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AB-386 • 2026

Personal Income Tax Law: Corporation Tax Law: credits: student loan payments.

Personal Income Tax Law: Corporation Tax Law: credits: student loan payments.

Education Labor Taxes
Passed Legislature

This bill passed both chambers and reached final enrollment, even if later executive action is not shown here.

Sponsor
Tangipa
Last action
2026-02-02
Official status
From committee: Filed with the Chief Clerk pursuant to Joint Rule 56.
Effective date
Not listed

Plain English Breakdown

The official source material does not provide specific details on the total amount of tax credits that can be claimed by all businesses in one year or the exact process managed by the Franchise Tax Board and Student Aid Commission for distributing these tax credits.

Student Loan Payment Tax Credit

This law allows businesses to claim a tax credit for payments made towards their full-time employees' student loans, up to $3,000 per employee each year.

What This Bill Does

  • Allows businesses to claim a tax credit of up to $3,000 per full-time employee for payments made towards the employee's student loan debts.

Who It Names or Affects

  • Businesses that want to help their full-time employees pay back student loans.
  • Full-time employees who have student loan debts and work for businesses that offer this benefit.

Terms To Know

Tax Credit
A reduction in the amount of tax a business or individual has to pay.
Franchise Tax Board
The agency that collects state taxes and manages tax credits for businesses.

Limits and Unknowns

  • This law only applies to taxable years starting from January 1, 2027, until January 1, 2032.
  • Businesses must follow specific rules set by the Franchise Tax Board and Student Aid Commission to claim these tax credits.

Bill History

  1. 2026-02-02 California Legislative Information

    From committee: Filed with the Chief Clerk pursuant to Joint Rule 56.

  2. 2026-01-31 California Legislative Information

    Died pursuant to Art. IV, Sec. 10(c) of the Constitution.

  3. 2025-05-05 California Legislative Information

    In committee: Set, first hearing. Held under submission.

  4. 2025-04-29 California Legislative Information

    Re-referred to Com. on REV. & TAX.

  5. 2025-04-28 California Legislative Information

    From committee chair, with author's amendments: Amend, and re-refer to Com. on REV. & TAX. Read second time and amended.

  6. 2025-03-17 California Legislative Information

    In committee: Set, first hearing. Referred to REV. & TAX. suspense file.

  7. 2025-02-18 California Legislative Information

    Referred to Com. on REV. & TAX.

  8. 2025-02-04 California Legislative Information

    From printer. May be heard in committee March 6.

  9. 2025-02-03 California Legislative Information

    Read first time. To print.

Official Summary Text

AB 386, as amended, Tangipa.
Personal Income Tax Law: Corporation Tax Law: credits: student loan payments.
(1) The Personal Income Tax Law and the Corporation Tax Law allow various credits against the taxes imposed by those laws.
This bill, for taxable years beginning on or after January 1,
2026,
2027,
and before January 1,
2031,
2032,
would allow a credit against those taxes to a qualified taxpayer for student loan
payments
payments, as defined,
made by the qualified taxpayer on behalf of a
qualified
full-time employee, as defined, not to exceed $3,000 per employee during the taxable year. The bill would define qualified taxpayer for this purpose to mean a
business
taxpayer
whose employees do not perform jobs described by specified federal law. The bill would limit the aggregate amount of credits allocated to $25,000,000 per year, and would require the Franchise Tax
Board
Board, in coordination with the Student Aid Commission,
to allocate the
credit,
credit through tentative credit reservations,
as described.
(2) The Personal Income Tax Law, in modified conformity with federal income tax law, generally defines “gross income” as income from whatever source derived, except as specifically excluded, and provides various exclusions from gross income.
This bill, for taxable years beginning on or after January 1,
2026,
2027,
and before January 1,
2031,
2032,
would provide an exclusion from gross income for student
loan payments made by a qualifying employer, as defined, on behalf of a
taxpayer
qualified taxpayer, as defined,
that is a full-time employee.
(3) Existing law requires a bill authorizing a new tax expenditure to contain, among other things, specific goals 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.
(4) This bill would take effect immediately as a tax levy.

Current Bill Text

Read the full stored bill text 
Download Bill PDF