If you’ve read a number of bills in the California Legislature that add new provisions to the Income and Taxation Code, you may have noticed the references to Section 41. What is “Section 41” and why do we often find it mentioned on tax bills?
Section 41 of the Revenue and Taxation Code requires any bill introduced after January 1, 2020 to contain this information if the bill permits new tax expenses (defined as “a credit, deduction, exclusion, exemption, or any other tax credit as provided by the state “). These new tax expenses must be subject to the Personal Income Tax Act, the Income Tax Act, or the Sales Tax (Creation Exemption) Act.
Section 41 requires the bill to contain:
- Specific goals, objectives and tasks to be achieved through tax expenditures.
- Detailed performance indicators to be used by the Legislature in assessing whether tax expenditures are in line with the goals, objectives, and objectives of the bill.
- Data collection requirements to enable the Legislature to determine whether tax expenditures meet, fall short of, or exceed those specific goals, targets, and objectives.
When a bill is introduced, sometimes the measure simply states that the Legislature intends to comply with section 41. In other cases, the version introduced contains more detailed provisions. However, by the time the bill reaches the governor’s desk, it will need to comply with Section 41 and contain the required information.