2016 Earned Income Tax Credits (EITC) Legislation

12/14/2016

Overview

One oAlternative Textf the ways states have used policy to help low-to-moderate-income working people get ahead is to offer a earned income tax credit to complement federal law.

The federal earned income tax credit (EITC) reduces the amount of taxes owed, and refunds the difference if the credit is larger than the amount owed. Rhode Island was the first to enact a state EITC in 1986 after the federal EITC was enacted in 1975. Twenty-six states and the District of Columbia also had an EITC in 2016.

During the 2016 legislative session, over 170 bills related to the earned income tax credit were introduced. Arizona, California, Iowa, New Jersey, New York, Oklahoma, Oregon, Rhode Island and Virginia collectively enacted 13 of these bills. These bills aimed to increase the rate of state credits, change refundability status, make certain provisions of state EITCs permanent and conduct EITC outreach. 

SUMMARY OF EITC BILL ACTIONS IN 2016

EITC Bill Action

Enactments - States

Notes

Outreach

7

Arizona

California (3 enactments)

Iowa

Virginia (2 enactments)

Outreach often includes funding for nonprofit organizations to provide free tax preparation and to increase awareness about EITC eligibility. 

Increase

3

New Jersey

Oregon

Rhode Island

None.

Change in Refundability

1
Oklahoma

In 2016, Oklahoma changed its  state EITC from a refundable tax credit to a nonrefundable tax credit.

Change in Provisions

2

New York

Virginia

In New York, an ehanced EITC geared to include noncustodial parents as eligible recipients of the state EITC was made permanent. In Virginia, provisions of the state EITC were also made permanent to align with the federal expansion of the EITC.


2016 State EITC Legislation

Arizona

  • Arizona HB 2622Requires the Department of Economic Security to provide all childcare subsidy recipients with information on the EITC.

California

  • California SB 826: Appropriates $11,752,000 for implementation of the state's EITC including processing returns, auditing, and making necessary system changes to support the EITC program. Also specifies that $2 million of this appropriation be used to support nonprofit and community-based organizations that increase awareness of the state EITC and free tax preparation assistance.
  • California AB 1847: Expands current employee notification requirements to include information about the state EITC in addition to the federal EITC. Also requires California employers to post a statement about the EITC in the workplace and for specified state departments, agencies and programs serving individuals who may qualify for the federal and/or state EITC to notify these individuals of eligibility and ways to claim the credit.
  • California AB 2877: Requires specified state departments, agencies and programs serving CalWORKS recipients to encourage potentially eligible recipients to claim the state and/or federal EITC by providing information about the tax credit and distributing the form to claim the EITC.

Iowa

  • Iowa HB 2460: Appropriates $195,678 for continuation of a grant to an Iowa-based nonprofit for the purpose of providing tax preparation assistance in order to assist low-income residents with tax filing and expand usage of the EITC.

New Jersey

  • New Jersey AB 12: Increases the state EITC from 30% to 35% of the federal credit for tax years after January 1, 2016.

New York

Oklahoma

Oregon

  • Oregon HB 4110: Increases Oregon’s state EITC from 8 percent of the federal credit to 11 percent of the federal credit for families with children under the age of 3.

Rhode Island

Virginia

  • Virginia HB 402/SB 545 (the bills are identical): Technical, modifies the Virginia tax code to conform to the taxation system of the Internal Revenue Code related to the EITC (specifically, this IRS change made provisions of the EITC that were set to expire in 2017 permanent—these provisions increase the EITC for families with more than two children and reduce the “marriage penalty” associated with the EITC which allows couples with higher income levels to be eligible for the EITC).
  • Virginia HB 1026: This bill increases outreach to potential EITC recipients by requiring the Department of Social Services to provide notice to recipients of various state benefits of the availability of the federal and state EITC—this information must be distributed annually and include information on the qualifying income levels, the amount of credit available, the process for applying for the credit and the availability of assistance in applying for the credit.
  • Virginia HB 29 (Budget Bill): Appropriates two years of funding ($185,725 from the general fund for the first year and $185,725 from the Temporary Assistance for Needy Families block grant for the second year) to contract with a nonprofit to provide outreach, education and tax preparation services to reach residents who may be eligible for the federal EITC. 

Jessica Hathaway is a policy associate with NCSL's Family Opportunity Project.

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