BILL ANALYSIS Ó SB 571 Page 1 Date of Hearing: June 24, 2013 ASSEMBLY COMMITTEE ON REVENUE AND TAXATION Raul Bocanegra, Chair SB 571 (Price) - As Amended: May 14, 2013 SENATE VOTE : 35-2 SUBJECT : Income taxes: voluntary contributions: Keep Arts in Schools Fund SUMMARY : Authorizes the addition of the Keep Arts in Schools Fund (Fund) checkoff to the personal income tax (PIT) form upon the removal of another voluntary contribution fund (VCF) from the form. Specifically, this bill : 1)Provides that all money transferred to the Fund, upon appropriation by the Legislature, shall be allocated to the: a) Franchise Tax Board (FTB) and the State Controller for reimbursement of all costs incurred administering the Fund; and, b) Arts Council, for allocation of grants to individuals or organizations administering arts programs for children in preschool through 12th grade pursuant to Government Code (GC) Section 8753(o). 2)Specifies that the Fund provisions shall remain in effect only until January 1 of the fifth taxable year following the Fund's first appearance on the PIT return. However, if the FTB determines that the amount of contributions estimated to be received during a calendar year will not meet a minimum contribution threshold, the provisions shall be inoperative with respect to taxable years beginning on or after January 1 of that calendar year. EXISTING LAW : 1)Allows taxpayers to contribute to one or more of the 18 VCFs on the PIT return. 2)Provides a specific sunset date for each VCF, except for the California Seniors Special Fund and the State Parks Protection SB 571 Page 2 Fund. 3)Requires each VCF to meet an annual minimum contribution amount to remain in effect, except for the California Seniors Special Fund, the California Firefighters' Memorial Fund, and the California Peace Officer Memorial Foundation Fund. 4)Provides for an Arts Council composed of 11 members. Among other things, the Arts Council is authorized, under GC Section 8753(o), to award prizes or direct grants to individuals or organizations in accordance with applicable regulations. FISCAL EFFECT : The FTB estimates that this bill would result in annual General Fund revenue losses of $10,000 beginning in fiscal year 2014-15. COMMENTS : 1)The author has provided the following statement in support of this bill: SB 571 is necessary to allow California taxpayers an opportunity to voluntarily contribute funds to a state program that promotes and finances art education programs in our public schools and communities throughout the state. 2)Proponents of this measure state: The California Arts Council would administer the resources collected in this fund to help ensure that every student has access to the benefits of quality arts education. We strongly support the mission and commitment of the Arts Council and are working closely with them to build a broad base of support for arts education. We support this legislation as an additional means of increasing the outreach efforts of the Arts Council. 3)Committee Staff Comments: a) What does this bill do? : This bill authorizes the addition of the Fund to the PIT return to support Arts Council grants to arts programs for children. Provided sufficient space is available, the Fund would first appear on the 2013 PIT return filed on or after January 1, 2014. SB 571 Page 3 b) The Arts Council : As noted above, state law provides for an Arts Council of 11 members. The Arts Council is charged with encouraging artistic awareness, promoting the employment of artists, and assisting independent local groups in developing their own art programs. The Arts Council is also tasked with awarding prizes and direct grants to individuals and organizations. c) Legislative history : SB 1076 (Price), Chapter 319, Statutes of 2010, first authorized the addition of an "Arts Council Fund" to the PIT return. As with the current legislative proposal, moneys from this VCF were allocated for grants to individuals and organizations administering arts programs under GC Section 8753(o). The Arts Council Fund first appeared on the 2010 PIT return and last appeared on the 2011 return because the FTB determined that contributions would fall below the required $250,000 minimum contribution amount for the 2012 calendar year. Specifically, in 2012, the Arts Council Fund received valid contributions totaling only $165,647, or $84,353 less than the $250,000 minimum contribution threshold. d) A second bite at the apple : This bill simply reauthorizes a VCF that was previously removed from the PIT return for lack of public support. While proponents may argue that this Fund is likely to fare better with a new name and in an improved economic climate, the Committee may wish to consider the questionable precedent of simply re-adding VCFs to the PIT return after they have failed to garner sufficient financial support in the past. e) So many causes, so little space : There are countless worthy causes that would benefit from the inclusion of a new VCF on the state's income tax returns. At the same time, space on the return is limited. Thus, it could be argued that the current system for adding VCFs to the form is subjective and essentially rewards causes that can convince the Legislature to include their fund on the form. REGISTERED SUPPORT / OPPOSITION : Support SB 571 Page 4 American Federation of State, County and Municipal Employees, AFL-CIO California Alliance for Arts Education Opposition None on file Analysis Prepared by : M. David Ruff / REV. & TAX. / (916) 319-2098