Bill Text: CA AB704 | 2021-2022 | Regular Session | Amended


Bill Title: Personal income taxes: deduction: qualified education loans.

Spectrum: Partisan Bill (Independent 1-0)

Status: (Introduced) 2022-01-20 - In committee: Held under submission. [AB704 Detail]

Download: California-2021-AB704-Amended.html

Amended  IN  Assembly  January 12, 2022
Amended  IN  Assembly  January 03, 2022

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 704


Introduced by Assembly Member Mayes

February 16, 2021


An act to amend Section 17072 of, and to add and repeal Section 17205 of, 17201.8 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 704, as amended, Mayes. Personal income taxes: deduction: qualified education loans.
(1) The Personal Income Tax Law allows allows, by way of conformity with deductions allowed under federal income tax law, various deductions in computing the income that is subject to the taxes imposed by that law, the Personal Income Tax Law, including a deduction against gross income for interest paid on qualified education loans not to exceed $2,500. a specified limit.
This bill, for taxable years beginning on or after January 1, 2023, and before January 1, 2028, would allow a deduction, in addition to the deduction described above, in determining adjusted gross income in an amount equal to the interest paid by the taxpayer during the taxable year on a qualified education loan, as defined. remove the limit on the deduction described above, as specified.
(2) Existing law requires that any bill introduced on or after January 1, 2020, that would authorize certain tax expenditures, as defined, or tax exemptions contain, among other things, specific goals, purposes, and objectives that the tax expenditure or exemption will achieve, detailed performance indicators, and data collection requirements.
This bill would express findings and declarations of the Legislature concerning the additional information required for any bill authorizing a new tax expenditure. The bill would require the Franchise Tax Board to review on an annual basis, beginning on January 1, 2024, the effectiveness of the deduction and to provide an annual written report of its findings to specified legislative committees.
(3) This bill would take effect immediately as a tax levy.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.Section 17072 of the Revenue and Taxation Code is amended to read:
17072.

(a)Section 62 of the Internal Revenue Code, relating to adjusted gross income defined, shall apply, except as otherwise provided.

(b)Section 62(a)(2)(D) of the Internal Revenue Code, relating to certain expenses of elementary and secondary school teachers, shall not apply.

(c)Section 62(a)(21) of the Internal Revenue Code, relating to attorneys’ fees relating to awards to whistleblowers, shall not apply.

(d)For taxable years beginning on or after January 1, 2023, and before January 1, 2028, Section 62(a) of the Internal Revenue Code, relating to the general rule, is modified to provide that the deduction under Section 17205 shall be allowed in determining adjusted gross income.

SEC. 2.Section 17205 is added to the Revenue and Taxation Code, to read:
17205.

SECTION 1.

 Section 17201.8 is added to the Revenue and Taxation Code, to read:

17201.8.
 (a) For taxable years beginning or on after January 1, 2023, and before January 1, 2028, there shall be allowed a deduction in an amount equal to the interest paid by the taxpayer during the taxable year on a qualified education loan. Section 221(a) of the Internal Revenue Code, relating to allowance of deduction, is modified to remove the limit specified by Section 221(b) of the Internal Revenue Code.
(b) For purposes of this section, the following definitions apply: all references to “qualified higher education expenses” in Section 221 of the Internal Revenue Code shall be replaced with “higher education expenses.”

(1)“Dependent” has the same meaning as the term is defined by Section 152 of the Internal Revenue Code, relating to dependent defined, determined without regard to Sections 152(b)(1), Section 152(b)(2), and Section 152(d)(1)(B) of the Internal Revenue Code.

(2)(A) “Qualified education loan” means an indebtedness incurred by the taxpayer solely to pay for higher education expenses that are incurred on behalf of the taxpayer or the taxpayer’s spouse or dependent, who is the taxpayer’s spouse or dependent at the time the indebtedness is incurred.

(B)“Qualified education loan” includes indebtedness used to refinance indebtedness that qualified as a qualified education loan.

(C)“Qualified education loan” does not include the following:

(i)Indebtedness owed to a person who is related, within the meaning of Section 267(b) or 707(b) of the Internal Revenue Code, relating to relationships and certain sales or exchanges of property with respect to controlled partnerships, respectively.

(ii)Indebtedness owed to a person by reason of a loan under a qualified employer plan, as defined in Section 72(p)(4) of the Internal Revenue Code, relating to qualified employer plan, etc., or under a contract referred to in Section 72(p)(5) of the Internal Revenue Code, relating to special rules for loans, etc., from certain contracts.

(3)“Higher education expenses” means the expenses of attendance at an institution of higher education, as provided in Section 529(e)(3) of the Internal Revenue Code. Notwithstanding Section 529(c)(7) of the Internal Revenue Code, “education expenses” shall not include any tuition expenses in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.

(c) Any amount of interest paid by the taxpayer during the taxable year on a qualified education loan that exceeds the taxpayer’s adjusted gross income may be carried over and claimed as a deduction in the following taxable year, and succeeding taxable years if necessary. For purposes of this section, “higher education expenses” means the expenses of attendance at an institution of higher education, as provided in Section 529(e)(3) of the Internal Revenue Code. Notwithstanding Section 529(c)(7) of the Internal Revenue Code, “education expenses” shall not include any tuition expenses in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.
(d) This section shall remain in effect only until December 1, 2028, and as of that date is repealed.

SEC. 3.SEC. 2.

 (a) For purposes of complying with the requirements of Section 41 of the Revenue and Taxation Code, and with respect to Section 17072 of the Revenue and Taxation Code, as amended by this act, and Section 17205 17201.8 of the Revenue and Taxation Code, as added and repealed by this act, the Legislature finds and declares all of the following:
(1) The specific goal of this act is to reduce the burden on taxpayers who are paying off student loan debt by allowing those taxpayers to deduct all of the interest paid on qualified education loans during the taxable year.
(2) The detailed performance indicators for the Legislature to use when measuring whether the deduction allowed by this act meets those goals, purposes, and objectives include all of the following:
(A) The total number of taxpayers claiming the deduction allowed by this act.
(B) A comparison of the amount deducted by individual taxpayers, pursuant to Section 17205 17201.8 of the Revenue and Taxation Code, to the amount deducted by those individual taxpayers in the years before the deduction was allowed.
(C) A review of the income levels of all of the individual taxpayers claiming the deduction allowed by this act.
(b) Beginning on January 1, 2024, and on an annual basis thereafter, the Franchise Tax Board shall review the effectiveness of the deduction allowed by this act and shall provide an annual written report of its findings to the Senate Committee on Governance and Finance, the Assembly Committee on Revenue and Taxation, and the Assembly Committee on Local Government. A report submitted pursuant to this subdivision shall be submitted in compliance with Section 9795 of the Government Code.

SEC. 4.SEC. 3.

 This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
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