BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 564
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          Date of Hearing:  April 4, 2011

                     ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
                                Henry T. Perea, Chair

                  AB 564 (Smyth) - As Introduced:  February 16, 2011

          Majority vote.  Fiscal committee.
           
          SUBJECT  :  Income taxes:  voluntary contributions:  Municipal 
          Shelter Spay-Neuter Fund 

           SUMMARY  :  Reauthorizes the addition of the Municipal Shelter 
          Spay-Neuter Fund (Fund) checkoff to the personal income tax 
          (PIT) form upon the removal of another voluntary contribution 
          fund (VCF) from the form.  Specifically,  this bill  :  

          1)Establishes the Fund in the State Treasury.

          2)Provides that all moneys transferred to the Fund, upon 
            appropriation by the Legislature, shall be allocated as 
            follows:

             a)   To the Franchise Tax Board (FTB) and the State 
               Controller for reimbursement of all costs incurred in 
               administering the checkoff; and,

             b)   To the California Department of Food and Agriculture 
               (CDFA) for distribution of grants to "eligible municipal 
               shelters."  

          3)Defines an "eligible municipal shelter" as a city or county 
            animal control agency or shelter that is current on its 
            reporting requirements to the State Department of Public 
            Health (DPH), Veterinary Public Health Section, and offers 
            spay and neuter services for dogs and cats owned by individual 
            members of the public.

          4)Provides that grants shall be made available to provide spay 
            and neuter services and programs for dogs and cats.

          5)Provides that no grant shall be made, and no grant funds shall 
            be used, to spay or neuter any animal that is impounded by an 
            eligible municipal shelter.  Further, if CDFA determines that 
            an eligible municipal shelter has misused its grant funds, 








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            that shelter shall no longer be eligible for grants.  

          6)Provides that CDFA shall do all of the following:

             a)   Accept grant applications from eligible municipal 
               shelters;

             b)   Process and approve, or reject all applications on a 
               first-come-first-served basis, in the following manner:

               i)     Eligible municipal shelters processing fewer than 
                 5,000 dogs and cats each year shall receive up to $7,500;

               ii)    Eligible municipal shelters processing between 5,000 
                 and 25,000 dogs and cats each year shall receive up to 
                 $15,000; and, 

               iii)   Eligible municipal shelters processing more than 
                 25,000 dogs and cats shall receive up to $22,500.

             c)   Make applications available to eligible municipal 
               shelters on the first day of the second calendar year after 
               the Fund first appears on the form.

          7)Provides that any grants distributed create an additional 
            funding source for spay and neuter services for eligible 
            municipal shelters and shall be used to supplement, not 
            supplant, other funding sources. 

          8)Requires DPH, upon the written request of CDFA, to make 
            available information regarding whether a city or county 
            animal control agency or shelter is current on its reporting 
            requirements.

          9)Provides for the VCF's automatic repeal on either January 1 of 
            the fifth taxable year following the VCF's first appearance on 
            the PIT return or on January 1 of an earlier year, if FTB 
            estimates that the annual contribution amount will be less 
            than $250,000, or an adjusted amount for subsequent taxable 
            years.

          10)Requires income tax preparers to inform taxpayers of all 
            existing VCFs to which contributions may be made.

           EXISTING LAW  :








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          1)Allows taxpayers to designate on their PIT returns a 
            contribution to any of 15 VCFs.

          2)Provides a specific sunset date for each VCF, except for the 
            California Seniors Special Fund.

          3)Provides that each VCF must meet a minimum annual contribution 
            amount to remain in effect, except for the California Seniors 
            Special Fund, the California Firefighters' Memorial Fund, and 
            the California Peace Officer Memorial Foundation Fund.   

           FISCAL EFFECT  :  The FTB estimates revenue losses, resulting from 
          contribution deductions, to be around $20,000 annually.  

           COMMENTS  :   

          1)The author has provided the following statement in support of 
            this bill:

               Voluntary spay and neuter programs hosted by shelters 
               throughout the state are crucial to limiting the number of 
               unwanted and abandoned pets.  Sheltering pets is a huge 
               financial burden to local governments, costing them an 
               estimated quarter of a billion dollars every year.  
               Unfortunately, shelters struggle to financially meet 
               current needs.  By placing the Municipal Shelter 
               Spay-Neuter Fund on tax forms, Californians will be given 
               an opportunity to support the needs of shelters by making 
               voluntary contributions to this new fund.  In addition, all 
               voluntary contribution funds currently listed on the tax 
               form will benefit from the provision in this bill that will 
               require tax preparers to notify clients of the opportunity 
               to donate to funds listed on the tax form.  

