California Legislature—2015–16 Regular Session

Assembly Bill No. 1929

Introduced by Assembly Member Brough

February 12, 2016

An act to amend Section 17052 of the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL’S DIGEST

AB 1929, as introduced, Brough. Personal income taxes: earned income credit: report.

The Personal Income Tax Law allows various credits against the taxes imposed by that law, including, in modified conformity with federal income tax laws, an earned income credit against personal income tax, as provided. Existing law requires the Franchise Tax Board to annually prepare a written report regarding the credit and to provide that report to specified legislative committees.

This bill would require the Franchise Tax Board to include in that annual report the number of false or fraudulent claims for the credit.

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.  

Section 17052 of the Revenue and Taxation Code
is amended to read:

17052.  

(a) (1) For each taxable year beginning on or after
January 1, 2015, there shall be allowed against the “net tax,” as
defined by Section 17039, an earned income tax credit in an amount
equal to an amount determined in accordance with Section 32 of
the Internal Revenue Code, relating to earned income, as applicable
for federal income tax purposes for the taxable year, except as
otherwise provided in this section.

(2) (A) The amount of the credit determined under Section 32
of the Internal Revenue Code, relating to earned income, as
modified by this section, shall be multiplied by the earned income
tax credit adjustment factor for the taxable year.

(B) Unless otherwise specified in the annual Budget Act, the
earned income tax credit adjustment factor for a taxable year
beginning on or after January 1, 2015, shall be 0 percent.

(C) The earned income tax credit authorized by this section
shall only be operative for taxable years for which resources are
authorized in the annual Budget Act for the Franchise Tax Board
to oversee and audit returns associated with the credit.

(b) (1) In lieu of the table prescribed in Section 32(b)(1) of the
Internal Revenue Code, relating to percentages, the credit
percentage and the phaseout percentage shall be determined as
follows:

 

In the case of an eligible individual with:	The credit percentage is:	The phaseout percentage is:
No qualifying children	7.65%	7.65%
1 qualifying child	34%	34%
2 or more qualifying children	40%	40%

 

(2) (A) In lieu of the table prescribed in Section 32(b)(2)(A)
of the Internal Revenue Code, the earned income amount and the
phaseout amount shall be determined as follows:

 

In the case of an eligible individual with:	The earned income amount is:	The phaseout amount is:
No qualifying children	$3,290	$3,290
1 qualifying child	$4,940	$4,940
2 or more qualifying children	$6,935	$6,935

 

(B) Section 32(b)(2)(B) of the Internal Revenue Code, relating
to joint returns, shall not apply.

(3) Section 32(b)(3)(A) of the Internal Revenue Code, relating
to increased percentage for three or more qualifying children, is
modified by substituting “the credit percentage and phaseout
percentage is 45 percent” for “the credit percentage is 45 percent.”

(c) (1) Section 32(c)(1)(A)(ii)(I) of the Internal Revenue Code
is modified by substituting “this state” for “the United States.”

(2) Section 32(c)(2)(A) of the Internal Revenue Code is modified
as follows:

(A) Section 32(c)(2)(A)(i) of the Internal Revenue Code is
modified by deleting “plus” and inserting in lieu thereof the
following: “and only if such amounts are subject to withholding
pursuant to Division 6 (commencing with Section 13000) of the
Unemployment Insurance Code.”

(B) Section 32(c)(2)(A)(ii) of the Internal Revenue Code shall
not apply.

(3) Section 32(c)(3)(C) of the Internal Revenue Code, relating
to place of abode, is modified by substituting “this state” for “the
United States.”

(d) Section 32(i)(1) of the Internal Revenue Code is modified
by substituting “$3,400” for “$2,200.”

(e) In lieu of Section 32(j) of the Internal Revenue Code, relating
to inflation adjustments, for taxable years beginning on or after
January 1, 2016, the amounts specified in paragraph (2) of
subdivision (b) and in subdivision (d) shall be recomputed annually
in the same manner as the recomputation of income tax brackets
under subdivision (h) of Section 17041.

(f) If the amount allowable as a credit under this section exceeds
the tax liability computed under this part for the taxable year, the
excess shall be credited against other amounts due, if any, and the
balance, if any, shall be paid from the Tax Relief and Refund
Account and refunded to the taxpayer.

(g) The Franchise Tax Board may prescribe rules, guidelines,
or procedures necessary or appropriate to carry out the purposes
of this section. Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code shall not
apply to any rule, guideline, or procedure prescribed by the
Franchise Tax Board pursuant to this section.

(h) Notwithstanding any other law, amounts refunded pursuant
to this section shall be treated in the same manner as the federal
earned income refund for the purpose of determining eligibility to
receive benefits under Division 9 (commencing with Section
10000) of the Welfare and Institutions Code or amounts of those
benefits.

(i) (1) For the purpose of implementing the credit allowed by
this section for the 2015 taxable year, the Franchise Tax Board
shall be exempt from the following:

(A) Special Project Report requirements under State
Administrative Manual Sections 4819.36, 4945, and 4945.2.

(B) Special Project Report requirements under Statewide
Information Management Manual Section 30.

(C) Section 11.00 of the 2015 Budget Act.

(D) Sections 12101, 12101.5, 12102, and 12102.1 of the Public
Contract Code.

(2) The Franchise Tax Board shall formally incorporate the
scope, costs, and schedule changes associated with the
implementation of the credit allowed by this section in its next
anticipated Special Project Report for its Enterprise Data to
Revenue Project.

(j) (1) In accordance with Section 41 of the Revenue and
Taxation Code, the purpose of the California Earned Income Tax
Credit is to reduce poverty among California’s poorest working
families and individuals. To measure whether the credit achieves
its intended purpose, the Franchise Tax Board shall annually
prepare a written report on the following:

(A) The number of tax returns claiming the begin delete credit. end delete begin insert credit,
including the number of false or fraudulent claims. end insert

(B) The number of individuals represented on tax returns
claiming the credit.

(C) The average credit amount on tax returns claiming the credit.

(D) The distribution of credits by number of dependents and
income ranges. The income ranges shall encompass the phase-in
and phaseout ranges of the credit.

(E) Using data from tax returns claiming the credit, including
an estimate of the federal tax credit determined under Section 32
of the Internal Revenue Code, an estimate of the number of families
who are lifted out of deep poverty by the credit and an estimate of
the number of families who are lifted out of deep poverty by the
combination of the credit and the federal tax credit. For the
purposes of this subdivision, a family is in “deep poverty” if the
income of the family is less than 50 percent of the federal poverty
threshold.

(2) The Franchise Tax Board shall provide the written report to
the Senate Committee on Budget and Fiscal Review, the Assembly
Committee on Budget, the Senate and Assembly Committees on
Appropriations, the Senate Committee on Governance and Finance,
the Assembly Committees on Revenue and Taxation, and the
Senate and Assembly Committees on Human Services.

(k) The tax credit allowed by this section shall be known as the
California Earned Income Tax Credit.