Bill Text: CA AB158 | 2021-2022 | Regular Session | Chaptered
Bill Title: Personal Income Tax Law: Corporation Tax Law: exclusions from income: Paycheck Protection Program.
Spectrum: Committee Bill
Status: (Passed) 2022-09-29 - Chaptered by Secretary of State - Chapter 737, Statutes of 2022. [AB158 Detail]
Download: California-2021-AB158-Chaptered.html
Assembly Bill
No. 158
CHAPTER 737
An act to amend Sections 17053.71, 17131.8, 23628, and 24308.6 of, to add Section 17053.75 to, and to repeal and add Section 19551.3 of, the Revenue and Taxation Code, to amend Section 8161 of the Welfare and Institutions Code, and to repeal Section 26 of Chapter 264 of the Statutes of 2020, relating to taxpayer relief, and making an appropriation therefor, to take effect immediately, bill related to the budget.
[
Approved by
Governor
September 29, 2022.
Filed with
Secretary of State
September 29, 2022.
]
LEGISLATIVE COUNSEL'S DIGEST
AB 158, Committee on Budget.
Personal Income Tax Law: Corporation Tax Law: exclusions from income: Paycheck Protection Program.
(1) The Personal Income Tax Law allows various credits against the taxes imposed by that law.
This bill would, for taxable years beginning on or after January 1, 2024, allow a credit in an amount equal to the greater of the dues paid to a labor organization during the taxable year by an individual multiplied by a workers’ tax credit adjustment factor, as described, or an amount of dues paid by an individual not to exceed a specified amount, as provided in the annual Budget Act. The bill would state the intent of the Legislature that the values provided in the annual Budget Act be calculated to limit the annual revenue loss resulting from the credit to no more than $400,000,000. The bill would provide that the credit
amount in excess of the taxpayer’s liability would be paid to the taxpayer from the Tax Relief and Refund Account upon appropriation by the Legislature. The bill would provide that this credit would be in lieu of any other credit or deduction that the qualified taxpayer may otherwise be allowed with respect to amounts taken into account in calculating the credit.
Existing law requires a bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives 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 and the Corporation Tax Law allow a small business hiring credit to a qualified small
business employer, as defined, calculated based on net increase in qualified employees, as defined, over a specified period of time.
This bill would make nonsubstantive clarifying changes to those provisions.
(3) 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, and provide various exclusions from gross income. Existing law, in conformity with the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act), and its subsequent amendments in the Paycheck Protection Program and Health Care Enhancement Act, the Paycheck Protection Program Flexibility Act of 2020, and the Consolidated Appropriations Act, 2021, among other things, excludes any amounts of covered loans forgiven under the CARES Act from gross income for purposes of the Personal
Income Tax Law and the Corporation Tax Law for taxable years beginning on or after January 1, 2019.
Existing law, effective June 30, 2022, excludes from gross income any covered loan amounts forgiven pursuant to the federal PPP Extension Act of 2021. Existing law makes changes to the computation of tax effective for taxable years beginning on or after January 1 of the year in which the act takes effect, except as provided.
This bill would provide that the provisions of law that exclude from gross income any covered loan amounts forgiven pursuant to the PPP Extension Act of 2021 are effective for taxable years beginning on or after January 1, 2019.
(4) The Personal Income Tax Law, in modified conformity with federal income tax laws, allows a California Earned Income Tax Credit (CalEITC) against personal
income tax and a payment from the Tax Relief and Refund Account 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. Existing law provides that any unwarranted disclosure or use of taxpayer information, as specified, is a misdemeanor.
Existing law establishes the State Department of Social Services and requires the department to administer various public social services programs, such as the CalFood Program and the In-Home Supportive Services Program. Existing law also establishes the State Department of Health Care Services within the California Health and Human Services Agency, and sets forth the department’s powers and duties relating to, among other things, public health, licensing and certification of certain health facilities, and the state Medi-Cal program.
Existing law requires the State Department of Social Services to exchange data with the Franchise Tax Board upon request, including the names, addresses, and contact information of individuals that may qualify for the CalEITC, and requires the data provided to remain confidential and be used only for purposes directly connected with the CalEITC.
Existing law also requires the State Department of Health Care Services to exchange data with the Franchise Tax Board upon request, including sufficient identifying information to allow the department and the board to assess the extent to which the department and the board can identify individuals enrolled in Medi-Cal who may be eligible for the CalEITC and the federal Earned Income Tax Credit. That law requires the data provided to remain confidential and be used only for purposes directly connected with the CalEITC and the federal Earned Income Tax Credit, as
specified.
Existing law authorizes the Franchise Tax Board to disclose individual income tax return information for taxable years beginning on or after January 1, 2018, and before January 1, 2020, to the State Department of Social Services, and requires the data provided to remain confidential and be used only for purposes of informing state residents of the availability of federal economic stimulus payments.
This bill would repeal the provisions relating to the exchange of data between the State Department of Social Services, State Department of Health Care Services, and the Franchise Tax Board described above.
The bill would instead require the State Department of Social Services and the State Department of Health Care Services to exchange data with the Franchise Tax Board, including the names, addresses, and contact
information of individuals that may qualify for the CalEITC, and would require all data provided to remain confidential and be used only for purposes directly connected with the federal Earned Income Tax Credit, the CalEITC, and other federal and state antipoverty tax credits.
