BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 670| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 670 Author: Jackson (D) Amended: 6/1/15 Vote: 21 SENATE GOVERNANCE & FIN. COMMITTEE: 6-0, 5/6/15 AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach NO VOTE RECORDED: Pavley SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/28/15 AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen SUBJECT: Income taxes: credit: dependent care: child care SOURCE: Author DIGEST: This bill reestablishes two employer tax credits related to providing childcare. ANALYSIS: Existing law allows taxpayers to claim tax credits designed as incentives for taxpayers to incur certain expenses, such as child adoption, or to influence behavior, including business practices and decisions. This bill: SB 670 Page 2 1)Allows a credit of 30% of the costs paid for the startup expenses of establishing a child care program or constructing a child care facility in California, that will primarily be used by the children of the taxpayer's employees, tenants leasing commercial or office space in the taxpayer's building, or for contributions to California child care information and referral services, capped at $50,000 per taxable year. 2)Allows a credit of 30% 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. 3)Allows 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. This credit is available through the 2021 tax year, although unused credits may be carried forward beyond the sunset date. 4)Takes effect immediately, and applies to taxable years beginning on or after January 1, 2016 and before January 1, 2021. Background Prior to 2012, state law allowed two tax credit programs for employers providing child care for employees: 1)30% of the costs paid for the startup expenses of establishing a child care program or constructing a child care facility in California that will primarily be used by the children of the taxpayer's employees, tenants leasing commercial or office space in the taxpayer's building, or for contributions to California child care information and referral services, capped at $50,000 per taxable year. 2)30% 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 SB 670 Page 3 salary reduction agreement. Both credits could be carried over until exhausted. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No According to the Senate Appropriations Committee, 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. This estimate was made prior to the amendment made on 5/13/15 SUPPORT: (Verified5/29/15) Bay Area Council OPPOSITION: (Verified5/29/15) None received ARGUMENTS IN SUPPORT: According to the author, "Access to affordable and quality child care has long been a challenge for working families, where demand has consistently outpaced supply. In California, the numbers are stark. 57 percent of women are in the workforce, 64 percent have children under the age of six. Many working single mothers also spend nearly half of their income (44%) on child care. Yet, the state only has the licensed child care capacity to serve 16 percent of children under the age of 12, this creates dire situations for working families, where oftentimes it is the mother who is forced to choose between remaining at home to care for her child or leaving her child unattended or with a caretaker with whom she may or may not be familiar so that she can work. When the Employer Child Care Tax Credit expired, we lost a tool SB 670 Page 4 that not only helped to alleviate the challenges working families face when trying to balance family and work, but also, the ability of California companies and businesses to provide supported child care programs. By re-establishing the ECTC, we can uphold the state's commitment to provide a supportive business environment while also helping to provide working mothers access to child care so that they can continue to pursue their careers and strengthen California's economy." Prepared by:Myriam Bouaziz / GOV. & F. / (916) 651-4119 6/1/15 18:22:38 **** END ****