Merge pull request #3039 from PolicyEngine/PavelMakarchuk/issue3038

Kentucky Family Size Tax Credit

changelog_entry.yaml

@@ -1,4 +1,4 @@
-- bump: patch
+- bump: minor
   changes:
-    fixed:
-    - Revert kentucky family size tax credit pull request 2908.
+    added:
+    - Kentucky family size tax credit.

docs/examples/income-sources.ipynb

@@ -2054,9 +2054,18 @@
     "\n",
     "household_benefits = sim.calculate(\"household_benefits\")\n",
     "household_pensions = sim.calculate(\"pension_income\", map_to=\"household\")\n",
-    "household_investment_income = sim.calculate(\"net_investment_income\", map_to=\"household\")\n",
-    "household_earnings = sim.calculate(\"employment_income\", map_to=\"household\") + sim.calculate(\"self_employment_income\", map_to=\"household\")\n",
-    "total_income = household_benefits + household_pensions + household_investment_income + household_earnings\n",
+    "household_investment_income = sim.calculate(\n",
+    "    \"net_investment_income\", map_to=\"household\"\n",
+    ")\n",
+    "household_earnings = sim.calculate(\n",
+    "    \"employment_income\", map_to=\"household\"\n",
+    ") + sim.calculate(\"self_employment_income\", map_to=\"household\")\n",
+    "total_income = (\n",
+    "    household_benefits\n",
+    "    + household_pensions\n",
+    "    + household_investment_income\n",
+    "    + household_earnings\n",
+    ")\n",
     "\n",
     "equivalised_income = sim.calculate(\"equiv_household_net_income\")\n",
     "household_count_people = sim.calculate(\"people\", map_to=\"household\")\n",
@@ -2082,22 +2091,30 @@
     "        income_sources.append(income_source)\n",
     "        income_source_values = income_source_decodes[income_source]\n",
     "        values.append(\n",
-    "            np.maximum(income_source_values[in_decile].sum(), 0) / total_income[in_decile].sum()\n",
+    "            np.maximum(income_source_values[in_decile].sum(), 0)\n",
+    "            / total_income[in_decile].sum()\n",
+    "        )\n",
+    "        cumulative_income += np.maximum(\n",
+    "            income_source_values[in_decile].sum(), 0\n",
     "        )\n",
-    "        cumulative_income += np.maximum(income_source_values[in_decile].sum(), 0)\n",
     "    # Add 'other income'\n",
     "    percentiles.append(percentile)\n",
     "    income_sources.append(\"Other\")\n",
     "    values.append(1 - cumulative_income / total_income[in_decile].sum())\n",
     "\n",
-    "df = pd.DataFrame({\n",
-    "    \"Percentile\": percentiles,\n",
-    "    \"Income source\": income_sources,\n",
-    "    \"Value\": values,\n",
-    "})\n",
+    "df = pd.DataFrame(\n",
+    "    {\n",
+    "        \"Percentile\": percentiles,\n",
+    "        \"Income source\": income_sources,\n",
+    "        \"Value\": values,\n",
+    "    }\n",
+    ")\n",
     "\n",
     "# Order by state support, other income, pensions, investment, earnings\n",
-    "df[\"Income source\"] = pd.Categorical(df[\"Income source\"], [\"State support\", \"Other\", \"Pensions\", \"Investment\", \"Earnings\"])\n",
+    "df[\"Income source\"] = pd.Categorical(\n",
+    "    df[\"Income source\"],\n",
+    "    [\"State support\", \"Other\", \"Pensions\", \"Investment\", \"Earnings\"],\n",
+    ")\n",
     "df = df.sort_values([\"Percentile\", \"Income source\"], ascending=[True, False])\n",
     "\n",
     "import plotly.express as px\n",
@@ -2118,7 +2135,7 @@
     "    yaxis=dict(\n",
     "        tickformat=\".0%\",\n",
     "        title=\"Percentage of income\",\n",
-    "        tickvals=[0, 0.1, 0.2, 0.3, 0.4, 0.5, 0.6, .7, .8, .9, 1],\n",
+    "        tickvals=[0, 0.1, 0.2, 0.3, 0.4, 0.5, 0.6, 0.7, 0.8, 0.9, 1],\n",
     "    ),\n",
     "    xaxis=dict(\n",
     "        title=\"Income percentile\",\n",

policyengine_us/parameters/gov/states/ky/tax/income/credits/family_size/family_size_cap.yaml

