Under current law, there are 2 earned income tax credits allowed against the state income tax. One is a mechanism to refund state revenues in excess of the constitutional spending limitation (EITC refund mechanism), while the other is an ordinary income tax credit (permanent EITC). The EITC refund mechanism only applies if the excess state revenues are above a specified amount, and it is only for one income tax year. If refunds are made through the EITC refund mechanism, then in the next income tax year and all future income tax years thereafter, the permanent EITC is available to eligible taxpayers. Without this trigger, the permanent EITC will not apply.
Based on legislative council staff's December forecast of excess state revenues for the 2015-16 fiscal year, tax credits would be available through the EITC refund mechanism for the 2016 income tax year, and the permanent EITC would apply for all income tax years beginning with the 2017 income tax year.
Section 1 of the bill permits eligible taxpayers to claim the permanent EITC beginning with the 2015 income tax year. There are no other changes to the permanent EITC. Section 3 repeals the EITC refund mechanism, and section 2 makes a conforming amendment to another refund mechanism that applied after the EITC refund mechanism to reflect this repeal.