating counties to report to the department’s Early Education & Support Division regarding the county’s assessment of how the pilot program is performing. The bill would require any moneys remaining in the fund after January 1, 2021, to be transferred to any other state fund identified by the department that provides funding for increased access to preschool programs for low-income children.

The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws.

This bill, under both laws, for taxable years beginning on or after January 1, 2016, and before January 1, 2020, would allow a credit equal to 40% of the amount contributed by the taxpayer during the taxable year to the California Preschool Investment Fund, as provided. The bill would limit the aggregate amount of credit allowed under both laws to not exceed $250,000,000 and would require the State Department of Education to establish a procedure for a person to obtain from the department a receipt indicating specified information, including the amount of monetary contributions made, for purposes of the tax credits allowed under these provisions.

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The

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begin insert This end insert bill would, until January 1, 2021, require the total annual amount of credits claimed pursuant to these provisions to be treated as though they were proceeds of taxes for purposes of calculating the moneys to be applied by the state for the support of school districts and community college districts pursuant to a specified provision of the California Constitution.

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.  

Article 7.5 (commencing with Section 8239.5)
is added to Chapter 2 of Part 6 of Division 1 of Title 1 of the Education Code, to read:

 

Article 7.5.  California Preschool Investment Pilot Program

 

8239.5.  

The Legislature finds and declares that by providing
an additional source of funding, the state can expand the number
of preschool slots and the number of subsidies provided to help
reduce the waitlist for parents seeking prekindergarten child care
assistance.

8239.6.  

For purposes of this article, the following terms have
the following meanings:

(a) “Department” means the State Department of Education.

(b) “Fund” means the California Preschool Investment Fund.

(c) “Person” means an individual, partnership, corporation,
limited liability company, association, or other group, however
organized.

(d) “Program” means the five-county investor funded preschool
pilot program.

8239.7.  

(a)  begin delete No later than end delete begin insert On or before end insert June 1, 2016, a county
may apply to the department for consideration of inclusion in the
program. For purposes of this section, a county’s local child care
and development planning council, established pursuant to Chapter
2.3 (commencing with Section 8499), shall be responsible for
making the application authorized pursuant to this section.

(b)  begin delete No later than end delete begin insert On or before end insert September 1, 2016, the
department shall determine, pursuant to subdivision (c), the five
counties that shall be included in the program. When making this
determination, the department shall ensure that urban, suburban,
and rural counties are represented in the program.

(c) The department shall make the determination of which five
counties shall be included in the program by giving priority to
counties that meet any of the following factors:

(1) The length of the county’s waitlist of individuals seeking
public child care assistance.

(2) The ability to increase the number of preschool slots
available to children in the county.

(3) Whether the county received federal Race to the Top funds,
authorized under the federal American Recovery and Reinvestment
Act of 2009 (Public Law 111-5), with favorable consideration
going to the counties that received the funds.

8239.8.  

(a) (1) The department may accept monetary
contributions made by a person for funding the purposes of this
article. The California Preschool Investment Fund is hereby created
in the State Treasury to receive any monetary contributions made
pursuant to this article.

(2) (A) The department shall establish a procedure for a person
to make monetary contributions to the fund and for a person to
obtain from the department a receipt that indicates the amount of
monetary contributions made by that person. The receipt shall also
contain, at minimum, the date the monetary contribution was made,
the name of the person who made the contribution, the amount of
the monetary contribution, and whether the person has or has not
been allocated a tax credit pursuant to Section 17053.87 or 23687
of the Revenue and Taxation Code.

(B) Subject to the annual cap as provided in subdivision (f) of
Sections 17053.87 and 23687 of the Revenue and Taxation Code,
the department shall allocate credits to contributors on a
first-come-first-served basis.

(C) The department shall notify the Franchise Tax Board of the
credits allocated on at least a monthly basis, and the Franchise Tax
Board and the department shall place this information on their
respective Internet Web sites together with information as to the
amount of remaining credits, at least every calendar quarter,
including information as to whether the cap described in
subdivision (f) of Sections 17053.87 and 23687 of the Revenue
and Taxation Code may be reached by the end of the calendar
quarter.

