BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1677
                                                                  Page  1

          Date of Hearing:   April 18, 2012

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                  AB 1677 (Nestande) - As Amended:  March 14, 2012 

          Policy Committee:                              Revenue and 
          Taxation     Vote:                            9-0

          Urgency:     No                   State Mandated Local Program: 
          No     Reimbursable:              

           SUMMARY  

          This bill increases the exemption for small tax certain small 
          tax-exempt organizations from $25,000 normal annual gross 
          receipts to $50,000.  The exemption is for the filing of an 
          annual information return.

           FISCAL EFFECT  

          FTB estimates an annual loss of $90,000 in fiscal year 2012-13, 
          $100,000 in 2013-14 and subsequent years.  This bill would 
          exempt approximately 10,000 organizations from filing and paying 
          a $10 fee.

           COMMENTS  

           1)Author's Statement  .  The author states non-profit 
            organizations, more often than not, pay tax accountants to 
            prepare their taxes and by filing a short return, commonly 
            known as the "postcard," non-profits save money that would 
            otherwise pay a tax accountant and can use those funds for 
            their cause.  The author argues this bill will save 
            non-profits money, not cost the state money and also mirrors 
            state tax law with the federal government's tax law.

           2)Arguments in Support  .  The proponents, Blindness Support 
            Services, Inc. and the Navy League of the United States, state 
            this bill is necessary to bring state tax law in conformity 
            with federal law to help small non-profit organizations. 

           3)Background.   An organization may be exempt from income and 
            franchise taxes if it is organized and operated for exempt 








                                                                  AB 1677
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            purposes and complies with specified requirements.  Religious 
            services, educational programs, medical care, political 
            activities, among others, qualify as exempt-purpose 
            activities.  Even though tax exempt, an organization still 
            must file an annual information return unless it is falls into 
            one of the enumerated exemptions.   
                
            One of the exemptions is for certain organization whose gross 
            receipts are normally less than $25,000 in the tax year.  
            Instead of filing an annual return, a qualified organization 
            submits basic information on a California e-Postcard, Form 
            199-N and is relieved of having to pay the $10 filing fee.  
            The federal exemption has been raised recently to $50,000.   
             
          4)There is no registered opposition to this bill  .

           Analysis Prepared by  :    Roger Dunstan / APPR. / (916) 319-2081