The bill would authorize the Franchise Tax Board to disclose individual income tax return information for taxable years beginning on or after January 1, 2020, and before January 1, 2022, to the State Department of Social Services and the State Department of Health Care Services, and would require the data provided to remain confidential and be used only for purposes of informing state residents of the availability of the Volunteer Income Tax Assistance (VITA), CalFile, the federal Earned Income Tax Credit, the California Earned Income Tax Credit, and other federal and state antipoverty tax credits that are designed to alleviate poverty and tax burdens of low-income
households.
The bill would additionally require the State Department of Social Services and the State Department of Health Care Services that receive data from the Franchise Tax Board to annually provide the Franchise Tax Board the results and findings of outreach conducted to measure whether the outreach achieves its intended purpose of increasing the number of claims for the federal Earned Income Tax Credit, the California Earned Income Tax Credit, and other state and federal antipoverty tax credits.
The bill would provide that an unauthorized disclosure or use of taxpayer information disclosed under these provisions is a misdemeanor. By expanding the scope of a crime, the bill would impose a state-mandated local program.
This bill would make an appropriation of $20,000 from the General Fund to the Franchise Tax
Board for the purpose of administering these data sharing provisions.
(5) Existing law, the Better for Families Act, requires the Controller to make a one-time Better for Families Tax Refund payment to each qualified recipient, as defined, of an applicable amount, as specified, in the form and manner determined by the Franchise Tax Board.
This bill would instead require the Franchise Tax Board to make these payments.
(6) This bill would also make findings and declarations related to a gift of public funds.
(7) 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 no reimbursement is required by this act for a specified reason.
(8) This bill would declare that it is to take effect immediately as a bill providing for appropriations related to the Budget Bill.
Digest Key
Vote: MAJORITY Appropriation: YES Fiscal Committee: YES Local Program: YESBill Text
The people of the State of California do enact as follows:
SECTION 1.
The Legislature finds and declares all of the following:(a) Income inequality continues to be a growing problem in California, and this measure would implement one reasonable change to the state’s Revenue and Taxation Code to address the problem.
(b) Unreimbursed business expenses over 2 percent of a taxpayer’s adjusted gross income are generally tax deductible on both federal and California income tax returns. Therefore, those taxpayers that itemize their deductions get the
benefit of public tax subsidies for their business expenses. For the wealthiest tax filers, the combined federal and state tax benefit is in the range of 50 percent of the unreimbursed business expenses.
(c) Lower income workers do not get the tax benefits to subsidize their business expenses because they do not itemize their deductions, or, if they do, they get a smaller percentage benefit because of their lower tax brackets.
(d) One of the most common business expenses for lower and middle-income workers is union dues. While those in higher income professions get the tax benefit of deducting association dues and other business expenses, union members are often unable to get the same level of benefit.
(e) Therefore, to help address the problem of growing income inequality and to provide the same tax benefit for
lower income earners and the wealthiest among us, a refundable workers’ tax credit equal to a percentage of the union member fees should be offered in lieu of the tax deduction.
SEC. 2.
Section 17053.71 of the Revenue and Taxation Code is amended to read:17053.71.
(a) (1) For each taxable year beginning on or after January 1, 2021, and before January 1, 2022, there shall be allowed a small business hiring credit against the “net tax,” as defined in Section 17039, to a qualified small business employer that receives a tentative credit reservation under Section 6902.10, in an amount calculated pursuant to paragraph (2).(2) The amount of the credit allowed by this subdivision shall be equal to the amount calculated pursuant to subparagraph (A) minus the amount calculated pursuant to subparagraph (B).
(A) One thousand dollars ($1,000) for each net increase in qualified employees, as specified in subdivision (c), not to exceed one
hundred fifty thousand dollars ($150,000).
(B) If the qualified small business employer received a tentative credit reservation amount pursuant to Section 6902.8, either of the following applies:
(i) For a qualified small business employer that made an irrevocable election pursuant to Section 6902.8 to apply the credit against qualified sales and use taxes pursuant to Section 6902.7, the credit amounts allocated to the qualified small business employer pursuant to Sections 6902.7 and 6902.8.
(ii) For a qualified small business employer that elected to apply the credit under Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001), or both, the tentative credit reservation amount received by the qualified small business employer pursuant to Section 6902.8.
(b) For purposes of this section:
(1) “Monthly full-time equivalent” means either of the following:
(A) For a qualified employee paid hourly qualified wages, “monthly full-time equivalent” means the total number of hours employed per month for the qualified small business employer by the qualified employee, not to exceed 167 hours per month per qualified employee, divided by 167.
(B) In the case of a salaried qualified employee, “monthly full-time equivalent” means the total number of weeks employed per month for the qualified small business employer by the qualified employee divided by 4.33 multiplied by the time base the qualified employee was employed.
(2) (A) “Qualified employee” means an employee who is paid qualified wages by a qualified small business employer.
(B) “Qualified employee” shall not include an employee whose qualified wages are included in calculating any other credit allowed under this part, except for the credit allowed under Section 17053.72.
(3) (A) “Qualified small business employer” means a taxpayer that as of December 31, 2020, employed a total of 500 or fewer qualified employees and meets one of the following requirements:
(i) Has a decrease of 20 percent or more in gross receipts determined by comparing gross receipts for the period beginning on January 1, 2020, and ending on December 31, 2020, to the gross receipts for the period beginning on January 1, 2019, and ending on December 31, 2019.
(ii) Is a fiscal year filer that has a decrease of 20 percent or more in gross receipts determined by comparing either of the following:
(I) The gross receipts for fiscal year 2019–20 to the gross receipts from fiscal year 2018–19.
(II) The average of gross receipts for fiscal year 2019–20 and fiscal year 2020–21 to the gross receipts from fiscal year 2018–19.
