BILL ANALYSIS Ó SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: AB 564 HEARING: 6/29/11 AUTHOR: Smyth FISCAL: Yes VERSION: 4/6/11 TAX LEVY: No CONSULTANT: Faulkner MUNICIPAL SHELTER SPAY-NEUTER CHECK OFF Reestablishes the Municipal Shelter Spay-Neuter Fund check-off. Background and Existing Law Existing state law allows taxpayers to contribute money to one or more of 15 voluntary contribution funds (VCFs) by checking a box on their state income tax return. California law requires contributions made through check-offs to be made from taxpayers' own resources and not from their tax liability, as is possible on federal tax returns. Check-off amounts may be claimed as charitable contributions on taxpayers' tax returns during the subsequent year. The Franchise Tax Board (FTB) designs tax returns to provide for the designation of contributions to specified funds either on the return itself or on a separate schedule that must be attached to the return. With a few exceptions, VCFs remain on the return until they are either repealed or fail to meet their minimum contribution amount. The minimum contribution amounts are adjusted annually for inflation. For most VCFs, the minimum contribution amount is $250,000 in the fund's second year. By September 1st of each year, the FTB must determine the minimum contribution amount required for each fund to remain on the form for the following calendar year and whether estimated contributions to each fund will be less than the minimum contribution amount for that calendar year. If the FTB estimates that a fund will fail to meet the minimum contribution amount, that fund is repealed effective for taxable years beginning on or after January 1st of the following calendar year. The Municipal Shelter Spay-Neuter Fund first appeared on the 2008 personal income tax return but was removed from AB 564 -- 4/6/11 -- Page 2 the 2010 return for failing to meet its minimum contribution requirement amount of $250,000 in the second year of its existence. Contributions of $210,029 and $194,462 were made to the fund in calendar years 2009 and 2010, respectively. The fund's original repeal date was January 1, 2013. Proposed Law Assembly Bill 564 reestablishes the Municipal Shelter Spay-Neuter Fund. The fund will be added to the tax form when another VCF is removed and shall remain on the form for five years unless it is repealed earlier for failing to meet the minimum contribution amount. AB 564 defines "eligible municipal shelter" and authorizes the Department of Food and Agriculture to distribute grants to eligible municipal shelters for the purposes of providing low cost or free spay-neuter services and programs for dogs and cats owned by individual members of the public. The grants are on a first-come-first-served basis and allocated based on the number of cats and dogs the eligible municipal shelter processes each year. The grant funds cannot be used to spay or neuter any animal that is impounded. AB 564 also encourages all persons who prepare state income tax returns to inform their clients, in writing prior to completion of the return, that they may make a contribution to any voluntary contribution check-off on the return. State Revenue Impact The FTB estimates this bill will result in a revenue loss of $20,000 each fiscal year the Fund is in place. Comments 1. Purpose of the bill . The author states, "Voluntary spay and neuter programs hosted by shelters throughout the state are crucial to limiting the number of unwanted and abandoned pets. More than 830,000 dogs and cats entered animal shelters in California in 2009. The staggering AB 564 -- 4/6/11 -- Page 3 amount of animals in need of support from California shelters places a significant financial burden on local facilities, costing them an estimated quarter of a billion dollars annually. Many municipally-run shelters rely on donations to support program including voluntary spay and neuter efforts. By placing the Municipal Shelter Spay-Neuter Fund on the tax form, Californians will be given an opportunity to support the needs of shelters by making voluntary contributions to this new fund." 2. Many worthy causes . Countless worthy causes may be funded by tax check-offs. The current system remains subjective and is limited to those organizations that can convince the Legislature to include them on the form. These check-offs give the state a role in collecting money for charity. The Committee may wish to consider whether the state should use the tax code to encourage contributions to certain charitable organizations. 3. Rerun . This fund recently appeared on the return but was repealed for failing to meet its minimum contribution requirement. Should the fund be given a second chance so soon after it failed? The Committee may wish to consider the precedent of reestablishing past VCFs that have failed to garner sufficient support. 