BILL ANALYSIS                                                                                                                                                                                                    �




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de Le�n, Chair


          SB 693 (Correa) - Personal income tax: credits: qualified  
          teachers
          
          Amended: January 8, 2014        Policy Vote: G&F 6-0
          Urgency: No                     Mandate: No
          Hearing Date: January 21, 2014                          
          Consultant: Robert Ingenito     
          
          This bill meets the criteria for referral to the Suspense File.


          Bill Summary: SB 693 would enact a teacher tax credit equal to  
          the amount spent for instructional materials, up to $250  
          annually. 

          Fiscal Impact: The Franchise Tax Board (FTB) estimates that this  
          bill would result in annual revenue losses of $2.5 million in  
          2014-15, $4.9 million in 2015-16, and $7.1 million in 2016-17  
          (General Fund). Additionally, FTB would incur increased  
          administrative costs (not yet determined) that would likely  
          exceed $50,000 (General Fund). 
              
          Background: Current law provides for various tax credits  
          designed to provide incentives for taxpayers that incur certain  
          expenses (such as child adoption), or to influence behavior,  
          including business practices and decisions (such as research and  
          development credits). Such tax incentives are enacted to  
          encourage taxpayers to do something, but for the tax credit,  
          they would not otherwise do.

          California previously allowed a teacher retention tax credit  
          teachers based upon the taxpayer's years of service as a  
          credentialed teacher. However, the Legislature only allowed the  
          credit for taxable years 2000, 2001, and 2003, suspended it in  
          2002, and 2004 through 2006, and ultimately repealed it in 2007.  
          Teachers claimed $165 million in tax credits in 2003.  

          Teachers may claim a deduction from income on their federal  
          income taxes of up to $250 for any unreimbursed expenses paid or  
          incurred for books, supplies, or computer equipment used in the  
          classroom. 









          SB 693 (Correa)
          Page 1


          Proposed Law: SB 693 would enact a teacher tax credit equal to  
          the amount incurred for instructional materials, up to $250 per  
          year.  The bill defines "educational expenses" in a way almost  
          identical to the federal deduction.  Only teachers, as defined,  
          that work at least 900 hours during the school year may claim  
          the credit, and only for the first three years of employment.

          Taxpayers may carry the credit over for four years.  FTB may  
          make rules, guidelines, or procedures necessary to implement it,  
          but the bill provides that the Administrative Procedures Act  
          doesn't apply to any rules FTB issues.  The credit sunsets in  
          2019.   

          Staff Comments: Under the provisions of the bill as currently  
          drafted, a teacher could spend $250 on school supplies and claim  
          the credit, but then in the subsequent year could return those  
          and still claim the entire credit.