AB 1847, as amended, Mark Stone. Earned Income Tax Credit Information Act: California Earned Income Tax Credit.
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.
The Personal Income Tax Law, in modified conformity with federal income tax laws, allows an earned income credit against personal income tax, and a payment in excess of that credit amount, to an eligible individual that is equal to that portion of the earned income tax credit allowed by federal law as determined by the earned income tax credit adjustment factor as set forth in the annual Budget Act.
Existing law, the Earned Income Tax Credit Information Act, requires an employer, as defined, to notify all employees that they may be eligible for the federal earned income tax credit, as specified.
This bill would require those same employers currently required to notify employees who may be eligible for the federal earned income tax credit to also notify these employees that they may be eligible for the California Earned Income Tax Credit under the same conditions.
Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 19851 of the Revenue and Taxation Code
2 is amended to read:
The Legislature finds and declares as follows:
4(a) Congress created the federal earned income tax credit (EITC)
5in 1975 to offset the adverse effects of the Medicare and social
6security payroll taxes on working poor families and to encourage
7low-income workers to seek employment rather than welfare.
8(b) Due to a relatively low percentage of federal earned income
9tax credit eligible persons who participate in the federal Earned
10Income Tax Credit program, hundreds of millions of federal dollars
11go unclaimed by the working poor in California.
12(c) In 2015, the State of California authorized a state
13amplify the poverty-reducing effects of the federal EITC for the
14poorest working Californians.
15(d) In order to alleviate the tax burden on working poor persons
16and families, to enhance the wages and income of working poor
17persons and families, to ensure that California receives its share
18of the federal money available in the federal Earned Income Tax
19Credit program, to ensure that the poorest working Californians
20access the additional state EITC, and to inject additional federal
21money into the California economy, the state shall facilitate the
22furnishing of information to working poor persons and families
23regarding the availability of the federal and state earned income
24tax credit so that they may claim those credits on their federal and
25state income tax returns.
26(e) It is the intent of this act to offer the most cost-effective
27assistance to eligible taxpayers through the following:
28(1) Notices provided by their employers.
29(2) Notices provided by state departments and agencies that
30serve those who may qualify for the EITC.
31(3) By taking steps to ensure that eligible Californians claim
32both the federal and state EITC.
Section 19852 of the Revenue and Taxation Code is
2amended to read:
For purposes of this part, the following terms have the
5(a) “Employer” means any California employer who is subject
6to, and is required to provide, unemployment insurance to his or
7her employees, under the Unemployment Insurance Code.
8(b) “Employee” means any person who is covered by
9unemployment insurance by his or her employer, pursuant to the
10Unemployment Insurance Code.
begin delete“EITC” end deletemeans
the federal earned income
12tax credit, as defined in Section 32 of the Internal Revenue
begin delete Code,
13and the California Earned Income Tax Credit, as defined in Section
19 “State departments and agencies that serve those who may
20qualify for the EITC” means the
21following programs in the specified departments and agencies:
22(1) The State Department of Education: free or reduced-price
23meal program and National School Lunch Program.
24(2) Employment Development Department: California
26(3) State Department of Health Care Services: the Medi-Cal
28(4) Managed Risk Medical Insurance Board (MRMIB): the
29Healthy Families Program.
Section 19853 of the Revenue and Taxation Code is
34amended to read:
(a) An employer shall notify all employees that they
36may be eligible for the EITC within
37one week before or after, or at the same time, that the employer
38provides an annual wage summary, including, but not limited to,
39a Form W-2 or a Form 1099, to any employee.
P4 1(b) The state departments and agencies that serve those who
2may qualify for the EITC, as defined
begin delete (d)end delete of Section 19852, shall notify their program
4recipients that they may be eligible for the EITC, at least once a year during the months of January
6through April, or alternatively, shall provide this annual notification
7during a regularly scheduled contact with a recipient by telephone,
8mail, or electronic communication, or by an in-person
9communication. State departments or agencies that do not directly
10communicate with persons or households with persons who may
11qualify for the EITC may communicate
12indirectly through agencies, districts, or regulated entities that
13serve eligible persons or households with eligible persons.
