BILL NUMBER: SB 1421 INTRODUCED
BILL TEXT
INTRODUCED BY Senators Solis, Escutia, Hayden, and Vasconcellos
(Coauthors: Assembly Members Aroner, Kuehl, and Villaraigosa)
FEBRUARY 2, 2000
An act to amend Sections 17039, 19340, and 19341 of, and to add
and repeal Section 17052 of, the Revenue and Taxation Code, relating
to taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
SB 1421, as introduced, Solis. Income taxes: credit: earned
income.
The Personal Income Tax Law authorizes various credits against the
taxes imposed by that law.
This bill would, for each taxable year beginning on or after
January 1, 2000, and before January 1, 2005, provide a refundable
credit in an amount equal to 15% of the earned income credit allowed
by federal law. Refunds payable in connection with the credit would
be available only if the Legislature appropriates funds for that
purpose.
This bill would also make various conforming changes in provisions
relating to interest payable on refunds and overpayments of tax
based on refunds owed.
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 17039 of the Revenue and Taxation Code is
amended to read:
17039. (a) Notwithstanding any provision in this part to the
contrary, for the purposes of computing tax credits, the term "net
tax" means the tax imposed under either Section 17041 or 17048 plus
the tax imposed under Section 17504 (relating to lump-sum
distributions) less the credits allowed by Section 17054 (relating to
personal exemption credits) and any amount imposed under paragraph
(1) of subdivision (d) and paragraph (1) of subdivision (e) of
Section 17560. Notwithstanding the preceding sentence, the "net tax"
shall not be less than the tax imposed under Section 17504 (relating
to the separate tax on lump-sum distributions), if any. Credits
shall be allowed against "net tax" in the following order:
(1) Credits that do not contain carryover or refundable
provisions, except those described in paragraphs (4) and (5).
(2) Credits that contain carryover provisions but do not contain
refundable provisions.
(3) Credits that contain both carryover and refundable provisions.
(4) The minimum tax credit allowed by Section 17063 (relating to
the alternative minimum tax).
(5) Credits for taxes paid to other states allowed by Chapter 12
(commencing with Section 18001).
(6) Credits that contain refundable provisions but do not contain
carryover provisions.
The order within each paragraph shall be determined by the
Franchise Tax Board.
(b) Notwithstanding the provisions of Sections 17052
(relating to the earned income credit), 17061 (relating to
refunds pursuant to the Unemployment Insurance Code) , and
19002 (relating to tax withholding), the credits provided in those
sections shall be allowed in the order provided in paragraph (6) of
subdivision (a).
(c) (1) Notwithstanding any other provision of this part, no tax
credit shall reduce the tax imposed under Section 17041 or 17048 plus
the tax imposed under Section 17504 (relating to the separate tax on
lump-sum distributions) below the tentative minimum tax, as defined
by Section 17062, except the following credits, but only after
allowance of the credit allowed by Section 17063:
(A) The credit allowed by Section 17052 (relating to earned
income credit).
(B) The credit allowed by former Section 17052.4 (relating
to solar energy).
(B)
(C) The credit allowed by former Section 17052.5 (relating
to solar energy).
(C)
(D) The credit allowed by Section 17052.5 (relating to solar
energy).
(D)
(E) The credit allowed by Section 17052.12 (relating to
research expenses).
(E)
(F) The credit allowed by former Section 17052.13 (relating
to sales and use tax credit).
(F)
(G) The credit allowed by Section 17052.15 (relating to Los
Angeles Revitalization Zone sales tax credit).
(G)
(H) The credit allowed by Section 17053.5 (relating to the
renter's credit).
(H)
(I) The credit allowed by former Section 17053.8 (relating
to enterprise zone hiring credit).
(I)
(J) The credit allowed by Section 17053.10 (relating to Los
Angeles Revitalization Zone hiring credit).
(J)
(K) The credit allowed by former Section 17053.11 (relating
to program area hiring credit).
