Bill Text: CA SB80 | 2015-2016 | Regular Session | Chaptered


Bill Title: Personal income taxes: earned income credit.

Spectrum: Unknown

Status: (Passed) 2015-06-24 - Chaptered by Secretary of State. Chapter 21, Statutes of 2015. [SB80 Detail]

Download: California-2015-SB80-Chaptered.html
BILL NUMBER: SB 80	CHAPTERED
	BILL TEXT

	CHAPTER  21
	FILED WITH SECRETARY OF STATE  JUNE 24, 2015
	APPROVED BY GOVERNOR  JUNE 24, 2015
	PASSED THE SENATE  JUNE 19, 2015
	PASSED THE ASSEMBLY  JUNE 19, 2015
	AMENDED IN ASSEMBLY  JUNE 16, 2015

INTRODUCED BY   Committee on Budget and Fiscal Review

                        JANUARY 9, 2015

   An act to amend Sections 19136 and 19167 of, and to add Section
17052 to, the Revenue and Taxation Code, relating to taxation, and
making an appropriation therefor, to take effect immediately, bill
related to the budget.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 80, Committee on Budget and Fiscal Review. Personal income
taxes: earned income credit.
   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,
2015, in modified conformity with federal income tax laws, would
allow an earned income credit against personal income tax, and a
payment in excess of that credit amount, 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 set forth in the annual Budget Act.
   Existing law requires any bill authorizing a new personal income
tax credit to contain, among other things, specific goals, purposes,
and objectives that the tax credit will achieve, detailed performance
indicators, and data collection requirements, as provided.
   To measure whether the earned income credit achieves its intended
purpose, this bill would require the Franchise Tax Board to annually
prepare a specified written report and to provide that report to
specified legislative committees.
   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.
   By authorizing new payments from that account for amounts in
excess of personal income tax liabilities, this bill would make an
appropriation.
   The Personal Income Tax Law imposes taxes based upon taxable
income and also imposes interest and penalties with regard to those
taxes under specified circumstances, including a penalty for the
underpayment of estimated tax. Existing law provides no addition to
tax shall be imposed to the extent that the underpayment was created
or increased by any law that is chaptered during and operative for
the taxable year of the underpayment.
   This bill would provide that addition to tax shall not be imposed
if the applicable percentage for the earned income tax credit for the
taxable year was less than the applicable percentage for that credit
for the preceding taxable year and would impose a penalty, in
conformity with federal law, for failure to be diligent in
determining eligibility for the earned income tax credit, as
specified.
   This bill would declare that it is to take effect immediately as a
bill providing for appropriations related to the Budget Bill.
   Appropriation: yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 17052 is added to the Revenue and Taxation
Code, 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) (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        The credit   The phaseout
eligible individual      percentage   percentage
with:                    is:          is:
No qualifying children   7.65%        7.65%
1 qualifying child       34%          34%
2 or more qualifying     40%          40%
children


   (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        The earned   The
eligible individual      income       phaseout
with:                    amount is:   amount is:
No qualifying children   $3,290       $3,290
1 qualifying child       $4,940       $4,940
2 or more qualifying     $6,935       $6,935
children


