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AB-2977 Personal Income Tax Law: young child tax credit.(2023-2024)



Current Version: 04/24/24 - Amended Assembly

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AB2977:v97#DOCUMENT

Amended  IN  Assembly  April 24, 2024
Amended  IN  Assembly  March 21, 2024

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Assembly Bill
No. 2977

Introduced by Assembly Member Jackson

February 16, 2024

An act to amend Sections 17052, 17052.1, and 23153 of, and to add Sections 17052.1.1 and 18033 to, Section 17052.1 of the Revenue and Taxation Code, relating to taxation, and making an appropriation therefor.


LEGISLATIVE COUNSEL'S DIGEST


AB 2977, as amended, Jackson. Personal Income Tax Law: young child tax credit.

(1)The

The Personal Income Tax Law allows various credits against the taxes imposed by that law, including a young child tax credit to a qualified taxpayer in a specified amount multiplied by the earned income tax credit adjustment factor, as provided. That law also allows a payment from the continuously appropriated 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. Under existing law, the young child tax credit phases out by reducing the amount of the credit by $20 for each $100, or fraction thereof, that the taxpayer’s earned income, as defined, exceeds a specified amount.
This bill would, bill, for taxable years beginning on or after January 1, 2025, and before January 1, 2030, would instead define a “qualifying child” to mean a child younger than 18 years of age as of the last day of the taxable year. The bill would establish the Child Tax Credit Expansion Fund in the State Treasury, and continuously appropriate the moneys in that fund to the Franchise Tax Board, as provided. The bill would also require the Franchise Tax Board, for taxable years beginning on or after January 1, 2024, 2025, and before January 1, 2030, to recalculate the phaseout provisions for the young child tax credit such that the credit reaches $0 as earned income reaches $50,000. The bill would require the Franchise Tax Board to first utilize the moneys in the Child Tax Credit Expansion Fund for the purpose of the above-described expansion of the young child tax credit. By establishing and funding a new continuously appropriated fund, and by increasing the payments from the Tax Relief and Refund Account, a continuously appropriated fund, the bill would make an appropriation.
Existing law requires any bill authorizing a new tax expenditure to contain, among other things, specific goals that the tax expenditure will achieve, detailed performance indicators, and data collection requirements.
This bill would include additional information required for any bill authorizing a new tax expenditure.

(2)The Personal Income Tax Law, in modified conformity with federal income tax laws, allows an earned income tax credit against personal income tax and a payment from the Tax Relief and Refund Account, a continuously appropriated fund, for an allowable credit in excess of tax liability 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. Under existing law, the earned income tax credit phases out for taxpayers that earn over a specified amount and, for taxable years beginning on or after January 1, 2020, the credit reaches $0 when the taxpayer’s income reaches $30,000, as adjusted.

This bill would, for taxable years beginning on or after January 1, 2024, adjust the phaseout of the earned income tax credit so that the credit reaches $0 when the taxpayer’s income reaches $20,000, as adjusted. The bill would direct that any increase in revenue or savings from this change be deposited into the Child Tax Credit Expansion Fund.

(3)The Personal Income Tax Law, in modified conformity with federal income tax laws, provides for the taxation of the gain or loss from the disposition of property. Existing law generally calculates gain for this purpose as the difference of the amount realized from the disposition of property over the adjusted basis of the property, and calculates loss for this purpose as the difference of the adjusted basis of the property over the amount realized from the disposition of the property. Under existing law, where property is received from a decedent, the basis of the property becomes the fair market value of the property as of the date of the decedent’s death, except as provided.

This bill would eliminate the rule that allows the basis of property to automatically become the fair market value of the property as of the date of a decedent’s death. The bill would direct that any increase in revenue generated due to this change be deposited into the Child Tax Credit Expansion Fund.

(4)Existing law, the Corporation Tax Law, imposes a tax according to or measured by net income, except as provided. Existing law also imposes a minimum franchise tax of $800, except as provided, on every corporation incorporated in this state, qualified to transact intrastate business in this state, or doing business in this state, as specified. Existing law establishes an exception to the minimum franchise tax for corporations that incorporate or qualify to do business for their first taxable year.

