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HB24-1134

Adjustments to Tax Expenditures to Reduce Burden

concerning the corporate income tax; and making the state's corporate income tax more uniform compared to other states by replacing the current combined reporting standard with the multistate tax commission's standard and modifying the computation of the receipts factor to make it more congruent with the unitary business principle.
Session:
2024 Regular Session
Subject:
Fiscal Policy & Taxes
Bill Summary

Sections 1 and 2 of the bill modify 2 existing state income tax credits for child care expenses. Under current law, one of the credits can be claimed by an individual who claims the federal credit allowed for child and dependent care expenses (federal credit). The other credit can be claimed under the same parameters as the first credit but by an individual who does not meet the minimum income threshold to be able to claim the federal credit. The bill streamlines the 2 state income tax credits into one credit to be claimed for income tax years commencing on and after January 1, 2026 , and increases the amount of the credit from 50% of the federal credit to 70% of the federal credit, claimed without regard to income limitations imposed for claiming the federal credit . The bill also clarifies that the credit is for expenses related to child care and dependent care, as such expenses are qualified under the federal credit. Section 3 increases the amount of the state earned income tax credit (EITC or credit ) that can be claimed by an individual as a percentage of the individual's federal earned income tax credit (federal credit) amount as follows:

  • for all For the income tax years year commencing on or after January 1, 2024, from the current levels level of 38% for income tax years commencing in 2024, 25% for income tax years commencing in 2025, and 20% for income tax years commencing in 2026 or any later year to 50%;
  • For the income tax year commencing on January 1, 2025, from the current level of 25% to 35%; and
  • For income tax years commencing on or after January 1, 2026, from the current level of 20% to 30%.

Additionally, after income tax year 2024, the bill allows for the amount of the credit to increase to a maximum of 50% based on an estimated adjustment factor which is calculated as the forecasted compound annual growth of state revenue that is otherwise nonexempt revenue in any fiscal year in relation to state fiscal year 2024-25. For income tax year 2025, the amount of credit may be claimed at 50% of the federal credit if the estimated adjustment factor is equal to or greater than 2%. For income tax year 2026 and all subsequent income tax years, the amount of credit is increased as follows:

  • If the estimated adjustment factor is equal to or greater than 3% but less than 3.25%, the credit can be claimed at 35% of the federal credit;
  • If the estimated adjustment factor is equal to or greater than 3.25% but less than 3.5%, the credit can be claimed at 40% of the federal credit;
  • If the estimated adjustment factor is equal to or greater than 3.5% but less than 3.75%, the credit can be claimed at 45% of the federal credit; and
  • If the estimated adjustment factor is equal to or greater than 3.75%, the credit can be claimed at 50% of the federal credit.

Sections 4 and 5 make the state's corporate income tax more uniform compared to other states by replacing the current combined reporting standard with the multistate tax commission's standard. In addition, these sections modify the computation of receipts factor to make it more congruent with the unitary business principle. Section 4 also repeals obsolete provisions concerning corporate income tax.

(Note: Italicized words indicate new material added to the original summary; dashes through words indicate deletions from the original summary.)


(Note: This summary applies to the reengrossed version of this bill as introduced in the second house.)

Status

Introduced
Passed
Became Law

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Bill Text

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The effective date for bills enacted without a safety clause is August 7, 2024, if the General Assembly adjourns sine die on May 8, 2024, unless otherwise specified. Details