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SB-227 Education finance: Local Schools and Colleges Voluntary Contribution Fund: personal income taxes: credits.(2017-2018)



Current Version: 07/05/18 - Amended Assembly

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SB227:v95#DOCUMENT

Amended  IN  Assembly  July 05, 2018
Amended  IN  Assembly  June 04, 2018
Amended  IN  Senate  January 25, 2018
Amended  IN  Senate  January 03, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill
No. 227

Introduced by Senators De León, Allen, Hill, Lara, and McGuire

February 02, 2017

An act to add and repeal Section 42127.81 to of the Education Code, and to amend Section 17039 of, and to add and repeal Section 17053.88 to, of, the Revenue and Taxation Code, relating to education finance, and making an appropriation therefor.


LEGISLATIVE COUNSEL'S DIGEST


SB 227, as amended, De León. Education finance: Local Schools and Colleges Voluntary Contribution Fund: personal income taxes: credits.
(1) Existing law establishes a governing board to establish and administer a unit known as the County Office Fiscal Crisis and Management Assistance Team. Among other duties, this unit provides fiscal management assistance, at the request of any school district, charter school, county office of education, or community college district.
This bill would authorize authorize, until January 1, 2023, this governing board to receive voluntary contributions made by individuals to school districts, charter schools, child care centers operated by local educational agencies, and community college districts. The bill would require these contributed moneys to be deposited in the Local Schools and Colleges Voluntary Contribution Fund, which the bill would establish in a county treasury, as specified, under the administration of the County Office Fiscal Crisis and Management Assistance Team. The bill would create 2 new subaccounts of the fund, the Baseline Schools and Colleges Subaccount and the Supplemental Schools and Colleges Subaccount, into which the moneys deposited in the Local Schools and Colleges Voluntary Contribution Fund would be deposited, as specified.
The bill would require the funds deposited in the Baseline Schools and Colleges Subaccount described above to be transferred to the State Treasury to reimburse the General Fund for that subaccount’s share of meeting the constitutional minimum funding requirement for local educational agencies and community college districts.
The bill would require the funds deposited in the Supplemental Schools and Colleges Subaccount to be allocated, on the basis of average daily attendance, to local educational agencies and community college districts, as specified, thereby making an appropriation.
Because the bill would create new duties for a county treasury, it would constitute a state-mandated local program. Because the bill would require the deposit of a new source of moneys into a continuously appropriated fund, it would make an appropriation.
(2) The Personal Income Tax Law allows various credits against the tax imposed by that law.
This bill, for taxable years beginning on or after January 1, 2018, and before January 1, 2023, would allow a credit under the Personal Income Tax Law in an amount equal to 85% of the amount contributed by the taxpayer to the Local Schools and Colleges Voluntary Contribution Fund, as identified in the certification required by this bill to be issued by the County Office Fiscal Crisis and Management Assistance Team.
This bill would require the County Office Fiscal Crisis and Management Assistance Team to establish a procedure for any taxpayer to obtain from the office a certification for the credit allowed, as specified. The bill would require the County Office Fiscal Crisis and Management Assistance Team to provide the Franchise Tax Board with a copy of the certifications issued, as provided. This bill would limit the aggregate amount of credits allowable for the 2018–19 fiscal year and each fiscal year thereafter, through the 2022–23 fiscal year, plus any unallocated credit amount for the preceding fiscal year to $45,000,000,000.
This bill would, if the amount allowable as a credit under this bill exceeds the taxpayer’s tax liability for the taxable year, require the excess to be credited against other amounts due, if any, and the balance, if any, upon appropriation by the Legislature, to be paid from the ____ Fund and refunded to the taxpayer.
The Personal Income Tax Law provides for an alternative minimum tax and provides that, except for specified credits, no credit shall reduce the regular tax, as defined, below the tentative minimum tax.
This bill, for taxable years beginning on or after January 1, 2018, and before January 1, 2023, would allow the credit to reduce the regular tax below the tentative minimum tax.
(3) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.
(4) This bill would become operative on January 1, 2019, only if Senate Constitutional Amendment 23 of the 2017–18 Regular Session is submitted to, and approved by, the voters at the November 6, 2018, statewide general election.
Vote: MAJORITY   Appropriation: YES   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 Section 42127.81 is added to the Education Code, immediately following Section 42127.8, to read:

