BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1073|
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UNFINISHED BUSINESS
Bill No: SB 1073
Author: Monning (D), et al.
Amended: 8/19/16
Vote: 27
PRIOR VOTES NOT RELEVANT
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 8/29/16 (Pursuant to
Senate Rule 29.10)
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach,
Pavley
ASSEMBLY FLOOR: 78-0, 8/25/16 - See last page for vote
SUBJECT: Personal income taxes: earned income credit:
credit percentage: phaseout percentage
SOURCE: Author
DIGEST: This bill clarifies that, for eligible individuals with
three or more qualifying children, the state's Earned Income Tax
Credit (EITC) credit percentage shall be 45%.
Assembly Amendments remove provisions requiring the Department
of Public Health to update regulations governing lead-related
construction work to conform to the United States Environmental
Protection Agency's Lead Renovation, Repair, and Painting Rule.
The amendments clarify that, for eligible individuals with three
or more qualifying children, the state's EITC credit percentage
shall be 45%.
SB 1073
Page 2
ANALYSIS:
Existing law:
1)Allows eligible individuals a refundable federal and state
EITC, which allows the taxpayer to obtain a refund for the
excess of the credit over the taxpayer's liability.
2)Specifies that in the case of an eligible individual with
three or more qualifying children, the credit percentage is
45% under federal law.
3)Specifies that in the case of an eligible individual with
three or more qualifying children, the credit percentage is
40% under state law.
4)Conforms to former Internal Revenue Code (IRC) Section
32(b)(3)(A), since deleted, which provided a temporarily
enhanced credit percentage of 45% for three or more qualifying
children.
This bill:
1)Provides that for eligible individuals with three or more
qualifying children, the state's EITC percentage shall be 45%.
2)Deletes an obsolete cross reference.
3)Applies to taxable years beginning on or after January 1,
2016.
SB 1073
Page 3
Background
For taxable years beginning on or after January 1, 2015,
California law allows an EITC in an amount determined under IRC
Section 32, except as modified. Specifically, the state EITC
sets the following credit percentages to determine the credit
amount:
For an individual with no qualifying children 7.65%.
For an individual with one qualifying child 34%.
For an individual with two or more qualifying children 40%.
Additionally, the state EITC conforms to former IRC Section
32(b)(3)(A), which provided an enhanced credit percentage of 45%
for individuals with three or more qualifying children,
originally set to sunset at the end of the 2017 taxable year.
However, in late 2015, Congress made the once temporary 45%
credit percentage enhancement permanent by deleting IRC Section
32(b)(3) and adding the 45% credit percentage to the federal
table for eligible individuals with 3 or more qualifying
children. The Franchise Tax Board stated that, because IRC
Section 32(b)(3) no longer exists, the credit percentages are
governed by the state's standalone table, which provides a 40%
credit for eligible individuals with three or more children.
Thus parents with three or more children would be eligible for a
smaller credit for the 2016 taxable than in the 2015 taxable
year. To ensure these taxpayers receive the enhanced credit
amount, this bill explicitly provides that the credit percentage
is 45%.
FISCAL EFFECT: Appropriation: Yes Fiscal
Com.:YesLocal: No
Unknown.
SUPPORT: (Verified8/29/16)
SB 1073
Page 4
None received
OPPOSITION: (Verified8/29/16)
None received
ARGUMENTS IN SUPPORT: According to the author, "SB 1073
will allow the current California statute regarding the Earned
Income Tax Credit to conform to federal law, providing a 45% tax
credit for individuals and families with three or more
qualifying children. Prior federal law provided the enhanced
45% tax credit rate for three or more qualifying children in a
separate paragraph of the Internal Revenue Code (IRC) that was
specifically meant for temporary 'extensions' of that enhanced
rate. Beginning with the 2016 tax year, the enhanced federal
45% tax credit rate was unexpectedly made permanent, and added
to permanent tax credit rates by repealing provisions that
contained the 'temporary extensions' of the enhanced 45% tax
credit rate. For California purposes, the 45% tax credit rate
applies for the 2015 taxable year, but expires for taxable years
beginning on or after January 1, 2016. Because of the
unexpected way that Congress restructured the code section,
California statute does not conform to the revised federal
section. SB 1073 will make the necessary conforming changes in
state statute to reflect the revisions made in federal law
allowing qualified Californians to benefit from the increased
Earned Income Tax Credit funds available to them."
ASSEMBLY FLOOR: 78-0, 8/25/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Calderon,
Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper,
Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Gallagher,
Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez,
Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger
Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey,
SB 1073
Page 5
Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes,
McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte,
O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez,
Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting,
Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon
NO VOTE RECORDED: Burke, Beth Gaines
Prepared by:Myriam Bouaziz / GOV. & F. / (916) 651-4119
8/29/16 18:49:50
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