Amended in Senate May 4, 2016

Amended in Senate March 15, 2016

Senate Bill No. 874

Introduced by Senator Gaines

January 14, 2016

An act to amend Section 17054 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

SB 874, as amended, Gaines. Personal Income Tax Law: exemption credit: dependents.

The Personal Income Tax law authorizes a credit of $227 for each dependent of a taxpayer for each taxable year beginning on or after January 1, 1999, as adjusted for inflation, which may be reduced if a taxpayer’s federal adjusted gross income exceeds a threshold amount. The credit for the 2015 taxable year is $337.

This bill would increase that credit to begin delete $422 end delete begin insert $371 end insert for taxable years beginning on or after January 1, 2016, which would be adjusted for inflation in taxable years thereafter.

This bill would take effect immediately as a tax levy.

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 17054 of the Revenue and Taxation Code
is amended to read:

17054.  

In the case of individuals, the following credits for
personal exemption may be deducted from the tax imposed under
Section 17041 or 17048, less any increases imposed under
paragraph (1) of subdivision (d) or paragraph (1) of subdivision
(e), or both, of Section 17560.

(a) In the case of a single individual, a head of household, or a
married individual making a separate return, a credit of fifty-two
dollars ($52).

(b) In the case of a surviving spouse (as defined in Section
17046), or a husband and wife making a joint return, a credit of
one hundred four dollars ($104). If one spouse was a resident for
the entire taxable year and the other spouse was a nonresident for
all or any portion of the taxable year, the personal exemption shall
be divided equally.

(c) In addition to any other credit provided in this section, in
the case of an individual who is 65 years of age or over by the end
of the taxable year, a credit of fifty-two dollars ($52).

(d) (1)  begin insert (A) end insert begin insert   end insert For taxable years beginning before January 1, 2016,
a credit of two hundred twenty-seven dollars ($227) for each
dependent (as defined in Section 17056) for whom an exemption
is allowable under Section 151(c) of the Internal Revenue Code,
relating to additional exemption for dependents. The credit allowed
under this begin delete paragraph end delete begin insert subparagraph end insert for taxable years beginning
on or after January 1, 1999, shall not be adjusted pursuant to
subdivision (i) for any taxable year beginning before January 1,
2000.

begin delete

(2)

end delete

begin insert (B) end insert  For taxable years beginning on or after January 1, 2016, a
credit of begin delete four end delete begin insert three end insert hundred begin delete twenty-two end delete begin insert seventy-one end insert dollars begin delete ($422) end delete
begin insert ($371) end insert for each dependent, as defined in Section 17056, for whom
an exemption is allowable under Section 151(c) of the Internal
Revenue Code, relating to additional exemption for dependents.
The credit allowed under this begin delete paragraph end delete begin insert subparagraph end insert for taxable
years beginning on or after January 1, 2016, shall be computed,
as otherwise provided in subdivision (i), for taxable years beginning
on or after January 1, 2017.

begin delete

(3)

end delete

begin insert (2) end insert  (A) For taxable years beginning on or after January 1, 2015,
a credit shall not be allowed under paragraph (1) with respect to
any individual unless the identification number, as defined in
Section 6109 of the Internal Revenue Code, of that individual is
included on the return claiming the credit.

(B) A disallowance of a credit due to the omission of a correct
identification number required under this paragraph, may be
assessed by the Franchise Tax Board in the same manner as is
provided by Section 19051 in the case of a mathematical error
appearing on the return. A claimant shall have the right to claim
a credit or refund of adjusted amounts within the period provided
in Section 19306, 19307, 19308, or 19311, whichever period
expires later.

begin delete

(4)

end delete

begin insert (3) end insert  (A) For taxable years beginning on or after January 1, 2009,
the credit allowed under paragraph (1) for each dependent shall
be equal to the credit allowed under subdivision (a). This
subparagraph shall cease to be operative for taxable years beginning
on or after January 1, 2011, unless the Director of Finance makes
the notification pursuant to Section 99040 of the Government
Code, in which case this subparagraph shall cease to be operative
for taxable years beginning on or after January 1, 2013.

(B) For taxable years that subparagraph (A) ceases to be
operative, the credit allowed under paragraph (1) for each
dependent shall be equal to the amount that would be allowed if
subparagraph (A) had never been operative.

(e) A credit for personal exemption of fifty-two dollars ($52)
for the taxpayer if he or she is blind at the end of his or her taxable
year.

(f) A credit for personal exemption of fifty-two dollars ($52)
for the spouse of the taxpayer if a separate return is made by the
taxpayer, and if the spouse is blind and, for the calendar year in
which the taxable year of the taxpayer begins, has no gross income
and is not the dependent of another taxpayer.

(g) For the purposes of this section, an individual is blind only
if either (1) his or her central visual acuity does not exceed 20/200
in the better eye with correcting lenses, or (2) his or her visual
acuity is greater than 20/200 but is accompanied by a limitation
in the fields of vision such that the widest diameter of the visual
field subtends an angle no greater than 20 degrees.

(h) In the case of an individual with respect to whom a credit
under this section is allowable to another taxpayer for a taxable
year beginning in the calendar year in which the individual’s
taxable year begins, the credit amount applicable to that individual
for that individual’s taxable year is zero.

(i) For each taxable year beginning on or after January 1, 1989,
the Franchise Tax Board shall compute the credits prescribed in
this section. That computation shall be made as follows:

(1) The California Department of Industrial Relations shall
transmit annually to the Franchise Tax Board the percentage change
in the California Consumer Price Index for all items from June of
the prior calendar year to June of the current calendar year, no
later than August 1 of the current calendar year.

(2) The Franchise Tax Board shall add 100 percent to the
percentage change figure which is furnished to them pursuant to
paragraph (1), and divide the result by 100.

(3) The Franchise Tax Board shall multiply the immediately
preceding taxable year credits by the inflation adjustment factor
determined in paragraph (2), and round off the resulting products
to the nearest one dollar ($1).

(4) In computing the credits pursuant to this subdivision, the
credit provided in subdivision (b) shall be twice the credit provided
in subdivision (a).

SEC. 2.  

This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.