BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SCR 12|
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THIRD READING
Bill No: SCR 12
Author: Liu (D)
Amended: 4/25/11
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 6-3, 04/27/11
AYES: Wolk, DeSaulnier, Hancock, Hernandez, Kehoe, Liu
NOES: Huff, Fuller, La Malfa
SUBJECT : Taxation
SOURCE : Author
DIGEST : This resolution encourages state and local
governments and community organizations to utilize federal
outreach tools to improve educational awareness of the
federal Earned Income Tax Credit (EITC), and other tax
credits, among Californians.
ANALYSIS : In 1975, Congress enacted the EITC to help
alleviate the burden of Social Security taxes and to
encourage work among low- and moderate-income taxpayers.
The EITC is a federal income tax credit that gives
low-income individuals a credit equal to a percent of their
earned income. The EITC is targeted to low- to moderate-
income households. The federal government refunds the
credit when the EITC exceeds the amount of taxes owed for
those who claim and qualify for the credit.
To attract filers, existing federal and state laws require
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that employers notify eligible employees of the EITC. The
notification must be given in one of the following ways:
On the W-2 tax form.
A substitute W-2 form with the same EITC
information.
Provide "Notice 797."
An employer's written statement as "Notice 797."
California employers must also visibly post a statement
about the EITC in the workplace.
This resolution makes the following legislative findings:
1.The EITC is available to taxpayers who work, but do not
earn high incomes and may often struggle to make ends
meet. These taxpayers could be missing an opportunity to
pay less federal income tax, pay no federal income tax,
or receive a refund.
2.Working California individuals may be missing out on a
federal refund of up to five thousand six hundred
sixty-six dollars because they are not aware of the EITC.
They may also not be aware of additional working family
tax credits, such as the Child Tax Credit, the Child and
Dependent Care Credit, and the Making Work Pay Credit.
3.According the Internal Revenue Service, up to 25 percent
of eligible taxpayers nationwide may fail to claim the
EITC because they are not aware of the credit or of free
assistance to claim the credit.
4.New parents, grandparents raising grandchildren, and
foster parents may not realize they qualify for the EITC.
Some families, such as those in the military and those
raising children with disabilities may not realize that
there are special rules that may help them quality for
the EITC.
5.The Internal Revenue Service and other organizations
collaborate with local agencies to offer Volunteer Income
Tax Assistance to raise awareness of the EITC and provide
tools to local agencies to link financial education and
other asset-building efforts, such as individual
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development accounts.
6.Employers can help increase the take-home pay of their
employees by making employees aware of the EITC.
7.The federal EITC increases California's revenue and
stimulates the local and state economy.
8.Every year an estimated one billion dollars are lost to
hardworking families and the California economy because
of failure to claim the EITC.
This resolution urges state and local governments and
community organizations to promote education and awareness
of the federal EITC and other tax credits that help working
families persevere through difficult economic times.
Comments
In 2010, over 800,000 of eligible Californians failed to
claim the EITC because they were unaware of their
eligibility or were unaware of the program altogether. In
an economic climate with slow wage growth, the EITC
provides low- to moderate-income households a much-needed
income boost. SCR 12 seeks to complement the federal
outreach with additional state mobilization, like community
events, public service announcements, and collaborations
with local banking institutions to increase claims among
eligible Californians.
Related Legislation
AB 509 (Skinner) requires state departments and agencies,
which serve low-income individuals or families, to notify
service recipients that they may be eligible for the EITC.
Prior Legislation
AB 650 (Lieu and Jones) 2007, requires any employer that is
required to provide unemployment insurance to employees to
notify them of their possible eligibility for the EITC. AB
2813 (Nunez, 2004) and AB 1370 (Wesson, 1999) would have
required employers to notify eligible employees about the
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EITC program and its benefits. Governor Davis vetoed AB
1370 (Wesson, 1999) stating, "it is the responsibility of
the federal government to educate taxpayers on its
availability." Governor Schwarzenegger vetoed AB 2813
(Nunez, 2004) because "it is duplicative of federal
efforts."
FISCAL EFFECT : Fiscal Com.: No
SUPPORT : (Verified 4/27/11)
California Tax Reform Association
AGB:nl 4/27/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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