(3) Moneys in the fund shall be allocated as follows:

(A) First, moneys in the fund shall be transferred to the General
Fund in an amount equal to the aggregate amount of certified
credits allowed pursuant to Sections 17053.87 and 23687 of the
Revenue and Taxation Code for the taxable year.

(B) Second, upon appropriation:

(i) To the Franchise Tax Board and the department for
reimbursement of all administrative costs incurred by those
agencies in connection with their duties under this article.

(ii) To the department for the purposes of this article, as provided
in subdivision (b).

(b) The moneys appropriated to the department pursuant to
clause (ii) of subparagraph (B) of paragraph (3) of subdivision (a)
shall be used to fund the California state preschool programs,
pursuant to Article 7 (commencing with 8235). The moneys shall
only be used to support state preschools located in one of the five
counties participating in the program.

8239.9.  

A county selected to participate in the program pursuant
to Section 8239.7 shall annually report to the department’s Early
Education & Support Division. The report shall contain the
county’s assessment of how the program is performing.

8239.10.  

(a) This article shall remain in effect only until
January 1, 2021, and as of that date is repealed, unless a later
enacted statute, that is enacted before January 1, 2021, deletes or
extends that date.

(b) Any moneys remaining in the fund as of January 1, 2021,
shall be transferred to any other state fund identified by the
department that provides funding for increased access to preschool
programs for low-income children.

SEC. 2.  

Section 41202 of the Education Code is amended to
read:

41202.  

The words and phrases set forth in subdivision (b) of
Section 8 of Article XVI of the Constitution of the State of
California shall have the following meanings:

(a) “Moneys to be applied by the State,” as used in subdivision
(b) of Section 8 of Article XVI of the California Constitution,
means appropriations from the General Fund that are made for
allocation to school districts, as defined, or community college
districts. An appropriation that is withheld, impounded, or made
without provisions for its allocation to school districts or
community college districts shall not be considered to be “moneys
to be applied by the State.”

(b)  (1) “General Fund revenues which may be appropriated
pursuant to Article XIII B,” as used in paragraph (1) of subdivision
(b) of Section 8 of Article XVI of the California Constitution,
means General Fund revenues that are the proceeds of taxes as
defined by subdivision (c) of Section 8 of Article XIII B of the
California Constitution, including, for the 1986-87 fiscal year
only, any revenues that are determined to be in excess of the
appropriations limit established pursuant to Article XIII B of the
California Constitution for the fiscal year in which they are
received. General Fund revenues for a fiscal year to which
paragraph (1) of subdivision (b) is being applied shall include, in
that computation, only General Fund revenues for that fiscal year
that are the proceeds of taxes, as defined in subdivision (c) of
Section 8 of Article XIII B of the California Constitution, and shall
not include prior fiscal year revenues. Commencing with the
1995-96 fiscal year, and each fiscal year thereafter, “General Fund
revenues that are the proceeds of taxes,” as defined in subdivision
(c) of Section 8 of Article XIII B of the California Constitution,
includes any portion of the proceeds of taxes received from the
state sales tax that are transferred to the counties pursuant to, and
only if, legislation is enacted during the 1995-96 fiscal year the
purpose of which is to realign children’s programs. The amount
of the proceeds of taxes shall be computed for any fiscal year in
a manner consistent with the manner in which the amount of the
proceeds of taxes was computed by the Department of Finance for
purposes of the Governor’s Budget for the Budget Act of 1986.

(2) (A) For purposes of calculating the moneys to be applied
by the state, as used in subdivision (b) of Section 8 of Article XVI
of the California Constitution, the “General Fund revenues that
are the proceeds of taxes,” as defined in subdivision (c) of Section
8 of Article XIII   B of the California Constitution, shall include the
total annual amount of credit claimed pursuant to Sections
17053.87 and 23687 of the Revenue and Taxation Code as though
they were proceeds of taxes.

(B) This paragraph shall become inoperative on January 1, 2021.

