BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 754 HEARING: 6/26/13
AUTHOR: Muratsuchi FISCAL: Yes
VERSION: 5/20/13 TAX LEVY: No
CONSULTANT: Ewing
VOLUNTARY CONTRIBUTIONS: CALIFORNIA BEACH AND COASTAL
ENHANCEMENT ACCOUNT
Creates the "Protect Our Coast and Oceans Fund" tax
check-off on the income tax form.
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 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
repealed by a sunset date, or if they fail to meet a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its minimum contribution amount, that fund is repealed for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 754 -- 5/20/13 -- 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 and how many groups are eligible to receive
funding. Some of the funds have been repealed under the
terms of their statutes.
------------------------------------------------------------
|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 754 -- 5/20/13 -- 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 754 -- 5/20/13 -- 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 754 -- 5/20/13 -- 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 754 creates the "Protect Our Coast and Oceans
Fund" on the tax form, when space is available.
Contributions would support eligible programs that receive
grant funding through the California Coastal Commission
Whale Tail Grants Program and related expenses. The bill
maintains all existing requirements for the program,
including the annual reporting by September 1st of each
year to determine eligibility for the following year, and
the $250,000 minimum contribution requirements, beginning
in the second year, with annual adjustment for inflation
and an automatic repeal after five years.
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 754 would establish
a tax check-off program to support California's Whale Tail
Competitive Grants Program, which was first established
through California's Whale Tail License Plate program. The
Whale Tail Competitive Grants Program provides funding for
coastal and marine outreach and education for youth, beach
and coastal habitat improvement activities with youth and
AB 754 -- 5/20/13 -- Page 6
adults, and related innovative "adopt-a-beach" programs.
Establishing a tax check-off program will facilitate
charitable giving to this important state program.
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.
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
AB 754 -- 5/20/13 -- Page 7
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
for including a tax check-off in the new program
Designate an administering agency to implement the
program, enforce standards, and monitor program
effectiveness.
AB 754 -- 5/20/13 -- Page 8
3. Related legislation . AB 754 is not the only bill
dealing with tax check-offs this legislative session:
Assembly Bill 247 (Wagner) extends the repeal date from
2015 to 2020 for the California Fund for Senior Citizens
tax check-off on the tax form.
Assembly Bill 394 (Yamada) extends the repeal date of the
California Alzheimer's Disease and Related Disorders
Research Fund 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 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 from 2014
to 2019 for the Emergency Food Assistance Program check
off on the tax form.
Senate Bill 571 (Price) creates the Art for Kids Fund
check-off on the tax form.
Assembly Actions
Assembly Revenue and Taxation Committee9-0
Assembly Appropriations 17-0
Assembly Floor 70-2
Support and Opposition (6/20/13)
Support : Monterey Bay Aquarium.
Opposition : Unknown.