Bill Text: CA SB691 | 2021-2022 | Regular Session | Amended


Bill Title: Personal Income Tax Law: Earned Income Tax Credit: Young Child Tax Credit.

Spectrum: Partisan Bill (Democrat 3-0)

Status: (Introduced) 2021-05-04 - May 3 hearing: Placed on APPR suspense file. [SB691 Detail]

Download: California-2021-SB691-Amended.html

Amended  IN  Senate  April 15, 2021
Amended  IN  Senate  March 11, 2021

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Senate Bill
No. 691


Introduced by Senator Rubio
(Coauthor: Senator Hueso)
(Coauthor: Assembly Member Santiago)

February 19, 2021


An act to amend Sections 17052 and 17052.1 of the Revenue and Taxation Code, relating to taxation, and making an appropriation therefor.


LEGISLATIVE COUNSEL'S DIGEST


SB 691, as amended, Rubio. Personal Income Tax Law: earned income tax credit: young child tax credit. Earned Income Tax Credit: Young Child Tax Credit.
The Personal Income Tax Law, beginning on or after January 1, 2015, in modified conformity with federal income tax laws, allows an earned income tax credit against personal income tax and a payment from the Tax Relief and Refund Account for an allowable credit in excess of tax liability, to an eligible individual that is equal to that portion of the earned income tax credit allowed by federal law as determined by the earned income tax credit adjustment factor, as specified. For taxable years beginning on and after January 1, 2020, this tax credit is available to any eligible individuals using an individual taxpayer identification number.
This bill would, for taxable years beginning on or after January 1, 2021, allow an additional earned income tax credit to eligible individuals with no dependents whose earned income is too high for the taxpayer to receive the federal earned income tax credit. The additional earned income tax credit is in a specified amount, multiplied by the earned income tax credit adjustment factor, and phases out as the income of the eligible individual increases beyond a specified amount. The bill would also increase the earned income tax credit available to eligible individuals who are not eligible for the federal earned income tax credit because they are 18 to 24 years of age, 65 years of age or older, or because they file using a federal individual taxpayer identification number.
The Personal Income Tax Law allows, for each taxable year beginning on or after January 1, 2019, a young child tax credit against the taxes imposed under that law and a payment from the Tax Relief and Refund Account for an allowable credit in excess of tax liability to a qualified taxpayer in a specified amount multiplied by the earned income tax credit adjustment factor, as provided. Existing law defines “qualified taxpayer” for this purpose to include an eligible individual who has a qualified child, as defined, and is allowed an earned income tax credit, as specified.
This bill would expand the definition of “qualified taxpayer” to also include an eligible individual who has a qualified child and has zero or negative earned income, would have received an earned income tax credit but for the fact that the individual has no earned income, as defined, for the taxable year. The bill would exclude from that definition an individual who has disqualified income, as defined, in excess of $3,400.
Existing law establishes the continuously appropriated Tax Relief and Refund Account and provides that payments required to be made to taxpayers or other persons from the Personal Income Tax Fund are to be paid from that account, including any amount to be paid as an earned income tax credit or a young child tax credit in excess of any tax liabilities.
By increasing the amounts to be paid with funds from the Tax Relief and Refund Account, and thus, authorizing new payments from that account for additional amounts in excess of personal income tax liabilities, this bill would make an appropriation.
Existing law requires any bill authorizing a new tax expenditure, as defined to include tax credits, to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements.
This bill would state the intent of the Legislature to comply with the additional information requirement for any bill authorizing a new income tax expenditure.
Vote: 2/3   Appropriation: YES   Fiscal Committee: YES   Local Program: NO  

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


SECTION 1.

 Section 17052 of the Revenue and Taxation Code is amended to read:

17052.
 (a) (1) For each taxable year beginning on or after January 1, 2015, there shall be allowed against the “net tax,” as defined by Section 17039, an earned income tax credit in an amount equal to an amount determined in accordance with Section 32 of the Internal Revenue Code, relating to earned income, as applicable for federal income tax purposes for the taxable year, except as otherwise provided in this section.

(2)For each taxable year beginning on or after January 1, 2021, in addition to the credit allowed pursuant to paragraph (1), there shall be allowed against the “net tax” for each eligible individual with no dependents an additional earned income tax credit in an amount equal to an amount determined pursuant to paragraph (3) of subdivision (b).

