Will you have to pay federal taxes on your California tax refund?

Your guide to California policy and politics
Sameea Kamal BY Sameea Kamal February 10, 2023
Presented by Dairy Cares, Climate-Smart Agricultural Partnership and Southern California Gas Company

Will you have to pay federal taxes on your California tax refund?

Update: The Internal Revenue Service announced today that California taxpayers do not have to report the Middle Class Tax Refund on their federal returns.

From CalMatters economy reporter Grace Gedye:

When gas prices were soaring in 2022 and Califorina’s state budget had a ballooning surplus, lawmakers decided to send relief payments to millions of residents to help with rising costs. 

In recent months, the money has been flowing: The state has issued more than 7 million direct deposits and 9.4 million debit cards, ranging in value from $200 to $1,050. 

Some Californians who think they qualify for the payment haven’t received it, and are struggling to get their questions answered

But the people who have received a Middle Class Tax Refund also have a problem: What to do about taxes? 

Tax season is officially upon us, so some people who want their refunds as soon as possible have already started filing their returns. 

California officials have made it clear that people don’t need to claim the payment as income on their state tax return. 

But on the question of federal taxes, Californians have been left in limbo.

The state’s tax board says the payments may be considered federally taxable income. Last week, the Internal Revenue Service essentially told people in California and other states where state relief payments were sent out to hold off on filing their taxes while they work out what clarification they can offer.  

  • IRS: “For taxpayers uncertain about the taxability of their state payments, the IRS recommends they wait until additional guidance is available or consult with a reputable tax professional.”

An IRS spokesperson confirmed on Thursday afternoon that this was still the agency’s stance.

On Wednesday, a group of Republican state lawmakers called on the Biden administration to exempt the payments from federal income taxes.

  • The GOP letter to President Biden: “Middle class Californians should not be taxed twice on their own refunds.”

Luckily, many Californians have more time to file their taxes this year. Both the federal and state have extended the filing deadline for individual returns from April 18 to May 15 for people in areas affected by the winter storms. 

  • A correction: An item in Thursday’s newsletter about paid family leave misidentified the author of a new law that increased benefits for low-wage workers. It’s Sen. María Elena Durazo, a Los Angeles Democrat.

The coronavirus bottom line: As of Tuesday, California had 11,061,732 confirmed cases and 99,694 total deaths, according to state data now updated just once a week on Thursdays.

CalMatters is also tracking coronavirus hospitalizations by county.California has administered 87,896,913 total vaccine doses, and 72.6% of eligible Californians have received their primary vaccine series.


1 On CA streets, 50 is the new 70

Elbert Lee Jones Jr. outside the Close to Home St. Mary's Center transitional housing in West Oakland on Jan. 12, 2023. Photo by Martin do Nascimento, CalMatters
Elbert Lee Jones Jr. outside the Closer to Home St. Mary’s Center transitional housing in West Oakland on Jan. 12, 2023. Photo by Martin do Nascimento, CalMatters

Californians are very concerned about homelessness: It ranks just behind the economy and jobs in what they said the governor and Legislature need to address, according to a poll out this month

But many may not know that the fastest growing group of Californians on the streets are seniors. And that adds even more challenges to a crisis that so far has defied bill after bill and billions of dollars.

CalMatters’ Ana B. Ibarra explains: While the number of people seeking homeless services from 2017 to 2021 increased by 43%, the number of people 55 and older seeking services soared a whopping 84%, a bigger increase than any other age group, according to the state’s tally. (The overall percentage of seniors in California increased in that time by just 7%).

Included in the homeless count are people who have been unhoused for a long time, but also includes people experiencing homelessness for the first time after age 50 — often due to soaring rents, and fixed incomes and benefits that haven’t kept up.

  • Sharon Cornu, executive director at nonprofit service operator St. Mary’s Center: “It’s remarkable to think about: You’ve kept yourself employed and housed and above water this whole time period, and in what ought to be golden years, here you are out on the street.”

On top of that, the health impact of living on the streets can prematurely age, sicken and kill people. That’s why homelessness advocates and experts refer to “seniors” as anyone 50 and older.  And most shelters are not equipped to serve a geriatric population. 

  • Sara Mirhadi, chief program officer at Poverello House, which serves the homeless in downtown Fresno: “At this point, I feel like our shelters are slowly becoming de facto nursing facilities. I’ve had to ask staff to do a lot of things that they normally wouldn’t do.”

As Ana reports, in 2021, Gov. Gavin Newsom released a 10-year blueprint on how to better prepare the state for a graying population — a quarter of the state’s residents will be 60 or older by 2030. The top priority in that master plan? Increasing affordable housing options for seniors. 

Another proposal this year: Senate Bill 37, carried by state Sen. Anna Caballero, a Merced Democrat, would create a state-run housing subsidy program for elderly people and those with disabilities at highest risk of becoming homeless. A similar bill last year failed to receive funding in the state budget. 

2 State tries to combat disinformation

A College Area Pregnancy Services clinic in San Diego on June 26, 2018. Photo by Gregory Bull, AP Photo
A College Area Pregnancy Services clinic in San Diego on June 26, 2018. Photo by Gregory Bull, AP Photo

From CalMatters political reporter Ben Christopher: 

California lawmakers have been getting a crash course in just how difficult it is to get people to stop saying things you don’t want them to.

This week’s example: “Crisis pregnancy centers,” facilities run by anti-abortion groups that provide pregnancy counseling and other non-invasive services, while dissuading patients from terminating a pregnancy.

