New California Credit: College Access Tax Credit

A new California tax credit became available in 2014 for both individuals and businesses who contribute to the College Access Tax Credit Fund (CATC), which is administered by the California Educational Facilities Authority (CEFA). The fund will be used to strengthen the diminishing resources used to provide Cal Grants to low-income college students.

The credit can be claimed for taxable years 2014-2016 by taxpayers who make cash contributions to the CATC fund. Please note that before the credit is claimed the taxpayer must first receive a credit certificate and allocation amount from CEFA. The credit calculation is based upon a percentage of the amount you contribute each taxable year as follows:

• 60% of the contributed amount in 2014
• 55% of the contributed amount in 2015
• 50% of the contributed amount in 2016

Your contribution amount has no limit but the total amount that CEFA can certify and allocate annually is $500 million. Any unused credits that you have can be carried forward for a maximum of six years.

The following illustrates an example of a taxpayer making a contribution to the CATC fund in 2015:

John Brown makes a $10,000 contribution to the CATC fund on November 01, 2015. John’s contribution is certified by CEFA and receives his credit allocation as follows:

• Federal: John will take a $10,000 charitable contribution deduction; and
• CA: John will get a $5,500 credit ($10,000 x 55%) on his state income tax return but will be unable to claim a charitable contribution deduction.

Interested in receiving this new California tax credit? CEFA has released the following regulations on how to access and claim the College Access Tax Credit:

1. Apply for the credit, including the amount of the credit requested, before making the donation at CEFA’s website (www.treasurer.ca.gov/cefa/catc).
2. In approximately 10 days, CEFA will send a “Notice of Allocation Reservation” and a “Contribution Submittal Form.”
3. You, as the taxpayer, will then have 20 days from the date shown on the Notice of Allocation Reservation to make the actual donation.
4. Once the actual donation is made, CEFA will administer a final certification allowing for the credit to be claimed.

The application period for the 2015 taxable year will begin on July 1, 2015 and end on January 4, 2016.

If you have any additional questions or concerns regarding this new California tax credit, please feel free to contact your BPW advisor at (805) 963-7811.