January, 2005

The State EITC Online Resource Center is pleased to present its electronic newsletter on current policy developments around state and federal Earned Income Tax Credits. For more information, please go to: www.stateeitc.com.

Feel free to forward this newsletter to your interested associates and to email greg@thehatchergroup.com with news, information or other resources to be added to the update. If you do not want to receive this newsletter in the future, please reply with the word UNSUBSCRIBE in the header.

In this edition of the policy update:

• Legislation on Fast Track to Make Indiana's State EITC Permanent
• Iowa Governor Proposes Increasing State EITC
• Colorado Groups Push for Tax Changes
• New Report Makes Case for EITC in Ohio
• Hartford Sues IRS Over Precertification Test
• Free Tax Assistance Video Premiered at Congressional Staff Briefing
• IRS Provides Online Tool to Determine EITC Eligibility
• ACORN Report Finds Success in Pilot Project
• Center on Budget and Policy Priorities 2005 Outreach Campaign Kit Now Available
• Report Presents Practical Policy Options for States to Help Working-Poor Families

Legislation on Fast Track to Make Indiana's State EITC Permanent

A bill that would make the state’s EITC permanent passed the Indiana House unanimously on January 11. The bill now moves to the Indiana Senate. The House bill was introduced by Rep. Mike Murphy (R) and had the support of three co-authors: Rep. John Day (D), Rep Cindy Noe (R), and Rep Sheila Klinker (D). In recent years, Indiana’s state EITC has passed the legislature as an amendment to the state budget, which made it sunset every two years. Indiana’s state EITC is equal to 6% of the federal credit. Increasing the size of Indiana’s state EITC and making it permanent are key legislative goals of the Indiana Institute for Working Families, which is supporting the legislation.

For the Institute’s summary report on the bill, go: Summary Report
For the latest on the bill’s progress, go to: Bill 1083

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Iowa Governor Proposes Increasing State EITC

Iowa Governor Tom Vilsack has proposed significant changes in Iowa tax policy, including increasing the state’s earned income tax credit and making the credit refundable. Iowa currently has a non-refundable state EITC that is 6.5% of the federal credit. Other proposed measures would eliminate the state income tax on all pension and Social Security income, eliminate federal deductions and lower the top rate, and broaden the sales tax base. Governor Vilsack also supports legislative efforts to reform the state's property tax system that include improving services, reducing property taxes, and preserving representative government at the local level.

Go to: Times Republican Story

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Colorado Groups Push for Tax Changes

In Colorado, a coalition of community groups including the Colorado Fiscal Policy Institute, 9 to 5 National Association of Working Women, CO AFL-CIO, Women’s Agenda, Women’s Lobby, and the Piton Foundation, will push to increase the state’s EITC and make it permanent. Currently, the credit is contingent upon the state collecting revenues above limits set by its 1992 tax and expenditure limit known as TABOR. Colorado did not collect enough excess revenues to fund the state EITC in tax years 2002 and 2003. Since representatives from the League of Women Voters, Colorado AARP, and the state legislature are seeking changes to TABOR that will direct future excess revenues to other state services, the need for a permanent EITC is critical, according to the coalition. Colorado adopted a refundable state EITC in 1999 which is equal to 10% of the federal credit.

Go to: Colorado Center on Law and Policy

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New Report Makes Case for EITC in Ohio

A report by Policy Matters Ohio outlines measures that community leaders are taking in response to Cleveland being named the poorest city in the country in 2004. In addition to calling for better outreach to those individuals eligible for the federal EITC, the report recommends that Ohio also adopt a state EITC. The report found that low-income workers in the Cleveland area claimed the EITC at a significantly lower rate than workers in other cities. More than 7,800 tax filers in the city of Cleveland, and more than 14,600 filers in Cuyahoga County, who do not currently claim the EITC, may be eligible to receive the credit.

Go to: Policy Matters Ohio Report

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Hartford Sues IRS Over Precertification Test

The City of Hartford filed suit against the IRS on November 29, 2004, claiming that the 4,000 residents who are eligible to receive the federal EITC refund may have their civil rights violated by IRS precertification demands. Previously, the IRS chose Hartford as a concentrated test site for EITC precertification, sending out 8,200 letters to Hartford-area taxpayers asking them to provide third-party proof that their children live with them for at least six months of the year. Hartford taxpayers can be denied the credit if they do not provide this proof. Hartford Mayor Eddie A. Perez said the concentrated precertification test unfairly targets Hartford residents. IRS spokesperson Nancy Mathis told the Hartford Courant via e-mail, "Our objective is to maximize participation and minimize the error rate. . . We want all eligible taxpayers, but only those who are eligible, to claim this important credit."

Go to: Hartford News Release

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Free Tax Assistance Video Premiered at Congressional Staff Briefing

The Hatcher Group organized a Congressional staff briefing on December 6 on how Members of Congress can get involved in free tax assistance campaigns in their districts. More than 40 staffers attended the briefing, which included presentations from Ed Hatcher, Alan Berube of the Brookings Institution, and the offices of U.S. Representatives Jim Cooper (TN-5th), Sherrod Brown (OH-13th), and Julia Carson (IN-6th). At the briefing, the Hatcher Group presented their CD-ROM, Connecting Constituents to Free Tax Assistance: Opportunities for Members of Congress. The CD-ROM includes tax assistance campaign materials from elected officials, resources and links, and an eight-minute video featuring U.S. Representatives Cooper and Christopher Shays (CT-4th).

To view the CD-ROM and video, go to: www.thehatchergroup.com

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IRS Provides Online Tool to Determine EITC Eligibility

The Internal Revenue Service has launched an online application to help tax preparers determine whether their clients are eligible for the EITC. The tool, available in English and Spanish, determines eligibility for the credit, filing status of the taxpayer, and whether the taxpayer’s children meet the qualification definition for EITC. Next year, taxpayers will be able to use the tool to calculate the amount of the expected credit.

Go to: IRS Online Tool

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ACORN Report Finds Success In Pilot Project

The Association of Community Organizations for Reform Now (ACORN) has released a report describing the successes of their Volunteer Income Tax Assistance (VITA) program. The pilot program, which was conducted by ACORN and funded by the Marguerite Casey Foundation, targeted New Orleans, Miami, and San Antonio. The program successfully aided thousands of families in claiming their full EITC benefits through free tax preparation services provided by ACORN. The report also warns that tax preparers reap over a billion dollars per year from low-income working families through bank products such as refund anticipation loans, or RALs.

Go to: Report

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Center on Budget and Policy Priorities 2005 Outreach Campaign Kit Available

The 2005 “Make Tax Time Pay” Community Outreach Kit promotes both the Earned Income Tax Credit and the Child Tax Credit. The kit contains up-to-date fact sheets and includes new information on how workers with disabilities and families raising children with disabilities may take advantage of these credits. The kit includes promotional materials such as posters, flyers, and envelope stuffers in both English and Spanish. It also contains sample tax forms and a guide on how to run a successful outreach campaign.

Go to: Outreach Campaign Kit

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Report Presents Practical Policy Options for States to Help Working-Poor Families

The Center on Budget and Policy Priorities report “State Policies to Assist Working-Poor Families” suggests establishing a State Earned Income Tax Credit as a primary tool to help working-poor families. Specifically, the report suggests making the credit refundable, adjusting the credit for family size, and including workers without a qualifying child.

Go to: Report

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