California AMT exemption for a child uses the federal 59(j) amount instead of the Schedule P (540) amount ($9,550 vs $9,750 in 2025) #10505

Summary

ca_amt_exemption limits a child's California AMT exemption to earned income plus the federal IRC 59(j) amount (gov.irs.income.amt.exemption.child.amount). The Schedule P (540) instructions print a different California amount in every year from 2021 to 2025:

So when the child limit applies, PE's California exemption is $100 too high in 2021 and $100 to $200 too low from 2022 to 2025.

Code (main at 4c65c82)

policyengine_us/variables/gov/states/ca/tax/income/alternative_minimum_tax/exemption/ca_amt_exemption.py:

        p_irs = parameters(period).gov.irs.income.amt.exemption
        ...
        # Line 7
        exemption_amount_child = p_irs.child.amount
        # Line 8
        earned_income = tax_unit("head_earned", period)
        # Line 9
        total_reduced_exemption_amount = exemption_amount_child + earned_income
        # Line 10
        child_exemption = min_(total_reduced_exemption_amount, adult_exemption)

Line 37 reads gov.irs.income.amt.exemption.child.amount (7,950 / 8,200 / 8,800 / 9,250 / 9,550 for 2021–2025, 9,750 for 2026). These are the correct federal amounts: for example, Rev. Proc. 2020-45, PDF page 12, section 3.13, gives "plus (2) $7,950" for 2021, and Rev. Proc. 2024-40, PDF page 11, section 3.12, gives "plus (2) $9,550" for 2025. California has no parameter of its own for this amount.

Law

California conformity. Cal. Rev. & Tax. Code 17062.1 (added by SB 711, Stats. 2025, Ch. 231, effective October 1, 2025):

For the purposes of this chapter, Part VI of Subchapter A of Chapter 1 of Subtitle A of the Internal Revenue Code, relating to alternative minimum tax, as it read on January 1, 2015, shall apply, except as otherwise provided.

Cal. Rev. & Tax. Code 17062(b)(5)–(7) replaces the IRC 55(d)(1) exemption amounts and the 55(d)(3) phase-out amounts and indexes them by the California CPI. The only part of section 59 that section 17062 changes is 59(a) (subdivision (e): "The provisions of Section 59(a) of the Internal Revenue Code, relating to the alternative minimum tax foreign tax credit, shall not apply."). It does not modify section 59(j).

IRC 59(j) as it read on January 1, 2015. 26 U.S.C. 59(j), 2014 edition, "(j) Treatment of unearned income of minor children":

(1) In general
In the case of a child to whom section 1(g) applies, the exemption amount for purposes of section 55 shall not exceed the sum of—
(A) such child's earned income (as defined in section 911(d)(2)) for the taxable year, plus
(B) $5,000.
(2) Inflation adjustment
In the case of any taxable year beginning in a calendar year after 1998, the dollar amount in paragraph (1)(B) shall be increased by an amount equal to the product of—
(A) such dollar amount, and
(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting "1997" for "1992" in subparagraph (B) thereof.

The California amount. Instructions for Schedule P (540), Part II Alternative Minimum Tax (AMT), "Line 22 – Exemption amount", heading "Certain Children Under Age 24", and the Exemption Worksheet in the same line instruction. 2025 text (2025 instructions):

Certain Children Under Age 24
Your exemption amount is limited to the amount of your earned income plus $9,750 if condition 1, 2, or 3 below applies to you.
You were under age 18 at the end of 2025.
You were age 18 at the end of 2025 and did not have earned income that was more than half of your support.
You were a full-time student over age 18 and under age 24 at the end of 2025 and did not have earned income that was more than half of your support.
If condition 1, 2, or 3 applies to you, complete the Exemption Worksheet, including lines 7 through 10, to figure the amount to enter on line 22.

Exemption Worksheet, lines 7 to 10 (2025):

Minimum exemption amount for certain children under age 24 $9,750.
Enter your earned income*, if any.
Add line 7 and line 8.
Enter the smaller of line 6 or line 9 here and on Schedule P (540), Part II, line 22

The same two sentences in each year's instructions, under the same heading:

The instructions do not say how the FTB computes the amount. It is lower than the federal amount in 2021 and higher from 2022, so this issue relies on the printed amounts, not on an indexing method.

Reproduction (PE-US main, 4c65c82)

A 17-year-old dependent (is_tax_unit_dependent: true) who is the head of their own single-filer tax unit, California, no earned income, with ca_amti 60,000 and ca_income_tax_before_credits 2,000 set as inputs. (I set these two as inputs because PE gives a tax unit whose only member is a dependent zero adjusted_gross_income and zero ca_agi, even with taxable_interest_income of 60,000, so a child's own return cannot be computed from income in PE today.)

ca_amt = 7% × (60,000 − line 22) − 2,000 (Schedule P lines 22–26):

For example, 2025: 7% × (60,000 − 9,750) − 2,000 = 3,517.50 − 2,000 = 1,517.50.

Suggested fix

1. Add a California parameter, for example gov.states.ca.tax.income.amt.exemption.child.amount, with the printed amounts (2021: 7,850; 2022: 8,300; 2023: 8,950; 2024: 9,450; 2025: 9,750), each referenced to that year's Schedule P (540) instructions, Line 22, "Certain Children Under Age 24".
2. Read it at line 37 of ca_amt_exemption in place of gov.irs.income.amt.exemption.child.amount.
3. For 2026 and later, the FTB has not published an amount. The other California AMT amounts uprate with gov.states.ca.cpi; the instructions do not state the method for this amount, so the uprating choice should be noted in the parameter until the FTB publishes the 2026 instructions.
4. Add ca_amt_exemption tests for a child head, for example the 2025 case above (9,750 with no earned income; 9,750 + earned income when that is below line 6). The child branch has no test today.

Related: #10268 / PR #10501 (California AMT phase-out rate) edit the same file at lines 26–27, not line 37.