BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 394 HEARING: 6/26/13
AUTHOR: Yamada FISCAL: Yes
VERSION: 4/18/13 TAX LEVY: No
CONSULTANT: Austin
PERSONAL INCOME TAX: VOLUNTARY CONTRIBUTION: ALZHEIMER'S
DISEASE.
Extends from 2015 until 2020 the "California Alzheimer's
Disease and Related Disorders Research Fund" Check-Off.
Background and Existing Law
Existing law allows taxpayers to contribute to one or more
of 18 voluntary contribution funds, known as VCFs or
check-offs, 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 in 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repealed by a sunset date, or if they fail to meet a
minimum contribution amount. Minimum contribution amounts
are adjusted annually for inflation, with specific
exceptions. For most VCFs, the minimum contribution amount
is $250,000, beginning 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
estimate whether contributions to each fund meet that
amount. If the FTB estimates that a fund will fail to meet
its minimum contribution amount, that fund is repealed for
the following calendar year.
AB 394 -- 4/18/13 -- Page 2
The following check-offs do not have a minimum contribution
requirement:
California Firefighters' Memorial Foundation Fund,
California Peace Officer Memorial Foundation Fund,
and
California Seniors Special Fund.
Proceeds from tax check-offs are dedicated to a range of
programs. The following list provides information on all
the check-offs as well as how many groups are eligible to
receive funding. Some of the funds have been repealed by
their own terms.
------------------------------------------------------------
|Voluntary | 2012 | Contribution Allotment |
|Contribution Fund |Contribution| |
| | Totals | |
|---------------------+------------+-------------------------|
|ALS/Lou Gehrig's | $137,290 |As many as apply and |
|Disease Research | |receive grants provided |
|Fund | |for by the monies |
| | |contributed. |
|---------------------+------------+-------------------------|
|Alzheimer's | $466,485 |As many as contract or |
|Disease/Related | |receive grants provided |
|Disorders Fund | |by the monies |
| | |contributed. |
|---------------------+------------+-------------------------|
|Arts Council Fund | $165,647 |As many as apply and |
| | |receive grants provided |
| | |by the monies |
| | |contributed. |
|---------------------+------------+-------------------------|
|CA Breast Cancer | $440,771 |As many as apply and |
|Research Fund | |receive grants provided |
| | |from the monies |
| | |contributed. |
|---------------------+------------+-------------------------|
|CA Cancer Research | $432,355 |As many as apply and |
|Fund | |receive grants provided |
| | |from the monies |
| | |contributed. |
|---------------------+------------+-------------------------|
|CA Firefighters' | $152,004 |1 Group: California Fire |
|Memorial Fund | |Foundation. |
AB 394 -- 4/18/13 -- Page 3
|---------------------+------------+-------------------------|
|CA Fund for Senior | $272,742 |1 Group: California |
|Citizens | |Senior Legislature. |
|---------------------+------------+-------------------------|
|CA Peace Officer | $136,172 |1 Group: California |
|Memorial Foundation | |Peace Officer Memorial |
|Fund | |Commission. |
|---------------------+------------+-------------------------|
|CA Police Activities | $67,202 |The state CALPAL and |
|League (CALPAL) Fund | |county CALPAL chapters. |
|---------------------+------------+-------------------------|
|CA Sea Otter Fund | $351,037 |Department of Fish and |
| | |Wildlife, and as many as |
| | |apply for grants and |
| | |contracts provided for |
| | |by 50% of contributions. |
|---------------------+------------+-------------------------|
|CA Seniors Special | $61,315 |The first $80K to the |
|Fund | |Area Agency on Aging |
| | |Advisory Council of |
| | |California and the rest |
| | |to area agencies as |
| | |allocated by the |
| | |California Department of |
| | |Aging. |
|---------------------+------------+-------------------------|
|CA YMCA Youth and |Initial Tax |The first $300K to the |
|Government Fund |Return 2012 |CA YMCA Youth and |
| | |Government Program. The |
| | |rest is allocated in |
| | |$10K annual grants to |
| | |the: African American |
| | |Leaders for Tomorrow |
| | |Program, Asian Pacific |
| | |Youth Leadership |
| | |Project, Chicano Latino |
| | |Youth Leadership |
| | |Project. The money is |
| | |to be used to support |
| | |program participation. |
| | |Remaining funds |
| | |allocated to the CA YMCA |
| | |Youth and Government |
| | |Program, whose board may |
