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AB-5 Income and corporation taxes: credits: health savings account.(2007-2008)

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CALIFORNIA LEGISLATURE— 2007–2008 1st Ext.

Assembly Bill
No. 5

Introduced  by  Assembly Member Nakanishi

September 18, 2007

An act to add and repeal Sections 17053.77 and 23677 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 5, as introduced, Nakanishi. Income and corporation taxes: credits: health savings account.
The Personal Income Tax Law and the Corporation Tax Law authorize various credits against the taxes imposed by those laws.
This bill would authorize a credit against those taxes for each taxable year beginning on or after January 1, 2008, and before January 1, 2013, in an amount equal to 15% of the amount paid or incurred by a qualified taxpayer, as defined, during the taxable year for qualified health insurance, as defined, for specified employees of the taxpayer. This bill would also require the Franchise Tax Board and the Legislative Analyst to report on the usage and effectiveness of the credit, as specified.
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 17053.77 is added to the Revenue and Taxation Code, to read:

17053.77.
 (a) For each taxable year beginning on or after January 1, 2008, and before January 1, 2013, there shall be allowed as a credit against the “net tax,” as defined in Section 17039, an amount equal to 15 percent of the amount paid or incurred by a qualified taxpayer during the taxable year for qualified health insurance for employees of the taxpayer who perform services in this state and who pay income taxes to the state.
(b) For purposes of this section:
(1) “Qualified health insurance” means amounts paid on behalf of employees to a high deductible health plan, as defined by Section 223(c)(2) of the Internal Revenue Code, or to a health savings account, as defined by Section 223(d) of the Internal Revenue Code.
(2) “Qualified taxpayer” means any new small to medium size employer, or any existing small to medium size employer that, during any of the five taxable years immediately preceding the taxable year, has not provided health insurance to employees employed by the employer in this state.
(3) For purposes of this paragraph:
(A) “Small employer” means a person, as defined in Section 7701(a) of the Internal Revenue Code, or a private entity employing, for wages or salary, at least two but no more than 19 persons.
(B) “Medium employer” means a person, as defined in Section 7701(a) of the Internal Revenue Code, or a private entity employing, for wages or salary, at least 20 but no more than 199 persons.
(C) “New small to medium employer” means a small employer or a medium employer that began doing business on or after October 1, 2008.
(c) The credit allowed by this section shall be in lieu of any deduction to which the taxpayer otherwise may be entitled for expenses on which a credit under this section is claimed.
(d) On or before December 1, 2011, the Franchise Tax Board shall report to the Legislature on the total number of employers using the credit under this section, the total number of employees who have enrolled in high deductible health plans since the inception of the credit, and the total cost of this credit to the state.
(e) In the case where the credit allowed by this section exceeds the “net tax,” the excess may be carried over to reduce the “net tax” in the following year, and succeeding years if necessary, until the credit is exhausted.
(f) A qualified taxpayer is only eligible for the credit allowed by this section for the first year in which the credit is claimed and for each of the two consecutive taxable years following the taxable year in which the credit is first claimed.
(g) This section shall remain in effect only until December 1, 2013, and as of that date is repealed, unless a later enacted statute that is enacted before December 1, 2013, deletes or extends that date.

SEC. 2.

 Section 23677 is added to the Revenue and Taxation Code, to read:

23677.
 (a) For each taxable year beginning on or after January 1, 2008, and before January 1, 2013, there shall be allowed as a credit against the “tax,” as defined in Section 23036, an amount equal to 15 percent of the amount paid or incurred by a qualified taxpayer during the taxable year for qualified health insurance for employees of the taxpayer who perform services in this state and who pay income taxes to the state.
(b) For purposes of this section:
(1)  “Qualified health insurance” means amounts paid on behalf of employees to a high deductible health plan, as defined by Section 223(c)(2) of the Internal Revenue Code, or to a health savings account, as defined by Section 223(d) of the Internal Revenue Code.
(2) “Qualified taxpayer” means any new small to medium size employer, or any existing small to medium size employer that, during any of the five taxable years immediately preceding the taxable year, has not provided health insurance to employees employed by the employer in this state.
(3) For purposes of this paragraph:
(A) “Small employer” means a person, as defined in Section 7701(a) of the Internal Revenue Code, or a private entity employing, for wages or salary, at least two but no more than 19 persons.
(B) “Medium employer” means a person, as defined in Section 7701(a) of the Internal Revenue Code, or a private entity employing, for wages or salary, at least 20 but no more than 199 persons.
(C) “New small to medium employer” means a small employer or a medium employer that began doing business on or after October 1, 2008.
(c) The credit allowed by this section shall be in lieu of any deduction to which the taxpayer otherwise may be entitled for expenses on which a credit under this section is claimed.
(d) On or before December 1, 2011, the Franchise Tax Board shall report to the Legislature on the total number of employers using the credit under this section, the total number of employees who have enrolled in high deductible health plans since the inception of the credit, and the total cost of this credit to the state.
(e) In the case where the credit allowed by this section exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and succeeding years if necessary, until the credit is exhausted.
(f) A qualified taxpayer is only eligible for the credit allowed by this section for the first year in which the credit is claimed and for each of the two consecutive taxable years following the taxable year in which the credit is first claimed.
(g) This section shall remain in effect only until December 1, 2013, and as of that date is repealed, unless a later enacted statute that is enacted before December 1, 2013, deletes or extends that date.

SEC. 3.

 On or before March 1, 2012, the Legislative Analyst shall report to the Legislature on the effectiveness of the tax credits authorized by Sections 17053.77 and 23677 of the Revenue and Taxation Code upon employed Californians’ ability to meet deductible medical expenses incurred under qualified health insurance plans.

SEC. 4.

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