Income taxes: credits: unemployment insurance tax.
Impact
If enacted, AB 656 would amend the Revenue and Taxation Code to instate new sections granting credits for employers paying federal unemployment insurance tax. Specifically, it would allow employers to claim credits equal to reductions in state unemployment tax credits applied against their federal unemployment insurance tax. This adjustment intends to alleviate some of the financial burdens that California employers currently face due to the state's borrowing from the Federal Unemployment Trust Account, thus potentially stimulating job retention and economic stability among businesses in the state.
Summary
Assembly Bill No. 656, introduced by Assembly Members Kiley and Obernolte, seeks to provide a tax credit to employers in California for contributions made to the Federal Unemployment Trust Account. This bill aims to address the impact of California's outstanding debt to the Federal Unemployment Trust Account by allowing employers a credit that corresponds to the reduction of their credits under the Federal Unemployment Tax Act due to this debt. Designed to take effect immediately as a tax levy, the bill proposes to activate this measure for taxable years beginning on or after January 1, 2017.
Contention
The bill raises concerns regarding the financial implications for the state budget, given its immediate effect as a tax levy. Proponents argue that this measure is essential to support employers, especially those affected by the increased federal tax liabilities caused by California's unemployment debt. However, opposing voices may criticize the management of state funds and question whether such tax credits would effectively address the broader issues of unemployment and economic support, emphasizing the need for a comprehensive approach toward enhancing California's unemployment insurance system and reducing its debts.