BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 670 (Jackson) - Income taxes: credit: dependent care:
child care
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|Version: May 13, 2015 |Policy Vote: GOV. & F. 6 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: May 26, 2015 |Consultant: Robert Ingenito |
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SUSPENSE FILE. AS AMENDED.
Bill
Summary: SB 670 would (1) reestablish two employer tax credits
related to providing childcare, and (2) increase the percentages
for the Child & Dependent Care Expenses Credit.
Fiscal Impact (as approved on May 28,
2015): The Franchise Tax Board (FTB) estimates that the bill's
three changes to tax law would result in an aggregate General
Fund revenue loss of $0.5 million in 2015-16, $4.3 million in
2016-17, and $4.8 million in 2017-18. FTB indicates that the
bill's impact on department operations would be minor.
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Background: Prior to 2012, state law allowed two tax credit programs for
employers providing child care for employees. Both credits could
be carried over until they were exhausted:
30 percent of startup costs of establishing a child care
program or constructing a child care facility in California
primarily used by (1) the children of the taxpayer's
employees, (2) tenants leasing commercial or office space
in the taxpayer's building, or (3) for contributions to
California child care information and referral services.
The credit was capped at $50,000 per taxable year.
30 percent of the costs paid for contributions to a
qualified care plan made on behalf of any qualified
dependent, not to exceed $360 for each qualified dependent.
Contributions must be direct payments to child care
providers, and not pursuant to a salary reduction
agreement.
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
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.
Current 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
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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.
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 reestablish the aforementioned two employer tax
credits for providing childcare to employees. Any credits in
excess of tax liability may be carried over for use in
succeeding years, though the amount of the credit that may be
claimed by any taxpayer in any one year cannot exceed $50,000.
Additionally, the bill would increase the credit percentages for
the Child and Dependent Care Credit as follows:
If AGI is: Credit Percentage:
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$40,000 or less 63%
Over $40,000 but not over $70,000 53%
Over $70,000 but not over $100,000 42%
Over $100,000 0%
Related
Legislation: SB 268 (Nguyen) would increase the maximum adjusted
gross income and the maximum amount of employment-related
expenses to which the credit may be applied. The bill is
current on this Committee's Suspense File.
Staff
Comments: With respect to each of the three individual tax law
changes proposed by the bill, FTB estimates the following
revenue impacts:
The Employer Child Care Program Credit would result in
General Fund revenue losses of $0.1 million in 2015-16,
$0.6 million in 2016-17, and $0.7 million in 2017-18.
The Employer Child Care Contribution Credit would result
in General Fund revenue losses of $0.4 million in 2015-16,
$3.7 million in 2016-17 and $4.1 million in 2017-18.
The Child and Dependent Care Credit would result in
General Fund revenue losses of $3.6 million in both 2016-17
and 2017-18.
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Author's Amendments (as adopted May 28, 2015): Amendments would
remove the increases in the Child and Dependent Care Credit
percentages.
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