An act to amend Section 17052.1 of the Revenue and Taxation Code, relating to taxation, and making an appropriation therefor.
AB 397 would expand California’s Young Child Tax Credit by phasing in a higher qualifying-child age limit over several years. Under current law, the credit applies to taxpayers with a child under age 6; this bill would raise that age threshold to under 10 for tax year 2025, under 13 for 2026, under 16 for 2027, and then restore the underlying Section 17052 definition beginning in 2028. The bill keeps the existing credit structure, including the income-based phaseout, refundability through the Tax Relief and Refund Account, and the Franchise Tax Board’s authority to issue guidance and emergency regulations to prevent improper claims.
The bill also adds or reinforces statutory findings and reporting requirements tied to Section 41 tax-expenditure rules. It states the credit’s purpose is to reduce poverty among California’s poorest working families and children, and it requires the Franchise Tax Board to produce annual reports on the number of returns claiming the credit, the number of qualifying children, and the average credit amount. For years affected by the 2025 amendments, the FTB must also separately report estimated figures absent the amendments. The bill expressly states that otherwise eligible undocumented persons may receive the credit, and it applies the amendments retroactively to taxable years beginning on or after January 1, 2022, except where the age-phase-in begins in 2025.
AB 397 would affect the Revenue and Taxation Code section governing the Young Child Tax Credit and would likely increase state General Fund or special-fund outlays through the continuously appropriated Tax Relief and Refund Account because more taxpayers would qualify for refundable payments. It is also an appropriation bill and a tax expenditure measure, so it carries fiscal committee implications and requires a two-thirds vote. The bill does not create a local program, but it would directly affect low-income working families with children and the Franchise Tax Board’s administration and audit workload.
The available voting history suggests the bill has received some committee support, passing one committee vote 5-1, but it has not advanced beyond committee filing as reflected in the last action. No committee transcript is provided, so there is no recorded floor or committee debate to indicate broader sentiment. Based on the text and the vote, the measure appears generally favorable to expanding child-related tax relief, while still being treated as a fiscally significant proposal.
The main point of contention is likely cost and scope. Expanding eligibility from children under 6 to older children would substantially broaden the pool of eligible taxpayers and increase refund payments, which may raise budget concerns. Administrative integrity is another issue, reflected in the bill’s detailed anti-fraud and emergency-rulemaking provisions. Supporters are likely to emphasize poverty reduction and family assistance, while fiscal skeptics may focus on the appropriation, retroactive application, and the size of the expanded benefit.
AB 397 would amend Revenue and Taxation Code Section 17052.1, expanding the Young Child Tax Credit’s qualifying-child age definition on a temporary phase-in basis and thereby increasing the number of taxpayers eligible for the refundable credit. Because excess credit amounts are paid from the continuously appropriated Tax Relief and Refund Account, the bill would increase state expenditures and constitute an appropriation. It also reinforces Franchise Tax Board reporting, rulemaking, and anti-improper-payment authority, and it expressly confirms eligibility for otherwise qualified undocumented taxpayers.
The bill appears to have a generally supportive policy posture, as reflected by its committee passage on a 5-1 vote and its framing as a poverty-reduction measure for working families and children. The absence of transcript material limits direct evidence of debate, but the available history suggests at least some bipartisan or cross-faction acceptance of the concept. At the same time, the measure’s fiscal impact and appropriation status indicate that it is likely to draw budget scrutiny even among supporters of the underlying policy.
The likely areas of contention are the cost of expanding a refundable tax credit, the retroactive application to earlier tax years, and whether the Franchise Tax Board has sufficient resources to administer and audit the expanded credit. Opponents or fiscal skeptics may question whether broadening eligibility to older children is the best use of state funds, while supporters are likely to argue that the change better targets poverty relief for low-income families. The bill’s explicit inclusion of undocumented taxpayers may also be a policy flashpoint for some legislators.