BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 2326
                                                                  Page  1

          Date of Hearing:   May 14, 2014

                                  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


          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,  


          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
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            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