@@ -0,0 +1,12 @@
+description: Kentucky caps the family size at this number when calculating the poverty threshold for the family size tax credit.
+values:
+  2005-01-01: 4
+metadata:
+  label: Kentucky family size tax credit family size cap
+  period: year
+  unit: people
+  reference:
+    - title: Kentucky 141.066, (1) (e) (4)
+      href: https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=49188 
+    - title: 2022 Kentucky individual tax credit schedule, ITC
+      href: https://revenue.ky.gov/Forms/Schedule%20ITC%202022.pdf#page=2

policyengine_us/parameters/gov/states/ky/tax/income/credits/family_size/rate.yaml

@@ -0,0 +1,57 @@
+description: Kentucky provides a credit for a fraction of tax liability, based on modified gross income as a percent of a modified poverty line.
+metadata:
+  type: single_amount
+  threshold_unit: /1
+  amount_unit: /1
+  label: Kentucky family size tax credit rate
+  reference:
+    - title: Kentucky 141.066, (3)
+      href: https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=49188 
+    - title: 2022 Kentucky individual tax credit schedule, ITC
+      href: https://revenue.ky.gov/Forms/Schedule%20ITC%202022.pdf#page=2
+
+brackets:
+  - threshold:
+      2005-01-01: -.inf
+    amount:
+      2005-01-01: 1
+  - threshold:
+      2005-01-01: 1
+    amount:
+      2005-01-01: 0.9
+  - threshold:
+      2005-01-01: 1.04
+    amount:
+      2005-01-01: 0.8
+  - threshold:
+      2005-01-01: 1.08
+    amount:
+      2005-01-01: 0.7
+  - threshold:
+      2005-01-01: 1.12
+    amount:
+      2005-01-01: 0.6
+  - threshold:
+      2005-01-01: 1.16
+    amount:
+      2005-01-01: 0.5
+  - threshold:
+      2005-01-01: 1.2
+    amount:
+      2005-01-01: 0.4
+  - threshold:
+      2005-01-01: 1.24
+    amount:
+      2005-01-01: 0.3
+  - threshold:
+      2005-01-01: 1.27
+    amount:
+      2005-01-01: 0.2
+  - threshold:
+      2005-01-01: 1.3
+    amount:
+      2005-01-01: 0.1
+  - threshold:
+      2005-01-01: 1.33
+    amount:
+      2005-01-01: 0

policyengine_us/parameters/gov/states/ky/tax/income/credits/non_refundable.yaml

@@ -0,0 +1,7 @@
+description: Kentucky non-refundable tax credits.
+metadata:
+  unit: list
+  label: Kentucky non-refundable credits
+values:
+  2021-01-01:
+    - ky_family_size_tax_credit

policyengine_us/tests/policy/baseline/gov/states/ky/tax/income/credits/family_size_tax_credit/ky_family_size_tax_credit.yaml

@@ -0,0 +1,17 @@
+- name: 20% rate
+  period: 2023
+  input: 
+    state_code: KY
+    ky_family_size_tax_credit_rate: 0.2
+    ky_income_tax_before_non_refundable_credits: 1_000
+  output:
+    ky_family_size_tax_credit: 200
+
+- name: 0% rate
+  period: 2023
+  input: 
+    state_code: KY
+    ky_family_size_tax_credit_rate: 0
+    ky_income_tax_before_non_refundable_credits: 1_000
+  output:
+    ky_family_size_tax_credit: 0

policyengine_us/tests/policy/baseline/gov/states/ky/tax/income/credits/family_size_tax_credit/ky_family_size_tax_credit_rate.yaml

