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SB-533 Income taxes: credit: childcare.(2023-2024)

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Date Published: 05/04/2023 09:00 PM
SB533:v96#DOCUMENT

Amended  IN  Senate  May 04, 2023
Amended  IN  Senate  April 25, 2023
Amended  IN  Senate  March 20, 2023

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Senate Bill
No. 533

Introduced by Senator Limón

February 14, 2023

An act to add and repeal Sections 17052.17, 17052.18, 23617, and 23618 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


SB 533, as amended, Limón. Income taxes: credit: childcare.
The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws, including, in modified conformity with federal income tax law, authorizes a credit for household and dependent care expenses necessary for gainful employment, as provided.
This bill, for taxable years beginning on or after January 1, 2024, and before January 1, 2029, would allow a credit in the amount of 30% of the costs of startup expenses for childcare programs or constructing a childcare facility, to be used primarily by the children of the taxpayer’s employees or by the children of employees of tenants leasing commercial or office space in a building owned by the taxpayer, or of the costs of providing childcare information and referral services to the taxpayer’s employees, as provided, not to exceed $50,000 $30,000 for the taxable year.
This bill, for taxable years beginning on or after January 1, 2024, and before January 1, 2029, would also allow a credit in the amount of 30% of the cost paid or incurred by the taxpayer for contributions to a qualified care plan made on behalf of any qualified dependent of the taxpayer’s qualified employees, not to exceed $360 for each qualified dependent.
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 would make specified findings detailing the goals, purposes, and objectives of the above-described tax credits, performance indicators for determining whether the credits meets those goals, purposes, and objectives, and data collection requirements.
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 17052.17 is added to the Revenue and Taxation Code, to read:

17052.17.
 (a) For each taxable year beginning on or after January 1, 2024, and before January 1, 2029, there shall be allowed as a credit against the “net tax,” as defined by Section 17039, an amount equal to the amount determined in subdivision (b).
(b) (1) The amount of the credit allowed by this section shall be 30 percent of any of the following:
(A) The costs paid or incurred by the taxpayer on or after January 1, 2024, for the startup expenses of establishing a childcare program or constructing a childcare facility in California, to be used primarily by the children of the taxpayer’s employees.
(B) The cost paid or incurred by the taxpayer on or after January 1, 2024, for startup expenses of establishing a childcare program or constructing a childcare facility in California, to be used primarily by the children of employees of tenants leasing commercial or office space in a building owned by the taxpayer.
(C) (i) The cost paid or incurred by the taxpayer on or after January 1, 2024, for contributions to California childcare information and referral services, including, but not limited to, those that identify local childcare services, offer information describing these resources to the taxpayer’s employees, and make referrals of the taxpayer’s employees to childcare services where there are vacancies.
(ii) In the case of a childcare facility established by two or more taxpayers, the credit shall be allowed to each taxpayer if the facility is to be used primarily by the children of the employees of each of the taxpayers or the children of the employees of the tenants of each of the taxpayers.
(2) The amount of the credit allowed by this section shall not exceed fifty thirty thousand dollars ($50,000) ($30,000) for a taxable year.
(c) For purposes of this section, the following shall apply:
(1) “Dependent” has the same meaning as in Section 152 of the Internal Revenue Code.
(2) “Primarily” means enrollment of more than 50 percent on average during the taxable year.
(3) “Startup expenses” include, but are not limited to, feasibility studies, site preparation, and construction, renovation, or acquisition of facilities for purposes of establishing or expanding onsite or nearsite centers by one or more employers or one or more building owners leasing space to employers.
(d) If two or more taxpayers share in the costs eligible for the credit provided by this section, each taxpayer shall be eligible to receive a tax credit with respect to their respective share of the costs paid or incurred.
(e) In the case where the credit allowed and limited under subdivision (b) for the taxable year exceeds the “net tax,” the excess may be carried over to reduce the “net tax” in the following year, and the succeeding seven years if necessary, until the credit has been exhausted.
(f) Any deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which the credit is based shall be reduced by the amount of the credit allowed under this section.
(g) In order to be allowed the credit under subparagraph (A) or (B) of paragraph (1) of subdivision (b), the taxpayer shall indicate, in the form and manner prescribed by the Franchise Tax Board, the number of children that the childcare program or facility will be able to legally accommodate.
(h) (1) For purposes of complying with Section 41, on or before January 1, 2026, and annually thereafter, the Franchise Tax Board shall submit to the Legislature a report on the following:
(A) The dollar amount of credits claimed annually.
(B) The number of childcare facilities established or constructed by taxpayers claiming the credit.
(C) The number of children served by these facilities.
(2) The report to be submitted by paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.
(i) This section shall remain in effect only until December 1, 2029, and as of that date is repealed.

SEC. 2.Section 10752.18 is added to the Revenue and Taxation Code, to read:
10752.18.

SEC. 2.

