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AB-2803 Income taxation: credits: dependent care.(2021-2022)

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Date Published: 04/26/2022 09:00 PM
AB2803:v97#DOCUMENT

Amended  IN  Assembly  April 26, 2022
Amended  IN  Assembly  March 31, 2022

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 2803

Introduced by Assembly Member Valladares

February 18, 2022

An act to add and repeal Sections 17053.84 and 23684 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 2803, as amended, Valladares. Income taxation: credits: dependent care.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws.
This bill, under both laws, for taxable years beginning on or after January 1, 2023, and before January 1, 2028, would allow a credit against those taxes for contributions paid or incurred by a taxpayer for qualified care or backup care for dependents, as specified, of the taxpayer’s employees, in an amount equal to 35% 25% of the contributions, or 50% 30% for a small employer taxpayer, as provided, not to exceed $500,000 $250,000 per taxable year.
Existing law requires any bill authorizing a new 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.
The bill also would include additional information required for any bill authorizing a new tax credit.
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 17053.84 is added to the Revenue and Taxation Code, to read:

17053.84.
 (a) For each taxable year beginning on or after January 1, 2023, and before January 1, 2028, there shall be allowed a credit against the “net tax,” as defined in Section 17039, in an amount equal to the amount determined in subdivision (b).
(b) (1) The amount of the credit allowed by this section shall be 35 25 percent of the costs paid or incurred by a taxpayer for contributions to qualified care.
(2) The amount of the credit allowed by this section shall be 50 30 percent of the cost paid or incurred by a small employer taxpayer for contributions to qualified care.
(3) The amount of the credit allowed by this section in any taxable year for a taxpayer or a small employer taxpayer shall not exceed five two hundred fifty thousand dollars ($500,000). ($250,000).
(c) For purposes of this section:
(1) “Backup care” means care provided to a qualified dependent when a qualified employee’s regular qualified care cannot be utilized. A taxpayer may provide backup care in any of the following ways:
(A) By contracting with a qualified care provider or a backup care benefit provider and providing direct payments to the qualified care provider or making payments to a backup care benefit provider for backup care services.
(B) By directly paying or arranging for payment of qualified care backup care annually to a qualified care provider or a backup care benefits provider upon receipt of an invoice detailing the number of backup care hours used by a qualified employee.
(C) By reimbursing a qualified employee directly or through a backup care benefit provider for backup care paid directly by the employee.
(2) “Backup care benefit provider” means a third-party vendor that offers services to provide employees options for locating or arranging for the provision of backup care, either through various backup care benefit providers or through a reimbursement program for care paid directly by the employee.

(2)

(3) “Contributions” include direct payments for qualified care. “Contributions” do not include amounts contributed for qualified care pursuant to a salary reduction agreement to provide benefits under a dependent care assistance program within the meaning of Section 129 of the Internal Revenue Code, as applicable, for purposes of Part 11 (commencing with Section 23001) and this part.

(3)

(4) “Employee” includes an individual who is an employee within the meaning of Section 401(c)(1) of the Internal Revenue Code, relating to self-employed individuals.

(4)

(5) “Qualified care” includes, but is not limited to, onsite service, center-based service, in-home care or home-provider care, or backup care, provided to a qualified dependent. A taxpayer may provide qualified care in any of the following ways:

(A)By contracting with a qualified care provider and providing direct payments to the qualified care provider for qualified care services.

(B)By directly paying or arranging for payment of qualified care annually to a qualified care provider upon receipt of an invoice detailing the number of qualified care hours used by qualified employees.

(5)

(6) (A) “Qualified dependent” means a dependent of a qualified employee who is under the age of 14 years.
(B) “Qualified dependent” does not include a dependent of a qualified employee or that employee’s spouse if the dependent qualifies as a dependent under subdivision (d) of Section 17054.

(6)

(7) “Qualified employee” means an employee of the taxpayer or the small employer taxpayer who is performing services for the taxpayer or the small employer taxpayer in this state, within the meaning of Section 25133, during the period in which the qualified care is performed.

(7)

(8) “Small employer taxpayer” means, with respect to any taxable year, any taxpayer if both of the following apply:
(A) The average number of employees of the taxpayer on business days during the taxable year does not exceed 75.
(B) The gross receipts of the taxpayer during the taxable year do not exceed twenty-five million dollars ($25,000,000).

(d)If a taxpayer makes contributions to qualified care and also collects fees from parents to support a childcare facility owned and operated by the taxpayer, no credit shall be allowed under this section for contributions in the amount, if any, by which the sum of the contributions and fees exceed the total cost of providing care. The Franchise Tax Board may require the taxpayer to provide information about fees collected from parents of children.

(e)

(d) If the credit is claimed by a taxpayer for contributions to qualified care that is used at a facility owned by the taxpayer, the basis of that facility shall be reduced by the amount of the credit. The basis adjustment shall be made for the taxable year for which the credit is allowed.

(f)

(e) In order to be allowed the credit authorized under this section, the taxpayer shall indicate, in the form and manner prescribed by the Franchise Tax Board, the number of qualified dependents provided qualified care.

(g)

(f) No deduction shall be allowed as otherwise provided in this part for that portion of expenses paid or incurred for the taxable year that is equal to the amount of the credit allowed under this section.

(h)

(g) If 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 has been exhausted.

(i)

(h) This section shall remain in effect only until December 1, 2028, and as of that date is repealed.

SEC. 2.