@@ -0,0 +1,39 @@
+- name: No income
+  period: 2023
+  input: 
+    state_code: KY
+    ky_modified_agi: 0
+    state_group: CONTIGUOUS_US
+    tax_unit_size: 1
+  output:
+    ky_family_size_tax_credit_rate: 1
+
+- name: One person with income at fpg
+  period: 2022
+  input: 
+    state_code: KY
+    ky_modified_agi: 13_590
+    state_group: CONTIGUOUS_US
+    tax_unit_size: 1
+  output:
+    ky_family_size_tax_credit_rate: 1
+
+- name: Seven person, capped at 4 # fpg = 13_590 + 3 * 4_720 = 27_750, 119%
+  period: 2022
+  input: 
+    state_code: KY
+    ky_modified_agi: 33_000
+    state_group: CONTIGUOUS_US
+    tax_unit_size: 7
+  output:
+    ky_family_size_tax_credit_rate: 0.5
+
+- name: Three people with income over fpg
+  period: 2022
+  input: 
+    state_code: KY
+    ky_modified_agi: 50_000
+    state_group: CONTIGUOUS_US
+    tax_unit_size: 3
+  output:
+    ky_family_size_tax_credit_rate: 0

policyengine_us/tests/policy/baseline/gov/states/ky/tax/income/credits/family_size_tax_credit/ky_modified_agi.yaml

@@ -0,0 +1,19 @@
+- name: State AGI over federal AGI
+  period: 2023
+  input: 
+    state_code: KY
+    adjusted_gross_income: 900
+    tax_exempt_form_4972_lumpsum_distributions: 10
+    ky_agi: 1_000
+  output:
+    ky_modified_agi: 1_010
+
+- name: State AGI under federal AGI
+  period: 2023
+  input: 
+    state_code: KY
+    adjusted_gross_income: 2_000
+    tax_exempt_form_4972_lumpsum_distributions: 10
+    ky_agi: 1_000
+  output:
+    ky_modified_agi: 2_010

policyengine_us/tests/policy/baseline/gov/states/ky/tax/income/ky_income_tax_before_non_refundable_credits.yaml

@@ -0,0 +1,31 @@
+- name: No income
+  period: 2023
+  input:
+    ky_taxable_income: 0
+    state_code: KY
+  output:
+    ky_income_tax_before_non_refundable_credits: 0
+
+- name: 2023 tax rate
+  period: 2023
+  input:
+    ky_taxable_income: 1_000
+    state_code: KY
+  output:
+    ky_income_tax_before_non_refundable_credits: 45
+
+- name: 2022 tax rate
+  period: 2022
+  input:
+    ky_taxable_income: 1_000
+    state_code: KY
+  output:
+    ky_income_tax_before_non_refundable_credits: 50
+
+- name: 2021 tax rate
+  period: 2021
+  input:
+    ky_taxable_income: 1_000
+    state_code: KY
+  output:
+    ky_income_tax_before_non_refundable_credits: 50

policyengine_us/tests/policy/baseline/gov/states/ky/tax/income/ky_income_tax_before_refundable_credits.yaml

@@ -1,31 +1,18 @@
-- name: No income
+- name: Subtractions
   period: 2023
   input:
-    ky_taxable_income: 0
+    ky_income_tax_before_non_refundable_credits: 1_100
     state_code: KY
+    ky_non_refundable_credits: 1_000
   output:
-    ky_income_tax_before_refundable_credits: 0
+    ky_income_tax_before_refundable_credits: 100
 
-- name: 2023 tax rate
+- name: Capped at 0
   period: 2023
   input:
-    ky_taxable_income: 1_000
-    state_code: KY
-  output:
-    ky_income_tax_before_refundable_credits: 45
-
-- name: 2022 tax rate
-  period: 2022
-  input:
-    ky_taxable_income: 1_000
+    ky_income_tax_before_non_refundable_credits: 1_000
     state_code: KY
+    ky_non_refundable_credits: 1_100
   output:
-    ky_income_tax_before_refundable_credits: 50
+    ky_income_tax_before_refundable_credits: 0
 