(c) “General Fund revenues appropriated for school districts,”
as used in paragraph (1) of subdivision (b) of Section 8 of Article
XVI of the California Constitution, means the sum of
appropriations made that are for allocation to school districts, as
defined in Section 41302.5, regardless of whether those
appropriations were made from the General Fund to the
Superintendent, to the Controller, or to any other fund or state
agency for the purpose of allocation to school districts. The full
amount of any appropriation shall be included in the calculation
of the percentage required by paragraph (1) of subdivision (b) of
Article XVI of the California Constitution, without regard to any
unexpended balance of any appropriation. Any reappropriation of
funds appropriated in any prior year shall not be included in the
sum of appropriations.

(d) “General Fund revenues appropriated for community college
districts,” as used in paragraph (1) of subdivision (b) of Section 8
of Article XVI of the California Constitution, means the sum of
appropriations made that are for allocation to community college
districts, regardless of whether those appropriations were made
from the General Fund to the Controller, to the Chancellor of the
California Community Colleges, or to any other fund or state
agency for the purpose of allocation to community college districts.
The full amount of any appropriation shall be included in the
calculation of the percentage required by paragraph (1) of
subdivision (b) of Article XVI of the California Constitution,
without regard to any unexpended balance of any appropriation.
Any reappropriation of funds appropriated in any prior year shall
not be included in the sum of appropriations.

(e) “Total allocations to school districts and community college
districts from General Fund proceeds of taxes appropriated pursuant
to Article XIII B,” as used in paragraph (2) or (3) of subdivision
(b) of Section 8 of Article XVI of the California Constitution,
means the sum of appropriations made that are for allocation to
school districts, as defined in Section 41302.5, and community
college districts, regardless of whether those appropriations were
made from the General Fund to the Controller, to the
Superintendent, to the Chancellor of the California Community
Colleges, or to any other fund or state agency for the purpose of
allocation to school districts and community college districts. The
full amount of any appropriation shall be included in the calculation
of the percentage required by paragraph (2) or (3) of subdivision
(b) of Section 8 of Article XVI of the California Constitution,
without regard to any unexpended balance of any appropriation.
Any reappropriation of funds appropriated in any prior year shall
not be included in the sum of appropriations.

(f) “General Fund revenues appropriated for school districts
and community college districts, respectively” and “moneys to be
applied by the state for the support of school districts and
community college districts,” as used in Section 8 of Article XVI
of the California Constitution, shall include funds appropriated for
part-day California state preschool programs under Article 7
(commencing with Section 8235) of Chapter 2 of Part 6 of Division
1 of Title 1, and the After School Education and Safety Program
established pursuant to Article 22.5 (commencing with Section
8482) of Chapter 2 of Part 6 of Division 1 of Title 1, and shall not
include any of the following:

(1) Any appropriation that is not made for allocation to a school
district, as defined in Section 41302.5, or to a community college
district, regardless of whether the appropriation is made for any
purpose that may be considered to be for the benefit to a school
district, as defined in Section 41302.5, or a community college
district. This paragraph shall not be construed to exclude any
funding appropriated for part-day California state preschool
programs under Article 7 (commencing with Section 8235) of
Chapter 2 of Part 6 of Division 1 of Title 1 or the After School
Education and Safety Program established pursuant to Article 22.5
(commencing with Section 8482) of Chapter 2 of Part 6 of Division
1 of Title 1.

(2) Any appropriation made to the Teachers’ Retirement Fund
or to the Public Employees’ Retirement Fund except those
appropriations for reimbursable state mandates imposed on or
before January 1, 1988.

(3) Any appropriation made to service any public debt approved
by the voters of this state.

(4) With the exception of the programs identified in paragraph
(1), commencing with the 2011-12 fiscal year, any funds
appropriated for the Child Care and Development Services Act,
pursuant to Chapter 2 (commencing with Section 8200) of Part 6
of Division 1 of Title 1.

(g) “Allocated local proceeds of taxes,” as used in paragraph
(2) or (3) of subdivision (b) of Section 8 of Article XVI of the
California Constitution, means, for school districts as defined,
those local revenues, except revenues identified pursuant to
paragraph (5) of subdivision (j) of Section 42238.02, that are used
to offset state aid for school districts in calculations performed
pursuant to Sections 2575, 42238.02, and Chapter 7.2 (commencing
with Section 56836) of Part 30.