 Section 23684 is added to the Revenue and Taxation Code, to read:

23684.
 (a) For each taxable year beginning on or after January 1, 2023, and before January 1, 2028, there shall be allowed a credit against the “tax,” as defined in Section 23036, in an amount equal to the amount determined in subdivision (b).
(b) (1) The amount of the credit allowed by this section shall be 35 25 percent of the costs paid or incurred by a taxpayer for contributions to qualified care.
(2) The amount of the credit allowed by this section shall be 50 30 percent of the cost paid or incurred by a small employer taxpayer for contributions to qualified care.
(3) The amount of the credit allowed by this section in any taxable year for a taxpayer or a small employer taxpayer shall not exceed five two hundred fifty thousand dollars ($500,000). ($250,000).
(c) For purposes of this section:
(1) “Backup care” means care provided to a qualified dependent when a qualified employee’s regular qualified care cannot be utilized. A taxpayer may provide backup care in any of the following ways:
(A) By contracting with a qualified care provider or a backup care benefit provider and providing direct payments to the qualified care provider or making payments to a backup care benefit provider for backup care services.
(B) By directly paying or arranging for payment of qualified backup care annually to a qualified care provider or a backup care benefits provider upon receipt of an invoice detailing the number of backup care hours used by a qualified employee.
(C) By reimbursing a qualified employee directly or through a backup care benefit provider for backup care paid directly by the employee.
(2) “Backup care benefit provider” means a third-party vendor that offers services to provide employees options for locating or arranging for the provision of backup care, either through various backup care benefit providers or through a reimbursement program for care paid directly by the employee.

(2)

(3) “Contributions” include direct payments for qualified care. “Contributions” do not include amounts contributed for qualified care pursuant to a salary reduction agreement to provide benefits under a dependent care assistance program within the meaning of Section 129 of the Internal Revenue Code, as applicable, for purposes of Part 11 (commencing with Section 23001) and this part.

(3)

(4) “Employee” includes an individual who is an employee within the meaning of Section 401(c)(1) of the Internal Revenue Code, relating to self-employed individuals.

(4)

(5) “Qualified care” includes, but is not limited to, onsite service, center-based service, in-home care or home-provider care, or backup care, provided to a qualified dependent. A taxpayer may provide qualified care in any of the following ways:

(A)By contracting with a qualified care provider and providing direct payments to the qualified care provider for qualified care services.

(B)Directly paying or arranging for payment of qualified care annually to a qualified care provider upon receipt of an invoice detailing the number of qualified care hours used by qualified employees.

(5)

(6) (A) “Qualified dependent” means a dependent of a qualified employee who is under the age of 14 years.
(B) “Qualified dependent” does not include a dependent of a qualified employee or that employee’s spouse if the dependent qualifies as a dependent under subdivision (d) of Section 17054.

(6)

(7) “Qualified employee” means an employee of the taxpayer or the small employer taxpayer who is performing services for the taxpayer or the small employer taxpayer in this state, within the meaning of Section 25133, during the period in which the qualified care is performed.

(7)

(8) “Small employer taxpayer” means, with respect to any taxable year, any taxpayer if both of the following apply:
(A) The average number of employees of the taxpayer on business days during the taxable year does not exceed 75.
(B) The gross receipts of the taxpayer during the taxable year do not exceed twenty-five million dollars ($25,000,000).

(d)If a taxpayer makes contributions to qualified care and also collects fees from parents to support a childcare facility owned and operated by the taxpayer, no credit shall be allowed under this section for contributions in the amount, if any, by which the sum of the contributions and fees exceed the total cost of providing care. The Franchise Tax Board may require the taxpayer to provide information about fees collected from parents of children.

(e)

(d) If the credit is claimed by a taxpayer for contributions to qualified care that is used at a facility owned by the taxpayer, the basis of that facility shall be reduced by the amount of the credit. The basis adjustment shall be made for the taxable year for which the credit is allowed.

(f)

(e) In order to be allowed the credit authorized under this section, the taxpayer shall indicate, in the form and manner prescribed by the Franchise Tax Board, the number of qualified dependents provided qualified care.

(g)

(f) No deduction shall be allowed as otherwise provided in this part for that portion of expenses paid or incurred for the taxable year that is equal to the amount of the credit allowed under this section.

(h)

(g) If 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 has been exhausted.

(i)

(h) This section shall remain in effect only until December 1, 2028, and as of that date is repealed.

SEC. 3.

 For the purpose of complying with Section 41 of the Revenue and Taxation Code, with respect to Sections 17053.84 and 23684 of the Revenue and Taxation Code, as added by this act, the Legislature finds and declares all of the following:
(a) The specific goals, purposes, and objectives that the credit will achieve are as follows:
(1) To recognize that working families require child and dependent care support to fully participate in the workforce.
(2) To provide working families with additional dependent care support to address affordability and access issues and to help fill dependent care gaps.
(3) To incentivize more employers to offer their employees dependent care support services.
(b) To measure whether the credit achieves its intended purpose, the Franchise Tax Board shall prepare a written report on all of the following:
(1) The number and common characteristics of taxpayers claiming the credit.
(2) The number and common characteristics of small employer taxpayers claiming the credit.
(3) The average credit amount on taxpayer tax returns claiming the credit.
(4) The average credit amount on small employer taxpayer tax returns claiming the credit.
(5) The number of taxpayers claiming the credit in a taxable year that have not claimed the credit for a previous taxable year.
(6) The number of small employer taxpayers claiming the credit in a taxable year that have not claimed the credit for a previous taxable year.
(c) The Franchise Tax Board shall provide the written report prepared pursuant to subdivision (b), on or before ____, and in compliance with Section 9795 of the Government Code, 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 Government and Finance, and the Assembly Committee on Revenue and Taxation.

SEC. 4.

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