BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 564
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          Date of Hearing:   May 4, 2011

                                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


          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 


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            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


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           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 


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               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