(3)

(2) (A) The amount of the credit determined under Section 32 of the Internal Revenue Code, relating to earned income, as modified by this section, shall be multiplied by the earned income tax credit adjustment factor for the taxable year.
(B) Unless otherwise specified in the annual Budget Act, the earned income tax credit adjustment factor for a taxable year beginning on or after January 1, 2015, shall be 0 percent.
(C) The earned income tax credit authorized by this section shall only be operative for taxable years for which resources are authorized in the annual Budget Act for the Franchise Tax Board to oversee and audit returns associated with the credit.
(b) (1) In lieu of the table prescribed in Section 32(b)(1) of the Internal Revenue Code, relating to percentages, the credit percentage and the phaseout percentage shall be determined as follows:
In the case of an eligible individual with:
The credit percentage is:
The phaseout percentage is:
No qualifying children
7.65%
7.65%
1 qualifying child
34%
34%
2 qualifying children
40%
40%
3 or more qualifying children
45%
45%
(2) (A) In lieu of the table prescribed in Section 32(b)(2)(A) of the Internal Revenue Code, the earned income amount and the phaseout amount shall be determined as follows:
In the case of an eligible individual with:
The earned income amount is:
The phaseout amount is:
No qualifying children
$3,290
$3,290
1 qualifying child
$4,940
$4,940
2 or more qualifying children
$6,935
$6,935
(B) Section 32(b)(2)(B) of the Internal Revenue Code, relating to joint returns, shall not apply.

(3)(A)The additional credit described in paragraph (2) of subdivision (a) shall be the earned income tax credit adjustment factor multiplied by the excess of the amount determined in clause (i) over the amount determined in clause (ii).

(i)The base credit amount.

(ii)The phaseout percentage multiplied by so much of the eligible individual’s earned income as exceeds the phaseout amount.

(B)No credit shall be allowed pursuant to paragraph (2) of subdivision (a) to an eligible individual unless such individual has earned income of at least the minimum earned income amount.

(C)For purposes of this paragraph, the following definitions apply:

(i)The “minimum earned income amount” is fifteen thousand eight hundred twenty dollars ($15,820).

(ii)The “base credit amount” is one hundred twelve dollars ($112).

(iii)The “phaseout amount” is twenty-five thousand dollars ($25,000).

(iv)The “phaseout percentage” is 2.64 percent.

(D)Notwithstanding subdivision (e), the minimum earned income amounts listed in clause (i) of subparagraph (C) shall be adjusted annually, beginning with the first taxable year beginning on or after January 1, 2021, in accordance with subsection (j) of Section 32 of the Internal Revenue Code.

(E)For purposes of this paragraph, subdivision (o) does not apply.

(F)For taxable years beginning after the taxable year in which the minimum wage, as defined in Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the phaseout amounts in clause (iii) of subparagraph (C) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.

(c) (1) Section 32(c)(1)(A)(ii)(I) of the Internal Revenue Code is modified by substituting “this state” for “the United States.”
(2) (A)For each taxable year beginning on or after January 1, 2018, Section 32(c)(1)(A)(ii)(II) of the Internal Revenue Code is modified by deleting “25 but not attained age 65” and inserting in lieu thereof the following: “18.”

(B)For each taxable year beginning on or after January 1, 2021, for each eligible individual who is 18 to 24 years of age, or who is at least 65 years of age, the amount of the credit allowed pursuant to paragraph (1) of subdivision (a) shall be increased by one hundred dollars ($100). This increase to the credit shall be applied prior to multiplying the credit by the earned income tax credit adjustment factor, and prior to applying the phaseout percentage.