14Departments, agencies, and programs are encouraged to develop
15the most effective method to provide notice to recipients of EITC eligibility, as long as the notice contains
17substantially the same language as the notice described in Section
19(c) The employer shall provide the notification required by
20subdivision (a) by handing directly to the employee or mailing to
21the employee’s last known address either of the following:
22(1) Instructions on how to obtain any notices available from the
23Internal Revenue Service
begin delete orend delete the Franchise Tax Board for this
24purpose, including, but not limited to, the IRS Notice 797
begin delete and
25Form W-5, California Form 3514, or any successor notice or form.end delete
28(2) Any notice created by the employer, as long as it contains
29substantially the same language as the notice described in
30paragraph (1) or in Section 19854.
31(d) The employer shall not satisfy the notification required by
32subdivision (a) by posting a notice on an employee bulletin board
33or sending it through office mail. However, these methods of
34notification are encouraged to help inform all employees of the
36(e) Every employer shall process, in accordance with federal
37law, Form W-5 for advance payments of the EITC, and California
38Form 3514, upon the request of the employee.
Section 19854 of the Revenue and Taxation Code is
5amended to read:
The notice furnished to employees regarding the
7availability of the EITC shall state as
10BASED ON YOUR ANNUAL EARNINGS, YOU MAY
11BE ELIGIBLE TO RECEIVE THE EARNED INCOME TAX
12CREDIT FROM THE FEDERAL GOVERNMENT
begin delete OR THE THE
13STATE OF CALIFORNIA.end delete
begin delete EARNED INCOME TAX CREDITend delete IS A
15REFUNDABLE INCOME TAX CREDIT FOR
16LOW-INCOME WORKING INDIVIDUALS AND
begin delete EARNED INCOME TAX CREDITend delete
18 HAS NO EFFECT ON CERTAIN
19WELFARE BENEFITS. IN MOST CASES,
begin delete EARNED PAYMENTS WILL
20INCOME TAX CREDITend delete
21NOT BE USED TO DETERMINE ELIGIBILITY FOR
22MEDICAID, SUPPLEMENTAL SECURITY INCOME,
23FOOD STAMPS, LOW-INCOME HOUSING OR MOST
24TEMPORARY ASSISTANCE FOR NEEDY FAMILIES
25PAYMENTS. EVEN IF YOU DO NOT OWE FEDERAL
begin delete OR TAXES, YOU MUST FILE A TAX
27RETURN TO RECEIVE THE
begin delete EARNED INCOME TAX BE SURE TO FILL OUT THE
begin delete EARNED INCOME TAX CREDITend delete FORM
30IN THE FEDERAL INCOME TAX RETURN
begin delete BOOKLET FOR
31AND ANY RELATED STATE FORMS.end delete
32INFORMATION REGARDING YOUR ELIGIBILITY TO
33RECEIVE THE FEDERAL
begin delete EARNED INCOME TAX INCLUDING INFORMATION ON HOW
35TO OBTAIN THE IRS NOTICE 797
begin delete OR FORM W-5,end delete
36ANY OTHER NECESSARY
begin delete FEDERALend delete FORMS AND
37INSTRUCTIONS, CONTACT THE INTERNAL REVENUE
38SERVICE BY CALLING 1-800-829-3676 OR THROUGH
39ITS WEB SITE AT WWW.IRS.GOV.
begin delete FOR MORE
40INFORMATION REGARDING YOUR ELIGIBILITY FOR
P6 1THE CALIFORNIA EARNED INCOME TAX CREDIT,
2INCLUDING INFORMATION ON HOW TO OBTAIN
3CALIFORNIA FORM 3514 CONTACT THE FRANCHISE
4TAX BOARD THROUGH ITS INTERNET WEB SITE AT
5WWW.FTB.CA.GOV. end delete