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SB-860 Personal Income Tax Law: Young Child Tax Credit.(2021-2022)



Current Version: 05/19/22 - Amended Senate

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SB860:v97#DOCUMENT

Amended  IN  Senate  May 19, 2022
Amended  IN  Senate  March 24, 2022

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Senate Bill
No. 860

Introduced by Senator Rubio
(Coauthor: Senator Hueso)

January 20, 2022

An act to amend Section 17052.1 of the Revenue and Taxation Code, relating to taxation, and making an appropriation therefor. taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


SB 860, as amended, Rubio. Personal Income Tax Law: Young Child Tax Credit.
(1) The Personal Income Tax Law, for each taxable year beginning on or after January 1, 2019, allows a refundable young child tax credit against the taxes imposed under that law in a specified amount, not to exceed $1,000 per each qualified taxpayer per taxable year. Existing law defines “qualified taxpayer” for this purpose to include an eligible individual who has a qualified child, as defined, and is allowed an earned income tax credit, as specified. Existing law requires amounts of the credit in excess of the qualified taxpayer’s tax liability to be credited against other amounts due, if any, and the balance, if any, to be paid to the qualified taxpayer from the Tax Relief and Refund Account, a continuously appropriated fund.
This bill would expand the definition of “qualified taxpayer” to also include an eligible individual who has a qualified child and would have received an earned income tax credit but for the fact that the individual has no earned income, as defined, for the taxable year. The bill would require the amount of the young child tax credit to be recomputed annually in the same manner as the recomputation of income tax brackets, as specified. By increasing the amounts to be paid with funds from the Tax Relief and Refund Account, the bill would authorize additional payments from the Tax Relief and Refund Account, thus making an appropriation. The bill would authorize amounts of the credit in excess of the qualified taxpayer’s tax liability that are for these expanded qualified taxpayers or that are for specified additional amounts to be credited against other amounts due and paid to the qualified taxpayer only upon appropriation by the Legislature.
(2) Existing law requires any bill authorizing a new tax expenditure, as defined to include tax credits, to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements.
This bill would include findings and reporting requirements in compliance with this requirement.

(3)This bill would also make findings and declarations related to a gift of public funds.

(3) This bill would take effect immediately as a tax levy.
Vote: TWO_THIRDSMAJORITY   Appropriation: YESNO   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) 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).
(i) For each taxable year beginning on or after January 1, 2022, and before January 1, 2023, the twenty dollars ($20) in subparagraph (C) 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 ($0.01).
(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 “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.
(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) “Qualified taxpayer” means an eligible individual who has at least one qualifying child and who satisfies either of the following:
(1) Has been allowed a tax credit under Section 17052.
(2) Meets both of the following requirements:
(A) 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.
(B) 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.
(c) “Qualifying child” shall have the same meaning as under Section 17052, except that the child shall be younger than 6 years old 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) If (1) Subject to paragraph (2), 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.
(2) Notwithstanding any law, paragraph (1) shall apply for the following amounts and qualified taxpayers only upon appropriation by the Legislature:
(A) For qualified taxpayers who are only eligible for the credit pursuant to paragraph (2) of subdivision (b).
(B) For any additional amounts that are eligible to be credited or paid to a qualified taxpayer as a result of the amendments made to this section by the act adding this subdivision and that would not have been made prior to January 1, 2022, but for those amendments.
(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 clause (ii) of subparagraph (C) of paragraph (2) of subdivision (a).

SEC. 2.

 (a) (1) For purposes of complying with Section 41 of the Revenue and Taxation Code, the Legislature finds and declares that the goal, purpose, and objective of the credit under Section 17052.1 of the Revenue and Taxation Code, as amended by this act, hereinafter “the credit,” is to reduce poverty among California’s poorest working families and individuals.
(2) The performance indicators to measure whether the credit meets the goal, purpose, and objective stated in paragraph (1) are as follows:
(A) The total number of persons or accounts whose credits were reduced through offsets and debt collection each year, broken down by referring agency or jurisdiction.
(B) The total dollar amount of credits offset each year.
(C) The average dollar amount per account of credits offset each year.
(D) The total expenses associated with offsets undertaken by the Franchise Tax Board each year.
(3) The Franchise Tax Board shall have the following data collection and reporting requirements:
(A) The Franchise Tax Board shall prepare a written report that includes an analysis of the manner and extent of offsets and government debt collection conducted by the Franchise Tax Board and shall make recommendations to provide relief to low-income California taxpayers whose credits are reduced through offsets and debt collection.
(B) The analysis shall include, but is not limited to, all of the following:
(i) Data detailing current offsets and debt collection conducted by the Franchise Tax Board. The data shall include the performance indicators described in paragraph (2). Debt collection data shall also include the number of persons subject to debt collection, type of debt, and value of the debt.
(ii) An examination of how to best provide relief for tax filers eligible for the credit.
(iii) An outline of the statutory or regulatory changes needed to protect low-income California taxpayers from offset and debt collection through the Franchise Tax Board.
(C) In fulfilling its requirements under this subdivision, the Franchise Tax Board shall engage any state agency task force and may engage individual or organizational stakeholders that exist to reduce poverty or address debt burden of low-income households.
(b) (1) By January 1, 2024, 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.
(2) The disclosure provisions of this subdivision shall be treated as an exception to Section 19542 of the Revenue and Taxation Code.
SEC. 3.

The Legislature hereby finds and declares that the payments authorized by Section 17052.1 of the Revenue and Taxation Code serve the public purpose of providing financial support to Californians, and do not constitute gifts of public funds within the meaning of Section 6 of Article XVI of the California Constitution.

SEC. 3.

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