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April 28, 2020 Honorable Toni Atkins Honorable Anthony Rendon President pro Tempore Speaker California State Senate California State Assembly

Honorable Holly J. Mitchell Honorable Phil Ting Chair Chair Senate Budget & Fiscal Review Committee Assembly Committee on Budget

RE: CalEITC and Young Child Tax Credit Outreach and Free Tax Prep Assistance – COVID-19 Dear Legislative and Budget Committee Leaders, Our organizations write to strongly support the continued funding of California Earned Income Tax Credit (CalEITC) Outreach and Education and Free Tax Preparation Assistance grants as part of the workload and COVID-19 2020-2021 budget package. We are asking for this funding to be maintained at $10 million with the adjustment of it being allocated for a minimum of two years for uninterrupted programming. This will support the existing grant program that funds qualified nonprofits and local government agencies to perform outreach and provide free tax preparation services to enable more eligible low-income working families and individuals to claim CalEITC, the newly established state Young Child Tax Credit (YCTC), and the federal EITC. The CalEITC and the YCTC are key to tackling California’s poverty crisis and as our state grapples with COVID-19 and the economic realities of reduced work hours and income, and skyrocketing unemployment claims, it will become even more critical to help low-income individuals and households file their taxes to ensure access to COVID-19 relief funding, including federal dollars. At a time of economic insecurity, alongside complex and evolving relief packages, the need for clear outreach and education from trusted sources is only increasing in communities across our state. Similarly, the need for tax filing assistance will drastically go up – be it online via remote technology or again in-person as the guidelines around physical distancing change in the coming months. We need to answer the Governor’s call to “meet this moment” with a robust structure of well-trained tax assistors and a growing network of online filing resources that are culturally and linguistically appropriate so that we are able to leverage the full power and potential of all credits available to tax filers. The current Outreach and Education funding has helped non-profit and community based organizations spread awareness about the credit and has allowed them to stay on top of how filing and eligibility has changed, specifically the new YCTC and all associated tax forms and software updates to common filing options. Even as Volunteer Income Tax Assistance (VITA) sites have had to pivot from physical locations to remote and online options in light of COVID-19, the demand for assistance and information from trusted sources has not abated, nor will it. In fact, we anticipate the need for help will only increase as more people hear about federal and state based relief and need support in navigating new and uncertain financial territories. Californians are naturally concerned, especially those in low-income households, and will need accurate, no-cost information and help from someone they trust in their community. The California Legislature has championed the CalEITC for years, continually expanding access to the credit and underscoring the need to have effective outreach to educate those who are

potentially eligible for the CalEITC, YCTC, and Federal EITC. The CalEITC is one of California’s best tools to help alleviate poverty, stimulate local economies and businesses, and act as a frontline defense against the deepest risks of economic downturn – risks our state is very much going to be managing for some time as we recover from the COVID-19 pandemic. Research shows that lower-income households who receive tax credits put that money immediately back into the local and state economy, with studies showing that each additional $1 in EITC refunds generates between $1.58 and $2 in local economic activity – a major boon for California’s recovery efforts. But to achieve this economic boost, it requires that currently and newly eligible households successfully file their taxes and complete the relevant forms to receive the credits. This, paired with the fact many household cannot weather an unexpected $400 expense, makes it clear that we cannot afford to leave out a single person or household that could benefit from CalEITC or the YCTC. Outreach and Education along with Free Tax Preparation Assistance VITA therefore becomes an even more pressing resource, both for households grappling with a rapidly changing economic reality and in order to fuel our state’s short and long-term recovery. The value of California’s investment in these programs is clear: Since the state began supporting in EITC outreach, the amount of unclaimed federal EITC dollars has decreased by $400 million, from nearly $2 billion in 2015 to $1.5 billion in 2019. These extra dollars have helped families and their communities in every district throughout the state. While 2.7 million California households claimed $6.3 billion in federal EITC dollars last year, nearly 25% of eligible households still did not claim the federal EITC. By continuing to support EITC outreach, California has the potential to access that remaining $1.5 billion in federal support. To make the Free Tax Preparation Assistance grants even more effective, California should simply adjust the timing of these grants to make them year-round over 2-year increments. The Internal Revenue Service utilizes funding in 2-year increments for VITA grants, to help organizations plan longer term, provide services year round, and to provide stability to organizations that provide free tax preparation. This also would help our currently funded grantee Community Based Organizations (CBOs) in adjusting to the new tax deadlines in 2020 and the likely ongoing need to assist filers as COVID-19 relief rolls out. Grantees need the flexibility to respond to a rapidly changing landscape and be a source of clarity for Californians in an uncertain time. An investment of this kind would also help mitigate the costs associated with ramping up and down VITA services that are incurred under the current funding structure. We believe this will allow CBOs to be more efficient overall and ensure that tax filers have better access to the services they need to receive the credits that help keep them financially afloat, regardless of what time of year it is. FTB reports show an increase of 42% in CalEITC claims, from 1,477,060 in 2018 up to 2,091,338 in 2019 and we believe much of this can be attributed to the increase in state funding for free tax preparation assistance/VITA services and the accompanying community outreach in the 2019-2020 budget. With the notable expansions for state credits also included in last year’s budget, the need to assist more families will be greater than ever before.

Recommendation: Provide $10 million a year for a minimum of two years in grants for two purposes: 1) continue and increase outreach grants at $10 million yearly, and 2) continue grants to increase the availability of free tax preparation assistance at $10 million yearly. Thank you for your leadership on behalf of low-income children and families in California. We look forward to working with you in the coming months to respond to COVID-19 and advance towards a future where no Californian lives in poverty, especially working families. For more information, please contact Anna Hasselblad at ahasselblad@unitedwaysca.org or Trevor Rodgers at trevor@goldenstateopportunity.org. Sincerely, Golden State Opportunity United Ways of California California Partnership California Food Policy Advocates Children’s Defense Fund Coachella Valley Immigrant Dignity Coalition Roberts Enterprise Development Fund National Association of Social Workers California Chapter Bay Area Asset Funders End Child Poverty California GRACE Institute Los Angeles Alliance for a New Economy Training Occupational Development Educating Communities (TODEC) Legal Center Friends Committee on Legislation in California The Unity Council California Food Policy Council QueensCare / QueensCare Health Center Korean Resource Center People Organized for Westside Renewal (POWER) Silicon Valley Community Foundation