BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1847| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1847 Author: Mark Stone (D), et al. Amended: 4/7/16 in Assembly Vote: 21 SENATE GOVERNANCE & FIN. COMMITTEE: 5-0, 6/22/16 AYES: Hertzberg, Nguyen, Beall, Hernandez, Pavley NO VOTE RECORDED: Lara, Moorlach SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/11/16 AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen ASSEMBLY FLOOR: 79-0, 5/31/16 - See last page for vote SUBJECT: Earned Income Tax Credit Information Act: California Earned Income Tax Credit SOURCE: Author DIGEST: This bill expands the current employee notification requirement relating to the federal Earned Income Tax Credit (EITC) to include a reference to the California EITC. ANALYSIS: Existing law: 1)Allows a federal and state refundable EITC to certain eligible AB 1847 Page 2 individuals. A refundable credit allows for the excess of the credit over the taxpayer's tax liability to be refunded to the taxpayer. The EITC amount is based on a percentage of the taxpayer's earned income and is phased out as income increases. The percentage varies depending on whether the taxpayer has qualifying children. 2)Requires California employers, state departments, and certain state agencies to provide formal notification of possible eligibility for the federal EITC. This bill: 1)Expands the current employee notification requirement relating to the federal EITC to include a reference to the California EITC. 2)Provides that the amended EITC notification provisions will apply to notices furnished on or after January 1, 2017. Background Both federal and state laws require employers to notify all employees that they may be eligible for the federal EITC. Under federal law, an employer must provide an employee with Form W-2, a substitute of W-2, Notice 797, or a written statement with the same wording as Notice 797. Under California's law - the Earned Income Tax Credit Information Act (EITC Act) - an employer must also notify employees about the federal EITC within one week before or after the employer provides the employees with their annual wage summary (e.g., a Form W-2 or a Form 1099). Employers must either hand the notice directly to each employee or mail it to the employee's last known address. Furthermore, all California employers must post a statement about the EITC in the workplace. In addition, state law requires certain specified state departments, agencies and programs serving individuals who may qualify for the federal EITC to notify these individuals of the availability of this credit and the ways to AB 1847 Page 3 claim it. The law encourages departments, agencies, and programs to develop the least costly, as well as the most effective, methods to provide notice. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No According to the Senate Appropriations Committee: This bill will result in an annual General Fund revenue loss of unknown magnitude, likely in excess of $50,000. The Franchise Tax Board would incur minor and absorbable costs to update guidance related to notifying employees of the California EITC. SUPPORT: (Verified8/12/16) Abrazar, Inc. California Asset Building Association California Association of Public Authorities California Catholic Conference California Family Resource Association California Tax Reform Association California Welfare Directors Association Children's Defense Fund Common Sense Kids Action County Welfare Directors Association of California First 5 Association of California Good Hands Foundation Inland Empire United Way National Association of Social Workers, California Chapter AB 1847 Page 4 Small Business California United Ways of California United Ways of the Bay Area, Fresno and Madera Counties, Monterey County, Orange County, San Diego County, and Stanislaus County OPPOSITION: (Verified8/12/16) None received ARGUMENTS IN SUPPORT: According to the author, "AB 1847 builds upon the 2015 creation of the statewide California Earned Income Tax Credit (EITC), which provides a new tax credit to the state's poorest working families. The creation of the California EITC represents a necessary step to reduce the poverty rate of working families and improve the economic outlook on the state's impoverished communities. However, the only way that families can benefit from these credits is by filing for taxes, even though most families for the state EITC are not required to file. This simple measure requires employers to notify their employees of possible eligibility for the State EITC in order to increase the number of families who file taxes and receive benefits, just as employers are already required to notify their employees about possible eligibility for the federal EITC." ASSEMBLY FLOOR: 79-0, 5/31/16 AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon AB 1847 Page 5 NO VOTE RECORDED: Harper Prepared by:Myriam Bouaziz / GOV. & F. / (916) 651-4119 8/15/16 20:17:22 **** END ****