(3) Section 32(c)(2)(A) of the Internal Revenue Code is modified as follows:
(A) Section 32(c)(2)(A)(i) of the Internal Revenue Code is modified by deleting “plus” and inserting in lieu thereof the following: “and only if such amounts are subject to withholding pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.”
(B) Section 32(c)(2)(A)(ii) of the Internal Revenue Code shall not apply.
(4) For taxable years beginning on or after January 1, 2017, paragraph (3) shall not apply and in lieu thereof Section 32(c)(2)(A) of the Internal Revenue Code is modified as follows:
(A) Section 32(c)(2)(A)(i) of the Internal Revenue Code is modified by deleting “plus” and inserting in lieu thereof the following: “and only if such amounts are subject to withholding pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code, plus.”
(B) Section 32(c)(2)(A)(ii) of the Internal Revenue Code shall apply.
(5) Section 32(c)(3)(C) of the Internal Revenue Code, relating to place of abode, is modified by substituting “this state” for “the United States.”
(d) Section 32(i)(1) of the Internal Revenue Code is modified by substituting “$3,400” for “$2,200.”
(e) (1) In lieu of Section 32(j) of the Internal Revenue Code, relating to inflation adjustments, for taxable years beginning on or after January 1, 2016, the amounts specified in paragraph (2) of subdivision (b) and in subdivision (d) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(2) For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, when recomputing the amounts referenced in paragraph (1), the percentage change in the California Consumer Price Index shall be deemed to be the greater of 3.1 percent or the percentage change in the California Consumer Price Index as calculated under subdivision (h) of Section 17041 for that taxable year.
(3) For each taxable year beginning on or after January 1, 2019, and before January 1, 2020, when recomputing the amounts referenced in paragraph (1), the percentage change in the California Consumer Price Index shall be deemed to be the greater of 3.5 percent or the percentage change in the California Consumer Price Index as calculated under subdivision (h) of Section 17041 for that taxable year.
(f) 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 be paid from the Tax Relief and Refund Account and refunded to the taxpayer.
(g) (1) The Franchise Tax Board may prescribe rules, guidelines, procedures, or other guidance to carry out the purposes of this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.
(2) (A) The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section, including any regulations to prevent improper claims from being filed or improper payments from being made with respect to net earnings from self-employment.
(B) The adoption of any regulations pursuant to subparagraph (A) may be adopted as emergency regulations in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) and shall be deemed an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare. Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, these emergency regulations shall not be subject to the review and approval of the Office of Administrative Law. The regulations shall become effective immediately upon filing with the Secretary of State, and shall remain in effect until revised or repealed by the Franchise Tax Board.
(h) 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.
(i) (1) For the purpose of implementing the credit allowed by this section for the 2015 taxable year, the Franchise Tax Board shall be exempt from the following:
(A) Special Project Report requirements under State Administrative Manual Sections 4819.36, 4945, and 4945.2.
(B) Special Project Report requirements under Statewide Information Management Manual Section 30.
(C) Section 11.00 of the 2015 Budget Act.
(D) Sections 12101, 12101.5, 12102, and 12102.1 of the Public Contract Code.
(2) The Franchise Tax Board shall formally incorporate the scope, costs, and schedule changes associated with the implementation of the credit allowed by this section in its next anticipated Special Project Report for its Enterprise Data to Revenue Project.
(j) (1) In accordance with Section 41 of the Revenue and Taxation Code, the purpose of the California Earned Income Tax Credit is to reduce poverty among California’s poorest working families and individuals. To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall annually prepare a written report on the following:
(A) The number of tax returns claiming the credit.
(B) The number of individuals represented on tax returns claiming the credit.
(C) The average credit amount on tax returns claiming the credit.
(D) The distribution of credits by number of dependents and income ranges. The income ranges shall encompass the phase-in and phaseout ranges of the credit.
(E) Using data from tax returns claiming the credit, including an estimate of the federal tax credit determined under Section 32 of the Internal Revenue Code, an estimate of the number of families who are lifted out of deep poverty by the credit and an estimate of the number of families who are lifted out of deep poverty by the combination of the credit and the federal tax credit. For the purposes of this subdivision, a family is in “deep poverty” if the income of the family is less than 50 percent of the federal poverty threshold.
(2) The Franchise Tax Board shall provide the written report to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, the Assembly Committee on Revenue and Taxation, and the Senate and Assembly Committees on Human Services.
(k) The tax credit allowed by this section shall be known as the California Earned Income Tax Credit.
(l) The amendments made to this section by Chapter 722 of the Statutes of 2016 shall apply to taxable years beginning on or after January 1, 2016.
(m) (1) For each taxable year beginning on or after January 1, 2017, and before January 1, 2018, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred dollars ($100) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty dollars ($250) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:
In the case of an eligible individual with:
The credit percentage is:
The phaseout percentage is:
No qualifying children
2.20%1.22%
1 qualifying child
3.10%2.29%
2 qualifying children
2.13%3.45%
3 or more qualifying children
2.12%3.49%
(2) For each taxable year beginning on or after January 1, 2017, and before January 1, 2018, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred dollars ($100) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty dollars ($250) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows:
In the case of an eligible individual with:
The earned income amount is:
The phaseout amount is:
No qualifying children
$5,354$5,354
1 qualifying child
$9,484$9,484
2 qualifying children
$13,794$13,794
3 or more qualifying children
$13,875$13,875
(n) (1) For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred three dollars ($103) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty-eight dollars ($258) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:
In the case of an eligible individual with:
The credit percentage is:
The phaseout percentage is:
No qualifying children
2.20%1.08%
1 qualifying child
3.10%2.00%
2 qualifying children
2.13%2.82%
3 or more qualifying children
2.12%2.85%
(2) For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred three dollars ($103) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty-eight dollars ($258) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows:
In the case of an eligible individual with:
The earned income amount is:
The phaseout amount is:
No qualifying children
$5,520$5,520
1 qualifying child
$9,778$9,778
2 qualifying children
$14,222$14,222
3 or more qualifying children
$14,305$14,305
(o) (1) For each taxable year beginning on or after January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to two hundred dollars ($200) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to five hundred five dollars ($505) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:
In the case of an eligible individual with:
The credit percentage is:
The phaseout percentage is:
No qualifying children5.43%0.92%
1 qualifying child
6.33%2.88%
2 qualifying children
4.20%3.75%
3 or more qualifying children
4.15%3.78%
(2) For each taxable year beginning on or after January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to two hundred dollars ($200) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to five hundred five dollars ($505) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows:
In the case of an eligible individual with:
The earned income amount is:
The phaseout amount is:
No qualifying children$4,334$4,334
1 qualifying child
$9,381$9,381
2 qualifying children
$14,137$14,137
3 or more qualifying children
$14,302$14,302
(3) For taxable years beginning on or after January 1, 2020, and until and including the taxable year in which the minimum wage, as defined in Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, both of the following shall occur:
(A) The amounts in paragraphs (1) and (2) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(B) The phaseout percentage for each of the four categories of eligible individuals shall be recalculated by the Franchise Tax Board in such a manner that, for a taxpayer with an earned income of thirty thousand dollars ($30,000), the calculated amount of credit is equal to zero.
(4) For taxable years beginning after the taxable year in which the minimum wage, as defined in Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the amounts in paragraphs (1) and (2) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(p) (1)For For each taxable year beginning on or after January 1, 2020, Section 32(m) of the Internal Revenue Code, relating to identification numbers, is modified as follows:

(A)

(1) By deleting “(other than a social security number issued pursuant to clause (II) (or that portion of clause (III) that relates to clause (II)) of section 205(c)(2)(B)(i) of the Social Security Act).”

(B)

(2) By substituting “federal individual taxpayer identification number or a social security number” for “social security number.”

(2)For each taxable year beginning on or after January 1, 2021, for each eligible individual that files using a federal individual taxpayer identification number, the amount of the credit allowed pursuant to paragraph (1) of subdivision (a) shall be increased by one hundred dollars ($100). This increase to the credit shall be applied prior to multiplying the credit by the earned income tax credit adjustment factor, and prior to applying the phaseout percentage.

(q) An eligible individual, eligible individual’s spouse, or qualifying child using a federal individual taxpayer identification number as authorized under subdivision (p) shall:
(1) Upon request of the Franchise Tax Board, provide:
(A) Identifying documents acceptable for purposes of obtaining a California driver’s license as authorized by subdivisions (a) and (c) of Section 12801.9 of the Vehicle Code, enacted by Chapter 524 of the Statutes of 2013, and related regulations adopted for purposes of establishing documents acceptable to prove identity.
(B) Identifying documents used to report earned income for the taxable year.
(2) Upon receiving a valid social security number issued to that individual by the Social Security Administration, notify the Franchise Tax Board, in the time and manner prescribed by the Franchise Tax Board.
(r) The Legislature finds and declares that, to the extent they are otherwise qualified for a credit under this section, undocumented persons are eligible for the tax credit authorized by this section within the meaning of subsection (d) of Section 1621 of Title 8 of the United States Code.
(s) For each taxable year beginning on or after January 1, 2021, for an eligible individual who files a California Individual Income Tax Return using a federal individual taxpayer identification number and who has been allowed a credit under this section for that taxable year, the amount of the credit allowed pursuant to this section shall be increased by one hundred dollars ($100).