Assemblymember Rebecca Bauer-Kahan, a Democrat from San Ramon, is pushing a new bill that would prevent these centers from making “false or misleading” statements about whether they offer abortion services.

Supporters of abortion rights have long argued that these crisis pregnancy centers frequently masquerade as medical clinics to lure people who are seeking an abortion and persuade them to give birth.

California Democrats tried regulating the centers away in 2015 with a law forcing them to post notices about state subsidized abortion services and provide other disclaimers. But the U.S. Supreme Court struck down the law, handing conservative legal groups a hefty windfall in the process. Conservative justices scolded California for trying to “impose its own message in the place of individual speech, thought, and expression.” 

But Bauer-Kahan said she’s found a work-around: The state’s restrictions on false advertising.

  • Bauer-Kahan: “We are outlawing misinformation. We are outlawing the practice of misleading the patient.”

Some “misinformation” is protected by the First Amendment. Some speech (defamation, credible violent threats and, yes, false advertising) is not. But it’s not always easy for lawmakers to tell the difference. 

Last month, a federal judge put a hold on a California law passed last year that would have allowed the state to revoke the medical licenses of doctors who spread false information about COVID-19. Judge William Shubb called the law’s definition of misinformation “unconstitutionally vague.”

3 More attempts at gun control

Smith & Wesson SD VE 9mm semi-automatic pistols for sale at a gun store in Oceanside on April 12, 2021. Photo by Bing Guan, Reuters
Semi-automatic pistols for sale at a gun store in Oceanside on April 12, 2021. Photo by Bing Guan, Reuters

Following the two deadly mass shootings in California in January, Democratic lawmakers continue to try and crack down further on guns in the state, even though California already has the strictest gun control laws in the nation

Sen. Nancy Skinner, a Democrat from Oakland, introduced a bill that would close a loophole that allows law enforcement officers to buy illegal handguns for their personal use or to resell them.

  • Skinner: “There’s no good reason to allow an exception when we know these weapons are unsafe. Law enforcement officers are not allowed to purchase other illegal products in the state. Guns should be no different.”

Skinner’s Senate Bill 377 also includes language that would require law officers to wait 10 days, like other Californians, to purchase legal handguns. It wouldn’t impact law enforcement agencies’ ability to purchase firearms not available to the general public for official use, though Skinner said she intends to add a provision that would prevent law enforcement agencies from purchasing guns from dealers that have a history of violating firearms laws.

And Sen. Anthony Portantino, a Democrat from Glendale, introduced SB 368, which would, among other provisions, ban firearms dealers from holding promotional events such as giveaways, lotteries and raffles.

In other public safety news: Attorney General Rob Bonta announced Thursday that the state took down an organized retail theft ring that stole more than $1 million worth of goods from at least 15 Apple stores throughout California and beyond since last August. The suspects allegedly entered stores and held back customers and employees while taking phones and tablets, he said. 

Eight people were arrested in the joint operation between the Department of Justice and the California Highway Patrol’s retail theft unit. The unit has recovered more than $28 million in merchandise and arrested more than 850 people since its creation in 2019, according to the office of Gov. Gavin Newsom, who expanded the unit last year and also put in his budget proposal $300 million over three years to combat retail theft, most in grants to local law enforcement.

In late 2021, a spate of smash-and-grab thefts at high-end stores in the Bay Area and Los Angeles grabbed headlines. As CalMatters criminal justice reporter Nigel Duara has explained, California’s property crimes dipped significantly during the first year of the pandemic, amid curfews and lockdown orders, but returned to pre-pandemic levels in 2021 as restrictions eased. 


CalMatters Commentary

Abandoning high-speed rail will be more costly for California than the project itself, writes Robert Cruickshank, former president of Californians For High Speed Rail.

California needs to invest in water crisis solutions, not a bullet train, argue Dana Goldman, dean of the Sol Price School of Public Policy at USC, and Alain Enthoven, an economics professor emeritus at Stanford University.

Other things worth your time

Some stories may require a subscription to read

Gimme Shelter podcast: What is the “builder’s remedy” and can it help solve California’s housing shortage?

State’s homeless crisis looms as Newsom eyes his political future // California Healthline

Sacramento targeted in new lawsuit over homeless camps on sidewalks // Sacramento Bee 

Attorney general’s spouse leads legislative committee that oversees his budget // KCRA

Weber on CA reparations: Conversation will lead to change // Sacramento Bee

California’s energy transition must balance oil, electricity, commissioner says // Sacramento Bee

Yahoo to eliminate 1,000 jobs in latest tech workforce cuts // Los Angeles Times

Northern Nevada is siphoning Californians, businesses — and problems // Los Angeles Times 

S.F. could help fund city’s stalled housing projects // San Francisco Chronicle

New drug ripping through SF is Narcan-resistant, users say // San Francisco Standard

DA Jenkins threatens to drop historic prosecution of an S.F. cop // San Francisco Chronicle

L.A. is replacing its largest gas plant with green hydrogen // Los Angeles Times

New proposed permits threaten outdoor dining in Los Angeles // Los Angeles Times 

San Jose mayor criticized for secret committee meetings // San José Spotlight 

Oakland Police Chief LeRonne Armstrong ‘not credible:’ confidential report finds // KTVU

State Capitol mourns loss of Allan Zaremberg – Los Angeles Times 

Advocates want state lawmakers to reconsider Capitol Annex options – CapRadio

See you next week


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