Personal income taxes: earned income credit.

The Personal Income Tax Law allows various credits against the taxes imposed by that law, including certain credits that are allowed in modified conformity to credits allowed by federal income tax laws. Federal income tax laws allow a refundable earned income tax credit for certain low-income individuals who have earned income and who meet certain other requirements. This bill, for taxable years beginning on or after January 1, 2015, in modified conformity with federal income tax laws, would allow an earned income credit against personal income tax, and a payment in excess of that credit amount, 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 set forth in the annual Budget Act. Existing law requires any bill authorizing a new personal income tax credit to contain, among other things, specific goals, purposes, and objectives that the tax credit will achieve, detailed performance indicators, and data collection requirements, as provided. To measure whether the earned income credit achieves its intended purpose, this bill would require the Franchise Tax Board to annually prepare a specified written report and to provide that report to specified legislative committees. Existing law establishes the continuously appropriated Tax Relief and Refund Account, and provides that payments required to be made to taxpayers or other persons from the Personal Income Tax Fund are to be paid from that account. By authorizing new payments from that account for amounts in excess of personal income tax liabilities, this bill would make an appropriation. The Personal Income Tax Law imposes taxes based upon taxable income and also imposes interest and penalties with regard to those taxes under specified circumstances, including a penalty for the underpayment of estimated tax. Existing law provides no addition to tax shall be imposed to the extent that the underpayment was created or increased by any law that is chaptered during and operative for the taxable year of the underpayment. This bill would provide that addition to tax shall not be imposed if the applicable percentage for the earned income tax credit for the taxable year was less than the applicable percentage for that credit for the preceding taxable year and would impose a penalty, in conformity with federal law, for failure to be diligent in determining eligibility for the earned income tax credit, as specified. This bill would declare that it is to take effect immediately as a bill providing for appropriations related to the Budget Bill.