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AB-2589 Earned Income Tax Credit: one-time child tax credit payment.(2021-2022)

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Date Published: 05/20/2022 04:00 AM
AB2589:v97#DOCUMENT

Amended  IN  Assembly  May 19, 2022
Amended  IN  Assembly  April 07, 2022

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 2589

Introduced by Assembly Member Santiago
(Coauthors: Assembly Members Bryan, Cervantes, Mike Fong, Cristina Garcia, Eduardo Garcia, Gipson, Low, Blanca Rubio, Salas, and Stone)
(Coauthor: Senator Wiener)

February 18, 2022

An act to amend Sections 17052, 17131.11, and 19554.1 of, and to add Section 17052.2 to, 17052 and 17052.1 of the Revenue and Taxation Code, relating to economic relief.


LEGISLATIVE COUNSEL'S DIGEST


AB 2589, as amended, Santiago. Earned Income Tax Credit: one-time child tax credit payment.
(1) 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 law provides that the amount of the credit is calculated as a percentage of the eligible individual’s earned income and is phased out above a specified amount as income increases and provides alternative calculation factors under specified circumstances. The law requires, for taxable years beginning on or after January 1, 2019, specified earned income amounts, phaseout amounts, and the amount of disqualified income that would disallow this credit to be recomputed annually in the same manner as the recomputation of income tax brackets, as prescribed.
This bill, upon appropriation, for each taxable year beginning on or after January 1, 2022, would revise the alternative calculation factors and phaseout amounts and remove the earned income threshold at which the phaseout ends, thereby increasing the amount of eligible taxpayers.

(2)Existing law authorizes various forms of relief for low-income Californians, including certain tax benefits and public assistance programs. Existing law also provides various forms of assistance to those Californians that have been impacted by the COVID-19 emergency, including a one-time Golden State Stimulus payment to each qualified recipient, as defined.

This bill, upon appropriation, would authorize the Controller to make a one-time child tax credit payment of $2,000 per qualifying child, as provided, to each qualified recipient, as defined, in a form and manner determined by the Franchise Tax Board. The bill would require these one-time child tax credit payments to be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer.

(2) The Personal Income Tax Law allows 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 qualifying child, as defined, and is allowed an earned income tax credit, as specified. That law limits the definition of “qualifying child” for this purpose to a child younger than 6 years of age.
This bill, for taxable years for which an appropriation is made by the Legislature, would increase the amount of the young child tax credit, would allow a young child tax credit to a qualified taxpayer for each qualifying child, would expand the definition of “qualifying child,” as specified, and would expand the definition of “qualified taxpayer,” as specified.
Vote: MAJORITY   Appropriation: NO   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) (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.
(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) 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.”
(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.
(F) The number of filers with incomes under the threshold amounts, as defined in subdivision (s), who did not claim 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.
(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, and before January 1, 2022, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to two hundred dollars ($200), as recomputed pursuant to paragraphs (3) and (4), ($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), as recomputed pursuant to paragraphs (3) and (4), 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, and before January 1, 2022, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to two hundred dollars ($200), as recomputed pursuant to paragraphs (3) and (4), ($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), as recomputed pursuant to paragraphs (3) and (4), 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 before January 1, 2022, and until and including the taxable year in which the minimum wage, as defined in paragraph (1) of subdivision (b) of 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) (A) 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.
(B) For taxable years beginning on or after January 1, 2023, the phaseout percentages applicable for taxable year 2022, as recalculated under subparagraph (B) of paragraph (3), shall apply.
(p) 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:
(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).”
(2) By substituting “federal individual taxpayer identification number or a social security number” for “social security number.”
(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)This subdivision shall apply for each taxable year beginning on or after January 1, 2022.

(1)(A)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

0%

0%

1 qualifying child

34%

34%

2 qualifying children

40%

40%

3 or more qualifying children

45%

45%

(B)(i)In the case of an eligible individual with no qualifying children, the amount of the credit, as computed pursuant to subdivisions (a) and (b), shall be equal to two hundred ninety-nine dollars ($299), multiplied by the earned income tax credit adjustment factor for that taxable year.

(ii)(I)In the case of an eligible individual with no qualifying children, the amount of the credit, as computed pursuant to subdivisions (a) and (b), shall be reduced by thirteen dollars ($13) for each one hundred dollars ($100), or fraction thereof, by which the qualified taxpayer’s earned income exceeds the threshold amount. For purposes of this subclause, the “threshold amount” shall be twenty-eight thousand dollars ($28,000).

(II)The amount in subparagraph (B) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.

(III)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 “threshold amount” in clause (ii) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.

