BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 347| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 347 Author: Bass (D), et al Amended: 2/16/10 in Senate Vote: 21 SENATE REVENUE & TAXATION COMMITTEE : 5-0, 2/11/10 AYES: Wolk, Walters, Alquist, Ashburn, Padilla SENATE APPROPRIATIONS COMMITTEE : 7-0, 2/12/10 AYES: Kehoe, Alquist, Corbett, Leno, Price, Walters, Yee NO VOTE RECORDED: Cox, Denham, Liu, Wyland ASSEMBLY FLOOR : 64-3, 1/27/10 - See last page for vote SUBJECT : Income and corporation taxes: charitable tax deductions: Haiti earthquake victims SOURCE : Author DIGEST : This bill allows an individual or a corporate taxpayer to deduct a charitable contribution made for the relief of victims of the earthquake in Haiti on the taxpayer's 2009 tax return, instead of the 2010 tax return. ANALYSIS : Existing federal law: 1. Allows taxpayers to claim an income tax deduction for CONTINUED AB 347 Page 2 charitable contributions. The deduction is generally available for the taxable year in which the contribution is made. Thus, for taxpayers whose taxable year is the calendar year, the tax benefit of a charitable contribution made in January or February will not be realized until the following calendar year when the tax return is filed. 2. Requires taxpayers who claim a charitable deduction to maintain a record of the contribution in the form of a bank record or a written communication from the donee organization showing the name of the organization, the date of the contribution, and the contribution amount. In addition to these recordkeeping requirements, substantiation requirements apply in the case of charitable contributions with a value of $250 or more. Specifically, no charitable deduction is allowed for any contribution of $250 or more unless the taxpayer substantiates the contribution through a contemporaneous written acknowledgement of the contribution by the donee. 3. Allows individual and corporate taxpayers who make qualified charitable contributions in support of the Haiti earthquake relief between January 12, 2010, and March 1, 2010, the choice of deducting those contributions in either the 2009 tax year or the 2010 tax year. [Public Law (P.L.) 111-126]. Provides that, in the case of those contributions, a telephone bill showing the name of the donee organization, the date of the contribution, and the amount of the contribution shall be treated as meeting the prescribed recordkeeping requirements of Internal Revenue Code (IRC) Section 170(f)(17). Existing state law: 1. Conforms partially Person Income Tax (PIT) law to IRC Section 170, as amended as of January 1, 2005, relating to charitable contributions. 2. Provides that corporate charitable contributions are limited to 10 percent of the corporation's net income. AB 347 Page 3 This bill: 1. Provides that, for purposes of the PIT law and the Corporation Tax (CT) law, a taxpayer may treat a cash contribution made after January 11, 2010, and before March 1, 2010, for the relief of victims in areas affected by the earthquake in Haiti on January 12, 2010, as if the contribution was made on December 31, 2009, and not in 2010. 2. Specifies that a deduction for those charitable contributions must be, otherwise, allowable under existing PIT or CT law. 3. Provides that a telephone bill that shows the name of the donee organization, the date of the contribution, and the amount of the contribution meets the recordkeeping requirements of the PIT and CT laws. 4. Is repealed on December 1, 2011. Comment The author states that, "Last Friday, January 22, 2010, President Obama signed into law, HR 4462, a bipartisan measure that allows certain charitable contributions made to earthquake relief efforts in Haiti to be deducted in the 2009 tax year, instead of waiting until the 2010 tax year as provided by existing law. The outpouring of generosity on the part of all Americans and Californians, in particular, to the Haitian earthquake relief efforts has been overwhelming, especially in these tough economic times. The steps taken by the Congress and the President will allow these charitable contributions to be deducted from the 2009 federal income taxes. "I have introduced AB 347, along with Principal co-authors, Assembly Members Block and Calderon, to conform state law to the recently enacted federal provisions, Public Law 111-126. Specifically, AB 347 will allow individual and corporate taxpayers who make cash contributions to eligible charitable organizations for earthquake relief efforts in Haiti to take a tax deduction in the 2009 tax year. AB 347 makes it easier for more Californians to give and AB 347 Page 4 participate in the relief effort that our neighbors in Haiti desperately need." Purpose of this bill . This bill conforms California law to the provisions of P.L. 111-126. Specifically, this bill will give taxpayers the option of treating charitable cash contributions to the Haiti relief effort made after January 11, 2010, and before March 1, 2010, as having been made on December 31, 2009. Thus, taxpayers will have the ability, if they so choose, to take a deduction in this tax season on their 2009 returns. Background The Haiti Earthquake . On January 12, 2010, a 7.0 magnitude earthquake struck the island nation of Haiti approximately 16 miles from the capital city of Port-au-Prince causing widespread destruction and loss of life. The International Federation of the Red Cross estimates that up to three million people have been affected by the disaster, and while numbers are still preliminary, the country's Interior Minister has stated that the death toll could reach 200,000. Prior legislation . This bill is similar to legislation enacted following the Indian Ocean tsunami of December 26, 2004. Specifically, SB 50 (Campbell), Chapter 5, Statutes of 2005, conformed to federal law by allowing individual and corporate taxpayers that made qualified charitable contributions in January 2005 to deduct those contributions in either the 2004 or 2005 tax year. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No The Franchise Tax Board staff estimates that this bill will result in a revenue loss of $80,000 in fiscal year 2009-10 and a gain of $80,000 in fiscal year 2010-11. SUPPORT : (Verified 2/16/10) California Society of Enrolled Agents Spidell Publishing, Inc. AB 347 Page 5 ASSEMBLY FLOOR : AYES: Adams, Ammiano, Arambula, Beall, Tom Berryhill, Blakeslee, Block, Blumenfield, Bradford, Brownley, Buchanan, Caballero, Charles Calderon, Chesbro, Conway, Cook, Coto, De La Torre, Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick, Gilmore, Hagman, Harkey, Hayashi, Hernandez, Hill, Huber, Huffman, Jeffries, Jones, Knight, Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande, Niello, John A. Perez, Portantino, Ruskin, Silva, Smyth, Solorio, Audra Strickland, Swanson, Torres, Torrico, Tran, Villines, Yamada NOES: Anderson, Bill Berryhill, Nielsen NO VOTE RECORDED: Carter, Davis, De Leon, DeVore, Hall, V. Manuel Perez, Salas, Saldana, Skinner, Torlakson, Bass DLW:mw 2/16/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****