(K)
(L) For each taxable year beginning on or after January 1,
1994, the credit allowed by Section 17053.17 (relating to Los Angeles
Revitalization Zone hiring credit).
(L)
(M) The credit allowed by Section 17053.30
(relating to land and water conservation).
(M) The credit allowed by Section 17053.33 (relating to
targeted tax area sales or use tax credit).
(N) The credit allowed by Section 17053.34 (relating to targeted
tax area hiring credit).
(O) The credit allowed by Section 17053.49 (relating to qualified
property).
(P) The credit allowed by Section 17053.70 (relating to enterprise
zone sales or use tax credit).
(Q) The credit allowed by Section 17053.74 (relating to enterprise
zone hiring credit).
(R) The credit allowed by Section 17054 (relating to credits for
personal exemption).
(S) The credit allowed by Section 17057 (relating to clinical
testing expenses).
(T) The credit allowed by Section 17058 (relating to low-income
housing).
(U) The credit allowed by Section 17061 (relating to refunds
pursuant to the Unemployment Insurance Code).
(V) Credits for taxes paid to other states allowed by Chapter 12
(commencing with Section 18001).
(W) The credit allowed by Section 19002 (relating to tax
withholding).
(2) Any credit that is partially or totally denied under paragraph
(1) shall be allowed to be carried over and applied to the net tax
in succeeding taxable years, if the provisions relating to that
credit include a provision to allow a carryover when that credit
exceeds the net tax.
(d) Unless otherwise provided, any remaining carryover of a credit
allowed by a section that has been repealed or made inoperative
shall continue to be allowed to be carried over under the provisions
of that section as it read immediately prior to being repealed or
becoming inoperative.
(e) (1) Unless otherwise provided, if two or more taxpayers (other
than husband and wife) share in costs that would be eligible for a
tax credit allowed under this part, each taxpayer shall be eligible
to receive the tax credit in proportion to his or her respective
share of the costs paid or incurred.
(2) In the case of a partnership, the credit shall be allocated
among the partners pursuant to a written partnership agreement in
accordance with Section 704 of the Internal Revenue Code, relating to
partner's distributive share.
(3) In the case of a husband and wife who file separate returns,
the credit may be taken by either or equally divided between them.
(f) Unless otherwise provided, in the case of a partnership, any
credit allowed by this part shall be computed at the partnership
level, and any limitation on the expenses qualifying for the credit
or limitation upon the amount of the credit shall be applied to the
partnership and to each partner.
(g) (1) With respect to any taxpayer that directly or indirectly
owns an interest in a business entity that is disregarded for tax
purposes pursuant to Section 23038 and any regulations thereunder,
the amount of any credit or credit carryforward allowable for any
taxable year attributable to the disregarded business entity shall be
limited in accordance with paragraphs (2) and (3).
(2) The amount of any credit otherwise allowed under this part,
including any credit carryover from prior years, that may be applied
to reduce the taxpayer's "net tax," as defined in subdivision (a),
for the taxable year shall be limited to an amount equal to the
excess of the taxpayer's regular tax (as defined in Section 17062),
determined by including income attributable to the disregarded
business entity that generated the credit or credit carryover, over
the taxpayer's regular tax (as defined in Section 17062), determined
by excluding the income attributable to that disregarded business
entity. No credit shall be allowed if the taxpayer's regular tax (as
defined in Section 17062), determined by including the income
attributable to the disregarded business entity, is less than the
taxpayer's regular tax (as defined in Section 17062), determined by
excluding the income attributable to the disregarded business entity.
(3) If the amount of a credit allowed pursuant to the section
establishing the credit exceeds the amount allowable under this
subdivision in any taxable year, the excess amount may be carried
over to subsequent taxable years pursuant to subdivisions (c) and
(d).
SEC. 2. Section 17052 is added to the Revenue and Taxation Code,
to read:
17052. (a) For each taxable year beginning on or after January 1,
2000, and before January 1, 2005, there shall be allowed as a credit
against the "net tax" (as defined by Section 17039) an amount
determined under subdivision (b).
