BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 564
                                                                  Page  1


          ASSEMBLY THIRD READING
          AB 564 (Smyth and Galgiani)
          As Amended  April 6, 2011
          Majority vote 

           REVENUE & TAXATION  9-0         APPROPRIATIONS      17-0        
           
           ----------------------------------------------------------------- 
          |Ayes:|Perea, Donnelly, Beall,   |Ayes:|Fuentes, Harkey,          |
          |     |Charles Calderon,         |     |Blumenfield, Bradford,    |
          |     |Cedillo, Fuentes, Gordon, |     |Charles Calderon, Campos, |
          |     |Harkey, Nestande          |     |Davis, Donnelly, Gatto,   |
          |     |                          |     |Hall, Hill, Lara,         |
          |     |                          |     |Mitchell, Nielsen, Norby, |
          |     |                          |     |Solorio, Wagner           |
          |-----+--------------------------+-----+--------------------------|
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           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.









                                                                  AB 564
                                                                  Page  2


          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, 
            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 








                                                                  AB 564
                                                                  Page  3


            estimates that the annual contribution amount will be less 
            than $250,000, or an adjusted amount for subsequent taxable 
            years.

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

           EXISTING LAW  :

          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  :  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.  

          Assembly Revenue and Taxation Committee Staff Comments:

          1)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 








                                                                  AB 564
                                                                  Page  4


            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.

          2)Legislative history:  AB 2291 (Mendoza), Chapter 328, Statutes 
            of 2008, authorizes 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.  

          3)VCF policy:  The Assembly Revenue and Taxation 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 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.  

           
          Analysis Prepared by  :  M. David Ruff / REV. & TAX. / (916) 
          319-2098 


                                                                FN: 0000929