California AB 3289 was enacted 7/15/24 (Chapter 124). It modifies Revenue & Taxation Section 41 which exists to improve accountability and transparency of the California tax system. Generally, any credit, deduction, exclusion, exemption of other tax benefit enacted is to state its goals, have detailed performance indicators to determine if the goal was met and call for appropriate data collection.
AB 3289 modifies this provision to exempt any new tax break that is a gross income exclusion if the lawmakers determine there is no available data to collect and report.
For example, picking a “hot” topic for summer 2024, if lawmakers added an exclusion for tips of certain employees, they would not have to include detailed performance indicators or data collection if lawmakers determine no available data can be collected and reported.
Per the Senate analysis (3/19/24) of AB 3289, the rationale for this change is that exclusions from gross income “often do not have available information to report, as the taxpayer does not list that excluded income on their return.”
I don’t think this change is needed. We should be able to find performance indicators for measuring if a tax break’s goals and purposes are met and enable data collection for any tax change. AND, for equity, fairness, transparency and accountability purposes, we should have exclusions reported on an individual’s tax return. Today, I think the only one reported is income on tax-exempt bonds. But that doesn’t go a step further to highlight to the filer how much taxes they saved by using that exclusion.
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