SB 1272, as amended, Runner. Income taxes: credit: small business employee savings plan.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws.
This bill would allow, for taxable years beginning on or after January 1, 2016, and before January 1, 2021, a tax credit under both laws in an amount equal to 50% of the qualified taxpayer’s contributions tobegin delete a qualified employee savings plan,end deletebegin insert an Employee Savings Match Plan,end insert as provided.
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 17053.50 is added to the Revenue and
2Taxation Code, to read:
(a) For taxable years beginning on or after January
41, 2016, and before January 1, 2021, there shall be allowed to a
5qualified taxpayer a credit against the “net tax,” as defined in
P2 1Section 17039, in an amount equal to 50 percent of the qualified
2taxpayer’s contributions tobegin delete a qualified employee savings plan,end deletebegin insert an
3Employee Savings Match Planend insert not to exceed two thousand dollars
4($2,000) per employee per taxable year.
5(b) For purposes of this section:
6(1) “Qualified employee savings plan” means an employee
7savings plan where at least half of the recipient employees earn
8less than forty thousand dollars ($40,000) in wages received from
9the qualified taxpayer per taxable year.
10
(1) “Employee Savings Match Plan” means a savings plan
11established by a qualified taxpayer that meets all of the following
12conditions:
13
(A) The employer may match voluntary contributions of
14participating employees, described in subparagraph (B), without
15limitation.
16
(B) Any employee who has an annual salary of at least twelve
17thousand dollars ($12,000) and has been continuously employed
18by the qualified taxpayer for at least six months may participate
19in an Employee Savings Match Plan.
20
(C) At least one-half of the participating employees, described
21in subparagraph (B), earn less than forty thousand dollars
22($40,000) during the calendar year in wages for work performed
23for the employer contributing to the plan.
24
(D) Deposits are held in an insured bank or other financial
25institution subject to withdrawal by employees, as provided in
26subparagraph (E).
27
(E) Any employee who withdraws funds from an Employee
28Savings Match Plan less than one year after the employee’s first
29contribution, or less than one year after a previous withdrawal
30shall not be eligible to participate in that plan for the remainder
31of the year in which that withdrawal was made or during the next
32calendar year. A transfer of funds from
an Employee Savings
33Match Plan into an IRA or other deferred compensation plan shall
34not be considered a withdrawal for purposes of this subparagraph.
35(2) “Qualified taxpayer” means a taxpayer that is a small
36business as defined in Section 14837 of the Government Code.
37
(c) In the case where the credit allowed by this section exceeds
38the “net tax” the excess may be carried over to reduce the “net
39tax,” in the following year, and succeeding three years if necessary,
40until the credit is exhausted.
P3 1
(d) Contributions to, and income from, an Employee Savings
2Match Plan shall be treated as ordinary income.
10 3(c)
end delete
4begin insert(e)end insert This section shall remain in effect only until December 1,
52021, and as of that date is repealed.
Section 23650 is added to the Revenue and Taxation
7Code, to read:
(a) For taxable years beginning on or after January 1,
92016, and before January 1, 2021, there shall be allowed to a
10qualified taxpayer a credit against thebegin delete “net tax,”end deletebegin insert “tax,end insertbegin insert”end insert as defined
11in Sectionbegin delete 17039,end deletebegin insert 23036,end insert in an amount equal to 50 percent of the
12qualified taxpayer’s contributions tobegin delete a qualified employee savings begin insert
an Employee Savings Match Plan,end insert not to exceed two thousand
13plan,end delete
14dollars ($2,000) per employee per taxable year.
15(b) For purposes of this section:
16(1) “Qualified employee savings plan” means an employee
17savings plan where at least half of the recipient employees earn
18less than forty thousand dollars ($40,000) in wages received from
19the qualified taxpayer per taxable year.
20
(1) “Employee Savings Match Plan” means a savings plan
21established by a qualified taxpayer that meets all of the following
22conditions:
23
(A) The employer may match voluntary contributions of
24participating employees, described in subparagraph (B), without
25limitation.
26
(B) Any employee who has an annual salary of at least twelve
27thousand dollars ($12,000) and has been continuously employed
28by the qualified taxpayer for at least six months may participate
29in an Employee Savings Match Plan.
30
(C) At least one-half of the participating employees, described
31in subparagraph (B), earn less than forty thousand dollars
32($40,000) during the calendar year in wages for work performed
33for the employer contributing to the plan.
34
(D) Deposits are held in an insured bank or other financial
35institution subject to withdrawal by employees, as provided in
36subparagraph (E).
37
(E) Any employee who withdraws funds from an Employee
38Savings Match Plan less than one year after the employee’s first
39contribution, or less than one year after a previous withdrawal
40shall not be eligible to participate in that plan for the remainder
P4 1of the year in which that withdrawal was made or during the next
2calendar year. A transfer of funds from an Employee Savings
3Match Plan into an IRA or other deferred compensation plan shall
4not be considered a withdrawal for purposes of this subparagraph.
5(2) “Qualified taxpayer” means a taxpayer that is a small
6business as defined in Section 14837 of the Government Code.
7
(c) In the case where the credit allowed by this section exceeds
8the “tax” the excess may be carried
over to reduce the “tax,” in
9the following year, and succeeding three years if necessary, until
10the credit is exhausted.
11
(d) Contributions to, and income from, an Employee Savings
12Match Plan shall be treated as ordinary income.
13(c)
end delete
14begin insert(e)end insert This section shall remain in effect only until December 1,
152021, and as of that date is repealed.
(a) In accordance with Section 41 of the Revenue and
17Taxation Code, the purpose of the credit allowed by Sections
1817053.50 and 23650 of the Revenue and Taxation Code, as added
19by Sections 1 and 2 of this act is to promote savings for employees,
20especially young and low-income workers who have no savings
21and no retirement options other than social security. To measure
22whether the credit achieves its intended purpose, on or before
23January 1, 2018, and each January 1 thereafter, the Franchise Tax
24Board shall annually prepare a written report to the Legislature of
25the following:
26(1) The percentage of employees under 30 years of age who are
27receiving matching funds.
28(2) The percentage of employees earning less than forty
29thousand dollars ($40,000) per annum who are receiving matching
30funds.
31(b) A report submitted pursuant to subdivision (a) shall be
32submitted in compliance with Section 9795 of the Government
33Code.
This act provides for a tax levy within the meaning of
35Article IV of the Constitution and shall go into immediate effect.
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