BILL ANALYSIS Ó SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: AB 971 HEARING: 6/29/11 AUTHOR: Monning FISCAL: Yes VERSION: 4/25/11 TAX LEVY: No CONSULTANT: Faulkner CALIFORNIA SEA OTTER VOLUNTARY CONTRIBUTION FUND Reenacts the California Sea Otter check-off for five years. 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 With a few exceptions, VCFs remain on the return until they are either repealed or fail to meet their minimum contribution amount.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 If the FTB estimates that a fund will fail to meet the minimum contribution amount, that fund is repealed effective for taxable years beginning on or after January 1st of the following calendar year. The California Sea Otter Fund first appeared on the 2006 personal income tax return and was automatically repealed AB 971 -- 4/25/11 -- Page 2 on January 1, 2011 pursuant to the original legislation (AB 2485, Jones, 2006). To date, the fund has raised over $1.3 million and additional contributions continue to be received with 2010 returns. Proposed Law Assembly Bill 971 reenacts the California Sea Otter Fund that was repealed on January 1, 2011. The check-off will be repealed on January 1, 2016 or on January 1st of an earlier year if the FTB estimates the fund will not meet the annually specified minimum contribution amount. The 2011 minimum contribution amount is $260,890. AB 971 requires money into the fund, upon appropriation by the Legislature, be allocated to the Department of Fish and Game for the purposes of establishing a sea otter fund and to the California Coastal Conservancy for competitive grants and contracts for research, projects, and programs related to the Federal Sea Otter Recovery Plan or improving the nearshore ocean ecosystem. State Revenue Impact The FTB estimates this bill will result in a revenue loss of $15,000 each fiscal year the Fund is in place. Comments 1. Purpose of the bill . The author states, "The California Sea Otter Fund supports researchers and managers in their efforts to study and protect the threatened population of sea otters in California, which were decimated by the early 1900s. Today, fewer than 3,000 sea otters exist along the state's coastline - one-fifth of the historic population - and we do not yet know why the population is recovering so slowly. The California Sea Otter Fund is a primary source of funding for sea otter field research. To date, the California Sea Otter Fund has supported the AB 971 -- 4/25/11 -- Page 3 advancement of a long-term study to identify impacts to sea otter health, including chemical and pathogen pollution that is prominent off the developed areas of the California coast. Findings from this study will help inform government agencies, scientists, and other sea otter supporters on how best to protect the sea otter and the health of our coast." 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 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 | |------------------------------+------------------------------| AB 971 -- 4/25/11 -- Page 4 |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 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 AB 971 -- 4/25/11 -- Page 5 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 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. Assembly Actions Assembly Revenue and Taxation Committee 6-0 Assembly Appropriations Committee:17-0 Assembly Floor 72-3 Support and Opposition (6/23/11) Support : Defenders of Wildlife (Co-sponsor); Monterey Bay Aquarium (Co-sponsor); Aquarium of the Pacific; Cal Coast; California Coastkeeper Alliance; Environmental Defense Fund; Friends of the Sea Otter; Heal the Bay; NRDC; Oceana; Paw PAC; Planning and Conservation League; Robert Down Elementary School Fifth Graders in Pacific Grove, California; Save Our Shores; Seventh Generation Advisors; Sierra Club California; Temple Beth El Second Graders in Aptos, California; The Otter Project; WILDCOAST/COASTASALVAJE; two individuals. Opposition : Unknown.