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