BILL ANALYSIS
AB 1938
Page 1
Date of Hearing: May 12, 2008
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Charles Calderon, Chair
AB 1938 (Plescia) - As Introduced: February 12, 2008
SUSPENSE
FOR VOTE ONLY
Majority vote. Tax levy. Fiscal committee.
SUBJECT : Personal income taxes: credits: spaying or neutering
SUMMARY : Allows a personal income tax credit for costs paid to
spay or neuter a cat or dog. Specifically, this bill :
1)Provides, for each taxable year beginning on or after January
1, 2008, a credit shall be allowed against a taxpayer's net
tax in an amount equal to 25% of the amount paid or incurred
by a taxpayer for "qualified costs" to spay or neuter a cat or
dog.
2)Provides that the credit shall be limited to the "qualified
costs" paid or incurred by a taxpayer for no more than two
spaying or neutering operations per calendar year.
3)Defines "qualified costs" as both of the following:
a) The actual costs of the spaying or neutering operation;
and,
b) The actual costs of any followup care associated with
the spaying or neutering operation.
4)Allows any unused credit to be carried over until exhausted.
5)Takes immediate effect as a tax levy.
EXISTING LAW provides various tax credits designed to encourage
socially beneficial behavior or to provide relief to taxpayers
who incur specified expenses.
AB 1938
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FISCAL EFFECT : The Franchise Tax Board (FTB) estimates that
this bill would reduce state revenues by $2 million per year.
Proposition 98 Fiscal Effect : Committee staff estimates that
this bill would reduce K-14 funding by $800,000 in each of the
next three fiscal years.
COMMENTS :
1)The author states that this bill, "encourages people to spay
and neuter their pets by authorizing an annual tax credit
equal to 25% of the aggregate amount paid." Furthermore, the
author states that this bill would alleviate the increasing
problem of abandoned cats and dogs in the State of California.
2)Proponents state, "This legislation would provide much-needed
incentives for Californians to spay or neuter their dogs and
cats, which would help reduce the number of unwanted pets and
therefore reduce costs to local animal shelters. Recognizing
that spay/neuter costs can be significant for many pet owners,
we believe that providing some monetary relief from those
costs is entirely appropriate. It should be noted that,
rather than creating new regulations which typically fail to
target problem breeders or create unintended consequences, AB
1938 would appropriately encourage pet owners to be
responsible in ensuring that their dogs or cats do not
contribute to the pet overpopulation problem."
3)Opponents state, "This bill would authorize a tax credit in an
amount equal to 25% of the aggregate amount paid or incurred
by a taxpayer for specified costs associated with spaying or
neutering a cat or dog, which would, in effect, result in an
expenditure and subsequent revenue loss at the state and local
levels."
4)FTB notes that this bill:
a) Limits the credit to the spaying or neutering costs for
up to two operations per calendar year. Thus, a couple
that files a joint tax return may claim this credit for up
to four operations - two per taxpayer. The author may wish
to amend this bill to clarify whether the credit should be
limited to two operations per tax return, or per taxpayer.
AB 1938
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b) Provides that "qualified costs" would include costs for
"followup care" associated with the spay or neuter
operation. The term "followup care", however, is not
defined. To eliminate confusion and reduce taxpayer
disputes, the author may wish to clarify this term.
c) Would allow taxpayers in certain circumstances to claim
multiple tax benefits for the same item of expense. To
eliminate this concern, this bill could be amended to
specify that the credit allowed under this section would be
taken in lieu of any other credit or deduction allowed for
the same expenses.
5)Committee staff notes:
a) Because this credit is not limited to individuals
earning a specified amount, it would be available to
taxpayers who require no financial incentive to spay or
neuter their pets.
b) This bill does not require the spaying or neutering
operation to occur in California. As such, a pet owner
could offset his/her California source income by taking a
credit for a pet operation done outside the state.
c) This bill would apply to taxable years beginning on or
after January 1, 2008. Thus, this bill would allow certain
taxpayers to take a credit for pet operations undertaken
before this bill's enactment. The author may wish to amend
the bill's operative date to bring the bill in line with
the stated intent of incentivizing future conduct.
d) Many local governments already provide subsidized spay
and neutering services. For example, the City of
Sacramento provides free spay and neuter clinics for the
pets of low-income residents.
e) This bill lacks a sunset date to allow periodic review
of this tax expenditure in the future.
f) This bill does not limit the number of years for the
carryover period. As such, FTB would be required to retain
the carryover on the tax forms indefinitely. Recent
credits have been enacted with a carryover period
limitation because credits are typically exhausted within
AB 1938
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eight years of being earned.
g) SB 430 (Vincent), introduced during the 2001-02
Legislative Session, would have provided a credit for
spaying or neutering a cat or dog purchased or adopted by
the taxpayer. SB 430 failed to pass out of the Senate
Revenue and Taxation Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
Animal Switchboard
The California Outdoor Heritage Alliance
The California Veterinary Medical Association
The League of Humane Voters
Opposition
American Federation of State, County and Municipal Employees,
AFL-CIO
California Professional Firefighters
California Tax Reform Association
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098