4. Public vs. private . The State Humane Association of California reports that many public shelters contract with private shelters for spay-neuter services. For example, the East Bay SPCA in Oakland performs 10,500 spay-neuter surgeries annually, which includes surgeries for Oakland and Alameda. They charge $100 for dogs and $60 for cats. Rescue groups and municipal agencies receive a further discount. The East Bay SPCA also provides low-income and free spay-neuter services. All pit bulls and pit-bull mixes are free. Only approximately 30% of the surgeries are full price. If the Committee wishes to reestablish this fund, the Committee may wish to consider including private shelters that perform a certain amount of spay-neuter surgeries for an eligible municipal shelter. 5. 2011 check-offs . Following is a list of 2011 check-offs and contribution amounts received in 2010: ------------------------------------------------------------- |Alzheimer's Disease/Related |$426,417 | AB 564 -- 4/6/11 -- Page 4 |Disorders Fund | | |------------------------------+------------------------------| |Arts Council Fund |Initial Tax Return 2010 | |------------------------------+------------------------------| |CA Breast Cancer Research |$519,728 | |Fund | | |------------------------------+------------------------------| |CA Cancer Research Fund |$275,587 | |------------------------------+------------------------------| |CA Firefighters' Memorial |$207,455 | |Fund | | |------------------------------+------------------------------| |CA Fund for Senior Citizens |$296,144 | |------------------------------+------------------------------| |CA Peace Officer Memorial |$135,250 | |Foundation Fund | | |------------------------------+------------------------------| |CA Police Activities League |Initial Tax Return 2010 | |(CALPAL) Fund | | |------------------------------+------------------------------| |CA Sea Otter Fund |$263,543 | |------------------------------+------------------------------| |CA Seniors Special Fund |$59,192 | |------------------------------+------------------------------| |CA Veterans Homes Fund |Initial Tax Return 2010 | |------------------------------+------------------------------| |Emergency Food for Families |$487,333 | |Fund | | |------------------------------+------------------------------| |Rare & Endangered Species |$578,215 | |Preservation Program | | |------------------------------+------------------------------| |Safely Surrendered Baby Fund |Initial Tax Return 2010 | |------------------------------+------------------------------| |State Children's Trust for |$448,081 | |the Prevention of Child Abuse | | ------------------------------------------------------------- 6. Can we all get along ? There are currently eight VCF bills making their way through the Legislature. With an estimated cost of $16,000 per bill to go through the legislative process, combining future VCF proposals into an omnibus VCF bill could prove time and cost effective. In addition to this bill, the following bills have been introduced this year: AB 564 -- 4/6/11 -- Page 5 SB 164 (Simitian) extends the repeal dates of both the State Children's Trust Fund for the Prevention of Child Abuse and the Rare and Endangered Species Preservation Program from January 1, 2013 to January 1, 2018. The Assembly Revenue and Taxation Committee with hear the bill on June 27th. SB 583 (Vargas) reestablishes the ALS/Lou Gehrig's Disease Research Fund. The bill is in the Assembly Appropriations Committee. SB 803 (DeSaulnier) creates a VCF designation on the personal income tax form for taxpayers to contribute to California Youth Leadership Project. The bill remains in the Senate Appropriations Committee. SBX1 3 (LaMalfa) creates a VCF designation on the personal income tax form, the Help Our State Fund, for taxpayers to contribute to the General Fund. The Committee will hear the bill on July 29th. AB 233 (Hall) creates a VCF designation on the personal income tax form for taxpayers to contribute to the California YMCA Youth and Government Fund. The Committee will hear the bill on July 29th. AB 764 (Swanson) creates a VCF designation on the personal income tax form for taxpayers to contribute to the Child Victims of Human Trafficking Fund. The Committee will hear the bill on July 29th. AB 971 (Monning) reestablishes the California Sea Otter Fund. The Committee will hear the bill on July 29th. 7. Technical amendment . Currently, there is space on the tax return for additional check-offs. However, as written, if this bill is enacted the Municipal Shelter Spay-Neuter Fund would be added when another VCF is removed. The Committee staff suggests the following language be included in the bill to expedite the addition of the VCF to the tax return in the event this bill is enacted: On page 3, line 32, after "return" add "or as soon as space is available". AB 564 -- 4/6/11 -- Page 6 Assembly Actions Assembly Revenue and Taxation Committee: 9-0 Assembly Appropriations Committee:17-0 Assembly Floor: 74-2 Support and Opposition (6/23/11) Support : Concerned Dog Owners of California (Co-sponsor); Humane Society of the United States (Co-sponsor); Laborers' International Union of North America Locals 777 and 792; Paw PAC; San Lorenzo Dog Training Club; Seventh Generation Advisors; State Human Association of California (if amended). Opposition : Unknown.