BILL ANALYSIS                                                                                                                                                                                                    




                     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          repealed or fail to meet their minimum contribution amount.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          that fund is repealed effective for taxable years beginning 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 




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          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:





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          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".






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                                 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.