BILL ANALYSIS Ó SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: AB 764 HEARING: 6/29/11 AUTHOR: Swanson FISCAL: Yes VERSION: 5/27/11 TAX LEVY: No CONSULTANT: Faulkner CHILD VICTIMS OF HUMAN TRAFFICKING VOLUNTARY CHECK OFF Creates the Child Victims of Human Trafficking 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 With a few exceptions, VCFs remain on the return until they are either repealed or fail to meet their minimum contribution amount.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 If the FTB estimates that a fund will fail to meet the minimum contribution amount, that fund is repealed effective for taxable years beginning on or after January 1st of the following calendar year. AB 764 -- 5/27/11 -- Page 2 Proposed Law Assembly Bill 764 creates the Child Victims of Human Trafficking Fund. The California Emergency Management Agency will administer the fund monies granted to community-based organizations that agree to serve minor victims of human trafficking. 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fund will be added to the tax form when another VCF is removed and shall remain on the form for five years unless it is repealed earlier for failing to meet the minimum contribution amount. 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, "Nearly 300,000 American children and youth are estimated to be at risk of child sexual exploitation each year. There are many organizations throughout the state that help to provide support services to young men and woman who have been victimized by sexual exploitation. This bill will facilitate these important treatment services by providing a funding mechanism to support organizations that serve sexually exploited minors. AB 764 authorizes individual taxpayers to contribute amounts in excess of their tax liability to the Child Victims of Human Trafficking Fund to be allocated to community-based organizations that serve minor victims of human trafficking." 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. 2011 check-offs . Following is a list of 2011 AB 764 -- 5/27/11 -- Page 3 check-offs and contribution amounts received in 2010: ------------------------------------------------------------- |Alzheimer's Disease/Related |$426,417 | |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 | | ------------------------------------------------------------- 4. 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 AB 764 -- 5/27/11 -- Page 4 omnibus VCF bill could prove time and cost effective. In addition to this bill, the following bills have been introduced this year: 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 will 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 564 (Smyth) reestablishes the Municipal Shelter Spay-Neuter Fund and encourages all persons who prepare state income tax returns to inform their clients in writing that they may contribute to any voluntary contribution check-off on the return. 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. 5. Technical amendments . Currently, there is space on the tax return for additional check-offs. However, as written, if this bill is enacted the Child Victims of Human Trafficking 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 AB 764 -- 5/27/11 -- Page 5 of the VCF to the tax return in the event this bill is enacted: On page 2, line 29, after "return" add "or as soon as space is available". Additionally, on page 3, line 23, strike "Victim-Witness Assistance Fund" and replace it with "Child Victims of Human Trafficking Fund". 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 : County of Alameda (Sponsor); District Attorney of Alameda County (Sponsor); American Federation of State, County and Municipal Employees, AFL-CIO; California Catholic Conference; California Police Chiefs Association; Children's Advocacy Institute; Junior Leagues of California State Public Affairs Committee; Kriss Worthington, Councilmember, City of Berkeley, District 7. Opposition : Unknown.