This bill would, for corporations incorporated or qualifying to do business in the state on or after January 1, 2025, eliminate the exception to the minimum franchise tax for the first taxable year of the corporation. The bill would direct that any increase in revenue generated due to this change be deposited into the Child Tax Credit Expansion Fund.

(5)This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 23 of the membership of each house of the Legislature.

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 of the Revenue and Taxation Code is amended to read:
17052.

(a)(1)For each taxable year beginning on or after January 1, 2015, there shall be allowed against the “net tax,” as defined by Section 17039, an earned income tax credit in an amount equal to an amount determined in accordance with Section 32 of the Internal Revenue Code, relating to earned income, as applicable for federal income tax purposes for the taxable year, except as otherwise provided in this section.

(2)(A)The amount of the credit determined under Section 32 of the Internal Revenue Code, relating to earned income, as modified by this section, shall be multiplied by the earned income tax credit adjustment factor for the taxable year.

(B)Unless otherwise specified in the annual Budget Act, the earned income tax credit adjustment factor for a taxable year beginning on or after January 1, 2015, shall be 0 percent.

(C)The earned income 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.

(b)(1)In lieu of the table prescribed in Section 32(b)(1) of the Internal Revenue Code, relating to percentages, the credit percentage and the phaseout percentage shall be determined as follows:

In the case of an eligible individual with:

The credit percentage is:

The phaseout percentage is:

No qualifying children

7.65%

7.65%

1 qualifying child

34%

34%

2 qualifying children

40%

40%

3 or more qualifying children

45%

45%

(2)(A)In lieu of the table prescribed in Section 32(b)(2)(A) of the Internal Revenue Code, the earned income amount and the phaseout amount shall be determined as follows:

In the case of an eligible individual with:

The earned income amount is:

The phaseout amount is:

No qualifying children

$3,290

$3,290

1 qualifying child

$4,940

$4,940

2 or more qualifying children

$6,935

$6,935

(B)Section 32(b)(2)(B) of the Internal Revenue Code, relating to joint returns, shall not apply.

(c)(1)Section 32(c)(1)(A)(ii)(I) of the Internal Revenue Code is modified by substituting “this state” for “the United States.”

(2)For each taxable year beginning on or after January 1, 2018, Section 32(c)(1)(A)(ii)(II) of the Internal Revenue Code is modified by deleting “25 but not attained age 65” and inserting in lieu thereof the following: “18.”

(3)Section 32(c)(2)(A) of the Internal Revenue Code is modified as follows:

(A)Section 32(c)(2)(A)(i) of the Internal Revenue Code is modified by deleting “plus” and inserting in lieu thereof the following: “and only if such amounts are subject to withholding pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.”

(B)Section 32(c)(2)(A)(ii) of the Internal Revenue Code shall not apply.

(4)For taxable years beginning on or after January 1, 2017, paragraph (3) shall not apply and in lieu thereof Section 32(c)(2)(A) of the Internal Revenue Code is modified as follows:

(A)Section 32(c)(2)(A)(i) of the Internal Revenue Code is modified by deleting “plus” and inserting in lieu thereof the following: “and only if such amounts are subject to withholding pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code, plus.”

(B)Section 32(c)(2)(A)(ii) of the Internal Revenue Code shall apply.

(5)Section 32(c)(3)(C) of the Internal Revenue Code, relating to place of abode, is modified by substituting “this state” for “the United States.”

(d)Section 32(i)(1) of the Internal Revenue Code is modified by substituting “$3,400” for “$2,200.”

(e)(1)In lieu of Section 32(j) of the Internal Revenue Code, relating to inflation adjustments, for taxable years beginning on or after January 1, 2016, the amounts specified in paragraph (2) of subdivision (b) and in subdivision (d) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.

(2)For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, when recomputing the amounts referenced in paragraph (1), the percentage change in the California Consumer Price Index shall be deemed to be the greater of 3.1 percent or the percentage change in the California Consumer Price Index as calculated under subdivision (h) of Section 17041 for that taxable year.

(3)For each taxable year beginning on or after January 1, 2019, and before January 1, 2020, when recomputing the amounts referenced in paragraph (1), the percentage change in the California Consumer Price Index shall be deemed to be the greater of 3.5 percent or the percentage change in the California Consumer Price Index as calculated under subdivision (h) of Section 17041 for that taxable year.

