Amended  IN  Assembly  March 02, 2023

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Assembly Bill
No. 14

Introduced by Assembly Member Davies Members Davies and Alanis
(Coauthors: Assembly Members Alanis, Chen, Dixon, Essayli, Vince Fong, Gallagher, Mathis, Sanchez, and Ta)

December 05, 2022

An act relating to taxation. An act to add and repeal Section 17052.6.1 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.


LEGISLATIVE COUNSEL'S DIGEST


AB 14, as amended, Davies. Income tax: childcare savings and investment accounts. Personal Income Tax: credit: childcare costs.
The Personal Income Tax Law allows various credits against the taxes imposed by that law. That law, in modified conformity to federal income tax law, authorizes a credit for household and dependent care expenses necessary for gainful employment, as provided.
This bill would allow a credit against those taxes for each taxable year beginning on or after January 1, 2025, and before January 1, 2030, in an amount equal to childcare costs, as defined, paid or incurred by the qualified taxpayer in this state. The bill would limit the total credit for each taxable year, as specified.
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.
This bill would take effect immediately as a tax levy.

The Personal Income Tax Law and the Corporation Tax Law, in conformity with federal income tax law, generally define “gross income” as income from whatever source derived, except as specifically excluded. Those laws also provide various exclusions and deductions from gross income, including exclusions and deductions for specified contributions to health savings accounts and medical savings accounts, as defined.

This bill would state the intention of the Legislature to enact legislation that would establish similar tax-preferred savings and investment accounts for childcare expenses.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NO  

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


SECTION 1.

 Section 17052.6.1 is added to the Revenue and Taxation Code, to read:

17052.6.1.
 (a) For each taxable year beginning on or after January 1, 2025, and before January 1, 2030, there shall be allowed a credit against the “net tax,” as defined in Section 17039, to a qualified taxpayer in an amount equal to childcare costs paid or incurred by the qualified taxpayer in this state. The total credit for a qualified taxpayer for each taxable year shall not exceed the lesser of the following:
(1) Five hundred dollars ($500).
(2) The amount of the allowable federal credit under Section 21 of the Internal Revenue Code less the amount of the credit claimed under Section 17052.6 for the applicable taxable year.
(b) For purposes of this section, the following definitions apply:
(1) “Childcare costs” mean employment-related expenses, within the meaning of Section 21 of the Internal Revenue Code, but limited to expenses for household services and care provided in this state, as described in Section 17052.6.
(2) “Qualified taxpayer” means a taxpayer who is qualified to receive the credit under Section 17052.6.
(c) In the case where 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 is exhausted.
(d) The Franchise Tax Board may prescribe rules, guidelines, or procedures necessary or appropriate to carry out the purposes of this section, including any guidelines regarding the allocation of the credit allowed under this section.
(e) (1) The Legislature finds and declares all of the following:
(A) Childcare costs are a major expense for families, with California ranked third in the nation for the cost of infant care.
(B) The average cost of infant care is $1,412 per month. Care for a four-year-old child is expected to be $956 per month.
(C) For many families, childcare costs are second only to housing.
(D) According to the Economic Policy Institute, which focuses on the needs of low- and middle-income workers, childcare may cost more than college in California.
(E) California’s current Child and Dependent Care Expenses Credit, which allows taxpayers to reduce their tax liability by a percentage of their eligible childcare expenses and can be claimed by families who pay for care in order to work or look for work, does not cover enough of the cost of childcare.
(2) For purposes of complying with Section 41, the Legislature finds and declares that the goal, purpose, and objective of the tax credit allowed by this section, hereafter “the credit”, is to help families with the cost of childcare.
(3) The performance indicators to measure whether the credit meets the goal, purpose, and objective stated in subdivision (b) are as follows:
(A) The number of taxpayers claiming the credit.
(B) The average credit amount on tax returns claiming the credit.
(4) The Franchise Tax Board shall have the following data collection and reporting requirements:
(A) Notwithstanding Section 19542, the board shall prepare a written report that includes data on the performance indicators described in subdivision (c).
(B) The report shall be provided to the Legislature by June 1, 2029, in compliance with Section 9795 of the Government Code.
(f) This section shall remain in effect only until December 1, 2030, and as of that date is repealed. However, any unused credit may continue to be carried forward, as provided in subdivision (c), until the credit is exhausted.

SEC. 2.

 This act provides for a tax levy within the meaning of Article IV of the California Constitution and shall go into immediate effect.
SECTION 1.

It is the intent of the Legislature to enact legislation that would provide for tax-preferred childcare savings and investment accounts to allow families to save for childcare expenses, often one of the largest expenses for a family.