(iii) For a taxpayer that first commences business after January 1, 2019, but on or before January 1, 2020, has a decrease of 20 percent or more in gross receipts in the second quarter of 2020 determined by comparing gross receipts from January 1, 2020, through February 28, 2020, multiplied by 1.5 to the gross receipts for the period beginning on April 1, 2020, and ending on June 30, 2020.
(B) “Qualified small business employer” does not include a taxpayer required to be included in a combined report under Section 25101 or 25110 or authorized to be included in a combined report under Section 25101.15.
(4) “Qualified wages” means wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.
(5) “Time base” means the fraction of full-time employment that the qualified employee is employed.
(6) “Weeks employed” means the total number of calendar days that a qualified employee was employed by the qualified small business employer during the month, divided by seven, not to exceed 4.33.
(c) The net increase in qualified employees of
a qualified small business employer shall be equal to the amount calculated pursuant to paragraph (2) minus the amount calculated pursuant to paragraph (1).
(1) The average monthly full-time equivalent qualified employees employed during the three-month period beginning on April 1, 2020, and ending on June 30, 2020, by the qualified small business employer. The average monthly full-time equivalent qualified employees is determined by adding the total monthly full-time equivalent qualified employees employed by the qualified small business employer for all three months and dividing the total by three.
(2) The lesser of either of the following:
(A) The average monthly full-time equivalent qualified employees employed during the 12-month period beginning on July 1, 2020, and ending on June 30, 2021, by the qualified
small business employer. The average monthly full-time equivalent qualified employees is determined by adding the total monthly full-time equivalent qualified employees employed by the qualified small business employer for all 12 months and dividing the total by 12.
(B) The average monthly full-time equivalent qualified employees employed during the three-month period beginning on April 1, 2021, and ending on June 30, 2021, by the qualified small business employer. The average monthly full-time equivalent qualified employees is determined by adding the total monthly full-time equivalent qualified employees employed by the qualified small business employer for all three months and dividing the total by three.
(d) 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 succeeding four years if
necessary, until the credit is exhausted.
(e) A deduction otherwise allowed under this part for qualified wages shall be reduced by the amount of the credit allowed under this section.
(f) For purposes of this section all of the following shall apply:
(1) All employees of the trades or businesses that are treated as related under Section 267, 318, or 707 of the Internal Revenue Code shall be treated as employed by a single qualified small business employer.
(2) If a qualified small business employer changes its business form to a different entity type after receiving a tentative credit reservation under Section 6902.10 and continues operation, the new entity shall be allowed the credit, and the determination of the amount of the credit under this
section with respect to qualified wages paid or incurred by the qualified small business employer shall apply to the new entity as if those qualified wages were paid or incurred by the new entity.
(g) Notwithstanding Section 23803, an “S” corporation that makes the election under Section 6902.10 shall be allowed to apply the full credit amount against qualified sales and use tax, and no amount of credit shall be allowed to reduce the shareholder’s liability under this part.
(h) A disallowance of a credit claimed due to the application of the limitation specified in Section 6902.10 shall be treated as a mathematical error appearing on the return. An amount of tax resulting from that disallowance may be assessed by the Franchise Tax Board in the same manner as provided by Section 19051.
(i) (1) The Franchise Tax Board may adopt regulations necessary or appropriate to carry out the purposes of this section.
(2) The Franchise Tax Board may adopt 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 regulation, rule, guideline, procedure, or other guidance adopted by the Franchise Tax Board pursuant to this section.
(j) Notwithstanding Section 19542, the Franchise Tax Board may provide to the California Department of Tax and Fee Administration, only to the extent allowed under federal law, information related to the credit allowed by Section 6902.9, this section, and Section 23628, including, but not limited to, the qualified small business employer names, amounts of tax credits allowed under each
section, amount of gross receipts, and the net increase in qualified employees.
(k) The amendments made to this section by Chapter 55 of the Statutes of 2022 shall apply for taxable years beginning on or after January 1, 2021, and before January 1, 2022.
(l) This section shall remain in effect only until December 1, 2026, and as of that date is repealed.
SEC. 3.
Section 17053.75 is added to the Revenue and Taxation Code, to read:17053.75.
(a) For taxable years beginning on or after January 1, 2024, and except as provided in subdivision (b), there shall be allowed to a qualified taxpayer a credit against the “net tax,” as defined in Section 17039, in an amount equal to the greater of the following:(1) Dues paid in that taxable year by the qualified taxpayer multiplied by the workers’ tax credit adjustment factor.
(2) The amount equal to dues paid in that taxable year by the qualified taxpayer, not to exceed an amount set pursuant to subdivision (b) of up to one hundred dollars ($100), recomputed annually beginning January 1, 2025, in the same manner as the recomputation of income tax brackets under subdivision
(h) of Section 17041.
(b) (1) Unless otherwise specified in the annual Budget Act, or a bill providing for appropriations related to the annual Budget Act, enacted after May 1, 2024, the workers’ tax credit adjustment factor shall be 0 percent for that year, and the dollar amount allowed pursuant to paragraph (2) of subdivision (a) shall be zero dollars ($0) for that taxable year.
(2) It is the intent of the Legislature that the workers’ tax credit adjustment factor and the maximum dollar amount allowed pursuant to paragraph (2) of subdivision (a) shall be set in a manner to limit the annual revenue loss resulting from this section to no more than four hundred million dollars ($400,000,000).
(c) For purposes of this section, the following definitions apply:
(1) “Bona fide labor organization” means a labor organization that satisfies all of the following:
(A) Is exempt from income taxes pursuant to Section 23701a.