42127.81.
 (a) Notwithstanding any other law, until January 1, 2023, the governing board provided for in subdivision (b) of Section 42127.8 shall be authorized to receive voluntary contributions made by individuals to school districts, charter schools, child care centers operated by local educational agencies, and community college districts, and the governing board shall deposit these contributions in the Local Schools and Colleges Voluntary Contribution Fund, which is hereby established in the county treasury of the county in which the County Office Fiscal Crisis and Management Assistance Team has its principal office under the administration of the County Office Fiscal Crisis and Management Assistance Team.
(b) The moneys deposited into the Local Schools and Colleges Voluntary Contribution Fund shall be allocated into two subaccounts in accordance with the following:
(1) (A) Commencing with the 2018–19 fiscal year, 85 percent of the first fifty-four billion five hundred million dollars ($54,500,000,000) deposited into the Local Schools and Colleges Voluntary Contribution Fund in that fiscal year shall be deposited into the Baseline Schools and Colleges Subaccount, which is hereby established within the Local Schools and Colleges Voluntary Contribution Fund. For the 2019–20 fiscal year, and each fiscal year thereafter, through the 2022–23 fiscal year, the fifty-four-billion-five-hundred-million-dollar ($54,500,000,000) amount referenced in this paragraph shall be adjusted by the same percentage as the adjustment of the appropriations limit made pursuant to Article XIII B of the California Constitution.
(B) The governing board provided for in subdivision (b) of Section 42127.8 shall do both of the following:
(i) On or before January 15 of each fiscal year, through the 2022–23 fiscal year, transfer to the State Treasury all of the moneys that were deposited in the Baseline Schools and Colleges Subaccount from July 1 to December 31, inclusive, of that fiscal year to reimburse the General Fund for the Baseline Schools and Colleges Subaccount’s share of meeting the requirements of Section 8 of Article XVI of the California Constitution.
(ii) On or before July 15 of each fiscal year, through the 2022–23 fiscal year, transfer to the State Treasury all of the moneys that were deposited in the Baseline Schools and Colleges Subaccount from January 1 to June 30, inclusive, of the prior fiscal year to reimburse the General Fund for the Baseline Schools and Colleges Subaccount’s share of meeting the requirements of Section 8 of Article XVI of the California Constitution.
(2) (A) Commencing with the 2018–19 fiscal year, through the 2022–23 fiscal year, the contributions to the Local Schools and Colleges Voluntary Contribution Fund in excess of 85 percent of the first fifty-four billion five hundred million dollars ($54,500,000,000), or the amount adjusted pursuant to subparagraph (A) of paragraph (1), shall be deposited into the Supplemental Schools and Colleges Subaccount, which is hereby established within the Local Schools and Colleges Voluntary Contribution Fund.
(B) The governing board provided for in subdivision (b) of Section 42127.8 shall do all of the following:
(i) On or before January 15 of each fiscal year, through the 2022–23 fiscal year, allocate 89 percent of the moneys deposited in the Supplemental Schools and Colleges Subaccount from July 1 to December 31, inclusive, of that fiscal year to school districts, county offices of education, and charter schools on the basis of an equal amount per unit of regular average daily attendance, as those numbers are reported at the time of the second principal apportionment for the prior fiscal year.
(ii) On or before January 15 of each fiscal year, through the 2022–23 fiscal year, allocate 11 percent of the moneys deposited in the Supplemental Schools and Colleges Subaccount from July 1 to December 31, inclusive, of that fiscal year to community college districts on the basis of an equal amount per enrolled full-time equivalent student, as those numbers of students are reported at the time of the second principal apportionment for the prior fiscal year.
(iii) On or before July 15 of each fiscal year, through the 2022–23 fiscal year, allocate 89 percent of the moneys deposited in the Supplemental Schools and Colleges Subaccount from January 1 to June 30, inclusive, of the prior fiscal year to school districts, county offices of education, and charter schools on the basis of an equal amount per unit of regular average daily attendance, as those numbers are reported at the time of the second principal apportionment for the prior fiscal year.
(iv) On or before July 15 of each fiscal year, through the 2022–23 fiscal year, allocate 11 percent of the moneys deposited in the Supplemental Schools and Colleges Subaccount from January 1 to June 30, inclusive, of the prior fiscal year to community college districts on the basis of an equal amount per enrolled full-time equivalent student, as those numbers of students are reported at the time of the second principal apportionment for the prior fiscal year.
(c) This section shall remain in effect only until January 1, 2024, and as of that date is repealed.

