BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 268 (Nguyen) - Income taxes: credit: dependent care
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|Version: April 20, 2015 |Policy Vote: GOV. & F. 6 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: May 11, 2015 |Consultant: Robert Ingenito |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 268 would increase (1) the maximum adjusted gross
income (AGI) related to the Dependent Care Credit, and (2) the
maximum amount of employment-related expenses to which the
credit may be applied.
Fiscal
Impact: The Franchise Tax Board indicates that this bill would
result in a General Fund revenue loss of $60 million in 2015-16,
$65 million in 2016-17, and $65 million in 2017-18. FTB
indicates that the bill's impact on department operations would
be minor.
Background: The federal Child and Dependent Care Credit is a nonrefundable
credit (a dollar for dollar reduction in tax liability), equal
to a portion of qualifying child or dependent care expenses paid
SB 268 (Nguyen) Page 1 of
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for the purpose of allowing the taxpayer either to be gainfully
employed or seek employment. 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 credit may be applied is $3,000 (for one
qualifying individual) or $6,000 (for two or more qualifying
individuals). The credit amount is equal to the applicable
percentage (20 to 35 percent), depending on the taxpayer's AGI,
multiplied by the qualified employment expenses paid. The
applicable percentage varies inversely with AGI; the higher the
AGI, the lower the percentage. Taxpayers with an AGI of $15,000
or less use the highest permissible percentage of 35 percent.
Existing California law provides a tax credit similar to the
federal version. State law conforms to the federal expenses cap,
and applies the federal credit percentage to calculate the
credit amount. However, state law limits expenses to care
provided in California, and income earned from California
sources. The state credit is computed by first applying the
federal credit percentage (20 to 35 percent) to the smallest of
three amounts: the expense cap, California expenses, or
California earned income. The state credit percentage is then
applied.
The state credit percentage varies based on the taxpayer's AGI,
and is limited to taxpayers with AGI of $100,000 or less.
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If AGI is: Credit Percentage:
$40,000 or less 50%
Over $40,000 but not over $70,000 43%
Over $70,000 but not over $100,000 34%
Over $100,000 0%
Proposed Law: This bill would increase the maximum AGI eligible
for the child care credit as follows:
If AGI is: Credit Percentage:
$100,000 or less 50%
Over $100,000 but not over $175,000 43%
Over $175,000 but not over $250,000 34%
Over $250,000 0%
SB 268 (Nguyen) Page 3 of
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The bill also would (1) increase the maximum amount of
employment-related expenses to which the credit may be applied
from $3,000 to $4,000 for one child and from $6,000 to $12,000
for two or more children, and (2) take effect immediately as a
tax levy.
Related
Legislation: SB 86 (Senate Budget and Fiscal Review Committee,
Chapter 14, Statutes of 2011) made the credit for child and
dependent care expenses nonrefundable beginning in taxable year
2011.
Staff
Comments: Using data captured from the relevant tax form (Forms
3506 -- Child and Dependent Care Expenses Credit), FTB
recalculated the amount of credit each taxpayer could claim to
reflect the higher AGI levels and increase in expenses specified
in the bill. As noted above, the result would be a revenue loss
in the of millions of dollars.
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