(C)(i)In the case of an eligible individual with one or more qualifying children, the amount of the credit, as computed pursuant to subdivisions (a) and (b), shall be no less than two hundred ninety-nine dollars ($299), multiplied by the earned income tax credit adjustment factor for that taxable year.

(ii)The amount in clause (i) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.

(2)(A)If the amount of credit computed pursuant to subdivision (a) and paragraph (1) is less than or equal to five hundred five dollars ($505), as recomputed pursuant to paragraphs (3) and (4) of subdivision (o), 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 subparagraph (B) below, then in lieu of the table prescribed in paragraph (1), the credit percentage and the phaseout percentage shall be determined as follows, as recomputed pursuant to paragraphs (3) and (4) of subdivision (o):

In the case of an eligible individual with:

The credit percentage is:

The phaseout percentage is:

1 qualifying child

6.33%2.88%

2 qualifying children

4.20%3.75%

3 or more qualifying children

4.15%3.78%

(B)If the amount of credit computed pursuant to subdivision (a) and paragraph (1) is less than or equal to five hundred five dollars ($505), as recomputed pursuant to paragraphs (3) and (4) of subdivision (o), 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, as recomputed pursuant to paragraphs (3) and (4) of subdivision (o):

In the case of an eligible individual with:

The earned income amount is:

The phaseout amount is:

1 qualifying child

$9,381$9,381

2 qualifying children

$14,137$14,137

3 or more qualifying children

$14,302$14,302

(C)(i)In the case of an eligible individual with one or more qualifying children, the amount of credit computed pursuant to subdivision (a) and paragraph (1) shall be no less than two hundred ninety-nine dollars ($299), multiplied by the earned income tax credit adjustment factor for that taxable year, except as provided in clause (ii).

(ii)In the case of an eligible individual with one or more qualifying children and adjusted gross income or, if greater, earned income, that is greater than or equal to the threshold amount, the amount of credit computed pursuant to clause (i) shall be reduced by thirteen dollars ($13) for each one hundred dollars ($100), or fraction thereof, by which the qualified taxpayer’s earned income exceeds the threshold amount. For purposes of this clause, the “threshold amount” shall be twenty-eight thousand dollars ($28,000).

(iii)The amount in clause (i) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.

(iv)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 threshold amount in clause (ii) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.

(s) (1) For taxable years beginning on or after January 1, 2022, if the amount of credit computed pursuant to subdivision (a), (b), or (o) for an eligible individual is two hundred ninety-nine dollars ($299) or less, multiplied by the earned income tax credit adjustment factor for that taxable year, the credit for the eligible individual shall be two hundred ninety-nine dollars ($299), multiplied by the earned income tax credit adjustment factor for the taxable year.
(2) For taxable years beginning on or after January 1, 2023, the amount in paragraph (1) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(3) The amount in paragraph (1), as adjusted by paragraph (2), shall be reduced by twelve dollars and seventy cents ($12.70) for each one hundred dollars ($100), or fraction thereof, by which the qualified taxpayer’s adjusted gross income or, if greater, earned income, exceeds the “threshold amount.” For purposes of this subdivision, the “threshold amount” shall be twenty-eight thousand dollars ($28,000).
(4) For taxable years beginning after the taxable year in which the minimum wage, as specified in paragraph (1) of subdivision (b) of Section 1182.12 of the Labor Code, is set at fifteen dollars ($15) per hour, the “threshold amount” in paragraph (3) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(t) The changes made to this section by the act adding this subdivision shall become operative upon appropriation by the Legislature.

SEC. 2.Section 17052.2 is added to the Revenue and Taxation Code, to read:
17052.2.

(a)Upon appropriation by the Legislature, the Controller shall make a one-time child tax credit payment in the applicable amount to each qualified recipient. A qualified recipient shall not receive more than one payment of the applicable amount. The payments may be made in the form and manner determined by the Franchise Tax Board.

(b)For purposes of this section, the following definitions shall apply:

(1)“Applicable amount” means two thousand dollars ($2,000) per qualifying child, as determined under Section 17052.

(2)“Qualified recipient” means an eligible individual with one or more qualifying children, as determined under Section 17052, who filed a California individual income tax return for the taxable year beginning on or after January 1, 2020, and before January 1, 2021, who has been allowed a tax credit pursuant to Section 17052 for that taxable year by November 15, 2022, and is a California resident on the date the Controller issues the payment pursuant to subdivision (a).

(3)“Resident” shall have the same meaning as that term is defined in Section 17014.

(c)The Franchise Tax Board shall provide the return or return information of the qualified recipients to the Controller as authorized under Section 19554.1 to allow the Controller to make payments authorized pursuant to this section.