SEC. 2.

 Section 17039 of the Revenue and Taxation Code is amended to read:

17039.
 (a) Notwithstanding any provision in this part to the contrary, for the purposes of computing tax credits, the term “net tax” means the tax imposed under either Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to lump-sum distributions) less the credits allowed by Section 17054 (relating to personal exemption credits) and any amount imposed under paragraph (1) of subdivision (d) and paragraph (1) of subdivision (e) of Section 17560. Notwithstanding the preceding sentence, the “net tax” shall not be less than the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions), if any. Credits shall be allowed against “net tax” in the following order:
(1) Credits that do not contain carryover or refundable provisions, except those described in paragraphs (4) and (5).
(2) Credits that contain carryover provisions but do not contain refundable provisions, except for those that are allowed to reduce “net tax” below the tentative minimum tax, as defined by Section 17062.
(3) Credits that contain both carryover and refundable provisions.
(4) The minimum tax credit allowed by Section 17063 (relating to the alternative minimum tax).
(5) Credits that are allowed to reduce “net tax” below the tentative minimum tax, as defined by Section 17062.
(6) Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(7) Credits that contain refundable provisions but do not contain carryover provisions.
The order within each paragraph shall be determined by the Franchise Tax Board.
(b) Notwithstanding the provisions of Sections 17061 (relating to refunds pursuant to the Unemployment Insurance Code) and 19002 (relating to tax withholding), the credits provided in those sections shall be allowed in the order provided in paragraph (6) of subdivision (a).
(c) (1) Notwithstanding any other provision of this part, no tax credit shall reduce the tax imposed under Section 17041 or 17048 plus the tax imposed under Section 17504 (relating to the separate tax on lump-sum distributions) below the tentative minimum tax, as defined by Section 17062, except the following credits:
(A) The credit allowed by Section 17052.2 (relating to teacher retention tax credit).
(B) The credit allowed by former Section 17052.4 (relating to solar energy).
(C) The credit allowed by former Section 17052.5 (relating to solar energy, repealed on January 1, 1987).
(D) The credit allowed by former Section 17052.5 (relating to solar energy, repealed on December 1, 1994).
(E) The credit allowed by Section 17052.12 (relating to research expenses).
(F) The credit allowed by former Section 17052.13 (relating to sales and use tax credit).
(G) The credit allowed by former Section 17052.15 (relating to Los Angeles Revitalization Zone sales tax credit).
(H) The credit allowed by Section 17052.25 (relating to the adoption costs credit).
(I) The credit allowed by Section 17053.5 (relating to the renter’s credit).
(J) The credit allowed by former Section 17053.8 (relating to enterprise zone hiring credit).
(K) The credit allowed by former Section 17053.10 (relating to Los Angeles Revitalization Zone hiring credit).
(L) The credit allowed by former Section 17053.11 (relating to program area hiring credit).
(M) For each taxable year beginning on or after January 1, 1994, the credit allowed by former Section 17053.17 (relating to Los Angeles Revitalization Zone hiring credit).
(N) The credit allowed by Section 17053.33 (relating to targeted tax area sales or use tax credit).
(O) The credit allowed by Section 17053.34 (relating to targeted tax area hiring credit).
(P) The credit allowed by Section 17053.49 (relating to qualified property).
(Q) The credit allowed by Section 17053.70 (relating to enterprise zone sales or use tax credit).
(R) The credit allowed by Section 17053.74 (relating to enterprise zone hiring credit).
(S) The credit allowed by Section 17054 (relating to credits for personal exemption).
(T) The credit allowed by Section 17054.5 (relating to the credits for a qualified joint custody head of household and a qualified taxpayer with a dependent parent).
(U) The credit allowed by Section 17054.7 (relating to the credit for a senior head of household).
(V) The credit allowed by former Section 17057 (relating to clinical testing expenses).
(W) The credit allowed by Section 17058 (relating to low-income housing).
(X) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 17059.2 (relating to GO-Biz California Competes Credit).
(Y) The credit allowed by Section 17061 (relating to refunds pursuant to the Unemployment Insurance Code).
