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AB-704 Personal income taxes: deduction: qualified education loans.(2021-2022)

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Date Published: 02/16/2021 09:00 PM
AB704:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Assembly Bill
No. 704


Introduced by Assembly Member Mayes

February 16, 2021


An act to amend Section 17072 of, and to add and repeal Section 17205 of, the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 704, as introduced, Mayes. Personal income taxes: deduction: qualified education loans.
The Personal Income Tax Law allows various deductions in computing the income that is subject to the taxes imposed by that law, including a deduction against gross income for interest paid on qualified education loans not to exceed $2,500. Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
This bill, for taxable years beginning on or after January 1, 2022, and before January 1, 2027, would allow a deduction, in addition to the deduction described above, in determining adjusted gross income in an amount equal to the interest paid by the taxpayer during the taxable year on a qualified education loan, as defined. The bill also would state the intent of the Legislature to comply with the additional information requirement for any bill authorizing a new income tax expenditure.
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 17072 of the Revenue and Taxation Code is amended to read:

17072.
 (a) Section 62 of the Internal Revenue Code, relating to adjusted gross income defined, shall apply, except as otherwise provided.
(b) Section 62(a)(2)(D) of the Internal Revenue Code, relating to certain expenses of elementary and secondary school teachers, shall not apply.
(c) Section 62(a)(21) of the Internal Revenue Code, relating to attorneys fees relating to awards to whistleblowers, shall not apply.
(d) For taxable years beginning on or after January 1, 2022, and before January 1, 2027, Section 62(a) of the Internal Revenue Code, relating to the general rule, is modified to provide that the deduction under Section 17205 shall be allowed in determining adjusted gross income.

SEC. 2.

 Section 17205 is added to the Revenue and Taxation Code, to read:

17205.
 (a) For taxable years beginning or on after January 1, 2022, and before January 1, 2027, there shall be allowed a deduction in an amount equal to the interest paid by the taxpayer during the taxable year on a qualified education loan.
(b) For purposes of this section, the following definitions shall apply:
(1) “Dependent” has the same meaning as the term defined by Section 152 of the Internal Revenue Code, relating to dependent defined, determined without regard to Sections 152(b)(1), Section 152(b)(2), and Section 152(d)(1)(B) of the Internal Revenue Code.
(2) (A) “Qualified education loan” means an indebtedness incurred by the taxpayer solely to pay for higher education expenses that are incurred on behalf of the taxpayer or the taxpayer’s spouse or dependent, who is the taxpayer’s spouse or dependent at the time the indebtedness is incurred.
(B) “Qualified education loan” includes indebtedness used to refinance indebtedness that qualified as a qualified education loan.
(C) “Qualified education loan” does not include the following:
(i) Indebtedness owed to a person who is related, within the meaning of Section 267(b) or 707(b) of the Internal Revenue Code, relating to relationships and certain sales or exchanges of property with respect to controlled partnerships, respectively.
(ii) Indebtedness owed to a person by reason of a loan under a qualified employer plan, as defined in Section 72(p)(4) of the Internal Revenue Code, relating to qualified employer plan, etc., or under a contract referred to in Section 72(p)(5) of the Internal Revenue Code, relating to special rules for loans, etc., from certain contracts.
(3) “Higher education expenses” means the expenses of attendance at an institution of higher education, as provided in Section 529(e)(3) of the Internal Revenue Code. Notwithstanding Section 529(c)(7) of the Internal Revenue Code, “education expenses” shall not include any tuition expenses in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.
(c) Any amount of interest paid by the taxpayer during the taxable year on a qualified education loan that exceeds the taxpayer’s adjusted gross income may be carried over and claimed as a deduction in the following taxable year, and succeeding taxable years if necessary.
(d) This section shall remain in effect only until December 1, 2027, and as of that date is repealed.

SEC. 3.

 It is the intent of the Legislature to comply with Section 41 of the Revenue and Taxation Code.

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.