(B) Actually represents employees in California as to wages, hours, and working conditions.
(C) Its officers have been democratically elected by its membership or otherwise in a manner consistent with federal law.
(D) Is free of domination or interference by any employer and has received no improper assistance or support from any employer.
(2) “Dues” means the amount paid or incurred during the taxable year by a taxpayer for dues or dues equivalents paid to a bona fide
labor organization.
(3) “Qualified taxpayer” means an individual who satisfies both of the following:
(A) Is represented for purposes of collective bargaining by, and who pays dues or dues equivalents to, a bona fide labor organization.
(B) Meets any of the following requirements:
(i) Has wages subject to withholding pursuant to Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.
(ii) Is a provider of in-home supportive services pursuant to Article 7 (commencing with Section 12300) of Chapter 3 of Part 3 of Division 9 of the Welfare and Institutions Code, or pursuant to Section 14132.95, 14132.952, or 14132.956 of the Welfare and Institutions Code.
(iii) Is a provider of waiver personal care services pursuant to Section 14132.97 of the Welfare and Institutions Code.
(d) The credit allowed pursuant to subdivision (a) shall be in lieu of any other credit or deduction that the qualified taxpayer may otherwise be allowed under this part with respect to amounts taken into account in calculating the credit allowed by this section.
(e) 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, upon appropriation by the Legislature, be paid from the Tax Relief and Refund Account and refunded to the qualified taxpayer.
(f) (1) For purposes of complying with Section 41, the Legislature finds and declares the following:
(A) The purpose of the credit allowed under this section is to help individuals with the cost of being a member of a union.
(B) The performance indicators for the Legislature to use when measuring whether the tax expenditure meets the goals, purposes, and objectives shall be the total number of returns claiming the credit and the aggregate dollar amount of credits claimed.
(2) (A) The Franchise Tax Board shall provide a report to the Legislature in compliance with Section 9795 of the Government Code, beginning in the 2026 calendar year and then on an annual basis each year thereafter, while the credit is in effect, on the total number of returns claiming the credit and the aggregate
dollar amount of credits claimed for the most recent taxable year for which information is available.
(B) The disclosure requirements of this paragraph shall be treated as an exception to Section 19542.
SEC. 4.
Section 17131.8 of the Revenue and Taxation Code is amended to read:17131.8.
(a) For taxable years beginning on or after January 1, 2019, gross income does not include any covered loan amount forgiven pursuant to Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), pursuant to the Paycheck Protection Program and Health Care Enhancement Act (Public Law 116-139), pursuant to the Paycheck Protection Program Flexibility Act of 2020 (Public Law 116-142), pursuant to the Consolidated Appropriations Act, 2021 (Public Law 116-260), or pursuant to the PPP Extension Act of 2021 (Public Law 117-6).(b) For taxable years beginning on or after January 1, 2019, gross income does not include any advance grant amount issued pursuant to Section 1110(e) of the Coronavirus Aid, Relief, and Economic Security Act
(Public Law 116-136), or pursuant to Section 331 of the Consolidated Appropriations Act, 2021 (Public Law 116-260).
(c) (1) Notwithstanding Section 17280, for taxable years beginning on or after January 1, 2019, subsection (a) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided.
(2) Paragraph (1) of subsection (a) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) is modified by substituting the phrase “For purposes of the Internal Revenue Code of 1986” with “For purposes of this part”.
(3) The provisions of paragraph (1) of subsection (a) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260), relating to paragraphs (2) and (3) of
subsection (i) of Section 7A of the Small Business Act, shall not apply to an ineligible entity.
(4) Paragraph (2) of subsection (a) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall not apply.
(d) (1) Notwithstanding Section 17280, for taxable years beginning on or after January 1, 2019, subsection (b) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided.
(2) Subsection (b) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) is modified by substituting the phrase “For purposes of the Internal Revenue Code of 1986, in the case of any taxable year ending after the date of the enactment of this Act” with “For purposes of this
part”.
(3) Paragraphs (2) and (3) of subsection (b) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall not apply to an ineligible entity.
(e) (1) Notwithstanding Section 17280, for taxable years beginning on or after January 1, 2019, subsection (a) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided.
(2) Subsection (a) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) is modified by substituting the phrase “For purposes of the Internal Revenue Code of 1986” with “For purposes of this part”.
(3) Paragraphs (2) and (3) of subsection (a) of Section 278 of Division N
of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall not apply to an ineligible entity.
(f) (1) Notwithstanding Section 17280, for taxable years beginning on or after January 1, 2019, subsection (b) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided.
(2) Subsection (b) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-120) is modified by substituting the phrase “For purposes of the Internal Revenue Code of 1986” with “For purposes of this part”.
(g) For purposes of this section, all of the following definitions shall apply:
(1) “Covered loan” has the same meaning as in Section 1106 of the
Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), or pursuant to the Consolidated Appropriations Act, 2021 (Public Law 116-260).
(2) “Advance grant amount” means an emergency Economic Injury Disaster Loan grant pursuant to Section 1110(e) of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), or a targeted Economic Injury Disaster Loan advance pursuant to Section 331 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260).
(3) “Ineligible entity” means a taxpayer that either:
(A) Is a publicly traded company.
(B) Does not meet the reduction from the gross receipts requirements of Section 636(a)(37)(A)(iv)(bb) of Title 15 of the United States Code, as added by Section 311 of Division
N of the Consolidated Appropriations Act, 2021 (Public Law 116-260).
