BILL ANALYSIS
AB 1508
Page 1
Date of Hearing: April 29, 2009
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
AB 1508 (Torrico) - As Amended: April 16, 2009
[This bill has been double referred to the Assembly Committee on
Revenue and Taxation and will be heard as it relates to the
issues under its jurisdiction.]
SUBJECT : Income and corporation taxes: credit: lending
employees to schools.
SUMMARY : Establishes a tax credit, beginning January 1, 2010,
for corporations that lend qualified employees, as defined, to
Title I public high schools to assist in teaching mathematics or
science and that also make charitable donations including, but
not limited to, classroom materials, resources, equipment, and
facilities. Specifically, this bill :
1)Requires for each taxable year beginning on or after January
1, 2010, there to be allowed as a credit against the "net
tax," as defined in Section 17039, and the "tax" as defined in
Section 23036, an amount equal to ___ percent of the amount
paid or incurred during the taxable year for qualified
expenses in connection with lending a qualified employee to a
Title I public school for the purpose of assisting in the
teaching of mathematics and science.
2)Defines "Qualified expenses" to mean both of the following:
a) Amounts paid or incurred by the taxpayer with respect to
expenses incurred by or on behalf of a taxpayer's employee
for the amount of compensated hours utilized for lending a
qualified employee to a Title I public school for the
purpose of assisting in the teaching of mathematics and
science.
b) Expenses paid or incurred by the taxpayer for the wages
of a qualified employee, to the extent those wages are
allocable to teaching.
3)Defines "Title I public school" to mean any high school in
this state that is a part of a public school district in which
at least 40% of the children in the school attendance area are
from low-income families or at least 40% of the students
enrolled are from low-income families eligible to receive
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federal Title I funds.
4)Defines "Mathematics" to mean instruction designed to develop
fluency in basic computational skills and an understanding of
mathematical concepts and mathematical reasoning and problem
solving, including, but not limited to, number sense,
algebraic functions, geometry and other measurement functions,
statistics, data analysis, probability analysis, and
quantitative concepts; and, specifies "Mathematics" includes,
but is not limited to, courses in algebra I, algebra II,
linear algebra, calculus, geometry, trigonometry, mathematical
analysis, probability and statistics, and advanced probability
and statistics.
5)Defines "Science" to mean instruction designed to develop
skills and procedures for the systematic pursuit of knowledge
that includes, but is not limited to, problem solving and
recognition, the collection of data through observation and
experiment, and the formulation and testing of hypotheses;
and, specifies "Science" includes, but is not limited to,
courses in biology, life science, physical science, physics,
chemistry, geoscience, health science, and computer science.
6)Specifies a credit shall be allowed under this section only if
a Title I public school issues a service record to the
taxpayer certifying receipt of the services; and, specifies
that service record shall contain the employee's name, dates
of teaching service, number of teaching hours, verification of
the employee's eminence credential, or eligibility for the
issuance thereof, and a verification signature from an
authorized agent or designee of the high school.
7)Specifies no deduction shall be allowed to a taxpayer for that
amount of expenses for which a credit is allowed to that
taxpayer under this section.
8)Specifies no credit shall be allowed under this section with
respect to the lending of a qualified employee to a high
school unless both of the following apply:
a) The employee does not supplant, or otherwise replace,
any teacher at the school.
b) The taxpayer makes charitable donations including, but
not limited to, classroom materials, resources, equipment,
and facilities.
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9)Specifies the maximum amount allowable as a credit to the
taxpayer shall be based on ___ percent of the total amount of
charitable contributions to the school for that taxable year;
and, specifies in the case where the credit allowed by this
section exceeds the "net tax" or "tax" the excess may be
carried over to reduce the "net tax" or "tax" in the following
year, and the succeeding seven years if necessary, until the
credit is exhausted.
10)Specifies this act provides for a tax levy within the meaning
of Article IV of the Constitution and shall go into immediate
effect.
