Jan. 26, 2018 – -This week the Chair of the Assembly Budget Committee, Assemblyman Phil Ting (D-San Francisco) and Assemblyman Kevin McCarty (D-Sacramento), introduced ACA 22: Middle Class Fiscal Relief Act. This measure would take to the ballot that, for taxable years beginning on or after January 1, 2018, the state would impose a surcharge of 10% on the net income of all corporations that is over $1,000,000. The measure would authorize the Legislature to increase or decrease the surcharge by a 2/3 vote of each house. The measure would require the deposit of those revenues, less refunds, into the Middle Class Fiscal Relief Fund, which would be created by the measure. Revenues in the fund would be allocated, upon appropriation by the Legislature, for specified purposes, including providing fiscal benefits to lower and middle-income Californians.
The Senate Pro Tem Kevin De Leon (D- Los Angeles), earlier this month released SB 277, the Senate’s response to federal tax reform legislation. The measure establishes the California Excellence Fund in the State’s General Office to accept charitable donations and offer a tax credit equal to the amount of the contribution to taxpayers. These provisions would, in theory, allow Californian taxpayers to deduct funds contributed to the California Excellence Fund under the federal charitable donation credit limits to counterbalance the impacts of the reduced State and Local Tax (SALT) deduction cap to $10,000 per year established by HR 1 (the Federal Tax Cuts and Jobs Act). While this plan may provide tax relief to Californians, the State’s authority to allow for these deductions as “charitable” is unclear and may be prohibited if the Internal Revenue Service denies the federal deductions or Congress clarifies the law.