          2)The Humane Society of the United States (Humane Society) is 
            sponsoring this bill. The Humane Society notes:

               During 2009 and 2010 when the Municipal Spay/Neuter Fund 
               (established by enactment of AB 2291 in 2008) appeared on 
               personal income tax forms, more than $400,000 was collected 
               from roughly 40,000 tax filers.  Unfortunately, the 
               economic downturn conspired against the new and fledgling 
               fund - causing it to fall short of the required $250,000 
               minimum contribution requirement in its second year.  At a 








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               time when local animal protection agencies - non-profit and 
               public - are struggling to meet operational obligations, 
               preventive spay/neuter services like those funded through 
               voluntary contribution funds are essential.  We are 
               committed to helping promote the fund to taxpayers to help 
               ensure future thresholds are met.  

          3)Proponents state:

               California's economic downturn has resulted in a dramatic 
               influx of animals into local animal shelters.  In 2009 more 
               than 830,000 dogs and cats entered animal shelters.  The 
               demand for care far outweighs the resources and staff 
               available to provide this care.  Accordingly, the 
               unfortunate reality of this situation is that many 
               sheltered animals are euthanized instead of being placed in 
               loving homes.  

          4)Committee Staff Comments:

              a)   So Many Causes, So Little Space :  There are countless 
               worthy causes that would benefit from the inclusion of a 
               new VCF on the state's income tax returns.  At the same 
               time, space on the returns is limited.  Thus, it could be 
               argued that the current system for adding VCFs to the form 
               is subjective and essentially rewards organizations that 
               can convince the Legislature to include their fund on the 
               form.

              b)   Legislative History  :  AB 2291 (Mendoza), Chapter 328, 
               Statutes of 2008, authorized the addition of an identical 
               VCF with the same name.  This VCF appeared on the 2008 and 
               2009 tax returns in calendar years 2009 and 2010 
               respectively.  The prior VCF received $210,029 in 2009 and 
               $194,462 in 2010.  In 2010, the VCF needed to meet a 
               minimum contribution threshold of $250,000 but failed to do 
               so, and as a result, the VCF ceased to be operative.  

              c)   VCF Policy  :  This Committee's VCF policy provides that, 
               "All proponents seeking authorization for a new or 
               reauthorized checkoff shall provide information justifying 
               their expectation that the checkoff will meet its 
               contribution minimum."  Given that an identically named VCF 
               failed to meet its minimum contribution threshold only a 
               few years ago, it is an open question whether this Fund 








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               will fare any better.  The Humane Society, which is 
               sponsoring this bill, states that "We are committed to 
               helping promote the fund to taxpayers to help ensure future 
               thresholds are met."  Nevertheless, Committee staff 
               questions the precedent of simply re-establishing past VCFs 
               when they fail to garner sufficient support to remain on 
               the form.  

              d)   Notification Requirement  :  In addition to its standard 
               VCF provisions, this bill would also require income tax 
               preparers to inform clients of all existing VCFs to which 
               contributions can be made.  No penalties are imposed for 
               noncompliance however.  Thus, while this provision 
               establishes an affirmative duty on the part of tax 
               preparers, it would operate in a more advisory fashion.  
               Committee staff questions whether this provision is 
               necessary, given that existing law already contains intent 
               language, in Business and Professions Code Section 22252.5, 
               encouraging "all persons who prepare state income tax 
               returns, including tax preparers, to inform their clients 
               in writing . . . that they may make a contribution to any 
               VCF] if they so choose."  

              e)   Related Legislation  :  The following related bills have 
               been introduced in the current Legislative Session:

               i)     AB 233 (Hall) would add the California YMCA Youth 
                 and Government Fund to the form; 

               ii)    AB 764 (Swanson) would add the Victim-Witness 
                 Assistance Fund to the form; and,   

               iii)   AB 971 (Monning) would extend the current repeal 
                 date for the current California Sea Otter Fund. 

              f)   Late Breaking News  :  The author has recently indicated 
               his desire to take amendments in Committee to do the 
               following:
              
                i)     Delete the bill's notification provisions; and, 
                
                ii)    Replace these provisions with legislative intent 
                 language encouraging tax preparers to inform their 
                 clients in writing that they may make a contribution to 
                 any VCF on the state income tax return.   








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          REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          Humane Society of the United States (sponsor) 
          Laborers' International Union of North America Locals 777 and 
          792 
          1 individual

           Opposition 
           
          None on file 
           
          Analysis Prepared by  :  M. David Ruff / REV. & TAX. / (916) 
          319-2098