EXISTING LAW :
1)Authorizes, upon the recommendation of the governing board of
a school district, the Commission on Teacher Credentialing to
issue an eminence credential to any person who has achieved
eminence, recognized outside their community, in a field of
endeavor taught or service practiced in the public schools of
California. This credential shall authorize teaching or the
performance of services in the public schools in the subject
or subject area or service and at the level or levels approved
by the commission as designated on the credential. Each
credential so issued shall be issued initially for a two-year
period and may be renewed for a three-year period by the
commission upon the request of the governing board of the
school district. Upon completion of the three-year renewal
period, the holder of an eminence credential shall be eligible
upon application for a professional clear teaching credential.
2)Provides various credits to businesses in order to provide
incentives for them to perform various actions or activities.
Credits have been provided to offset employer cost of
subsidizing employee ridesharing programs and transit passes,
and employer cost of providing various child care facilities
and services.
3)Provides various deductions for ordinary and necessary
business expenses of trade or business, such as, salaries,
wages, and employee benefits. Employers are also eligible to
claim charitable contribution deductions.
FISCAL EFFECT : Unknown
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COMMENTS : This bill would allow a credit on personal income tax
or corporation tax equal to ___% of the taxpayer's expenses
associated with loaning the taxpayer's employees to Title I
public high schools for the purpose of assisting in teaching
mathematics or science. Qualified expenses would include
employee wages allocable to teaching or employee expenses
related to teaching. Eligible employees are those whose
employment specialty includes math or science. The credit would
only be allowed for employees loaned to Title I public high
schools if the employee has, or is eligible for, an eminence
credential. The credit would only be allowed for employees
loaned if the taxpayer also makes charitable donations of
classroom materials, resources, equipment and facilities; and,
the maximum amount of tax credit shall be equal to a certain
percentage of the amount of charitable donations made to the
school that taxable year. No deduction would be permitted for
expenses for which the credit is claimed. If the credit exceeds
the taxpayer's tax liability (e.g., if the taxpayer is in a loss
position and pays no tax for the year), the credit may be
carried forward to up to 7 future years.
Committee Considerations . The bill specifies that a certain
percentage of "qualified expenses" shall be granted as a tax
credit for employers, but in a different section the bill also
specifies that a tax credit shall be based on a certain
percentage of "the total amount of charitable contributions to
the school for that taxable year." The author's intent is to
have the amount of the tax credit for "qualified expenses" be
limited by the amount of charitable donations given to the
school by the taxpayer during the taxable year. The committee
should consider clarifying the language in the bill regarding
the maximum tax credit allowed.
The definition of "qualified expenses" includes the wages and
expenses incurred by the visiting teacher. It is unclear if
"expenses" would include costs associated with commuting
including meals and mileage or if the intent is to include
expenses such as supplies needed for the lesson, etc. The
committee should consider whether the definition of "qualified
expenses" could be further clarified.
The bill authorizes employers to receive a tax credit for
expenses incurred by the employee associated with teaching. The
committee should consider that existing teachers cannot deduct
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expenses for commuting. Further, only in certain, limited
circumstances may teachers deduct expenses for teaching
supplies, class materials and equipment. The committee should
consider whether this bill creates an inequity to allow an
employer to receive a tax credit for such expenses, when a
regular teacher is not eligible for the same type of credit.
Title I Schools . Title I is part of the Elementary and
Secondary Education Act of 1965, and is the foundation of the
federal commitment to closing the achievement gap between
low-income and other students. Title I funds can be used for
instructional activities, counseling, parental involvement, and
program improvement. In return, school districts and states
must meet accountability requirements for raising student
performance. Local educational agencies target the Title I
funds they receive to schools with the highest percentages of
children from low-income families. Unless a participating
school is operating a schoolwide program, the school must focus
Title I services on children who are failing, or most at risk of
failing, to meet state academic standards. Schools in which low
income children make up at least 40% of enrollment are eligible
to use Title I funds for schoolwide programs that serve all
children in the school.
Eminence Credential . The Commission on Teacher Credentialing
(CTC) is authorized to grant an Eminence Credential to an
individual who is eminent in a specific endeavor and is
recognized as such beyond the boundaries of his or her
community, has demonstrably advanced his or her field and has
been acknowledged by his or her peers beyond the norm for others
in the specific endeavor. Eminence credentials are only
available at the recommendation of an employing agency. The
employing agency must demonstrate how the eminent individual
will enrich the educational quality of the employing agency.
