Personal Income Tax Law: Corporation Tax Law: credits: student loan payments.

Assembly Member Tangipa proposes a new tax incentive program allowing California employers to receive tax credits for student loan payments made on behalf of their full-time employees. The measure creates a credit of up to $3,000 per employee annually, with a statewide cap of $25 million per year from 2026 through 2031.

The program establishes priority allocation for veteran-owned, women-owned, minority-owned, and disabled-owned businesses, as well as employers with 500 or fewer employees. Qualifying businesses must have employees who work at least 35 hours per week or meet state standards for full-time salaried positions. The Franchise Tax Board will manage credit applications beginning July 1 each year for the following tax year.

The legislation pairs the employer tax credit with an exclusion allowing employees to omit employer-paid student loan assistance from their taxable income. Unused credits may carry forward for up to four years. The Franchise Tax Board must report annually to the Legislature starting December 2028 on program utilization, including the number of participating employers and total credits claimed.