Personal income tax: Earned Income Tax Credit.

Plain English Breakdown

The official source material does not provide details on how the phaseout percentage is adjusted or additional payments from the Tax Relief and Refund Account are allowed. It also lacks specifics about including goals, performance indicators, and data collection requirements.

Earned Income Tax Credit for Personal Income Tax

AB-398 ensures that eligible individuals receive at least $355 in Earned Income Tax Credit if their calculated credit is less than this amount, starting from January 1, 2025.

What This Bill Does

• Changes the minimum earned income tax credit for eligible individuals to be at least $355 if their calculated credit is below this amount.

Who It Names or Affects

• Eligible individuals who file personal income taxes in California.
• The Franchise Tax Board responsible for calculating and distributing the Earned Income Tax Credit.

Terms To Know

Tax Relief and Refund Account

A fund that continuously provides money to eligible individuals who have an earned income tax credit greater than their tax liability.

Earned Income Tax Credit (EITC)

A tax credit for low- to moderate-income working individuals and families, designed to offset the federal income tax burden and supplement wages.

Limits and Unknowns

• The bill does not specify what happens if an individual's calculated EITC is exactly $355.
• It is unclear how this change will affect overall state finances beyond the specified Tax Relief and Refund Account.

Official Summary Text

AB 398, as introduced, Ahrens.
Personal income tax: Earned Income Tax Credit.
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. The law provides that the amount of the credit is calculated as a percentage of the eligible individual’s earned income and is phased out above a specified amount as income increases, and provides alternative calculation factors under specified circumstances. Existing law, for taxable years beginning on or after January 1, 2020, and until and including the taxable year in which the minimum wage is set at $15 per hour,
requires the phaseout percentage for eligible individuals to be recalculated by the Franchise Tax Board so that the calculated amount of credit for a taxpayer with an earned income of $30,000 is equal to zero.
This bill, for taxable years beginning on or after January 1, 2025, if the amount of credit computed for an eligible individual is less than $355, as specified, would allow the credit for the eligible individual to be $355 instead, except as otherwise specified. By authorizing additional payments from a continuously appropriated account, this 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 also would include additional information required
for any bill authorizing a new tax expenditure.

Current Bill Text

Download Bill PDF