AB 494

Under current law the earned income tax credit (EITC), as a percentage of the

federal credit, is 4 percent for claimants with one qualifying child, 11 percent for

claimants with two qualifying children, and 34 percent for claimants with three or

more qualifying children. Under the bill, for taxable years beginning after December

31, 2014, the EITC, as a percentage of the federal credit, would be 11 percent for

claimants with no qualifying children or one qualifying child, and 25 percent for

claimants with two or more qualifying children.

This bill also creates a new refundable individual income tax credit for persons

who have earned income, as defined under the Internal Revenue Code, during the

taxable year to which the claim relates. Because the credit is refundable, if the

amount of the credit for which the claimant is eligible exceeds his or her tax liability,

the difference will be refunded to the claimant by check.

Under the bill, a claimant who has zero or one qualifying child may claim a

credit of $500, and a claimant who has two or more qualifying children may claim a

credit of $1,000. To be eligible to claim the credit, an individual must be at least 18

years old for the entire year to which the claim relates and the individual may not

be an individual who is eligible to be claimed as a dependent for federal income tax

purposes on another individual's tax return. The credit may not be claimed by

nonresidents or part-year residents of the state. In addition, only one spouse of a

married couple may claim the credit.

If a claimant is eligible to receive a check under the credit created in the bill,

the check must be direct deposited into an individual retirement account or college

savings 529 plan, which the claimant must establish.