(d)The payment authorized by this section shall be a refund or overpayment of income taxes under Chapter 6 (commencing with Section 19301) of Part 10.2 of any liability imposed under this part.

(e)The amount allowable as a payment under this section shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer.

(f)Notwithstanding any other law, the payment authorized 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, excluding benefits under Chapter 7 (commencing with Section 14000) of Part 3 of Division 9 of the Welfare and Institutions Code or amounts of those benefits.

(g)Notwithstanding any other law, the payment authorized pursuant to this section shall not be taken into account as income, and shall not be taken into account as resources for a period of 12 months from receipt, for purposes of determining the eligibility of the individual, or any other individual, for benefits or assistance or the amount or extent of benefits or assistance under any state or local program not covered in subdivision (f). With respect to a state or local program, this subdivision shall only be implemented to the extent that it does not conflict with federal law relating to that program, and that any required federal approval or waiver is first obtained for that program.

(h)The Legislature finds and declares that, to the extent they are otherwise qualified recipients pursuant to paragraph (2) of subdivision (b), undocumented persons are eligible for the payment authorized by this section within the meaning of subsection (d) of Section 1621 of Title 8 of the United States Code.

SEC. 3.Section 17131.11 of the Revenue and Taxation Code is amended to read:
17131.11.

(a)Gross income does not include any payments received by an individual pursuant to Section 8150, 8150.2, or 8151 of the Welfare and Institutions Code.

(b)Gross income does not include any payments received by an individual pursuant to Section 17052.2.

(c)This section shall remain in effect only until January 1, 2025, and as of that date is repealed.

SEC. 4.Section 19554.1 of the Revenue and Taxation Code is amended to read:
19554.1.

(a)Notwithstanding Section 19542, subject to the limitations of this section and federal law, the Franchise Tax Board may provide to the Controller return or return information, including identifying information and other information necessary for the Controller to make payments to “qualified recipients” pursuant to Section 8150 or 8150.2 of the Welfare and Institutions Code.

(b)Notwithstanding Section 19542, subject to the limitations of this section and federal law, the Franchise Tax Board shall provide to the Controller return or return information, including identifying information and other information necessary for the Controller to make payments to “qualified recipients” pursuant to Section 17052.2.

(c)(1)The information provided to the Controller under this section is subject to Section 19542.

(2)The Controller and any officer, employee, or agent, or former officer, employee, or agent, of the Controller shall not disclose or use any information obtained from the Franchise Tax Board pursuant to this section except for the purpose of making payments pursuant to Section 8150 or 8150.2 of the Welfare and Institutions Code.

(d)This section shall remain in effect only until January 1, 2025, and as of that date is repealed.

SEC. 5.

It is the intent of the Legislature to comply with the requirements of Section 41 of the Revenue and Taxation Code for the purpose of the tax expenditure allowed by the amendment to Section 17131.11 of the Revenue and Taxation Code made by this act.

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, except in taxable years in which an appropriation is made by the Legislature to provide for an expanded credit as specified in subdivision (e), 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) “Qualified taxpayer” means an eligible individual who has been allowed a tax credit under Section 17052 and has at least one qualifying child.
(c) “Qualifying child” shall have the same meaning as under Section 17052, except that the child shall be younger than 6 years old of age 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) Upon appropriation by the Legislature, for each taxable year beginning on or after January 1, 2022, the amount of the credit allowed by this section shall be calculated pursuant to this subdivision.
(1) (A) The credit allowed under this subdivision 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, for each qualifying child.
(B) The amount of the young child tax credit specified in subparagraph (A) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(C) The tax credit allowed pursuant to this subdivision shall be reduced by forty dollars ($40) 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,” as defined in subparagraph (C) of paragraph (2) of subdivision (a) as recomputed pursuant to paragraph (3) of subdivision (a).
(2) Notwithstanding subdivisions (b) and (c), for years in which this subdivision applies:
(A) “Qualified taxpayer” means an eligible individual who satisfies either of the following:
(i) Has been allowed a credit under Section 17052.
(ii) Meets both of the following requirements:
(I) Would otherwise have been allowed a tax credit under Section 17052, but has earned income, as defined in Section 32(c)(2) of the Internal Revenue Code, as modified by Section 17052, of zero dollars ($0) or less.
(II) Has wages subject to withholding pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code equal to or less than the maximum earned income amount allowed for a tax credit under Section 17052.
(B) “Qualifying child” has the same meaning as under Section 17052.

(e)

(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 qualified taxpayer.

(f)

(g) 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)

(h) (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)

(i) 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.