(4) “Publicly traded company” means a publicly traded entity as described in Section 342 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260).
(h) 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 standard, criterion, procedure, determination, rule, notice, guideline, or any other guidance established or issued by the Franchise Tax Board pursuant to this section.
(i) The amendments made by the act adding this subdivision shall be operative for taxable years beginning on or after January 1, 2019.
(j) The amendments made to this section by Chapter 55 of the Statutes of 2022 shall be operative for taxable years beginning on or after January 1, 2019.
SEC. 5.
Section 19551.3 of the Revenue and Taxation Code is repealed.SEC. 6.
Section 19551.3 is added to the Revenue and Taxation Code, to read:19551.3.
(a) The State Department of Social Services and the State Department of Health Care Services shall exchange data with the Franchise Tax Board, including, but not limited to, the names, addresses, and contact information of individuals that may qualify for the California Earned Income Tax Credit. The data provided shall remain confidential and shall be used only for purposes directly connected with the federal Earned Income Tax Credit, the California Earned Income Tax Credit, and other federal and state antipoverty tax credits.(b) Notwithstanding Section 19542 or any other law, the Franchise Tax Board may disclose individual income tax return information for taxable years beginning on or after January 1, 2020, and before January 1, 2022, to
the State Department of Social Services and the State Department of Health Care Services. The information provided shall remain confidential and shall be used only for purposes of informing state residents of the availability of the Volunteer Income Tax Assistance (VITA), CalFile, the federal Earned Income Tax Credit, the California Earned Income Tax Credit, and other federal and state antipoverty tax credits that are designed to alleviate poverty and tax burdens of low-income households. The Franchise Tax Board shall not disclose or provide any federal tax information.
(c) (1) The State Department of Social Services and the State Department of Health Care Services that receive data from the Franchise Tax Board shall annually provide to the Franchise Tax Board, no later than January 1 of each calendar year, the results and findings of outreach conducted to measure whether the outreach achieves its intended purpose of
increasing the number of claims for the federal Earned Income Tax Credit, the California Earned Income Tax Credit, and other state and federal antipoverty tax credits.
(2) The information required by this subdivision shall include, but is not limited to, all of the following elements:
(A) The number of outreach contacts.
(B) The response rate to the outreach contacts referenced in subparagraph (A), if known.
(C) A description of each outreach program and the parameters of that program.
(D) The number of individuals responding to outreach contacts referenced in subparagraph (A), if known.
(E) The number of individuals who
ultimately undertook the desired action and filed a return, if known.
(F) The name and amount of state and federal antipoverty tax credits claimed, if known.
(d) For purposes of this section, the following shall apply:
(1) “Voluntary Income Tax Assistance (VITA)” means the free basic income tax return preparation program, for federal and state personal income tax returns, managed by the Internal Revenue Service and operated by Internal Revenue Service partners and trained volunteers.
(2) “CalFile” means the Franchise Tax Board’s free, direct, online program for taxpayers to complete and e-file their state personal income tax returns.
(e) An unauthorized disclosure or use of the information
disclosed pursuant to this section is a misdemeanor pursuant to Section 19552.
SEC. 7.
Section 23628 of the Revenue and Taxation Code is amended to read:23628.
(a) (1) For each taxable year beginning on or after January 1, 2021, and before January 1, 2022, there shall be allowed a small business hiring credit against the “tax,” as defined in Section 23036, to a qualified small business employer that receives a tentative credit reservation under Section 6902.10, in an amount calculated pursuant to paragraph (2).(2) The amount of credit determined by this subdivision shall be equal to the amount calculated pursuant to subparagraph (A) minus the amount calculated pursuant to subparagraph (B).
(A) One thousand dollars ($1,000) for each net increase in qualified employees, as specified in subdivision (c), not to exceed one hundred fifty
thousand dollars ($150,000).
(B) If the qualified small business employer received a tentative credit reservation amount pursuant to Section 6902.8, either of the following applies:
(i) For a qualified small business employer that made an irrevocable election pursuant to Section 6902.8 to apply the credit against qualified sales and use taxes pursuant to Section 6902.7, the credit amounts allocated to the qualified small business employer pursuant to Sections 6902.7 and 6902.8.
(ii) For a qualified small business employer that elected to apply the credit under Part 10 (commencing with Section 17001) or Part 11 (commencing with Section 23001), or both, the tentative credit reservation amount received by the qualified small business employer pursuant to Section 6902.8.
(b) For purposes of this section:
(1) “Monthly full-time equivalent” means either of the following:
(A) In the case of a qualified employee paid hourly qualified wages, “monthly full-time equivalent” means the total number of hours employed per month for the qualified small business employer by the qualified employee, not to exceed 167 hours per month per qualified employee, divided by 167.
(B) In the case of a salaried qualified employee, “monthly full-time equivalent” means the total number of weeks employed per month for the qualified small business employer by the qualified employee divided by 4.33 multiplied by the time base the qualified employee was employed.
(2) (A) “Qualified employee” means an employee who is paid qualified wages by a qualified small business employer.
(B) “Qualified employee” shall not include an employee whose qualified wages are included in calculating any other credit allowed under this part, except for the credit allowed under Section 23627.
(3) (A) “Qualified small business employer” means a taxpayer that as of December 31, 2020, employed a total of 500 or fewer qualified employees and meets either of the following requirements:
(i) Has a decrease of 20 percent or more in gross receipts determined by comparing gross receipts beginning on January 1, 2020, and ending on December 31, 2020, to the gross receipts beginning on January 1, 2019, and ending on December 31, 2019.