(Z) Credits for taxes paid to other states allowed by Chapter 12 (commencing with Section 18001).
(AA) The credit allowed by Section 19002 (relating to tax withholding).
(AB) For taxable years beginning on or after January 1, 2014, the credit allowed by Section 17053.86 (relating to the College Access Tax Credit Fund).
(AC) For taxable years beginning on or after January 1, 2017, the credit allowed by Section 17053.87 (relating to the College Access Tax Credit Fund).
(AD) The For taxable years beginning on or after January 1, 2018, and before January 1, 2023, the credit allowed by Section 17053.88 (relating to contributions to the Local Schools and Colleges Voluntary Contribution Fund).
(2) Any credit that is partially or totally denied under paragraph (1) shall be allowed to be carried over and applied to the net tax in succeeding taxable years, if the provisions relating to that credit include a provision to allow a carryover when that credit exceeds the net tax.
(d) Unless otherwise provided, any remaining carryover of a credit allowed by a section that has been repealed or made inoperative shall continue to be allowed to be carried over under the provisions of that section as it read immediately prior to being repealed or becoming inoperative.
(e) (1) Unless otherwise provided, if two or more taxpayers (other than spouses) share in costs that would be eligible for a tax credit allowed under this part, each taxpayer shall be eligible to receive the tax credit in proportion to his or her respective share of the costs paid or incurred.
(2) In the case of a partnership, the credit shall be allocated among the partners pursuant to a written partnership agreement in accordance with Section 704 of the Internal Revenue Code, relating to partner’s distributive share.
(3) In the case of spouses who file separate returns, the credit may be taken by either or equally divided between them.
(f) Unless otherwise provided, in the case of a partnership, any credit allowed by this part shall be computed at the partnership level, and any limitation on the expenses qualifying for the credit or limitation upon the amount of the credit shall be applied to the partnership and to each partner.
(g) (1) With respect to any taxpayer that directly or indirectly owns an interest in a business entity that is disregarded for tax purposes pursuant to Section 23038 and any regulations thereunder, the amount of any credit or credit carryforward allowable for any taxable year attributable to the disregarded business entity shall be limited in accordance with paragraphs (2) and (3).
(2) The amount of any credit otherwise allowed under this part, including any credit carryover from prior years, that may be applied to reduce the taxpayer’s “net tax,” as defined in subdivision (a), for the taxable year shall be limited to an amount equal to the excess of the taxpayer’s regular tax (as defined in Section 17062), determined by including income attributable to the disregarded business entity that generated the credit or credit carryover, over the taxpayer’s regular tax (as defined in Section 17062), determined by excluding the income attributable to that disregarded business entity. No credit shall be allowed if the taxpayer’s regular tax (as defined in Section 17062), determined by including the income attributable to the disregarded business entity, is less than the taxpayer’s regular tax (as defined in Section 17062), determined by excluding the income attributable to the disregarded business entity.
(3) If the amount of a credit allowed pursuant to the section establishing the credit exceeds the amount allowable under this subdivision in any taxable year, the excess amount may be carried over to subsequent taxable years pursuant to subdivisions (c) and (d).
(h) (1) Unless otherwise specifically provided, in the case of a taxpayer that is a partner or shareholder of an eligible pass-thru entity described in paragraph (2), any credit passed through to the taxpayer in the taxpayer’s first taxable year beginning on or after the date the credit is no longer operative may be claimed by the taxpayer in that taxable year, notwithstanding the repeal of the statute authorizing the credit prior to the close of that taxable year.
(2) For purposes of this subdivision, “eligible pass-thru entity” means any partnership or “S” corporation that files its return on a fiscal year basis pursuant to Section 18566, and that is entitled to a credit pursuant to this part for the taxable year that begins during the last year the credit is operative.
(3) This subdivision shall apply to credits that become inoperative on or after the operative date of the act adding this subdivision.

