An act to amend Section 17052 of the Revenue and Taxation Code, relating to taxation, and making an appropriation therefor.
AB 398 would amend California’s Earned Income Tax Credit (CalEITC) statute to create a minimum credit amount for eligible taxpayers beginning in taxable year 2025. If the credit otherwise calculated under existing law is less than $355, the bill would instead set the credit at $355, with that floor indexed in later years and phased out as income rises. The bill preserves the existing structure of the CalEITC, including the different credit formulas for taxpayers with varying numbers of qualifying children, and ties the new minimum amount to the same earned income tax credit adjustment factor used elsewhere in the statute.
The bill also retains and restates the program’s existing administrative framework: the Franchise Tax Board (FTB) would continue to administer, audit, and issue guidance for the credit, and refunds in excess of tax liability would continue to be paid from the Tax Relief and Refund Account. AB 398 includes the required tax-expenditure findings and reporting language, directing the FTB to continue annual reporting on credit usage, average amounts, distribution by income and dependents, and estimates of families lifted out of deep poverty. It also specifies that the new minimum credit applies only within the same phaseout structure so that the benefit is targeted to lower-income workers.
AB 398 would amend Revenue and Taxation Code Section 17052, increasing the California Earned Income Tax Credit for taxpayers whose computed credit would otherwise fall below $355 for taxable years beginning on or after January 1, 2025. Because the credit is refundable, the bill would authorize additional payments from the continuously appropriated Tax Relief and Refund Account and therefore makes an appropriation. The bill would affect low-income working taxpayers eligible for CalEITC, while leaving the broader eligibility framework, FTB administration, and reporting requirements in place. It would also continue the statute’s interaction with public benefits rules by treating refunds the same as federal earned income refunds for benefit eligibility purposes.
The available voting history suggests generally favorable committee sentiment toward the bill. On April 28, 2025, the measure received a 5-1 vote for do pass and re-referral to Appropriations, indicating support from a majority of committee members. No committee transcript was provided, so there is no recorded floor or committee debate to indicate broader public testimony or detailed discussion. The bill’s purpose of increasing support for low-income working families appears to align with the existing policy goals of the CalEITC.
The main policy issue is fiscal: AB 398 expands a refundable tax credit, which increases state expenditures from a continuously appropriated fund and can raise concerns about budget cost and long-term program growth. Because the bill is a new tax expenditure, it must satisfy statutory requirements for goals, performance indicators, and data collection, which may draw scrutiny over whether the credit floor is the most effective anti-poverty tool. Any debate is likely to center on the size of the minimum credit, the phaseout design, and the state’s ability to fund and administer the expanded benefit, rather than on eligibility mechanics, which the bill largely preserves.