(ii) Is a fiscal year filer that has a decrease of 20 percent or more in gross receipts determined by comparing either of the following:
(I) The gross receipts for fiscal year 2019–20 to the gross receipts from fiscal year 2018–19.
(II) The average of gross receipts for fiscal year 2019–20 and fiscal year 2020–21 to the gross receipts from fiscal year 2018–19.
(iii) For a taxpayer that first commences business after January 1, 2019, but on or before January 1, 2020, has a decrease of 20 percent or more in gross receipts in the second quarter of 2020 determined by comparing gross receipts from January 1, 2020, through February 28, 2020, multiplied by 1.5 to the gross receipts for the period beginning on April 1, 2020, and ending on June 30, 2020.
(B) “Qualified small business employer” does not include a taxpayer required to be included in a combined report under Section 25101 or 25110 or authorized to be included in a combined report under Section 25101.15.
(4) “Qualified wages” means wages subject to withholding under Division 6 (commencing with Section 13000) of the Unemployment Insurance Code.
(5) “Time base” means the fraction of full-time employment that the qualified employee is employed.
(6) “Weeks employed” means the total number of calendar days that a qualified employee was employed by the qualified small business employer during the month, divided by seven, not to exceed 4.33.
(c) The net increase in qualified employees of
a qualified small business employer shall be equal to the amount calculated pursuant to paragraph (2) minus the amount calculated pursuant to paragraph (1).
(1) The average monthly full-time equivalent qualified employees employed during the three-month period beginning on April 1, 2020, and ending on June 30, 2020, by the qualified small business employer. The average monthly full-time equivalent qualified employees is determined by adding the total monthly full-time equivalent qualified employees employed by the qualified small business employer for all three months and dividing the total by three.
(2) The lesser of either of the following:
(A) The average monthly full-time equivalent qualified employees employed during the 12-month period beginning on July 1, 2020 and ending on June 30, 2021, by the qualified
small business employer. The average monthly full-time equivalent qualified employees is determined by adding the total monthly full-time equivalent qualified employees employed by the qualified small business employer for all 12 months and dividing the total by 12.
(B) The average monthly full-time equivalent qualified employees employed during the three-month period beginning on April 1, 2021 and ending on June 30, 2021, by the qualified small business employer. The average monthly full-time equivalent qualified employees is determined by adding the total monthly full-time equivalent qualified employees employed by the qualified small business employer for all three months and dividing the total by three.
(d) 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 succeeding four years if necessary,
until the credit is exhausted.
(e) A deduction otherwise allowed under this part for qualified wages shall be reduced by the amount of the credit allowed under this section.
(f) For purposes of this section:
(1) All employees of the trades or businesses that are treated as related under Section 267, 318, or 707 of the Internal Revenue Code shall be treated as employed by a single qualified small business employer.
(2) If a qualified small business employer changes its business form to a different entity type after receiving a tentative credit reservation under Section 6902.10 and continues operation, the new entity shall be allowed the credit, and the determination of the amount of the credit under this section with respect to qualified wages paid or
incurred by the qualified small business employer shall apply to the new entity as if those qualified wages were paid or incurred by the new entity.
(g) Notwithstanding Section 23803, an “S” corporation that makes the election under Section 6902.10 shall be allowed to apply the full credit amount against qualified sales and use tax, and no amount of credit shall be allowed to reduce the shareholder’s liability under Part 10 (commencing with Section 17001).
(h) A disallowance of a credit claimed due to the application of the limitation specified in Section 6902.10 shall be treated as a mathematical error appearing on the return. An amount of tax resulting from that disallowance may be assessed by the Franchise Tax Board in the same manner as provided by Section 19051.
(i) (1) The Franchise Tax
Board may prescribe any regulations necessary or appropriate to carry out the purposes of this section.
(2) The Franchise Tax Board may adopt 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 regulation, rule, guideline, procedure, or other guidance adopted by the Franchise Tax Board pursuant to this section.
(j) Notwithstanding Section 19542, the Franchise Tax Board may provide to the California Department of Tax and Fee Administration, only to the extent allowed under federal law, information related to the credit allowed by Section 6902.9, this section, and Section 17053.71, including, but not limited to, the qualified small business employer names, amounts of tax credits allowed under each section, amount of
gross receipts, and the net increase in qualified employees.
(k) The amendments made to this section by Chapter 55 of the Statutes of 2022 shall apply for taxable years beginning on or after January 1, 2021, and before January 1, 2022.
(l) This section shall remain in effect only until December 1, 2026, and as of that date is repealed.
SEC. 8.
Section 24308.6 of the Revenue and Taxation Code is amended to read:24308.6.
(a) For taxable years beginning on or after January 1, 2019, gross income does not include any covered loan amount forgiven pursuant to Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), pursuant to the Paycheck Protection Program and Health Care Enhancement Act (Public Law 116-139), pursuant to the Paycheck Protection Program Flexibility Act of 2020 (Public Law 116-142), pursuant to the Consolidated Appropriations Act, 2021 (Public Law 116-260), or pursuant to the PPP Extension Act of 2021 (Public Law 117-6).(b) For taxable years beginning on or after January 1, 2019, gross income does not include any advance grant amount issued pursuant to Section 1110(e) of the Coronavirus Aid, Relief, and Economic Security Act
(Public Law 116-136), or pursuant to Section 331 of the Consolidated Appropriations Act, 2021 (Public Law 116-260).
(c) (1) Notwithstanding Section 24425, for taxable years beginning on or after January 1, 2019, subsection (a) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided.
