An act to add and repeal Sections 17054.6.5 and 17131.16.5 to the Revenue and Taxation Code, relating to taxation, and making an appropriation therefor.
Summary
SB 1277 would create a temporary California personal income tax credit intended to provide cost-of-living relief to residents for taxable years beginning on or after January 1, 2027, and before January 1, 2032. The credit would be refundable, meaning taxpayers whose credit exceeds their tax liability could receive the remaining amount as a refund from the Tax Relief and Refund Account. The bill sets different credit amounts based on filing status, adjusted gross income, dependency status, and residency, with larger credits generally available to married couples, surviving spouses, and taxpayers with dependents.
The bill also excludes from gross income any refund amounts received under the credit, preventing those refunds from being taxed again. It applies only to taxpayers who meet the bill’s residency requirements, including having been a California resident for at least six months in the prior taxable year and being a resident when claiming the credit. The Franchise Tax Board would be authorized to adopt rules and regulations to administer the program, and the provisions would sunset on December 1, 2032.
Impact
SB 1277 would amend the Revenue and Taxation Code by adding a new refundable personal income tax credit section and a related gross-income exclusion for refunded credit amounts. Because the credit is payable from the continuously appropriated Tax Relief and Refund Account, the bill would increase state expenditures and is treated as an appropriation. It would affect individual income taxpayers who meet the residency and income thresholds, while also requiring the Franchise Tax Board to administer the credit and determine eligibility and proration for part-year residents and certain spouses.
Sentiment
The bill’s stated purpose is to provide targeted relief in response to California’s cost-of-living crisis, and its findings frame the measure as helping families maintain financial stability. However, the committee outcome suggests limited support at the hearing stage: the bill failed passage on a 1-4 vote, though reconsideration was granted. That pattern indicates the concept may have had some support in principle, but not enough committee backing to advance on the first attempt.
Contention
The main points of contention appear to be fiscal cost, the use of a continuously appropriated refund account, and whether the measure is an appropriate use of state funds for broad tax relief. Because the bill is refundable and applies to a wide range of income levels, opponents may have viewed it as expensive or insufficiently targeted, while supporters likely emphasized inflation and housing pressures. The inclusion of a legislative finding that the credit serves a public purpose and is not a gift of public funds suggests the bill also anticipates constitutional or policy objections to the refund structure.
An act to amend Sections 17271, 23036, and 24343 of, and to add and repeal Sections 17053.76 and 23633 of, the Revenue and Taxation Code, relating to taxation, and making an appropriation therefor.