Bill Text: CA AB1589 | 2023-2024 | Regular Session | Amended

California Assembly Bill 1589

Bill Title: Personal income taxes: deduction: California qualified tuition program.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Failed) 2024-02-01 - From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. [AB1589 Detail]

Download: California-2023-AB1589-Amended.html

Amended IN Assembly April 11, 2023

Amended IN Assembly March 23, 2023

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Assembly Bill

No. 1589

Introduced by Assembly Member Connolly

February 17, 2023

An act to amend Section 17072 of, and to add and repeal Section 17206.2 of, the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL'S DIGEST

AB 1589, as amended, Connolly. Personal income taxes: deduction: California qualified tuition program.

The Personal Income Tax Law, in modified conformity with federal income tax law, excludes from the gross income of distributions to a beneficiary of, or and earnings by a contributor to, a qualified tuition program, which includes a Golden State Scholarshare College Savings Trust, ~~distributions or earnings under that program, as specified.~~ if specified conditions are met.

This bill, for taxable years beginning on or after January 1, 2023, and before January 1, 2028, would allow under that law a deduction against gross income in the amount equal to the monetary contribution made by a qualified taxpayer, as defined, to the California qualified tuition program established pursuant to the Golden State Scholarshare Trust ~~Act.~~ Act, not to exceed $5,000 per beneficiary per taxable year. The bill would require, with exceptions, in the case of any distribution in excess of qualified higher education expenses, as defined, that the aggregate amount of the deduction allowed that reduced the qualified taxpayer’s gross income in any taxable year be added to the gross income of the qualified taxpayer in the taxable year of the distribution, as provided.

Existing law requires any bill authorizing a new tax deduction to contain, among other things, specific goals, purposes, and objectives that the tax deduction will achieve, detailed performance indicators, and data collection requirements.
The bill would make specified findings detailing the goals, purposes, and objectives of the above-described tax deduction, performance indicators for determining whether the deduction meets those goals, purposes, and objectives, and data collection requirements.

This bill would take effect immediately as a tax levy.

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

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

SECTION 1.

Section 17072 of the Revenue and Taxation Code is amended to read:

17072.

(a) Section 62 of the Internal Revenue Code, relating to adjusted gross income defined, shall apply, except as otherwise provided.

(b) Section 62(a)(2)(D) of the Internal Revenue Code, relating to certain expenses of elementary and secondary school teachers, shall not apply.

(c) Section 62(a)(21) of the Internal Revenue Code, relating to attorneys fees relating to awards to whistleblowers, shall not apply.

(d) Section 62(a) of the Internal Revenue Code, relating to the general rule, is modified to provide that the deduction under Section 17206.2 shall be allowed in determining adjusted gross income.

SEC. 2.

Section 17206.2 is added to the Revenue and Taxation Code, to read:

17206.2.

(a) For taxable years beginning on or after January 1, 2023, and before January 1, 2028, there shall be allowed a deduction in the amount equal to the monetary contribution made by a qualified taxpayer during the taxable year to one or more accounts established pursuant to the California qualified tuition program on behalf of a ~~beneficiary.~~ beneficiary, not to exceed five thousand dollars ($5,000) per beneficiary per taxable year.

(b) For the purposes of this section, the following definitions shall apply:

(1) “Monetary contribution” means cash contributions, pursuant to Section 529(b)(2) of the Internal Revenue Code, relating to cash contributions, to the California qualified tuition program, but shall not include cash contributions to the California qualified tuition program with respect to either of the following:

(A) Any amount transferred to the California qualified tuition program from a qualified tuition program established pursuant to Section 529 of the Internal Revenue Code, relating to qualified tuition programs, that is not the California qualified tuition program.

(B) Any amount transferred from the credit of one beneficiary under the California qualified tuition program to the credit of another beneficiary under the California qualified tuition program.

(2) “Qualified taxpayer” means an individual, or a married couple if filing a joint return, who, on behalf of a beneficiary, contributes money to a California qualified tuition program for which the ~~individual,~~ taxpayer, or a spouse in the case of a married couple filing a joint return, is the account ~~owner.~~ owner, and whose adjusted gross income does not exceed the following:

(A) In the case of a taxpayer who is a head of household, a surviving spouse, as defined in Section 17046, or a married couple filing a joint return, one hundred fifty thousand dollars ($150,000).
(B) In the case of a taxpayer filing a return other than as described in subparagraph (A), seventy-five thousand dollars ($75,000).

(3) “California qualified tuition program” means a qualified tuition program, as defined in Section 529 of the Internal Revenue Code, relating to qualified tuition programs, and as established pursuant to the Golden State Scholarshare Trust Act (Article 19 (commencing with Section 69980) of Chapter 2 of Part 42 of Division 5 of Title 3 of the Education Code).

(4) “Qualified higher education expenses” means qualified higher education expenses, as defined in Section 529(e)(3) of the Internal Revenue Code.

(c) (1) In the case of any distribution in excess of qualified higher education expenses, the aggregate amount of the deduction allowed under subdivision (a) that reduced the qualified taxpayer’s gross income in any taxable year shall be added to the gross income of the qualified taxpayer in the taxable year of the distribution to the extent that the distribution is attributable to the aggregate amount of contributions for which a deduction is allowed under this section in taxable years beginning on or after January 1, 2023, and before January 1, 2028.

(2) Paragraph (1) shall not apply to that portion of a distribution that, within 60 days of the distribution, is transferred to another California qualified tuition program.

(d) For the purposes of Section 529(c)(3) of the Internal Revenue Code, relating to distributions, amounts allowed as a deduction under this section shall not be treated as investment in the contract in applying Section 72 of the Internal Revenue Code, relating to annuities; certain proceeds of endowment and life insurance contracts.

(e) For purposes of complying with Section 41, the Legislature finds and declares the following:
(1) The specific goals, purposes, and objectives of the deduction is to provide additional incentives to those who would not qualify for state benefits, such as medical, to save for college by allowing a deduction on their taxes to allow them to qualify for social programs, as applicable, and to prepare their child for college.
(2) The performance indicator is the number of taxpayers whom both took the deduction and qualified for a program they did not qualify for previously.
(3) By July 1, 2024, and annually thereafter, the Franchise Tax Board shall prepare a report on the number of taxpayers whom both made a deduction and qualified for a program they did not qualify for previously.
~~(e)~~

(f) This section shall remain in effect only until December 1, 2028, and as of that date is repealed.