The bill specifies the school must provide a certifying receipt
documenting the service record of the employee including the
verification of the employee's eminence credential, or
eligibility for the issuance thereof. How would an individual
school determine a person's eligibility of an eminence
credential, without a credential actually being issued by the
CTC? School districts, not individual schools, must make a
recommendation to the CTC for the issuance of an eminence
credential, and the ultimate authority to issue such a
credential is given to the CTC, not a school or district. The
committee should consider how this would be implemented, and
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whether "eligibility" should be considered, or whether issuance
of the credential should instead be required. The committee
should also consider that if the visiting instructor is working
in a classroom with a certificated teacher, an eminence
credential may not be necessary at all.
Loss to the State General Fund . In this difficult economic
time, is it wise to issue tax credits to corporations, thus
reducing the overall state General Fund balance that would
otherwise go toward programs like education? While the tax
credit proposed in this measure is linked to the important
issues of math and science education opportunities for students,
is this the right economic time for the state to offer such a
tax credit?
Why Science and Math ? While there is a demonstrated shortage of
qualified math and science teachers in California, why should we
limit a tax credit only to companies in math and science fields?
A well-balanced student should learn history, English and other
languages, writing skills, art, music and literature. One could
argue that great literary artists would be equally beneficial in
the classroom and publishing companies could equally benefit
from a tax credit. The committee should consider whether it is
important to provide a tax credit only to companies in math and
science fields or if other fields would be equally important.
Employer gains by loaning employees, even without a credit .
High tech companies often find it very difficult to retain
qualified technical personnel. For that reason, employers are
hesitant to lay employees off, even when times are tough. This
bill effectively subsidizes employers wishing to retain
technical personnel rather than lay them off. During better
economic times, when sales are brisk and manufacturing and
research deadlines are tight, it is very unlikely that any
business would be interested in loaning employees to assist in
the teaching of math and science. Furthermore, the employer
gains in the long run by assisting schools in teaching math and
science. It increases the pool of math- and science-educated
students from which the employer will eventually hire future
employees. It could also be expected that loaned employees will
serve as ambassadors, or even recruiters, for the employer.
The Careers Project . A study completed in January 2009 by the
California Research Bureau titled, The Careers Project, surveyed
businesses regarding their existing partnerships with schools.
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Of those businesses that indicated they did not have
partnerships established with schools, 56% sited that "firms do
not have the resources to dedicate staff to supervise or mentor
students;" and, 33% sited "resource issues" as the barriers to
establishing a partnership with middle and high schools. The
Careers Project proposed the following as one of the policy
options for consideration, "To encourage businesses that do not
have the capacity to establish school-business partnerships, the
Legislature may consider creating a tax incentive for employers
to subsidize dedicated staff time for outreach activities and
partnerships with public middle and high schools in the state.
This would be particularly useful for the large majority of
employers in the state that are small business (i.e., less than
five employees). Given our current state budget challenges,
such an option would further impact state revenues, so it would
doubtlessly need to be part of a broader discussion about the
priorities and goals in public education." With this
recommendation in mind, the committee should consider if the
proposed tax credit in this measure is part of a broader
discussion about the priorities and goals in public education.
According to the author, as one of the leaders in the "new
economy," more than half of California's jobs require education
and training beyond the high school level and are projected to
be higher in the next ten years. This is also recognized by
California business and industry leaders as noted by the
California Business Roundtable: "The shortage of qualified
employees is the most significant cost driver for California
businesses. The business community understands that education
is the key to building a prosperous California. That explains
why California's business leaders cited improving the quality of
K-12 public education as an important policy priority for
California's future growth."
According to the author, unfortunately, California is seriously
ill-equipped to meet these workforce demands. California's
students remain far behind those in other states on many
measures of achievement and are dropping out of school in
astonishing numbers. For example, California ranked seventh
from the bottom in eighth grade math and second from the bottom
in science on the 2005 National Assessment of Education
Progress. Additionally, about one-quarter of all California
students who enter the ninth grade fail to earn a diploma four
years later. As a result, California sustains $46.4 billion in
total economic losses from every 120,000 20-year-olds who never
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complete high school. Furthermore, more than two-thirds of all
high school drop outs use food stamps during their working life
and are 68% more likely to be on a welfare program. AB 1508
will provide a tax incentive to industry leaders who provide
charitable contributions of resources and time to Title 1
schools to assist in the education of math and science.