SEC. 3.

 Section 17053.88 is added to the Revenue and Taxation Code, to read:

17053.88.
 (a) For taxable years beginning on or after January 1, 2018, and before January 1, 2023, there shall be allowed as a credit against the “net tax,” as defined in Section 17039, an amount equal to the amount identified in the certification issued by the County Office Fiscal Crisis and Management Assistance Team pursuant to subdivision (b).
(b) (1) For the purposes of this section, the County Office Fiscal Crisis and Management Assistance Team shall do all of the following:
(A) Establish a procedure for a taxpayer who makes a monetary contribution to the Local Schools and Colleges Voluntary Contributions Contribution Fund created by Section 42127.81 of the Education Code to obtain from the County Office Fiscal Crisis and Management Assistance Team a certification for the credit allowed by this section. The certification shall be issued in an amount that is equal to 85 percent of the amount contributed by the taxpayer to the Local Schools and Colleges Voluntary Contributions Contributions Fund created by Section 42127.81 of the Education Code.
(B) The procedure shall meet the following requirements:
(i) Beginning with the 2018–19 fiscal year, through the 2022–23 fiscal year, certifications shall be issued for contributions in the order that the monetary contributions are received. The amount identified in a certification issued for the 2018–19 fiscal year shall be allowed as a credit under subdivision (a) for taxable years beginning on or after January 1, 2018, but before January 1, 2019. The amount identified in a certification issued for every fiscal year thereafter shall be allowed as a credit under subdivision (a) for taxable years beginning on or after January 1 of the previous fiscal year, and before January 1 of the fiscal year.
(ii) The County Office Fiscal Crisis and Management Assistance Team shall cease issuance of the certifications attributable to a fiscal year once the credit threshold amount described in subdivision (d) is reached for the fiscal year. If the credit threshold amount is reached for a fiscal year before the fiscal year ends, the County Office Fiscal Crisis and Management Assistance Team shall begin issuing certifications for the following fiscal year.
(iii) The County Office Fiscal Crisis and Management Assistance Team shall certify the contribution amount eligible for credit and the fiscal year to which the certification is attributable within 45 days following receipt of the contribution.
(C) Provide to the Franchise Tax Board a copy of each credit certificate issued for the calendar year by January 31 of the calendar year immediately following the calendar year in which the credit certificate is issued.
(2) (A) The County Office Fiscal Crisis and Management Assistance Team shall adopt any regulations necessary or appropriate to implement this subdivision.
(B) The Administrative Procedure Act (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 regulation adopted by the County Office Fiscal Crisis and Management Assistance Team pursuant to subparagraph (A).
(c) (1) 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, upon appropriation by the Legislature, shall be paid from the ____ Fund and refunded to the taxpayer.
(2) No deduction shall be allowed under this part for amounts taken into account under this section in calculating the credit allowed by this section.
(d) The aggregate amount of credits that may be allocated for a fiscal year by the County Office Fiscal Crisis and Management Assistance Team pursuant to this section is forty-five billion dollars ($45,000,000,000) for the 2018–19 fiscal year and each fiscal year thereafter, through the 2022–23 fiscal year, plus any unallocated credit amount, if any, for the preceding fiscal year.
(e) The tax credit allowed by subdivision (a) of this section for contributions to the Local Schools and Colleges Voluntary Contributions Contribution Fund created by Section 42127.81 of the Education Code shall be known as the Local Schools and Colleges Voluntary Contributions Contribution Fund Tax Credit.
(f) (1) The Franchise Tax Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section.
(2) The Administrative Procedure Act (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.
(g) Section 41 shall not apply to the credit allowed by this section.
(h) This section shall remain in effect only until December 1, 2023, and as of that date is repealed.

SEC. 4.

 If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.

SEC. 5.

 This act shall become operative only if Senate Constitutional Amendment 23 of the 2017–18 Regular Session is submitted to, and approved by, the voters at the November 6, 2018, statewide general election, and in that event shall become operative on January 1, 2019.