BILL ANALYSIS SENATE COMMITTEE ON VETERANS AFFAIRS JEFF DENHAM, CHAIRMAN Bill No: AB 1088 Author: Fletcher Version: February 27, 2009 Hearing Date: April 13, 2010 Fiscal: Yes Consultant: Donald E. Wilson SUBJECT OF BILL Taxpayer contributions: California Veterans' Quality of Life Fund. PROPOSED LAW 1.Allows for the renewal and changes the name of the Veterans' Quality of Life Fund, a voluntary tax refund contribution designation on state tax forms, to the California Veterans' Home Fund. 2.Requires another voluntary tax contribution (VCF) designation be removed from the tax return form before this designation can be added. 3.Intent language stating money raised is to be in addition to not "supplant," existing money. 4.Sets $250,000 as the minimum annual contribution threshold beginning the second year after it appears on the tax form. 5.Adjusts the minimum annual contribution threshold by indexing inflation to the Consumer Price Index (CPI) as stated on or before August 1 of the calendar year. 6.Has a five-year sunset date after the first year the Veterans' Quality of Life Fund appears on the tax form. EXISTING LAW AND BACKGROUND 1.California opened its first veterans' home in Yountville in 1884 when land was donated to the state for the purpose of taking care of civil war veterans. 2.The Morale, Recreation, and Welfare fund was established to provide activities at the home for its resident veterans. 3.Under existing law regulating the administration of the Personal Income Tax Law, individual taxpayers are allowed to contribute amounts in excess of their tax liability for the support of specified funds or accounts, including, among others, the Veterans' Quality of Life Fund. 4.Existing law requires the expenditure of all moneys contributed to the fund, upon appropriation by the Legislature, for administrative costs and for distribution into the Morale, Welfare, and Recreation Fund for each of the veterans' homes. 5.Existing law sets a minimum dollar threshold that a check-off fund must raise in order to remain on tax return forms. 6.According to the Assembly Revenue and Taxation Committee - "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 in calendar years 2006 and 2007, respectively. The prior fund received $135,345 in 2006 and $168,146 in 2007. 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, and as a result, the fund ceased to be operative." COMMENT Page 2 1.Within the next few years an entire eight-home system will be completed. All homes will eventually need to have a Morale, Recreation, and Welfare Fund. 2. The state can fill the Morale fund from the general fund, which is unlikely in these economic times. Allowing people to donate the money directly from their tax returns relieves the need to find the money in an appropriation through the legislative process. 3.Any administrative costs associated with the tax check off will be covered by donations to the account - not the state treasury. 4.According to the Franchise Tax Board, since the donations are tax deductible and not a tax credit a significant amount of money ($250,000) can be donated to the quality of life fund with an impact of only $15,000 to the state's general fund. 5.Prior votes- a) Assembly Floor 71-0 b) Assembly Appropriations 17-0 c) Assembly Veterans' Affairs 8-0 d) Assembly Revenue & Taxation 5-0 SUPPORT American Legion, Department of California AMVETS, Department of California California Association of County Veterans Service Officers Vietnam Veterans of America, California State Council OPPOSE None received Page 3