(f)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 taxpayer.

(g)(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.

(h)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.

(i)(1)For the purpose of implementing the credit allowed by this section for the 2015 taxable year, the Franchise Tax Board shall be exempt from the following:

(A)Special Project Report requirements under State Administrative Manual Sections 4819.36, 4945, and 4945.2.

(B)Special Project Report requirements under Statewide Information Management Manual Section 30.

(C)Section 11.00 of the 2015 Budget Act.

(D)Sections 12101, 12101.5, 12102, and 12102.1 of the Public Contract Code.

(2)The Franchise Tax Board shall formally incorporate the scope, costs, and schedule changes associated with the implementation of the credit allowed by this section in its next anticipated Special Project Report for its Enterprise Data to Revenue Project.

(j)(1)In accordance with Section 41 of the Revenue and Taxation Code, the purpose of the California Earned Income Tax Credit is to reduce poverty among California’s poorest working families and individuals. 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 individuals represented on tax returns claiming the credit.

(C)The average credit amount on tax returns claiming the credit.

(D)The distribution of credits by number of dependents and income ranges. The income ranges shall encompass the phase-in and phaseout ranges of the credit.

(E)Using data from tax returns claiming the credit, including an estimate of the federal tax credit determined under Section 32 of the Internal Revenue Code, an estimate of the number of families who are lifted out of deep poverty by the credit and an estimate of the number of families who are lifted out of deep poverty by the combination of the credit and the federal tax credit. For the purposes of this subdivision, a family is in “deep poverty” if the income of the family is less than 50 percent of the federal poverty threshold.

(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.

(k)The tax credit allowed by this section shall be known as the California Earned Income Tax Credit.

(l)The amendments made to this section by Chapter 722 of the Statutes of 2016 shall apply to taxable years beginning on or after January 1, 2016.

(m)(1)For each taxable year beginning on or after January 1, 2017, and before January 1, 2018, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred dollars ($100) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty dollars ($250) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:

In the case of an eligible individual with:

The credit percentage is:

The phaseout percentage is:

No qualifying children

2.20%1.22%

1 qualifying child

3.10%2.29%

2 qualifying children

2.13%3.45%

3 or more qualifying children

2.12%3.49%

(2)For each taxable year beginning on or after January 1, 2017, and before January 1, 2018, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred dollars ($100) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty dollars ($250) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows:

 

In the case of an eligible individual with:

The earned income amount is:

The phaseout amount is:

No qualifying children

$5,354$5,354

1 qualifying child

$9,484$9,484

2 qualifying children

$13,794$13,794

3 or more qualifying children

$13,875$13,875

(n)(1)For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred three dollars ($103) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty-eight dollars ($258) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:

In the case of an eligible individual with:

The credit percentage is:

The phaseout percentage is:

No qualifying children

2.20%1.08%

1 qualifying child

3.10%2.00%

2 qualifying children

2.13%2.82%

3 or more qualifying children

2.12%2.85%

(2)For each taxable year beginning on or after January 1, 2018, and before January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to one hundred three dollars ($103) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to two hundred fifty-eight dollars ($258) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows:

 

In the case of an eligible individual with:

The earned income amount is:

The phaseout amount is:

No qualifying children

$5,520$5,520

1 qualifying child

$9,778$9,778

2 qualifying children

$14,222$14,222

3 or more qualifying children

$14,305$14,305

(o)(1)For each taxable year beginning on or after January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to two hundred dollars ($200) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to five hundred five dollars ($505) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, and the earned income amount is greater than or equal to the corresponding amount in the table set forth in paragraph (2) below, then in lieu of the table prescribed in paragraph (1) of subdivision (b), the credit percentage and the phaseout percentage shall be determined as follows:

In the case of an eligible individual with:

The credit percentage is:

The phaseout percentage is:

No qualifying children5.43%0.92%

1 qualifying child

6.33%2.88%

2 qualifying children

4.20%3.75%

3 or more qualifying children

4.15%3.78%

(2)For each taxable year beginning on or after January 1, 2019, if the amount of credit computed pursuant to subdivisions (a) and (b) is less than or equal to two hundred dollars ($200) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with no qualifying children, or less than or equal to five hundred five dollars ($505) multiplied by the ratio of the earned income tax credit adjustment factor for that taxable year divided by 0.85 for an eligible individual with one or more qualifying children, then in lieu of the table prescribed in subparagraph (A) of paragraph (2) of subdivision (b), the earned income amount and the phaseout amount shall be determined as follows:

In the case of an eligible individual with:

The earned income amount is:

The phaseout amount is:

No qualifying children$4,334$4,334

1 qualifying child

$9,381$9,381

2 qualifying children

$14,137$14,137

3 or more qualifying children

$14,302$14,302

(3)For taxable years beginning on or after January 1, 2020, and until and including 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, both of the following shall occur:

(A)The amounts in paragraphs (1) and (2) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.

(B)The phaseout percentage for each of the four categories of eligible individuals shall be recalculated by the Franchise Tax Board in such a manner that, for a taxpayer with an earned income of thirty thousand dollars ($30,000), the calculated amount of credit is equal to zero.

(4)(A)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 amounts in paragraphs (1) and (2) shall be recomputed annually in the same manner as the recomputation of income tax brackets under subdivision (h) of Section 17041.

(B)(i)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, and before January 1, 2024, the phaseout percentages for the prior taxable year, as recalculated under subparagraph (B) of paragraph (3), shall apply.

(ii)(I)For taxable years beginning on or after January 1, 2024, the phaseout percentages for the prior taxable years, as recalculated under subparagraph (B) of paragraph (3), shall apply, except that “twenty thousand dollars ($20,000)” shall be substituted for “thirty thousand dollars ($30,000).”

(II)Additional revenues and savings realized from this clause shall be deposited into the Child Tax Credit Expansion Fund established pursuant to Section 17052.1.1.

(p)For each taxable year beginning on or after January 1, 2020, Section 32(m) of the Internal Revenue Code, relating to identification numbers, is modified as follows:

(1)By deleting “(other than a social security number issued pursuant to clause (II) (or that portion of clause (III) that relates to clause (II)) of section 205(c)(2)(B)(i) of the Social Security Act).”

(2)By substituting “federal individual taxpayer identification number or a social security number” for “social security number.”

(q)An eligible individual, eligible individual’s spouse, or qualifying child using a federal individual taxpayer identification number as authorized under subdivision (p) shall:

(1)Upon request of the Franchise Tax Board, provide:

(A)Identifying documents acceptable for purposes of obtaining a California driver’s license or identification card as authorized by subdivisions (a), (b), and (c) of Section 12801.9 of the Vehicle Code and related regulations adopted for purposes of establishing documents acceptable to prove identity.

(B)Identifying documents used to report earned income for the taxable year.

(2)Upon receiving a valid social security number issued to that individual by the Social Security Administration, notify the Franchise Tax Board, in the time and manner prescribed by the Franchise Tax Board.

(r)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.

SEC. 2.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, and before January 1, 2024, 2025, and for taxable years beginning on or after January 1, 2030, 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.
(iv) For taxable years beginning on or after January 1, 2024, 2025, and before January 1, 2030, the Franchise Tax Board shall recompute the “threshold amount” in this subparagraph so that the credit reaches zero dollars ($0) as earned income reaches fifty thousand dollars ($50,000).
(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. 17052, or would have been allowed a credit under Section 17052 if not for the limitations on earned income described therein.
(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) “Qualifying child,” for taxable years beginning before January 1, 2025, and beginning on or after January 1, 2030, 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 taxable years beginning on or after January 1, 2025, and before January 1, 2030, “qualifying child” shall have the same meaning as under Section 17052, except that the child shall be younger than 18 years of age 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) (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, for taxable years beginning before January 1, 2025, shall be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer.

(2)For taxable years beginning on or after January 1, 2025, refunds required pursuant to this subdivision shall be paid first from the Child Tax Credit Expansion Fund, established pursuant to Section 17052.1.1, and then from the Tax Relief and Refund Account.

