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SB-1140 Personal income taxes: credits: child poverty tax credit.(2019-2020)

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Date Published: 02/19/2020 09:00 PM
SB1140:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 1140


Introduced by Senator Caballero
(Principal coauthor: Assembly Member Reyes)

February 19, 2020


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


LEGISLATIVE COUNSEL'S DIGEST


SB 1140, as introduced, Caballero. Personal income taxes: credits: child poverty 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. The Personal Income Tax Law allows a refundable young child tax credit against the taxes imposed under that law, for each taxable year beginning on or after January 1, 2019, in an amount equal to $1,176 multiplied by the earned income tax credit adjustment factor, not to exceed $1,000 per each qualified taxpayer per taxable year and requires amounts of this credit in excess of the qualified taxpayer’s tax liability to be paid to the qualified taxpayer from the Tax Relief and Refund Account, a continuously appropriated fund.
This bill, under the Personal Income Tax Law, would additionally allow a refundable child poverty tax credit against the taxes imposed under that law, for each taxable year beginning on or after January 1, 2020, in an amount equal to either (1) $2,940 multiplied by the earned income tax credit adjustment factor for qualified taxpayers, as defined, residing in a “Region 1” county on the last day of the taxable year, not to exceed $2,500 per each qualified taxpayer per taxable year, or (2) $2,353 multiplied by the earned income tax credit adjustment factor for qualified taxpayers, as defined, residing in a “Region 2” county on the last day of the taxable year, not to exceed $2,000 per each qualified taxpayer per taxable year, as specified. The bill would require amounts of this credit in excess of the qualified taxpayer’s tax liability to be paid to the qualified taxpayer from the Tax Relief and Refund Account, thereby making an appropriation. The bill would specify that the credit is only 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 earned income tax credit.
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 17052.1 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”. 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 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) (1) In addition to any credit allowed pursuant to subdivision (a), for each taxable year beginning on or after January 1, 2020, there shall be allowed against the “net tax,” as defined by Section 17039, a child poverty tax credit to a qualified taxpayer, in an amount as determined under paragraph (2).
(2) (A) (i) For qualified taxpayers residing in a “Region 1” county on the last day of the taxable year, the amount of the child poverty tax credit shall be equal to two thousand nine hundred forty dollars ($2,940), multiplied by the earned income tax credit adjustment factor for the taxable year as specified for Section 17052, but shall not exceed two thousand five hundred dollars ($2,500) in any taxable year.
(ii) For qualified taxpayers residing in a “Region 2” county on the last day of the taxable year, the amount of the child poverty tax credit shall be equal to two thousand three hundred fifty-three dollars ($2,353), multiplied by the earned income tax credit adjustment factor for the taxable year as specified for Section 17052, but shall not exceed two thousand dollars ($2,000) in any taxable year.
(B) The child poverty 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 “deep poverty threshold amount.” For purposes of this section, the “deep poverty threshold amount” shall be the phaseout amount prescribed for an individual with two or more children in paragraph (2) of subdivision (b) of Section 17052, as recomputed annually for inflation pursuant to subdivision (e) of Section 17052.
(C) For purposes of this subdivision, “Region 1” county and “Region 2” county shall have the same meaning as specified in Section 11452.018 of the Welfare and Institutions Code.
(c) The young child tax credit and the child poverty tax credit allowed by subdivisions (a) and (b) 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.

(b)“Qualified

(d) (1) For purposes of the young child tax credit allowed by subdivision (a), “qualified taxpayer” means an eligible individual who has been allowed a tax credit under Section 17052 and has at least one qualifying child.
(2) For purposes of the child poverty tax credit allowed by subdivision (b), “qualified taxpayer” means an eligible individual as defined in Section 32 of the Internal Revenue Code, as amended by Public Law 115-141, except that Section 32(m) of the Internal Revenue Code, relating to identification numbers, is modified by substituting “federal individual taxpayer identification number or a social security number” for “social security number” and 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)” and has at least one qualifying child.

(c)“Qualifying

(e) (1) For purposes of the young child tax credit allowed by subdivision (a), “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.
(2) For purposes of the child poverty tax credit allowed by subdivision (b), “qualifying child” means a qualifying child as defined in Section 32 of the Internal Revenue Code, as amended by Public Law 115-141, except as follows:
(A) Includes a qualifying child who is a noncitizen.
(B) Section 32(m) of the Internal Revenue Code, relating to identification numbers, is modified by substituting “federal individual taxpayer identification number or a social security number” for “social security number” and 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).”
(C) The qualifying child shall be younger than 6 years old as of the last day of the taxable year.

(d)

(f) (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)

(g) If the amount allowable as a credit under this section subdivisions (a) or (b) 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)

(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.

(g)

(i) (1) In accordance with Section 41 of the Revenue and Taxation Code, the purpose of the Young Child Tax Credit young child tax credit and the child poverty tax credit allowed by this section is to reduce poverty among California’s poorest working families and young children. To measure whether the credit credits achieves its their intended purpose, the Franchise Tax Board shall annually prepare a written report on the following:
(A) The number of tax returns claiming the credit. credits.
(B) The number of qualifying children represented on tax returns claiming the credit. credits.
(C) The average credit amount on tax returns claiming the credit. credits.
(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.