BILL ANALYSIS AB 1088 Page 1 Date of Hearing: January 21, 2010 ASSEMBLY COMMITTEE ON APPROPRIATIONS Kevin De Leon, Chair AB 1088 (Fletcher) - As Amended: January 11, 2010 Policy Committee: Revenue and Taxation Vote: 5-0 Veterans Affairs 8-0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill reinstates (under a new name) a voluntary contribution fund that fell below minimum contribution requirements and thus was removed from state income tax returns in 2007. Specifically, the bill: 1)Adds the California Veterans Fund to the list of voluntary contribution funds included on the personal income tax form. 2)Provides that the new fund will be included on the return upon removal of an existing fund, and will remain on the form for five years unless contributions fall below $250,000 per year. 3)Requires the California Department of Veterans Affairs (CDVA) to allocate the funds to the administrators of veterans' homes for the support of veterans' home services. FISCAL EFFECT 1)The contributions may be taken as an itemized deduction on income tax returns. The Franchise Tax Board estimates that the annual revenue losses from these deductions would be about $15,000. 2)Administrative costs will be deducted from the contribution proceeds. COMMENTS 1)Rationale . The bill is intended to provide additional funding AB 1088 Page 2 for veterans home programs. The author notes that, with five new California Veterans Homes set to be built, present funding for veterans' home programs is being stretched thin. 2)Background-voluntary contribution funds (VCFs) . California 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 most VCFs have historically ranged from $300,000 to $800,000 per year. All but one VCF (the California Seniors Special Fund) have sunset dates, and most must meet a minimum annual contribution to remain on the return. 3)Second try . AB 357 (Horton), Chapter 143, Statutes of 2005, authorized the addition of a virtually identical VCF called the Veterans' Quality of Life Fund to augment the amount of money available to the state's veterans' homes. The Veterans' Quality of Life Fund appeared on the 2005 and 2006 tax returns. For tax years beginning on or after January 1, 2007, the fund needed to meet a minimum contribution threshold of $250,000 but failed to do so (receiving less than $170,000 in each of its first two years), and as a result, the fund ceased to be operative. It is not clear whether anything has changed that would lead to higher contribution levels in the future. Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081