 Section 17052.18 is added to the Revenue and Taxation Code, to read:

17052.18.
 (a) For each taxable year beginning on or after January 1, 2024, and before January 1, 2029, there shall be allowed as a credit against the “net tax,” as defined by Section 17039, an amount equal to the amount determined in subdivision (b).
(b) (1) The amount of the credit allowed by this section shall be 30 percent of the cost paid or incurred by the taxpayer for contributions to a qualified care plan made on behalf of any qualified dependent of the taxpayer’s qualified employee.
(2) The amount of the credit allowed by this section shall not exceed three hundred sixty dollars ($360) for each qualified dependent per taxable year.
(c) For purposes of this section:
(1) “Qualified care plan” means a plan providing qualified care.
(2) “Qualified care” includes, but is not limited to, onsite service, center-based service, in-home care or home-provider care, and a dependent care center as defined by Section 21(b)(2)(D) of the Internal Revenue Code that is a specialized center with respect to short-term illnesses of an employee’s dependents. “Qualified care” must be provided in this state under the authority of a license when required by California law.
(3) “Specialized center” means a facility that provides care to mildly ill children and that may do all of the following:
(A) Be staffed by pediatric nurses and daycare workers.
(B) Admit children suffering from common childhood ailments (including colds, flu, and chickenpox).
(C) Make special arrangements for well children with minor problems associated with diabetes, asthma, breaks or sprains, and recuperation from surgery.
(D) Separate children according to their illness and symptoms in order to protect them from cross-infection.
(4) “Contributions” include direct payments to childcare programs or providers. “Contributions” do not include amounts contributed to a qualified care plan 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.
(5) “Qualified employee” means any employee of the taxpayer who is performing services for the taxpayer in this state, within the meaning of Section 25133, during the period in which the qualified care is performed.
(6) “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 individual treated as employee.
(7) “Qualified dependent” means any dependent, as defined in Section 152 of the Internal Revenue Code, of a qualified employee who is under 12 years of age at the end of the taxable year.
(d) If an employer makes contributions to a qualified care plan and also collects fees from parents to support a childcare facility owned and operated by the employer, a credit shall not 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 information about fees collected from parents of children served in the facility from taxpayers claiming credits under this section.
(e) If the duration of the childcare received is less than 42 weeks, the employer shall claim a prorated portion of the allowable credit. The employer shall prorate the credit using the ratio of the number of weeks of care received divided by 42 weeks.
(f) 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 the succeeding seven years if necessary, until the credit has been exhausted.
(g) The contributions to a qualified care plan shall not discriminate in favor of employees who are officers, owners, or highly compensated, or their dependents.
(h) Any deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which the credit is based shall be reduced by the amount of the credit allowed under this section.
(i) 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 children of employees served by the qualified childcare plan.
(j) (1) For purposes of complying with Section 41, on or before January 1, 2026, and annually thereafter, the Franchise Tax Board shall submit to the Legislature a report on the following:
(A) The dollar amount of credits claimed annually.
(B) The number of children of employees served by the qualified childcare plan for which the taxpayer claimed a credit.
(2) The report to be submitted by paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.
(k) This section shall remain in effect only until December 1, 2029, and as of that date is repealed.

SEC. 3.

 Section 23617 is added to the Revenue and Taxation Code, to read:

23617.
 (a) For each taxable year beginning on or after January 1, 2024, and before January 1, 2029, there shall be allowed as a credit against the “tax,” as defined by Section 23036, an amount equal to the amount determined in subdivision (b).
(b) (1) The amount of the credit allowed by this section shall be 30 percent of any of the following:
(A) The costs paid or incurred by the taxpayer on or after January 1, 2024, for the startup expenses of establishing a childcare program or constructing a childcare facility in California, to be used primarily by the children of the taxpayer’s employees.
(B) The cost paid or incurred by the taxpayer on or after January 1, 2024, for startup expenses of establishing a childcare program or constructing a childcare facility in California to be used primarily by the children of employees of tenants leasing commercial or office space in a building owned by the taxpayer.
(C) (i) The cost paid or incurred by the taxpayer on or after January 1, 2024, for contributions to California childcare information and referral services, including, but not limited to, those that identify local childcare services, offer information describing these resources to the taxpayer’s employees, and make referrals of the taxpayer’s employees to childcare services where there are vacancies.
(ii) In the case of a childcare facility established by two or more taxpayers, the credit shall be allowed to each taxpayer if the facility is to be used primarily by the children of the employees of each of the taxpayers or the children of the employees of the tenants of each of the taxpayers.
(2) The amount of the credit allowed by this section shall not exceed fifty thirty thousand dollars ($50,000) ($30,000) for a taxable year.
(c) For purposes of this section, the following shall apply:
(1) “Dependent” has the same meaning as in Section 152 of the Internal Revenue Code.
(2) “Primarily” means enrollment of more than 50 percent on average during the taxable year.
(3) “Startup expenses” include, but are not limited to, feasibility studies, site preparation, and construction, renovation, or acquisition of facilities for purposes of establishing or expanding onsite or nearsite centers by one or more employers or one or more building owners leasing space to employers.
(d) If two or more taxpayers share in the costs eligible for the credit provided by this section, each taxpayer shall be eligible to receive a tax credit with respect to its respective share of the costs paid or incurred.
(e) In the case where the credit allowed and limited under subdivision (b) for the taxable year exceeds the “tax,” the excess may be carried over to reduce the “tax” in the following year, and the succeeding seven years if necessary, until the credit has been exhausted.
(f) Any deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which the credit is based shall be reduced by the amount of the credit allowed under this section.
(g) In order to be allowed the credit under subparagraph (A) or (B) of paragraph (1) of subdivision (b), the taxpayer shall indicate, in the form and manner prescribed by the Franchise Tax Board, the number of children that the childcare program or facility will be able to legally accommodate.
(h) (1) For purposes of complying with Section 41, on or before January 1, 2026, and annually thereafter, the Franchise Tax Board shall submit to the Legislature a report on the following:
(A) The dollar amount of credits claimed annually.
(B) The number of childcare facilities established or constructed by taxpayers claiming the credit.
(C) The number of children served by these facilities.
(2) The report to be submitted by paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.
(i) This section shall remain in effect only until December 1, 2029, and as of that date is repealed.