SEC. 2.

 Section 17052.1 of the Revenue and Taxation Code is amended to read:

17052.1.
 (a) (1) For each taxable year beginning on or after January 1, 2019, there shall be allowed against the “net tax,” as defined by Section 17039, a young child tax credit to a qualified taxpayer, in an amount as determined under paragraph (2).
(2) (A) The amount of the young child tax credit shall be equal to one thousand one hundred seventy-six dollars ($1,176), multiplied by the earned income tax credit adjustment factor for the taxable year as specified for Section 17052.
(B) The young child tax credit allowable in any taxable year to any qualified taxpayer shall be limited to a maximum of one thousand dollars ($1,000).
(C) The young child tax credit shall be reduced by twenty dollars ($20) for each one hundred dollars ($100), or fraction thereof, by which the qualified taxpayer’s earned income, as defined in Section 17052, exceeds the “threshold amount”. amount. For purposes of this section, the “threshold amount” shall be twenty-five thousand dollars ($25,000).
(D) The young child tax credit authorized by this section shall only be operative for taxable years for which resources are authorized in the annual Budget Act for the Franchise Tax Board to oversee and audit returns associated with the credit allowed under Section 17052.
(3) For taxable years beginning after the taxable year in which the minimum wage, as defined in Section 1182.12 of the Labor Code, is set at $15 fifteen dollars ($15) per hour, the “threshold amount” in subparagraph (C) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(b) “Qualified taxpayer” means an eligible individual as determined under Section 17052 who has at least one qualifying child and satisfies either of the following:
(1) Has been allowed a tax credit under Section 17052.

(2)Has no earned income or negative earned income, but does not have more than three thousand four hundred dollars ($3,400) in disqualified income. For purposes of this paragraph, “earned income” has the same meaning as that term is defined by subparagraph (A) of paragraph (2) of subsection (c) of Section 32 of the Internal Revenue Code. For purposes of this paragraph, “disqualified income” has the same meaning as that term is defined by paragraph (2) of subsection (i) of Section 32 of the Internal Revenue Code.

(2) Would otherwise have been allowed a tax credit under Section 17052, but for the fact that the individual has no earned income, as defined in Section 17052.
(c) “Qualifying child” shall have the same meaning as under Section 17052, except that the child shall be younger than 6 years old as of the last day of the taxable year.
(d) (1) The Franchise Tax Board may prescribe rules, guidelines, procedures, or other guidance to carry out the purposes of this section. Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code shall not apply to any rule, guideline, or procedure prescribed by the Franchise Tax Board pursuant to this section.
(2) (A) The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section, including any regulations to prevent improper claims from being filed or improper payments from being made with respect to net earnings from self-employment.
(B) The adoption of any regulations pursuant to subparagraph (A) may be adopted as emergency regulations in accordance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code) and shall be deemed an emergency and necessary for the immediate preservation of the public peace, health and safety, or general welfare. Notwithstanding Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code, these emergency regulations shall not be subject to the review and approval of the Office of Administrative Law. The regulations shall become effective immediately upon filing with the Secretary of State, and shall remain in effect until revised or repealed by the Franchise Tax Board.
(e) 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 be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer.
(f) 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.
(g) (1) In accordance with Section 41 of the Revenue and Taxation Code, the purpose of the Young Child Tax Credit is to reduce poverty among California’s poorest working families and young children. To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall annually prepare a written report on the following:
(A) The number of tax returns claiming the credit.
(B) The number of qualifying children represented on tax returns claiming the credit.
(C) The average credit amount on tax returns claiming the credit.
(2) The Franchise Tax Board shall provide the written report to the Senate Committee on Budget and Fiscal Review, the Assembly Committee on Budget, the Senate and Assembly Committees on Appropriations, the Senate Committee on Governance and Finance, the Assembly Committee on Revenue and Taxation, and the Senate and Assembly Committees on Human Services.
(h) The Legislature finds and declares that, to the extent they are otherwise qualified for a credit under this section, undocumented persons are eligible for the tax credit authorized by this section within the meaning of subsection (d) of Section 1621 of Title 8 of the United States Code.

SEC. 3.

 It is the intent of the Legislature to comply with Section 41 of the Revenue and Taxation Code.
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