(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.
(3) (A) The Legislature finds and declares that the purpose of the amendments to this section made by the act adding this paragraph is to reduce poverty among California’s poorest working families and young children.
(B) For those years in which the report described in paragraph (2) includes information relating to taxable years beginning on or after January 1, 2025, and before January 1, 2030, the Franchise Tax Board shall separately state the details required by paragraph (1), and an estimate for what those details would be if not for the amendments made to this section by the act adding this paragraph.
(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. 3.Section 17052.1.1 is added to the Revenue and Taxation Code, to read:
17052.1.1.

The Child Tax Credit Expansion Fund is hereby established in the State Treasury. Notwithstanding Section 13340 of the Government Code, the moneys in the fund are hereby continuously appropriated without regard to fiscal year to the Franchise Tax Board for the purpose of expanding the young child tax credit, consistent with paragraph (2) of subdivision (c) of Section 17052.1.

SEC. 4.Section 18033 is added to the Revenue and Taxation Code, to read:
18033.

(a)For taxable years beginning on or after January 1, 2024, Section 1014 of the Internal Revenue Code, relating to basis of property acquired from a decedent, shall not apply.

(b)Any additional revenues generated due to the application of this section shall be deposited into the Child Tax Credit Expansion Fund, established pursuant to Section 17052.1.1.

SEC. 5.Section 23153 of the Revenue and Taxation Code is amended to read:
23153.

(a)Every corporation described in subdivision (b) shall be subject to the minimum franchise tax specified in subdivision (d) from the earlier of the date of incorporation, qualification, or commencing to do business within this state, until the effective date of dissolution or withdrawal as provided in Section 23331 or, if later, the date the corporation ceases to do business within the limits of this state.

(b)Unless expressly exempted by this part or the California Constitution, subdivision (a) shall apply to each of the following:

(1)Every corporation that is incorporated under the laws of this state.

(2)Every corporation that is qualified to transact intrastate business in this state pursuant to Chapter 21 (commencing with Section 2100) of Division 1 of Title 1 of the Corporations Code.

(3)Every corporation that is doing business in this state.

(c)The following entities are not subject to the minimum franchise tax specified in this section:

(1)Credit unions.

(2)Nonprofit cooperative associations organized pursuant to Chapter 1 (commencing with Section 54001) of Division 20 of the Food and Agricultural Code that have been issued the certificate of the board of supervisors prepared pursuant to Section 54042 of the Food and Agricultural Code. The association shall be exempt from the minimum franchise tax for five consecutive taxable years, commencing with the first taxable year for which the certificate is issued pursuant to subdivision (b) of Section 54042 of the Food and Agricultural Code. This paragraph only applies to nonprofit cooperative associations organized on or after January 1, 1994.

(d)(1)Except as provided in paragraph (2), paragraph (1) of subdivision (f) of Section 23151, paragraph (1) of subdivision (f) of Section 23181, and paragraph (1) of subdivision (c) of Section 23183, corporations subject to the minimum franchise tax shall pay annually to the state a minimum franchise tax of eight hundred dollars ($800).

(2)The minimum franchise tax shall be twenty-five dollars ($25) for each of the following:

(A)A corporation formed under the laws of this state whose principal business when formed was gold mining, which is inactive and has not done business within the limits of the state since 1950.

(B)A corporation formed under the laws of this state whose principal business when formed was quicksilver mining, which is inactive and has not done business within the limits of the state since 1971, or has been inactive for a period of 24 consecutive months or more.

(3)For purposes of paragraph (2), a corporation shall not be considered to have done business if it engages in business other than mining.

(e)Notwithstanding subdivision (a), for taxable years beginning on or after January 1, 1999, and before January 1, 2000, every “qualified new corporation” shall pay annually to the state a minimum franchise tax of five hundred dollars ($500) for the second taxable year. This subdivision shall apply to any corporation that is a qualified new corporation and is incorporated on or after January 1, 1999, and before January 1, 2000.

(1)The determination of the gross receipts of a corporation, for purposes of this subdivision, shall be made by including the gross receipts of each member of the commonly controlled group, as defined in Section 25105, of which the corporation is a member.

(2)“Gross receipts, less returns and allowances reportable to this state,” means the sum of the gross receipts from the production of business income, as defined in subdivision (a) of Section 25120, and the gross receipts from the production of nonbusiness income, as defined in subdivision (d) of Section 25120.

