Senate Bill No. 1372

Introduced by Senators DeSaulnier and Hancock

February 21, 2014

An act to amend Section 17151 of the Revenue and Taxation Code, relating to taxation.

LEGISLATIVE COUNSEL’S DIGEST

SB 1372, as introduced, DeSaulnier. Personal income tax: educational assistance credit.

The Personal Income Tax Law provides for an exclusion from the gross income of an employee for amounts paid or incurred by an employer for educational assistance to the employee, as specified, up to $5,250 during a calendar year.

This bill would make technical, nonsubstantive changes to these provisions.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 17151 of the Revenue and Taxation Code
is amended to read:

17151.  

(a) Gross income of an employee does not include any
amounts, not exceeding an aggregate amount of five thousand two
hundred fifty dollars ($5,250) per calendar year, that is paid or
incurred by the employer for educational assistance to the employee
pursuant to an educational assistance program.

(b) For purposes of this section, the following definitions shall
apply:

(1) “Educational assistance” means the payment by an employer
of expenses incurred begin delete by or on behalf of end delete begin insert by, or on behalf of, end insert an
employee for the employee’s education, and includes, but is not
limited to, payments for books, supplies, equipment, tuition, and
fees, and similar payments. “Educational assistance” includes the
provision by an employer of courses of instruction for an employee,
including the provision of books, supplies, and equipment.
“Educational assistance” does not include any payment for, or the
provision of, any of the following:

(A) Any tools or supplies that may be retained by the employee
after completion of a course of instruction.

(B) Any meals, lodging, or transportation.

(C) Any course or education involving sports, games, or hobbies.

(D) Any course or education taken at the graduate level of a
kind normally taken by an individual pursuing a program leading
to a law, business, medical, or other advanced academic or
professional degree. This subparagraph applies only to any course
or education taken at the graduate level beginning after June 30,
1996, and before January 1, 2000.

(2) “Educational assistance program” means a separate written
plan of an employer for the exclusive benefit of his or her
employees to provide those employees with educational assistance.
The program shall meet the following requirements:

(A) The program benefits employees who qualify under a
classification established by the employer and found by the
Franchise Tax Board not to be discriminatory in favor of employees
who are highly compensated employees (within the meaning of
Section 414(q) of the Internal Revenue Code) or their dependents.
For purposes of this subparagraph, there shall be excluded from
consideration employees who are not included in the program and
who are included in a unit of employees covered by an agreement
that the Franchise Tax Board finds to be a collective bargaining
agreement between employee representatives and one or more
employers, if there is evidence that educational assistance benefits
were the subject of good faith bargaining between the employee
representatives and the employer or employers.

(B) Not more than 5 percent of the amounts paid or incurred by
the employer for educational assistance during the year may be
provided for the class of individuals who are owners (or their
spouses or dependents), each of whom, on any day of the year,
owns more than 5 percent of the capital or profits interest in the
employer.

(C) The program does not provide eligible employees with a
choice between educational assistance and other remuneration
includable in gross income. For purposes of this section, the
business practices of the employer, as well as the written program,
shall be taken into account.

(D) The program need not be funded.

(E) Reasonable notification of the availability and terms of the
program is provided to eligible employees.

(3) “Employee” includes self-employed individuals within the
meaning of Section 401(c)(1) of the Internal Revenue Code.

(c) For purposes of this section:

(1) Any individual who owns the entire interest in an
unincorporated trade or business shall be treated as his or her own
employee.

(2) A partnership shall be treated as the employer of each partner
who is an employee within the meaning of paragraph (3) of
subdivision (b).

(3) (A) An educational assistance program shall not be
considered to fail to meet any of the requirements of paragraph
(2) of subdivision (b) on the sole basis of either of the following:

(i) Different utilization rates for the different types of
educational assistance made available under the program.

(ii) Successful completion or attainment of a particular course
grade is required for or considered in determining reimbursement
under the program.

(B) This section shall not be construed to affect the deduction
or inclusion in income of amounts that are paid or incurred or
received as reimbursement for educational expenses under Section
117, 162, or 212 of the Internal Revenue Code.

(d)  begin delete No end delete begin insert A end insert deduction or credit shall begin insert not end insert be allowed to the
employee with respect to any amount that the employee excludes
from income pursuant to this section.

(e) Section 127 of the Internal Revenue Code shall not apply.

(f) This section shall apply with respect to expenses relating to
courses beginning after June 30, 1996.