BILL NUMBER: AB 43 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY FEBRUARY 4, 2015
INTRODUCED BY Assembly Member Mark Stone
( Principal coauthor: Assembly Member
Levine )
DECEMBER 1, 2014
An act relating to taxation. An act to add
Section 17052.1 to the Revenue and Taxation Code, relating to
taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 43, as amended, Mark Stone. Personal income tax
taxes : credit: earned income.
The Personal Income Tax Law allows various credits against the
taxes imposed by that law, including certain credits that are allowed
in modified conformity to credits allowed by federal income tax
laws. Federal income tax laws allow a refundable earned income tax
credit for certain low-income individuals who have earned income and
who meet certain other requirements.
This bill, for taxable years beginning on or after January 1,
2016, in modified conformity with federal income tax laws, would
allow an earned income credit to an eligible individual that is equal
to specified percentages of the earned income tax credit allowed by
federal law. The bill would provide that in those years in which an
appropriation is made by the Legislature, the credit would be
refundable. The bill would also make findings and declarations.
This bill would take effect immediately as a tax levy.
The Personal Income Tax Law authorizes various credits against the
taxes imposed by that law. The federal Internal Revenue Code
authorizes a refundable earned income tax credit for certain
low-income individuals who have earned income and who meet certain
other requirements.
This bill would state the intent of the Legislature to enact
legislation that would create an refundable earned income tax credit
for low-income individuals working in California. The bill would also
make findings and declarations in this regard.
Vote: majority. Appropriation: no. Fiscal committee: no
yes . State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. (a) The
Legislature finds and declares all of the following:
(1)
(a) In its Supplemental Poverty Measure report for the
year 2013, released in October 2014, the United States Census Bureau
reported California's rate of poverty to be 23.4 percent. This rate
is the highest among all 50 states.
(2)
(b) Using census data released in September 2014, the
California Budget Project (CBP) reported that the economic recovery
from the Great Recession has largely bypassed low- and middle-income
Californians, with the bottom three-fifths of the income distribution
experiencing stagnating income gains. This is contrasted with the
top one-fifth of the income distribution experiencing gains of 52.4
percent.
(3)
(c) A briefing on poverty released by the CBP in August
2014 reports that 67 percent of families living in poverty were
supported by one or more workers in 2012. Given that the majority of
families living in poverty are working families in California, it is
evident that poverty largely reflects low-paying jobs, not the
absence of employment.
(4)
(d) In California, the Public Policy Institute of
California (PPIC), in collaboration with the Stanford Center on
Poverty and Inequality, has developed the California Poverty Measure
(CPM), which underscores the role of California's social safety net,
amount which includes the CalFresh Program, CalWORKs, and the federal
Earned Income Tax Credit (EITC), in mitigating poverty.
(5)
(e) Using data from 2011, a PPIC report on the CPM
released in October 2013, reveals that 22 percent of Californians,
8.1 million people, lived in poverty. A comparison of CPM rates by
county show that the three most populous counties, Los Angeles
County, San Diego County, and Orange County, all had rates above the
statewide CPM at 26.9 percent, 22.7 percent, and 24.3 percent,
respectively.
(6)
(f) The CPM rate for children statewide for children,
those under the age of 18, was 25.1 percent, the highest rate of any
age group. This amounts to 2.3 million of California's children
living in poverty.
(7)
(g) Without need-based safety net programs and
resources, over 30 percent of Californians would be living in
poverty. The absence of the safety net would increase the poverty
rate among California's children to 39 percent according to the CPM.
(8)
(h) Refundable tax credits, including the federal EITC,
reduced the poverty rate in California by 3.2 percent overall. Among
children, the poverty rate reduction was 6 percent. This means that
560,000 fewer children and 600,000 fewer working-age adults, 1.16
million people fewer in total, are living in poverty when refundable
tax credits are accounted for in the CPM.
(9)
(i) According to the National Conference of State
Legislatures, 25 states in the country and the District of Columbia,
provide an EITC in addition to the federal EITC. California does not
currently have a state EITC.
(10)
(j) A Brookings Institution report issued in January
2003, shows that in addition to boosting the family incomes of
families in poverty, state EITC refunds served as an important
economic stimulus for the communities and regions of the families by
magnifying the impact of the federal EITC overall.
(b) Based on these findings and declarations, it is the intent of
the Legislature to enact legislation that would create an refundable
earned income tax credit for low-income individuals working in
California.
SEC. 2. Section 17052.1 is added to the
Revenue and Taxation Code , to read:
17052.1. For each taxable year beginning on or after January 1,
2016, there shall be allowed a credit against the "net tax," as
defined by Section 17039, for the taxable year, an amount determined
in accordance with Section 32 of the Internal Revenue Code, as
amended by Section 1002(a) of Public Law 111-5, as amended by Section
219(a)(2) of Public Law 111-226, as amended by Section 103(c) of
Public Law 111-312, and as amended by Section 103(c) of Public Law
112-240, as amended by Section 206(a) of Public Law 113-295, relating
to earned income, except as follows:
(a) (1) For an eligible individual who has at least one qualifying
child under five years of age, the credit amount shall be equal to
the federal earned income credit amount multiplied by 35 percent.
(2) For an eligible individual who does not have a qualifying
child, the credit amount shall be equal to the federal earned income
credit amount multiplied by 60 percent.
(3) For any other eligible individual who does not meet the
requirements of paragraph (1) or (2), the credit amount shall be
equal to the federal earned income credit amount multiplied by 15
percent.
(b) If the amount allowable as a credit under this section exceeds
the tax liability computed under this part for the taxable year, the
excess shall be credited against other amounts due, if any, and the
balance, if any, shall, upon appropriation by the Legislature, be
refunded to the qualified taxpayer.
(c) Any amounts refunded to a taxpayer pursuant to this section
shall not be included in income subject to tax under this part.
(d) Notwithstanding any other law, amounts refunded pursuant to
this section shall be treated in the same manner as the federal
earned income refund for the purpose of determining eligibility to
receive benefits under Division 9 (commencing with Section 10000) of
the Welfare and Institutions Code or amounts of those benefits.
(e) This section is notwithstanding Section 41.
SEC. 3. This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.