(b) Except as otherwise provided in this section, the amount of
the credit allowed under subdivision (a) shall be computed by
multiplying the "federal credit amount" (as defined in subdivision
(c)) by 15 percent and therefrom the amount of tax imposed by Section
17062 (relating to alternative minimum tax), if any, for the same
taxable year.
(c) The term "federal credit amount" means the amount determined
for purposes of federal income tax under Section 32 of the Internal
Revenue Code prior to the application of Section 32(h), relating to
reduction of credit to taxpayers subject to alternative minimum tax.
(d) No credit shall be allowed under this section to any of the
following:
(1) Any person who is treated as a nonresident for any portion of
the taxable year.
(2) Any person who is married (within the meaning of Section
17021.5) and files a separate return for the taxable year.
(3) Any person who does not have a "qualifying child" (as defined
by Section 32(c)(3) of the Internal Revenue Code) for the taxable
year.
(e) Section 3507 of the Internal Revenue Code, relating to advance
payment of earned income credit, shall not apply.
(f) For purposes of this section, any reference to Section 32 of
the Internal Revenue Code means the Internal Revenue Code as amended
by Public Law 105-206.
(g) If the amount allowable as a credit under this section exceeds
the tax liability computed under this part, the excess shall be
credited against other amounts due, if any, and the balance, if any,
refunded to the taxpayer only if funds are appropriated for that
purpose by the Legislature.
(h) The Franchise Tax Board shall provide training and information
to employers in order that employees claiming the credit allowed by
this section are allowed to adjust their withholding allowances to
reflect the credit.
(i) This section shall remain in effect only until December 1,
2005, and as of that date, is repealed.
SEC. 3. Section 19340 of the Revenue and Taxation Code is amended
to read:
19340. Interest shall be allowed and paid on any overpayment in
respect of any tax, at the adjusted annual rate established pursuant
to Section 19521 as follows:
(a) In the case of a credit, from the date of the overpayment to
the due date of the amount for which the credit is allowed. Any
interest allowed on any credit shall first be credited on any amounts
due from the taxpayer under Part 10 (commencing with Section 17001),
this part, or Part 11 (commencing with Section 23001).
(b) In the case of a refund, including a refund in excess of tax
liability as prescribed in subdivision (g) of Section 17052 or
subdivision (j) of Section 17053.5, from the date of the
overpayment to a date preceding the date of the refund warrant by not
more than 30 days, the date to be determined by the Franchise Tax
Board.
SEC. 4. Section 19341 of the Revenue and Taxation Code is amended
to read:
19341. (a) Except as provided in subdivisions (b), (c), and (d),
if any overpayment of tax is refunded or credited within 90 days
after the return is filed, or within 90 days after the last day
prescribed for filing the return of tax (determined without regard to
any extension of time for filing the return), whichever is later, no
interest shall be allowed under Section 19340 on the overpayment.
For the purposes of this section, "overpayment of tax" includes a
refund in excess of tax liability as prescribed in subdivision
(g) of Section 17052 or subdivision (j) of Section 17053.5.
(b) In the case of returns which set forth no determination or
amount of tax liability, or credits other than that allowed under
Section 17053.5, and which are filed solely for the purpose of
claiming the renter credit, no interest shall be allowed on refunds
made within 90 days from the date on which the return is filed, or
within 90 days after the last day prescribed for filing the return,
whichever is later. This subdivision applies only when communication
with the claimant or other verification is necessary to determine
entitlement to the claimed credit.
(c) In the case of an individual or fiduciary taxable under Part
10 (commencing with Section 17001), for the 1982 taxable year and
each taxable year thereafter, the 90-day time periods specified in
subdivision (a) shall be 45 days.
(d) In the case of a return of tax which is filed after the last
date prescribed for filing the return (determined with regard to
extensions), no interest shall be allowed or paid for any day before
the date on which the return is filed.
SEC. 5. This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.