| | |award additional $10K |
| | |annual grants to |
AB 394 -- 4/18/13 -- Page 4
| | |additional nonprofit |
| | |civic youth |
| | |organizations. The funds |
| | |distributed to the CA |
| | |YMCA Youth and |
| | |Government Program are |
| | |to be used for |
| | |program-related |
| | |expenses. |
|---------------------+------------+-------------------------|
|CA Youth Leadership |Initial Tax |1 group: Department of |
|Fund |Return 2012 |Education to provide for |
| | |the CA Youth Leadership |
| | |Project. |
|---------------------+------------+-------------------------|
|CA Veterans Homes | $210,078 |The number of |
|Fund | |established veteran's |
| | |homes (7). |
|---------------------+------------+-------------------------|
|Child Victims of | $35,317 |As many counseling and |
|Human Trafficking | |prevention centers that |
|Fund | |apply and receive grants |
| | |provided from monies |
| | |contributed. |
|---------------------+------------+-------------------------|
|Emergency Food for | $551,515 |1 group: Department of |
|Families Fund | |Social Services for the |
| | |Emergency Food |
| | |Assistance Program. |
|---------------------+------------+-------------------------|
|Municipal Shelter | $244,701 |As many as apply and |
|Spay-Neuter Fund | |receive grants provided |
| | |from the monies |
| | |contributed. |
|---------------------+------------+-------------------------|
|Rare & Endangered | $558,681 |1 group: Department of |
|Species Preservation | |Fish and Wildlife |
|Program | |endangered conservation |
| | |programs. |
|---------------------+------------+-------------------------|
|Safely Surrendered | $158,645 |1 group: Department of |
|Baby Fund | |Social Services for |
| | |Safely Surrender Baby |
| | |Law awareness programs. |
|---------------------+------------+-------------------------|
|School Supplies for |Initial Tax |As many as apply and |
AB 394 -- 4/18/13 -- Page 5
|Homeless Children |Return 2012 |receive grants provided |
|Fund | |for by the monies |
| | |contributed. |
|---------------------+------------+-------------------------|
|State Children's | $376,243 |1 group: Department of |
|Trust for the | |Social Services for |
|Prevention of Child | |prevention and |
|Abuse | |intervention programs. |
|---------------------+------------+-------------------------|
|State Parks |Initial Tax |As many as purchase a |
|Protection |Return 2012 |parks pass that can be |
|Fund/Parks Pass | |provided from the monies |
|Purchase | |contributed. |
------------------------------------------------------------
Proposed Law
Assembly Bill 394 extends from January 1, 2015, the current
expiration date, until January 1, 2020 the California
Alzheimer's Disease and Related Disorders Research Fund
check off on the tax form. The bill maintains all the
existing requirements for the program including the annual
reporting by September 1st of each year, and the minimum
contribution requirements adjusted for inflation.
State Revenue Impact
The Franchise Tax Board estimates that this bill will
result in about $10,000 in lost revenue annually.
Comments
1. Purpose of the bill . Assembly Bill 394 would extend,
for five years, the sunset deadline for the tax check off
in support of the "California Alzheimer's Disease and
Related Disorders Research Fund." Established in 1987,
this tax check-off has raised $11.3 million dollars from
1.3 million tax payers, averaging $14.18 per person, to
fund 122 research studies on the cause, diagnosis,
treatment, prevention and care of people living with
AB 394 -- 4/18/13 -- Page 6
Alzheimer's and related dementias. The Alzheimer 's
Disease Program in the Department of Public Health
distributes tax check-off funds to California researchers
through a competitive grant process, which enables them to
gain creditability, funding, and competitive position to
receive further funding from other entities. AB 394 would
temporarily extend the fund's lifespan on the tax check-off
form.
2. Is there a better way ? Each year, the Committee
considers several bills relating to tax check-offs.
Previous committee analyses expressed concern over
establishing new tax check-offs or adopting special
legislation for a specific charity or program. The
Legislature has chosen to encourage charitable giving by
allowing organizations to receive funding through
check-offs and taxpayers to receive credit for charitable
giving on their tax return. The current design and
administration of the existing tax check-off program raises
a number of concerns that suggest the need for a different
approach to tax check-offs.