(3)“Qualified new corporation” means a corporation that is incorporated under the laws of this state or has qualified to transact intrastate business in this state, that begins business operations at or after the time of its incorporation and that reasonably estimates that it will have gross receipts, less returns and allowances, reportable to this state for the taxable year of one million dollars ($1,000,000) or less. “Qualified new corporation” does not include any corporation that began business operations as a sole proprietorship, a partnership, or any other form of business entity prior to its incorporation. This subdivision shall not apply to any corporation that reorganizes solely for the purpose of reducing its minimum franchise tax.

(4)This subdivision shall not apply to limited partnerships, as defined in Section 17935, limited liability companies, as defined in Section 17941, limited liability partnerships, as described in Section 17948, charitable organizations, as described in Section 23703, regulated investment companies, as defined in Section 851 of the Internal Revenue Code, real estate investment trusts, as defined in Section 856 of the Internal Revenue Code, real estate mortgage investment conduits, as defined in Section 860D of the Internal Revenue Code, qualified Subchapter S subsidiaries, as defined in Section 1361(b)(3) of the Internal Revenue Code, or to the formation of any subsidiary corporation, to the extent applicable.

(5)For any taxable year beginning on or after January 1, 1999, and before January 1, 2000, if a corporation has qualified to pay five hundred dollars ($500) for the second taxable year under this subdivision, but in its second taxable year, the corporation’s gross receipts, as determined under paragraphs (1) and (2), exceed one million dollars ($1,000,000), an additional tax in the amount equal to three hundred dollars ($300) for the second taxable year shall be due and payable by the corporation on the due date of its return, without regard to extension, for that year.

(f)(1)Notwithstanding subdivision (a), every corporation that incorporates or qualifies to do business in this state on or after January 1, 2000, and before January 1, 2025, shall not be subject to the minimum franchise tax for its first taxable year.

(2)This subdivision shall not apply to limited partnerships, as defined in Section 17935, limited liability companies, as defined in Section 17941, limited liability partnerships, as described in Section 17948, charitable organizations, as described in Section 23703, regulated investment companies, as defined in Section 851 of the Internal Revenue Code, real estate investment trusts, as defined in Section 856 of the Internal Revenue Code, real estate mortgage investment conduits, as defined in Section 860D of the Internal Revenue Code, and qualified Subchapter S subsidiaries, as defined in Section 1361(b)(3) of the Internal Revenue Code, to the extent applicable.

(3)This subdivision shall not apply to any corporation that reorganizes solely for the purpose of avoiding payment of its minimum franchise tax.

(4)Additional revenues realized from the amendments to this section made by the act adding this paragraph shall be deposited into the Child Tax Credit Expansion Fund established pursuant to Section 17052.1.1.

(g)Notwithstanding subdivision (a), a domestic corporation, as defined in Section 167 of the Corporations Code, that files a certificate of dissolution in the office of the Secretary of State pursuant to subdivision (b) of Section 1905 of the Corporations Code, prior to its amendment by the act amending this subdivision, and that does not thereafter do business shall not be subject to the minimum franchise tax for taxable years beginning on or after the date of that filing.

(h)The minimum franchise tax imposed by paragraph (1) of subdivision (d) shall not be increased by the Legislature by more than 10 percent during any calendar year.

(i)(1)Notwithstanding subdivision (a), for taxable years beginning on or after January 1, 2020, a corporation that is a small business solely owned by a deployed member of the United States Armed Forces shall not be subject to the minimum franchise tax for any taxable year the owner is deployed and the corporation operates at a loss or ceases operation.

(2)The Franchise Tax Board may promulgate regulations as necessary or appropriate to carry out the purposes of this subdivision, including a definition for “ceases operation.”

(3)For the purposes of this subdivision, all of the following definitions apply:

(A)“Deployed” means being called to active duty or active service during a period when a Presidential Executive order specifies that the United States is engaged in combat or homeland defense. “Deployed” does not include either of the following:

(i)Temporary duty for the sole purpose of training or processing.

(ii)A permanent change of station.

(B)“Operates at a loss” means negative net income as defined in Section 24341.

(C)“Small business” means a corporation with total income from all sources derived from, or attributable to, the state of two hundred fifty thousand dollars ($250,000) or less.

(4)This subdivision shall become inoperative for taxable years beginning on or after January 1, 2030.