BILL ANALYSIS AB 373 Page 1 Date of Hearing: May 23, 2001 ASSEMBLY COMMITTEE ON APPROPRIATIONS Carole Migden, Chairwoman AB 373 (Leach) - As Introduced: February 20, 2001 Policy Committee: Revenue and Taxation Vote: 8-0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill allows a taxpayer to deduct the costs of veterinary services for an animal adopted from an animal shelter or nonprofit animal welfare organization. Additionally, this bill allows a veterinarian to deduct expenses for providing certain pro bono services to adopted animals. FISCAL EFFECT The Franchise Tax Board (FTB) estimates minor General Fund revenue losses of less than $300,000 annually. COMMENTS 1)Background . The idea for this bill originated with Ms. Courtney Flynn, a student at Monte Vista High School in Danville, winner of Assemblywoman Leach's 2000 "There Ought to be a Law" essay contest. In her essay, Ms. Flynn speculated that the expense of caring for an adopted animal is one of the primary reasons why animals are returned to shelters. 2)Implementation Issues . The FTB points out that to the extent expenses incurred by a veterinarian in providing pro bono services are considered ordinary and necessary business expenses, such expenses are already deductible under current federal and state law. Consequently, this bill would not provide any additional benefit to a veterinarian who incurs expenses in connection with providing pro bono services for adopted animals. In the case where a corporation is paying the veterinarian wages for pro bono services, however, allowing AB 373 Page 2 both this deduction and the full amount of wages to be deducted (under current law) would have the effect of providing a double benefit for that item. Additionally, this bill allows a veterinarian to deduct expenses for services provided within one year of adoption. Since the veterinarian is not the party adopting the animal, it may be difficult for both the veterinarian and the FTB to be certain whether expenses paid or incurred in connection with providing such pro bono services would in fact qualify. It would have been difficult for Ms. Flynn to have foreseen these technical problems. Analysis Prepared by : Stephen Shea / APPR. / (916) 319-2081