-- name: 2021 tax rate
-  period: 2021
-  input:
-    ky_taxable_income: 1_000
-    state_code: KY
-  output:
-    ky_income_tax_before_refundable_credits: 50

policyengine_us/variables/gov/states/ky/tax/income/credits/family_size_credit/ky_family_size_tax_credit.py

@@ -0,0 +1,20 @@
+from policyengine_us.model_api import *
+
+
+class ky_family_size_tax_credit(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Kentucky family size tax credit"
+    unit = "/1"
+    definition_period = YEAR
+    reference = (
+        "https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=49188"
+    )
+    defined_for = StateCode.KY
+
+    def formula(tax_unit, period, parameters):
+        rate = tax_unit("ky_family_size_tax_credit_rate", period)
+        income = tax_unit(
+            "ky_income_tax_before_non_refundable_credits", period
+        )
+        return rate * income

policyengine_us/variables/gov/states/ky/tax/income/credits/family_size_credit/ky_family_size_tax_credit_rate.py

@@ -0,0 +1,28 @@
+from policyengine_us.model_api import *
+
+
+class ky_family_size_tax_credit_rate(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Kentucky family size tax credit rate"
+    unit = "/1"
+    definition_period = YEAR
+    reference = (
+        "https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=49188"
+    )
+    defined_for = StateCode.KY
+
+    def formula(tax_unit, period, parameters):
+        income = tax_unit("ky_modified_agi", period)
+        fpg = parameters(period).gov.hhs.fpg
+        # This will be CONTIGUOUS_US for Kentucky.
+        state_group = tax_unit.household("state_group", period)
+        p1 = fpg.first_person[state_group]
+        padd = fpg.additional_person[state_group]
+        family_size = tax_unit("tax_unit_size", period)
+        # No more than 4 people are accounted for in the credit
+        p = parameters(period).gov.states.ky.tax.income.credits.family_size
+        capped_family_size = min_(family_size, p.family_size_cap)
+        poverty_index = p1 + padd * (capped_family_size - 1)
+        share = income / poverty_index
+        return p.rate.calc(share, right=True)

policyengine_us/variables/gov/states/ky/tax/income/credits/family_size_credit/ky_modified_agi.py

@@ -0,0 +1,25 @@
+from policyengine_us.model_api import *
+
+
+class ky_modified_agi(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Kentucky modified adjusted gross income for the family size tax credit"
+    unit = USD
+    definition_period = YEAR
+    reference = "https://revenue.ky.gov/Forms/740%20Packet%20Instructions%205-9-23.pdf#page=22"
+    defined_for = StateCode.KY
+
+    def formula(tax_unit, period, parameters):
+        fed_agi = tax_unit("adjusted_gross_income", period)
+        # Lump sum distributions which are not included in federal AGI are added to the federal AGI
+        # Tax exempt interest from municipal bonds (non-Kentucky) is also added but excluded in this calculation
+        tax_exempt_lump_sum = tax_unit(
+            "tax_exempt_form_4972_lumpsum_distributions", period
+        )
+        total_fed_agi = fed_agi + tax_exempt_lump_sum
+
+        ky_agi = tax_unit("ky_agi", period)
+        # Lump sum distributions which are not included in federal AGI are added to the state AGI
+        total_ky_agi = ky_agi + tax_exempt_lump_sum
+        return max_(total_fed_agi, total_ky_agi)

policyengine_us/variables/gov/states/ky/tax/income/ky_agi.py

@@ -0,0 +1,11 @@
+from policyengine_us.model_api import *
+
+
+class ky_agi(Variable):
+    value_type = float
+    entity = TaxUnit
+    label = "Kentucky adjusted gross income"
+    unit = USD
+    definition_period = YEAR
+    reference = "https://revenue.ky.gov/Forms/740%20Packet%20Instructions%205-9-23.pdf#page=11"
+    defined_for = StateCode.KY