The current program generates a relatively small
share of statewide contributions.
The Franchise Tax Board reports that in 2012, 89,335
taxpayers contributed around $4.7 million to
California's tax check-off programs. Out of
approximately 15 million tax filers, less than 1% of
Californians are utilizing the tax check-off program
to make donations to charitable organizations. Data
from 2008, as analyzed by the Chronicle of
Philanthropy, indicate that in that year Californians
donated more than $17 billion to charities, ranking
the state first in the nation for sources of
charitable contributions and accounting for $1 in
every $8 donated in the U.S. In light of the low
participation rate among tax filers, and relatively
small level of funds contributed through tax
check-offs it is not clear that the tax check-off
program, as currently administered, is an efficient
and effective strategy to connect donors with
charitable organizations.
Increasing demand from charitable organizations
that want to participate in the program may soon
generate significant costs.
AB 394 -- 4/18/13 -- Page 7
Prior to a redesign of tax forms, and movement toward
greater use of electronic filings, there were more tax
check-off programs that could be accommodated on the
tax forms. While changes to the tax forms has
accommodated more tax check-offs, the FTB reports that
it can accommodate 12-15 additional tax check-offs
before its information technology system will need to
be redesigned, at a cost of between $800,000 and $1
million. Depending on the number of additional tax
check-offs approved by the Legislature each year, it
could be two-five years before the FTB's systems must
be upgraded.
The current tax check-off program lacks monitoring
to ensure that charities comply with state
requirements.
In authorizing tax check-offs, with some exceptions,
the Legislature has required that check-offs must
generate contributions that exceed a specified minimum
to remain on the tax form. This policy decision was
largely driven by competition for limited space on the
tax form. Other than the requirements to meet the
minimum contribution threshold, there are no specific
requirements in the tax code that govern participation
in a tax check-off program. For instance, charitable
organizations are required to meet numerous reporting
and filing requirements consistent with their
charitable status. SB 1262 (Sher, 2004) established
requirements for charitable organizations making
contracts for fundraising, including requirements for
those charities, register with the Office of the
Attorney General. There is no requirement under the
tax check-off statutes that the FTB or other agencies
administering tax check-off funds confirm that
recipient charities comply with these and other state
rules and regulations.
The Committee may wish to consider directing committee
staff to develop and submit proposals to revise the design
and administration of the tax check-off program to:
Continue to encourage charitable giving
Streamline the process for charitable organizations
and donors
Establish clear and consistent standards in statute
AB 394 -- 4/18/13 -- Page 8
for including a tax check-off in the new program
Designate an administering agency to implement the
program, enforce standards, and monitor program
effectiveness.
3. Related legislation . AB 394 is not the only bill
dealing with tax check-offs this legislative session:
Assembly Bill 247 (Wagner) extends the repeal date for
the California Fund for Senior Citizens tax check-off on
the tax form from 2015 to 2020.
Assembly Bill 511 (Pan) creates the American Red Cross,
California Chapters Fund check-off on the tax form.
Assembly Bill 754 (Muratsuchi) creates the Protect Our
Coast and Oceans Fund check-off on the tax form.
Assembly Bill 1286 (Skinner) temporarily suspends the
annual inflation adjustment for minimum contribution
levels for the California Breast Cancer Research Fund
check-off on the tax form.
Senate Bill 116 (Liu) extends the repeal date for the
Emergency Food Assistance Program check off on the tax
form from 2014 to 2019.
Senate Bill 571 (Price) creates the Art for Kids Fund
check-off on the tax form.
Assembly Actions
Assembly Revenue and Taxation Committee 9-0
Assembly Appropriations 17-0
Assembly Floor 78-0
Support and Opposition (06/20/13)
Support : Alzheimer's Association (sponsor); California
Assisted Living Association; California Association of Area
Agencies on Aging; California Association for Health
Services at Home; Leading Age California; California
Association for Health Services at Home (CASAH), The
University of California, California Long Term Care
Ombudsman Association; On Lock Senior Health Services.
Opposition : Department of Finance.
AB 394 -- 4/18/13 -- Page 9