(2) Paragraph (1) of subsection (a) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) is modified by substituting the phrase “For purposes of the Internal Revenue Code of 1986” with “For purposes of this part”.
(3) The provisions of paragraph (1) of subsection (a) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260), relating to paragraphs (2) and (3) of
subsection (i) of Section 7A of the Small Business Act, shall not apply to an ineligible entity.
(4) Paragraph (2) of subsection (a) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall not apply.
(d) (1) Notwithstanding Section 24425, for taxable years beginning on or after January 1, 2019, subsection (b) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided.
(2) Subsection (b) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) is modified by substituting the phrase “For purposes of the Internal Revenue Code of 1986, in the case of any taxable year ending after the date of the enactment of this Act” with “For purposes of this
part”.
(3) Paragraphs (2) and (3) of subsection (b) of Section 276 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall not apply to an ineligible entity.
(e) (1) Notwithstanding Section 24425, for taxable years beginning on or after January 1, 2019, subsection (a) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided.
(2) Subsection (a) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) is modified by substituting the phrase “For purposes of the Internal Revenue Code of 1986” with “For purposes of this part”.
(3) Paragraphs (2) and (3) of subsection (a) of Section 278 of Division N
of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall not apply to an ineligible entity.
(f) (1) Notwithstanding Section 24425, for taxable years beginning on or after January 1, 2019, subsection (b) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260) shall apply, except as provided.
(2) Subsection (b) of Section 278 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-120) is modified by substituting the phrase “For purposes of the Internal Revenue Code of 1986” with “For purposes of this part”.
(g) For purposes of this section, all of the following definitions shall apply:
(1) “Covered loan” has the same meaning as in Section 1106 of the
Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), or pursuant to the Consolidated Appropriations Act, 2021 (Public Law 116-260).
(2) “Advance grant amount” means an emergency Economic Injury Disaster Loan grant pursuant to Section 1110(e) of the Coronavirus Aid, Relief, and Economic Security Act (Public Law 116-136), or a targeted Economic Injury Disaster Loan advance pursuant to Section 331 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260).
(3) “Ineligible entity” means a taxpayer that either:
(A) Is a publicly traded company.
(B) Does not meet the reduction from the gross receipts requirements of Section 636(a)(37)(A)(iv)(bb) of Title 15 of the United States Code, as added by Section 311 of Division
N of the Consolidated Appropriations Act, 2021 (Public Law 116-260).
(4) “Publicly traded company” means a publicly traded entity as described in Section 342 of Division N of the Consolidated Appropriations Act, 2021 (Public Law 116-260).
(h) 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 standard, criterion, procedure, determination, rule, notice, guideline, or any other guidance established or issued by the Franchise Tax Board pursuant to this section.
(i) The amendments made by the act adding this subdivision shall be operative for taxable years beginning on or after January 1, 2019.
(j) The amendments made to this section by Chapter 55 of the Statutes of 2022 shall be operative for taxable years beginning on or after January 1, 2019.
SEC. 9.
Section 8161 of the Welfare and Institutions Code is amended to read:8161.
(a) The Franchise Tax Board shall, as soon as possible, make a one-time payment in the applicable amount to each qualified recipient. A qualified recipient shall not receive more than one payment of the applicable amount. The payments may be made in the form and manner determined by the Franchise Tax Board.(b) For purposes of this section, the following definitions shall apply:
(1) “Applicable amount” means any of the following:
(A) In the case of spouses filing a joint return pursuant to Part 10.2 (commencing with Section 18401) of Division 2 of the Revenue and Taxation Code, that reported a California adjusted gross income, on the return described in
clause (i) of subparagraph (A) of paragraph (4), of:
(i) One hundred fifty thousand dollars ($150,000) or less, the applicable amount shall be seven hundred dollars ($700) plus an additional three hundred fifty dollars ($350) if the qualified recipient claimed a credit for one or more dependents under paragraph (1) of subdivision (d) of Section 17054 of the Revenue and Taxation Code on the return described in clause (i) of subparagraph (A) of paragraph (4).
(ii) Two hundred fifty thousand dollars ($250,000) or less, and more than one hundred fifty thousand dollars ($150,000), the applicable amount shall be five hundred dollars ($500) plus an additional two hundred fifty dollars ($250) if the qualified recipient claimed a credit for one or more dependents under paragraph (1) of subdivision (d) of Section 17054 of the Revenue and Taxation Code on the return described in clause (i)
of subparagraph (A) of paragraph (4).
(iii) Five hundred thousand dollars ($500,000) or less, and more than two hundred fifty thousand dollars ($250,000), the applicable amount shall be four hundred dollars ($400) plus an additional two hundred dollars ($200) if the qualified recipient claimed a credit for one or more dependents under paragraph (1) of subdivision (d) of Section 17054 of the Revenue and Taxation Code on the return described in clause (i) of subparagraph (A) of paragraph (4).
(B) In the case of an individual filing a head of household return pursuant to Part 10.2 (commencing with Section 18401) of Division 2 of the Revenue and Taxation Code, or an individual filing a surviving spouse return pursuant to Part 10.2 (commencing with Section 18401) of Division 2 of the Revenue and Taxation Code that reported a California adjusted gross income, on the return described in
clause (i) of subparagraph (A) of paragraph (4), of:
(i) One hundred fifty thousand dollars ($150,000) or less, the applicable amount shall be three hundred fifty dollars ($350) plus an additional three hundred fifty dollars ($350) if the qualified recipient claimed a credit for one or more dependents under paragraph (1) of subdivision (d) of Section 17054 of the Revenue and Taxation Code on the return described in clause (i) of subparagraph (A) of paragraph (4).
