BILL ANALYSIS Ó
AB 2676
Page 1
Date of Hearing: May 25, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2676 (Chávez) - As Amended May 16, 2016
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|Policy |Revenue and Taxation |Vote:|9 - 0 |
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Urgency: Yes State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill expands the Child and Dependent Care Expenses tax
credit for tax years 2016 through 2018 by modifying the size of
the credit as follows:
1)For taxpayers with an adjusted gross income (AGI) of $40,000
or less, the applicable credit percentage is 65% instead of
50%.
2)For taxpayers with AGI between $40,000 and $70,000, the
applicable credit percentage is 50%, instead of 43%.
AB 2676
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3)For taxpayers with AGI over $70,000 but not over $100,000, the
applicable credit percentage is unchanged at 34%, and those
with AGI over $100,000 remain ineligible for the credit.
FISCAL EFFECT:
1)Minor and absorbable administrative costs to the Franchise Tax
Board (FTB) to update forms, processes, and software.
2)Annual GF revenue loss of approximately $2 million in FY
2016-17, FY 2017-18, and FY 2018-19.
COMMENTS:
1)Purpose. AB 2676 is intended to strengthen the state Child and
Dependent Care Expenses Credit, which is insufficient to meet
the needs of hardworking families. The author argues that this
bill will help minimize the federal strains of child care and
dependent care by relieving the tax burden on these families.
2)Background. The federal Child and Dependent Care Credit is a
nonrefundable credit, equal to a portion of qualifying child
or dependent care expenses paid for the purpose of allowing
the taxpayer to be employed. To obtain the credit, the
taxpayer must incur employment-related expenses to provide
care for a dependent under the age of 13. The maximum amount
of employment-related expenses to which the federal credit may
be applied is $3,000 if one qualifying individual is involved
or $6,000 if two or more qualifying individuals are involved.
The credit amount is equal to the applicable percentage (20 to
35%), as determined by the taxpayer's AGI times the qualified
employment expenses paid. Taxpayers with an AGI of $15,000 or
AB 2676
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less use the highest applicable percentage of 35%.
Existing California law provides a tax credit similar to the
federal child care credit, the Child and Dependent Care
Expenses Credit. State law conforms to the federal expenses
cap, and applies the federal credit percentage to calculate
the credit amount. The state credit is computed by first
applying the federal credit percentage (20 to 35%) to the
smallest of three amounts: the expense cap, California
expenses, or California earned income. The state credit
percentage is then applied. Unlike the federal credit, the
state credit has an income limit: taxpayers with AGI over
$100,000 cannot claim the state credit.
3)Who claims the Child Care and Dependent Care Expenses Credit?
Data for 2012 shows that a large majority of Child Care and
Dependent Care Expenses Credit benefits are concentrated among
households with incomes between $50,000 to $99,999. Around 85%
of allocated credit amounts were given to households in this
income range. Until December 31, 2010, this credit was
refundable; thus, it was available to Californians with little
or no tax liability. Beginning with 2011, the refundable
portion of the credit was repealed.
Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081