BILL ANALYSIS
SB 1154
Page 1
Date of Hearing: June 21, 2010
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
SB 1154 (Cedillo) - As Amended: April 27, 2010
SENATE VOTE : 35-0
SUBJECT : Public Utilities Commission: Earned Income Tax
Credit.
SUMMARY : Requires the California Public Utilities Commission
(PUC) to ensure that all applications for the PUC-administered
low-income programs include information about the applicant's
eligibility to qualify for the federal Earned Income Tax Credit
(Tax Credit). Specifically, this bill :
1)Requires the Low-Income Oversight Board (LIOB) to make
recommendations on whether the California Alternate Rates for
Energy (CARE) and Universal Lifeline Telephone Service (ULTS)
programs could assist with outreach regarding the Tax Credit
in a manner that would not detract from the primary goals of
these programs and would minimize negative ratepayer impacts.
2)Requires the PUC to ensure that all applications for the CARE
and the ULTS include information about the applicant's
eligibility to qualify for the Tax Credit.
3)Requires CARE and ULTS applicants to be provided with
information about the Tax Credit requirements, the potential
benefit to the applicant's tax return, and contact information
about where they can receive further information.
EXISTING LAW
1)Requires the PUC to establish a low-income assistance program,
referred to as the CARE program, administered by the
investor-owned utilities, which provides eligible low-income
customers a 20 percent discount on their electric and natural
gas bills.
2)Establishes the LIOB to advise the PUC on low-income electric
and gas customer issues.
SB 1154
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3)Establishes the ULTS program, administered by the PUC, which
provides eligible low-income customers a 50 percent discount
on the rate of basic telephone service.
4)Federal law provides for the Tax Credit, a refundable federal
income tax credit for low- to moderate-income working
households.
FISCAL EFFECT : Unknown.
COMMENTS : According to the author, the purpose of this bill is
to expand the knowledge of the Tax Credit to low- to
moderate-income working households. The author states that the
Internal Revenue Service (IRS) provides mailers; however, people
don't respond.
Tax Credit Refunds : The Tax Credit is a refundable federal
income tax credit for low to moderate income working individuals
and families. Congress originally approved the tax credit
legislation in 1975 in part to offset the burden of social
security taxes and to provide an incentive to work. When the Tax
Credit exceeds the amount of taxes owed, it results in a tax
refund to those who claim and qualify for the credit.
According to the IRS Web site, income eligibility for the Tax
Credit and the amount of credit varies with the number of
children in the household, ranging from a maximum tax credit of
$5,657 in a household with three or more qualifying children and
adjusted gross income of less than $43,279, to a minimum tax
credit of $457 in a household with no qualifying children and
adjusted gross income of less than $13,440.
According to a March 2010 report of the New America Foundation,
an estimated 2.4 million California residents will claim $4.95
billion in Tax Credit refunds in 2009. The report predicts an
additional 800,000 Californians will fail to claim the credit,
thereby leaving an estimated $1.2 billion in Tax Credit refunds
on the table. On average, families not claiming the credit
would have received a refund amounting to $1,400. The report
also states that there is a large disparity in the estimates on
the number of filers who fail to claim the credit. The
researchers cannot agree, but believe that, "A number of EITC
researchers have noted that counties with high numbers of
non-claimants tend to be those with: (1) high concentrations of
Hispanics; (2) significant numbers of low-income individuals;
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(3) high participation in the food stamp assistance programs;
(4) significant numbers of families with no qualifying
children."
Why the PUC : The PUC is a ratesetting and regulating body. The
State Constitution allows it to fix rates, establish rules,
examine records, etc. for all public utilities subject to its
jurisdiction. These public utilities include private
corporations and persons that own, operate, control, or manage
an electric, gas, telecommunications utilities, or other
industries such as water and common carriers, which could be
natural monopolies.
The PUC requires electric and gas utilities to provide
low-income households a 20% discount on their utility bills,
which is paid for by the other non-CARE ratepayers. The author
states that the eligibility for CARE and ULTS is similar to the
Tax Credit, which is why the PUC would be the right entity to
provide this information to ratepayers.
According to the Department of Finance analysis, "?it would
expand PUC involvement into a subject area that has nothing to
do with any form of public utility." The Finance analysis adds,
"The bill would create a bad precedent, since it would certainly
be possible for the PUC to require utilities to advertise all
sorts of programs, and in every case impose new costs on
ratepayers who may have no interest in, nor obtain any benefit
from, the advertised programs."
Questions for this committee : This bill would require that
applicants of CARE and ULTS be provided with information about
the potential benefit to the applicant's tax return. Would the
PUC need to provide special tax-return training for each of its
customer-service representatives to enable them to review each
applicant's household (if filing jointly) or individual tax
return to ascertain the potential tax return benefits? Does
this committee wish to expand the PUC's purview to include
dispersing the federal government's program information,
regardless of whether it's related to the regulation of public
utilities? Should the California ratepayers, who currently pay
over $1 billion annually for low-income and universal service
programs, be assessed another surcharge to pay for the PUC to
disperse information for unrelated federal programs? Because
the Tax Credit is a tax policy and federal tax policy can change
from year to year, would the Franchise Tax Board be the more
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relevant agency to provide information on federal tax law?
Would the Employment Development Department have greater contact
with the targeted population? If the PUC directs the regulated
utilities to provide the Tax Credit information and a regulated
utility staff inadvertently neglects to, would the PUC or the
utility be held liable and be responsible for damages? How
would the Legislature know if the amounts expended to inform
Californians of the Tax Credit renders any new applicants not
captured by the existing IRS campaign?
The IRS has clear information on its Internet site about the Tax
Credit, however, many people who qualify would need to know
about the Tax Credit first. Considering the disincentive for
the IRS to launch a marketing campaign to inform Americans about
the Tax Credit, and understanding that Californians may be
losing an opportunity to take advantage of federal funds, this
committee may wish to discuss whether it chooses to either of
the following amendments:
(1) Page 4 lines 30, strike "shall ensure" and
replace with "may consider providing" (2) Delete Page
4, lines 35-40, and Page 5, lines 1-6; or
(2) Page 4, line 34, after "Credit." include,
"This information may be in the form of a separate
brochure with information for the ratepayer on how to
access additional information on the Earned Income Tax
Credit."
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
California Public Utilities Commission (CPUC) (unless amended)
Analysis Prepared by : Gina Adams / U. & C. / (916) 319-2083