BILL ANALYSIS Ó AB 564 Page 1 Date of Hearing: May 4, 2011 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 564 (Smyth) - As Amended: April 6, 2011 Policy Committee: Revenue and Taxation Vote: 9-0 Urgency: No State Mandated Local Program: No Reimbursable: No SUMMARY This bill reauthorizes the addition of the Municipal Shelter Spay-Neuter Fund check-off to the personal income tax form upon the removal of another voluntary contribution fund (VCF) from the form. Specifically, this bill: 1)Establishes the Municipal Shelter Spay-Neuter Fund in the State Treasury and 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 check-off. b) To the California Department of Food and Agriculture (CDFA) for distribution of grants to eligible municipal shelters, which are defined as a city or county animal control agency or shelter that is current on its reporting requirements to the State Department of Public Health and offers spay and neuter services for dogs and cats owned by the public. 2)Provides that CDFA shall accept, process and approve grant applications from eligible municipal shelters and award the grants in amounts as specified and make them subject to specified conditions including that grants be used to supplement, not supplant, other funding sources. 3)Requires the repeal of the check-off on either January 1 of the fifth year following the VCF's first appearance on the AB 564 Page 2 return or on January 1 of an earlier year, if FTB estimates that the annual contribution amount will not meet the amount necessary to stay on the form. The required amount will be $250,000, or an amount adjusted for inflation in subsequent taxable years. FISCAL EFFECT FTB estimates this bill will cost the state about $20,000 per year. The FTB estimate assumes the check-off is added in the 2012-13 fiscal year, the donations meet the average amount for the other tax check-offs, and these donations are subsequently claimed as charitable deductions by taxpayers. Revenue losses would be similar in subsequent years, assuming there is no significant change in the amount of donations AB 564 Page 3 COMMENTS 1)Purpose. The author states that 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. The Humane Society of the United States, the bill's sponsor, notes the economic downturn caused this check-off to fall short of the required $250,000 minimum contribution requirement in its second year. 2)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 tax liabilities so they do not directly reduce the amount of state taxes. As charitable contributions, the taxpayer may deduct the amount of the check-off 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 have historically ranged from $300,000 to $800,000 per year. Except for the California Seniors Special Fund, all have sunset dates, and most must meet a minimum annual contribution to remain on the return. 3)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. As a result of the VCF failing to meet a minimum contribution threshold of $250,000, FTB removed it from the return. 2)Related legislation: The following related bills address personal income tax check-offs and have been introduced in the current legislative session: a) AB 233 (Hall) would authorize the addition of the California YMCA Youth and Government Fund check-off to the AB 564 Page 4 personal income tax form upon the removal of another voluntary contribution fund (VCF) from the form. b) AB 764 (Swanson) would add the Victim-Witness Assistance Fund to the form. c) AB 971 (Monning) would extend the current repeal date for the current California Sea Otter Fund. d) SB 164 (Simitian) would extend the repeal dates of the State Children's Trust Fund for the Prevention of Child Abuse and the Rare and Endangered Species Preservation Program to January 1, 2018. Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081