Committee Amendments : The author indicates intent to insert the
amount of credit allowed under this measure. If the bill is
passed by the committee, staff recommends the bill be amended to
include a reasonable percentage. Staff recommends the bill be
amended to clarify the definition of "qualified expenses" and
the maximum tax credit allowed, and clarify other technical
language. Staff recommends the bill eliminate the requirement
that qualified employees must obtain an eminence credential from
the CTC, but that the school district governing board must
certify that the person is qualified to assist in the teaching
of math and science. Staff also recommends the bill be amended
to include an evaluation of the proposed tax credit due to the
Legislature by November 1, 2012; include a sunset date of
December 31, 2013; and, a repeal date of January 1, 2014.
Previous legislation . AB 902 (Alquist) from 2001 authorized a
nonrefundable tax credit to employers who lend a qualified
employee to a public middle or high school (i.e., grades 7
through 12) in California or a community college in California
to teach math or science. The bill was passed by the Assembly
Revenue and Taxation Committee and the Assembly Floor and was
later substantially amended into another committee jurisdiction.
SB 558 (Morrow) from 2001 is substantially similar to AB 1508
(Torrico). SB 558 would have established a credit against
personal income or corporation tax equal to 50% of the
taxpayer's expenses associated with loaning the taxpayer's
employees to public high schools, community colleges, or
vocational schools for the purpose of teaching mathematics or
science. Qualified expenses would include employee wages
allocable to teaching or preparation time, teaching supplies,
class materials; and, equipment. The credit would only be
allowed for employees loaned to high schools if (1) the employee
has, or is eligible for, an "eminence credential"; and (2) the
employee fills a vacancy for which no certified high school
teacher is available. If the credit exceeds the taxpayer's tax
liability, the credit may be carried forward to up to 7 years.
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The credit would apply for the 2002 through 2006 tax years,
after which it would sunset. The Franchise Tax Board estimated
a revenue loss of about $1 million annually from SB 558. The
estimate was based on the assumption that loaned math and
science employee/teachers would comprise 1% of the total number
of math and science teachers in public high schools and
community colleges. The bill failed passage in the Senate
Revenue and Taxation Committee.
AB 462 (Wyland & Zettel) from 2001 authorized a credit against
those taxes for each taxable year beginning on or after January
1, 2002, and before January 1, 2006, in an amount equal to 50%
of the amount paid or incurred during the taxable or income year
for qualified expenses, as defined, in connection with lending
qualified employees, as defined, to public high schools, or
community colleges, in California for the purpose of teaching
math or science. The bill was referred to the Assembly Revenue
and Taxation Committee but was never heard.
SB 1948 (Lewis) from 2000 would have granted a 50% credit for
employees who lend their employees to public high schools,
community colleges, or vocational institutions in California for
the purpose of teaching mathematics or science during the 2001
through 2004 tax years. The credit would equal 50% of the costs
incurred by the employer in loaning its employees. Loaned
employees could only be used to fill empty mathematics or
science teaching positions where no certified teacher is
available, must have mathematics or science as their employment
specialty, must be certified by the receiving school as to the
number of hours they work for the school, and must have been
issued or be eligible for an "eminence credential" pursuant to
Section 44264 of the Education Code. The bill was heard by the
Senate Revenue and Taxation committee but no action was taken.
AB 81 (Cuneen & Alquist) from 2000 would have offered three
types of incentives to increase the number of qualified math and
science teachers and the quality of math and science instruction
in public high schools, community colleges, and vocational
institutions in California. One such incentive was nearly
identical to that which is proposed by AB 1508 (Torrico). The
bill failed passage in the Assembly Revenue and Taxation
Committee.
REGISTERED SUPPORT / OPPOSITION :
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Support
None on file.
Opposition
None on file.
Analysis Prepared by : Chelsea Kelley / ED. / (916) 319-2087