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AB-1128 Personal Income Tax Law: young child tax credit: qualifying child.(2023-2024)

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Date Published: 04/12/2023 09:00 PM
AB1128:v98#DOCUMENT

Revised  May 18, 2023
Amended  IN  Assembly  April 12, 2023

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Assembly Bill
No. 1128

Introduced by Assembly Member Santiago
(Coauthor: Assembly Member Lackey)(Coauthors: Assembly Members Cervantes, Lackey, and Pellerin)
(Coauthors: Senators Dodd Becker, Dodd, and Gonzalez)

February 15, 2023

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


AB 1128, as amended, Santiago. Personal Income Tax Law: young child tax credit: qualifying child.
The Personal Income Tax Law, in modified conformity with federal income tax law, allows an earned income tax credit against the taxes imposed under that law 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, and allows a payment from the Tax Relief and Refund Account for an allowable credit in excess of tax liability.
The Personal Income Tax Law also allows a young child tax credit against the taxes imposed under that law to a qualified taxpayer in a specified amount multiplied by the earned income tax credit adjustment factor, and allows a payment from the Tax Relief and Refund Account for an amount in excess of tax liability. Existing law defines “qualified taxpayer” for this purpose to include an eligible individual, as defined, who has a qualifying child, defined to be a child younger than 6 years of age as of the last day of the taxable year, and who meets other specified criteria.
This bill would remove the requirement that a qualifying child has to be younger than 6 years of age as of the last day of the taxable year. By increasing the payments from the Tax Relief and Refund Account, a continuously appropriated fund, the bill would make an appropriation.

This bill would additionally state the intent of the Legislature to enact subsequent legislation that would allow taxpayers the option to choose to receive advance and periodic payments for the California Earned Income Tax Credit and the Young Child Tax Credit, and would state the intent of the Legislature to ensure those advance and periodic payments are not considered income or assets for purposes of determining eligibility for, or benefits pursuant to, any state or federal public assistance programs, as specified.

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) (i) 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 in Section 17052.
(ii) The amount of the young child tax credit specified under clause (i) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(B) The young child tax credit allowable in any taxable year to any qualified taxpayer shall be limited to the maximum amount specified in clause (i) of subparagraph (A) as recomputed under clause (ii) of subparagraph (A).
(C) (i) 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).
(ii) (I) For each taxable year beginning on or after January 1, 2022, and before January 1, 2023, the twenty dollars ($20) in clause (i) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041, except that the resulting products shall be rounded off to the nearest cent.
(II) For taxable years beginning after 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, the amount calculated under subclause (I) shall substitute for the twenty dollars ($20) in clause (i).
(iii) For taxable years beginning after 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, the “threshold amount” in this subparagraph shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(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.
(b) (1) “Qualified taxpayer” means an eligible individual who has at least one qualifying child and who satisfies either of the following:
(A) Has been allowed a tax credit under Section 17052.
(B) Meets all 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) Does not have net losses in excess of thirty thousand dollars ($30,000) in the taxable year.
(iii) Does not have wages, salaries, tips, and other employee compensation in excess of thirty thousand dollars ($30,000) in the taxable year.
(2) For each taxable year beginning on or after January 1, 2022, the amounts specified under clauses (ii) and (iii) of subparagraph(B) subparagraph (B) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.
(c) (1) For each taxable year before January 1, 2023, “qualifying child” shall have the same meaning as under Section 17052, except that the child shall be younger than six years of age as of the last day of the taxable year.
(2) For each taxable year beginning on or after January 1, 2023, “qualifying child” shall have the same meaning as under Section 17052.
(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) 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) 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) (1) In accordance with Section 41, 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) 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.
(i) The amendments made to this section by the act adding this subdivision shall apply for taxable years beginning on or after January 1, 2022, except as provided in subparagraph (C) of paragraph (2) of subdivision (a).

SEC. 2.

(a)It is the intent of the Legislature to enact subsequent legislation that would allow advance and periodic payments for the California Earned Income Tax Credit and the Young Child Tax Credit, and would allow those advance and periodic payments to be at the option of the taxpayer.

(b)It is also the intent of the Legislature to ensure advance and periodic payments is not considered income or assets for purposes of determining eligibility for, or benefits pursuant to, any state or federal public assistance programs, or result any other negative consequences for the taxpayer, that would not occur if the taxpayer selected an annual payment.

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REVISIONS:
Heading—Line 3.
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