BILL ANALYSIS Ó AB 2326 Page 1 Date of Hearing: May 14, 2014 ASSEMBLY COMMITTEE ON APPROPRIATIONS Mike Gatto, Chair AB 2326 (Dickinson) - As Amended: May 6, 2014 Policy Committee: Revenue & Taxation Vote: 9-0 Urgency: No State Mandated Local Program: No Reimbursable: No SUMMARY This bill allows a deduction for costs of up to $100 incurred adopting a pet from a qualified animal rescue organization. The deduction sunsets on December 1, 2020, and will be available for taxable years beginning on or after January 1, 2015, and before January 1, 2020. FISCAL EFFECT Estimated decreases to GF revenue of $2.8 million, $3.0 million, and $3.1 million in FY 2014-15, FY 2015-16, and FY 2016-17, respectively. COMMENTS 1) Purpose. According to the author, an estimated 800,000 animals are abandoned in California every year, leaving local governments and nonprofit shelters to care for the animals. Supporters claim the estimated that the cost to every taxpayer in the United States to shelter tray animals is $3 per person, which amounts to about $120 million annually for California taxpayers. This bill is intended to promote the benefits to animals, governments, and charities of adopting rather than purchasing dogs and cats. 2) Modest Incentive. This bill is intended to encourage the adoption of pets from qualified animal rescue organizations with a maximum deduction of $100. Even at the top marginal income tax rate of 12.3%, the deduction results in a total tax savings of less than $13, and for most families, the tax savings would be less than $10. The Committee may wish to AB 2326 Page 2 consider whether that is a sufficient incentive to encourage anyone who would not otherwise have considered adopting a rescued animal to do so, and if so, whether that incentive created justifies the cost to the state. 3) Deduction Clarification. At the time of this analysis, the author was working on amendments to clarify that the deduction would be allowed from a taxpayer's adjusted gross income (i.e., "below the line"). Given that less than half of individual California taxpayers itemize their deductions, and given the overall cap on total itemized deductions under the personal income tax law, this clarification would result in many fewer taxpayers being eligible to claim the deduction, and therefore significantly lower impact to GF revenue. Analysis Prepared by : Joel Tashjian / APPR. / (916) 319-2081