BILL ANALYSIS SENATE REVENUE & TAXATION COMMITTEE Senator Lois Wolk, Chair AB 658 - Hayashi Amended: March 4, 2010 Hearing: June 9, 2010 Fiscal: Yes SUMMARY: Allows Taxpayers to Make Voluntary Contributions to the California Police Activities Fund (CALPAL) on their State Personal Income Tax Returns. EXISTING LAW allows taxpayers to contribute money to one or more of 15 voluntary contribution funds by checking a box on their state income tax return. California law requires contributions made through check-offs to be made from taxpayers' own resources (not from their tax liability, as is possible on federal tax returns). Check-off amounts may be claimed as charitable contributions on taxpayers' tax returns during the subsequent year. Allows the Franchise Tax Board (FTB) to design tax returns to provide for the designation of contributions to specified funds either on the return itself or on a separate schedule that must be attached to the return. THIS BILL creates the CALPAL check-off to the personal income tax form upon the removal of another voluntary contribution fund (VCF). Specifically, this bill: Requires the State Controller to allocate the funds to the state CALPAL (the statewide chapter of the nonprofit AB 658 - Hayashi Page 3 organization). Requires the FTB to compile a report of the CALPAL contributions received, by ZIP code, and distribute this report to the state CALPAL and the chairs of the Senate and Assembly Revenue and Taxation Committees. Directs the state CALPAL--upon receipt of the FTB information-to then allocate the funds to local chapters in proportion to the voluntary contributions made in the counties in which the local chapters reside. Provides that a contribution made by a taxpayer in a ZIP code that does not have a CALPAL chapter shall be allocated to the state CALPAL to help establish CALPAL chapters in that ZIP code, or to fund CALPAL activities and programs. Provides that the state CALPAL may use up to 15 percent of the total funds to cover administrative costs of this measure. Sunsets in five years after becoming operative, or whenever FTB estimates the annual contribution amount will be less than $250,000, as adjusted for inflation. FISCAL EFFECT: According to the FTB, this tax check-off will result in an annual revenue loss of approximately $15,000 per year beginning in fiscal year (FY) 2011-12. COMMENTS: A. Purpose of the Bill This bill is intended to provide an additional funding source for CALPAL. The author states that the program plays a vital role in building relationships between law enforcement personnel and community residents, particularly AB 658 - Hayashi Page 3 at-risk youths. B. Background CALPAL is a non-profit organization founded over 35 years ago by police officers and provides educational and recreational programs for youth ages 5-18. Over 300, 000 youth actively participate in CALPAL's 130 local chapters. Local CALPAL chapters are community-based organizations started and operated through the voluntary efforts of law enforcement officers. CALPAL's mission is to effectively connect local law enforcement officers with the communities they serve. The program connects local law enforcement officers, paid staff, and volunteers with youth. CALPAL personnel and volunteers serve as role models, coaches, tutors, mentors, chaperones and program managers. CALPAL chapters receive no state funding and rely exclusively on contributions for funding. C. Many Worthy Causes Taxpayers can make voluntary contributions to any of 15 funds listed on the state personal income tax return. The contributions are in addition to any tax liabilities otherwise owed. Thus, they do not directly reduce state taxes otherwise available to support state-funded programs in the year in which they are made. However, the amounts are allowed as an itemized deduction for charitable contributions on the subsequent year's income tax return. These voluntary contributions support various purposes, including cancer research, endangered species preservation, and emergency food assistance. Contributions to the VCFs have historically ranged from $250,000 to $800,000 per year. All but one VCF (the California Seniors Special Fund) have sunset dates, and most-except for the California Peace Officer Memorial Foundation Fund and the California AB 658 - Hayashi Page 3 Firefighters' Memorial Fund-must meet a minimum annual contribution to remain on the return. In the past, the Committee has expressed concern that countless worthy causes may be funded by tax check-offs. The Committee has stated that the current check-off system forces them to choose between worthy charities and non-profits for a spot on the tax return. The current system remains subjective and is limited to those organizations that can convince the Legislature to include them on the form. Additionally, taxpayers may currently contribute portions of their refunds to worthy organizations. Taxpayers may also claim a deduction for charitable contributions. The Committee may wish to consider whether the state should use the tax code to encourage contributions to certain charitable organizations. In addition to this bill, the following bills have been introduced this year: AB 1008 (Block) would create a VCF designation on the personal income tax form for taxpayers to contribute to the National Guard Education Assistance Fund. This bill is waiting to be heard in the Senate Revenue and Taxation Committee. AB 1088 (Fletcher) would create a VCF designation on the personal income tax return in order for taxpayers to contribute to the Morale, Welfare, and Recreation Fund for each of the veterans' homes, as provided. This bill is also being heard June 9th in the Senate Revenue and Taxation Committee. AB 1983 (Torrico) would create a VCF designation on the personal income tax return for taxpayers to contribute to the Safely Surrender Babies Fund. This bill is waiting to be heard in the Senate Revenue and Taxation Committee. AB 2017 (Hall) would create a VCF designation on the personal income tax return for taxpayers to contribute to the Young Men's Christian Association (YMCA) Youth AB 658 - Hayashi Page 3 and Government Fund. This bill is awaiting assignment in the Senate Rules Committee. SB 1076 (Price) would create a VCF designation on the personal income tax return for taxpayers to contribute to the Arts Council Fund. This bill has been held in the Senate Appropriations Committee. Support and Opposition Support: Alameda County Deputy Sheriffs' Activities League, Inc. (Sponsor), California Police Activities League, Industry Sheriff's Youth Activities League, Hollywood PAL, Rancho Cordova PAL, Antioch PAL, Los Angeles Police Department, Visalia PAL, South Lake Tahoe PAL, and various other local PALs and police departments too numerous to list here. Oppose: None on file. --------------------------------- Consultant: Meg Svoboda