SEC. 4.

 Section 23618 is added to the Revenue and Taxation Code, to read:

23618.
 (a) For each taxable year beginning on or after January 1, 2024, and before January 1, 2029, there shall be allowed as a credit against the “tax,” as defined by Section 23036, an amount equal to the amount determined in subdivision (b).
(b) (1) The amount of the credit allowed by this section shall be 30 percent of the cost paid or incurred by the taxpayer for contributions to a qualified care plan made on behalf of any qualified dependent of the taxpayer’s qualified employee.
(2) The amount of the credit allowed by this section shall not exceed three hundred sixty dollars ($360) for each qualified dependent per taxable year.
(c) For purposes of this section:
(1) “Qualified care plan” means a plan providing qualified care.
(2) “Qualified care” includes, but is not limited to, onsite service, center-based service, in-home care or home-provider care, and a dependent care center as defined by Section 21(b)(2)(D) of the Internal Revenue Code that is a specialized center with respect to short-term illnesses of an employee’s dependents. “Qualified care” must be provided in this state under the authority of a license when required by California law.
(3) “Specialized center” means a facility that provides care to mildly ill children and that may do all of the following:
(A) Be staffed by pediatric nurses and daycare workers.
(B) Admit children suffering from common childhood ailments (including colds, flu, and chickenpox).
(C) Make special arrangements for well children with minor problems associated with diabetes, asthma, breaks or sprains, and recuperation from surgery.
(D) Separate children according to their illness and symptoms in order to protect them from cross-infection.
(4) “Contributions” include direct payments to childcare programs or providers. “Contributions” do not include amounts contributed to a qualified care plan 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 10 (commencing with Section 17001) and this part.
(5) “Qualified employee” means any employee of the taxpayer who is performing services for the taxpayer in this state, within the meaning of Section 25133, during the period in which the qualified care is performed.
(6) “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 individual treated as employee.
(7) “Qualified dependent” means any dependent, as defined in Section 152 of the Internal Revenue Code, of a qualified employee who is under 12 years of age at the end of the taxable year.
(d) If an employer makes contributions to a qualified care plan and also collects fees from parents to support a childcare facility owned and operated by the employer, a credit shall not 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 information about fees collected from parents of children served in the facility from taxpayers claiming credits under this section.
(e) If the duration of the childcare received is less than 42 weeks, the employer shall claim a prorated portion of the allowable credit. The employer shall prorate the credit using the ratio of the number of weeks of care received divided by 42 weeks.
(f) 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 the succeeding seven years if necessary, until the credit has been exhausted.
(g) The contributions to a qualified care plan shall not discriminate in favor of employees who are officers, owners, or highly compensated, or their dependents.
(h) Any deduction otherwise allowed under this part for any amount paid or incurred by the taxpayer upon which the credit is based shall be reduced by the amount of the credit allowed under this section.
(i) 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 children of employees served by the qualified childcare plan.
(j) (1) For purposes of complying with Section 41, on or before January 1, 2026, and annually thereafter, the Franchise Tax Board shall submit to the Legislature a report on the following:
(A) The dollar amount of credits claimed annually.
(B) The number of children of employees served by the qualified childcare plan for which the taxpayer claimed a credit.
(2) The report to be submitted by paragraph (1) shall be submitted in compliance with Section 9795 of the Government Code.
(k) This section shall remain in effect only until December 1, 2029, and as of that date is repealed.

SEC. 5.

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