(h) “Allocated local proceeds of taxes,” as used in paragraph
(2) or (3) of subdivision (b) of Section 8 of Article XVI of the
California Constitution, means, for community college districts,
those local revenues that are used to offset state aid for community
college districts. In no event shall the revenues or receipts derived
from student fees be considered “allocated local proceeds of taxes.”

(i) For purposes of calculating the 4-percent entitlement pursuant
to subdivision (a) of Section 8.5 of Article XVI of the California
Constitution, “the total amount required pursuant to Section 8(b)”
shall mean the General Fund aid required for schools pursuant to
subdivision (b) of Section 8 of Article XVI of the California
Constitution, and shall not include allocated local proceeds of
taxes.

SEC. 3.  

Section 17053.87 is added to the Revenue and Taxation
Code, to read:

17053.87.  

(a) For taxable years beginning on or after January
1, 2016, and before January 1, 2020, there shall be allowed as a
credit against the “net tax,” as defined in Section 17039, an amount
equal to 40 percent of the amount contributed by the taxpayer
during the taxable year to the California Preschool Investment
Fund, created by Section 8239.8 of the Education Code.

(b) A credit shall only be allowed if the taxpayer has received
a receipt from the State Department of Education pursuant to
Section 8239.8 of the Education Code that indicates that the
taxpayer has made a contribution to the California Preschool
Investment Fund and that a credit would be allowed under this
section. The taxpayer shall provide the receipt upon request to the
Franchise Tax Board.

(c) (1) 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 four years if
necessary, until the credit is exhausted.

(2) A deduction otherwise allowed under this part for any
amount contributed by the taxpayer upon which the credit is based
shall be reduced by the amount of the credit allowed in subdivision
(a).

(d) Credit under this section shall be allowed only for credits
claimed on a timely filed original return of the taxpayer.

(e) (1) The Franchise Tax Board may prescribe rules, guidelines,
or procedures necessary or appropriate to carry out the purposes
of this section.

(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to
any standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board
pursuant to this section.

(f) The aggregate amount of credit that may be allowed pursuant
to this section and Section 23687 shall not exceed two hundred
fifty million dollars ($250,000,000) for each calendar year.

(g) This section is repealed on December 1, 2020.

SEC. 4.  

Section 23687 is added to the Revenue and Taxation
Code, to read:

23687.  

(a) For taxable years beginning on or after January 1,
2016, and before January 1, 2020, there shall be allowed as a credit
against the “tax,” as defined in Section 23036, an amount equal
to 40 percent of the amount contributed by the taxpayer during the
taxable year to the California Preschool Investment Fund, created
by Section 8239.8 of the Education Code.

(b) A credit shall only be allowed if the taxpayer has received
a receipt from the State Department of Education pursuant to
Section 8239.8 of the Education Code that indicates that the
taxpayer has made a contribution to the California Preschool
Investment Fund and that a credit would be allowed under this
section. The taxpayer shall provide the receipt upon request to the
Franchise Tax Board.

(c) (1) 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 four years if necessary,
until the credit is exhausted.

(2) A deduction otherwise allowed under this part for any
amount contributed by the taxpayer upon which the credit is based
shall be reduced by the amount of the credit allowed in subdivision
(a).

(d) Credit under this section shall be allowed only for credits
claimed on a timely filed original return of the taxpayer.

(e) (1) The Franchise Tax Board may prescribe rules, guidelines,
or procedures necessary or appropriate to carry out the purposes
of this section.

(2) Chapter 3.5 (commencing with Section 11340) of Part 1 of
Division 3 of Title 2 of the Government Code does not apply to
any standard, criterion, procedure, determination, rule, notice, or
guideline established or issued by the Franchise Tax Board
pursuant to this section.

(f) The aggregate amount of credit that may be allowed pursuant
to this section and Section 17053.87 shall not exceed two hundred
fifty million dollars ($250,000,000) for each calendar year.

(g) This section is repealed on December 1, 2020.