Under bills SB 174 and SB 798 signed by Gov. Jerry Brown in September 2014, California introduced a creative way to increase funding for the Cal Grant B program, which provides money for books and living expenses to low-income college students. Contributions to the CATC (College Access Tax Credit) Fund are eligible for a federal charitable contribution deduction as well as California tax credit. The amount of the California tax credit for years 2014-2016 is as follows:
60% for contributions during 2014
55% for contributions during 2015
50% for contributions during 2016
Since taxpayers are not allowed a deduction and a credit for the same contribution, any charitable deduction made to the CATC Fund claimed on a taxpayer’s federal income tax return must be added back as a state adjustment on their California income tax return. Additional information is available on the program website.
California taxpayers who want to donate to the program must first submit an application to CEFA (California Educational Facilities Authority) to prequalify for the credit. The application is available through the above link. The amount of the total California tax credits allowable under this program is limited to $500 million. The California tax credit is available for both individual and corporate taxpayers.
Recently passed (June 24, 2015) legislation SB 81 modified certain provisions of the CATC. Taxpayers may use the credit to reduce their California income tax below tentative minimum tax (TMT) for taxable years beginning on or after January 1, 2014. Taxpayers who already filed 2014 income tax returns, and who had the CATC limited to TMT, will be contacted by the Franchise Tax Board to inform them of the new retroactive legislation affecting CATC.