   (B) Section 32(b)(2)(B) of the Internal Revenue Code, relating to
joint returns, shall not apply.
   (3) Section 32(b)(3)(A) of the Internal Revenue Code, relating to
increased percentage for three or more qualifying children, is
modified by substituting "the credit percentage and phaseout
percentage is 45 percent" for "the credit percentage is 45 percent."
   (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) 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.
   (3) 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) 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.
   (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) The Franchise Tax Board may prescribe rules, guidelines, or
procedures necessary or appropriate 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.
   (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 Committees 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.
  SEC. 2.  Section 19136 of the Revenue and Taxation Code is amended
to read:
   19136.  (a) Section 6654 of the Internal Revenue Code, relating to
failure by an individual to pay estimated income tax, shall apply,
except as otherwise provided.
   (b) Section 6654(a)(1) of the Internal Revenue Code is modified to
refer to the rate determined under Section 19521 in lieu of Section
6621 of the Internal Revenue Code.
   (c) (1) Section 6654(e)(1) of the Internal Revenue Code, relating
to exceptions where the tax is a small amount, does not apply.
   (2) No addition to the tax shall be imposed under this section if
the tax imposed under Section 17041 or 17048 and the tax imposed
under Section 17062 for the preceding taxable year, minus the sum of
any credits against the tax provided by Part 10 (commencing with
Section 17001) or this part, or the tax computed under Section 17041
or 17048 upon the estimated income for the taxable year, minus the
sum of any credits against the tax provided by Part 10 (commencing
with Section 17001) or this part, is less than five hundred dollars
($500), except in the case of a separate return filed by a married
person the amount shall be less than two hundred fifty dollars
($250).
   (d) Section 6654(f) of the Internal Revenue Code does not apply
and for purposes of this section the term "tax" means the tax imposed
under Section 17041 or 17048 and the tax imposed under Section 17062
less any credits against the tax provided by Part 10 (commencing
with Section 17001) or this part, other than the credit provided by
subdivision (a) of Section 19002.
   (e) (1) The credit for tax withheld on wages, as specified in
Section 6654(g) of the Internal Revenue Code, is the credit allowed
under subdivision (a) of Section 19002.
   (2) (A) Section 6654(g)(1) of the Internal Revenue Code is
modified by substituting the phrase "the applicable percentage" for
the phrase "an equal part."
   (B) For purposes of this paragraph, "applicable percentage" means
the percentage amount prescribed under Section 6654(d)(1)(A) of the
Internal Revenue Code, as modified by subdivision (a) of Section
19136.1.
   (f) This section applies to a nonresident individual.
   (g) (1) No addition to tax shall be imposed under this section to
the extent that the underpayment was created or increased by either
of the following:
   (A) Any law that is chaptered during and operative for the taxable
year of the underpayment.
   (B) If, for a taxable year prior to its repeal, the adjustment
factor for the credit authorized by Section 17052 for the taxable
year was less than the adjustment factor for that credit for the
preceding taxable year.
   (2) (A) Notwithstanding Section 18415, subparagraph (A) of
paragraph (1) applies to penalties imposed under this section on or
after January 1, 2005.
   (B) Notwithstanding Section 18415, subparagraph (B) of paragraph
(1) applies to penalties imposed under this section on or after
January 1, 2016.
   (h) The amendments made to this section by Section 5 of Chapter
305 of the Statutes of 2008 apply to taxable years beginning on or
after January 1, 2009.
   (i) The amendments made to this section by Section 3 of Chapter 15
of the Fourth Extraordinary Session of the Statutes of 2009 apply to
amounts withheld on wages beginning on or after January 1, 2009.
  SEC. 3.  Section 19167 of the Revenue and Taxation Code is amended
to read:
   19167.  A penalty shall be imposed under this section for any of
the following:
   (a) In accordance with Section 6695(a) of the Internal Revenue
Code, for failure to furnish a copy of the return to the taxpayer, as
required by Section 18625.
   (b) In accordance with Section 6695(c) of the Internal Revenue
Code, for failure to furnish an identifying number, as required by
Section 18624.
   (c) In accordance with Section 6695(d) of the Internal Revenue
Code, for failure to retain a copy or list, as required by Section
18625 or for failure to retain an electronic filing declaration, as
required by Section 18621.5.
   (d) Failure to register as a tax preparer with the California Tax
Education Council, as required by Section 22253 of the Business and
Professions Code, unless it is shown that the failure was due to
reasonable cause and not due to willful neglect.
   (1) The amount of the penalty under this subdivision for the first
failure to register is two thousand five hundred dollars ($2,500).
This penalty shall be waived if proof of registration is provided to
the Franchise Tax Board within 90 days from the date notice of the
penalty is mailed to the tax preparer.
   (2) The amount of the penalty under this subdivision for a failure
to register, other than the first failure to register, is five
thousand dollars ($5,000).
   (e) The Franchise Tax Board shall not impose the penalties
authorized by subdivision (d) until either one of the following has
occurred:
   (1) Commencing January 1, 2006, and continuing each year
thereafter, there is an appropriation in the Franchise Tax Board's
annual budget to fund the costs associated with the penalty
authorized by subdivision (d).
   (2) (A) An agreement has been executed between the California Tax
Education Council and the Franchise Tax Board that provides that an
amount equal to all first year costs associated with the penalty
authorized by subdivision (d) shall be received by the Franchise Tax
Board. For purposes of this subparagraph, first year costs include,
but are not limited to, costs associated with the development of
processes or systems changes, if necessary, and labor.
   (B) An agreement has been executed between the California Tax
Education Council and the Franchise Tax Board that provides that the
annual costs incurred by the Franchise Tax Board associated with the
penalty authorized by subdivision (d) shall be reimbursed by the
California Tax Education Council to the Franchise Tax Board.
   (C) Pursuant to the agreement described in subparagraph (A), the
Franchise Tax Board has received an amount equal to the first year
costs described in that subparagraph.
   (f) In accordance with Section 6695(g) of the Internal Revenue
Code, for failure to be diligent in determining eligibility for
earned income credit for returns required to be filed on or after the
effective date of the act adding this subdivision.
  SEC. 4.  In future years, it is the intent of the Legislature to
enact legislation that would expand the California Earned Income Tax
Credit allowed by Section 17052 of the Revenue and Taxation Code, as
state budget conditions permit, to benefit a broader section of
working poor Californians.
  SEC. 5.  This act is a bill providing for appropriations related to
the Budget Bill within the meaning of subdivision (e) of Section 12
of Article IV of the California Constitution, has been identified as
related to the budget in the Budget Bill, and shall take effect
immediately.
                  
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