(ii) Two hundred fifty thousand dollars ($250,000) or less, and more than one hundred fifty thousand dollars ($150,000), the applicable amount shall be two hundred fifty dollars ($250) plus an additional two hundred fifty dollars ($250) if the qualified recipient claimed a credit for one or more dependents under paragraph (1) of subdivision (d) of Section 17054 of the Revenue and Taxation Code on the return described in
clause (i) of subparagraph (A) of paragraph (4).
(iii) Five hundred thousand dollars ($500,000) or less, and more than two hundred fifty thousand dollars ($250,000), the applicable amount shall be two hundred dollars ($200) plus an additional two hundred dollars ($200) if the qualified recipient claimed a credit for one or more dependents under paragraph (1) of subdivision (d) of Section 17054 of the Revenue and Taxation Code on the return described in clause (i) of subparagraph (A) of paragraph (4).
(C) In the case of any other individual that reported a California adjusted gross income, on the return described in clause (i) of subparagraph (A) of paragraph (4), of:
(i) Seventy-five thousand dollars ($75,000) or less, the applicable amount shall be three hundred fifty dollars ($350) plus an additional three hundred
fifty dollars ($350) if the qualified recipient claimed a credit for one or more dependents under paragraph (1) of subdivision (d) of Section 17054 of the Revenue and Taxation Code on the return described in clause (i) of subparagraph (A) of paragraph (4).
(ii) One hundred twenty-five thousand dollars ($125,000) or less and more than seventy-five thousand dollars ($75,000), the applicable amount shall be two hundred fifty dollars ($250) plus an additional two hundred fifty dollars ($250) if the qualified recipient claimed a credit for one or more dependents under paragraph (1) of subdivision (d) of Section 17054 of the Revenue and Taxation Code on the return described in clause (i) of subparagraph (A) of paragraph (4).
(iii) Two hundred fifty thousand dollars ($250,000) or less and more than one hundred twenty-five thousand dollars ($125,000), the applicable amount shall be two
hundred dollars ($200) plus an additional two hundred dollars ($200) if the qualified recipient claimed a credit for one or more dependents under paragraph (1) of subdivision (d) of Section 17054 of the Revenue and Taxation Code on the return described in clause (i) of subparagraph (A) of paragraph (4).
(2) “Individual” shall have the same meaning as that term is defined in Section 17005 of the Revenue and Taxation Code.
(3) “Resident” shall have the same meaning as that term is defined in Section 17014 of the Revenue and Taxation Code.
(4) (A) “Qualified recipient” means an individual that satisfies all of the following:
(i) Filed a California individual income tax return on or before October 15, 2021, for the taxable year
beginning on or after January 1, 2020, and before January 1, 2021.
(ii) Is a resident of the state on the date payment is issued pursuant to subdivision (a).
(iii) Was a resident of the state for six months or more of the taxable year beginning on or after January 1, 2020, and before January 1, 2021.
(iv) Cannot be claimed as a dependent, as defined in Section 17056 of the Revenue and Taxation Code, by another taxpayer.
(B) In the case of an individual who included either their federal individual taxpayer identification number or, if married, the federal individual taxpayer identification number of their spouse, on their California individual income tax return for the taxable year beginning on or after January 1, 2020, and before January 1, 2021, and
who meets all of the other requirements of a qualified recipient, if the individual or their spouse applied for, but did not receive, a federal individual taxpayer identification number on or before October 15, 2021, the individual is a qualified recipient for purposes of this section if the tax return described in this subparagraph was filed on or before February 15, 2022.
(C) Notwithstanding subparagraphs (A) and (B), “qualified recipient” shall not include an individual that satisfies all of the following:
(i) Is an individual without a dependent, as defined in Section 17056 of the Revenue and Taxation Code.
(ii) Files or filed their California individual income tax return using the single filing status for the taxable year described in clause (i) of subparagraph (A).
(iii) Is either of the following:
(I) Is deceased on the date the payment would otherwise be issued as authorized under subdivision (a).
(II) Is incarcerated, other than incarceration pending the disposition of charges, in a jail, prison, or similar penal institution or correctional facility on the date the payment would otherwise be issued as authorized under subdivision (a).
(c) In the case of a qualified recipient who files a joint return with their spouse pursuant to Part 10.2 (commencing with Section 18401) of the Revenue and Taxation Code for the taxable year described in clause (i) of subparagraph (A) of paragraph (4) of subdivision (b), the qualified recipient and their spouse shall be considered one qualified recipient for purposes of this section,
and shall receive only one payment of the applicable amount.
(d) The payment authorized by this section shall not be a refund of an overpayment of income taxes under Chapter 6 (commencing with Section 19301) of Part 10.2 of Division 2 of the Revenue and Taxation Code of any liability imposed under Part 10 (commencing with Section 17001) of Division 2 of the Revenue and Taxation Code.
(e) Notwithstanding any other law, the payment authorized 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), excluding benefits under Chapter 7 (commencing with Section 14000) of Part 3 of Division 9, or amounts of those benefits.
(f) Notwithstanding any other law, the payment
authorized pursuant to this section shall not be taken into account as income, and shall not be taken into account as resources for a period of 12 months from receipt, for purposes of determining the eligibility of such individual, or any other individual, for benefits or assistance or the amount or extent of benefits or assistance under any state or local program not covered in subdivision (e). With respect to a state or local program, this subdivision shall only be implemented to the extent that it does not conflict with federal law relating to that program, and that any required federal approval or waiver is first obtained for that program.
