BILL ANALYSIS Ó SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: SB 782 HEARING: 1/15/14 AUTHOR: DeSaulnier FISCAL: Yes VERSION: 1/6/14 TAX LEVY: No CONSULTANT: Ewing VOLUNTARY CONTRIBUTIONS: CALIFORNIA SEXUAL VIOLENCE VICTIM SERVICES FUND Creates the California Sexual Violence Victim Services Fund tax check-off on the income tax form. Background and Existing Law Existing law allows taxpayers to contribute to one or more of 20 voluntary contribution funds, known as VCFs or check-offs, by checking a box on their state income tax return. California law requires check-off 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 With a few exceptions, VCFs remain on the return until they either are repealed by a sunset date or fail to meet a minimum contribution amount.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 If the FTB estimates that a fund will fail to meet its minimum contribution amount, that fund is repealed for the following calendar year. SB 782 -- 1/6/14 -- 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 current tax check-offs and how contributions are administered. This list does not reflect tax contributions that have been repealed under the terms of their statutes. ------------------------------------------------------------ |Voluntary | 2013 | Contribution Allotment | |Contribution Fund |Contribution| | | | s | | |---------------------+------------+-------------------------| |Alzheimer's | $395,854 | As many as contract or | |Disease/Related | | receive grants provided | |Disorders Fund | | by the monies | | | | contributed. | |---------------------+------------+-------------------------| |CA Breast Cancer | $362,308 | As many as apply and | |Research Fund | | receive grants provided | | | | from the monies | | | | contributed. | |---------------------+------------+-------------------------| |CA Cancer Research | $384,308 | As many as apply and | |Fund | | receive grants provided | | | | from the monies | | | | contributed. | |---------------------+------------+-------------------------| |CA Firefighters' | $123,414 | California Fire | |Memorial Fund | | Foundation. | |---------------------+------------+-------------------------| |CA Fund for Senior | $228,965 | California Senior | |Citizens | | Legislature. | |---------------------+------------+-------------------------| |CA Peace Officer | $125,889 | California Peace | |Memorial Foundation | | Officer Memorial | |Fund | | Commission. | |---------------------+------------+-------------------------| |CA Sea Otter Fund | $227,791 | Department of Fish and | SB 782 -- 1/6/14 -- Page 3 | | | Wildlife, and as many | | | | as apply for grants and | | | | contracts provided for | | | | by 50% of | | | | contributions. | |---------------------+------------+-------------------------| |CA Seniors Special | $58,783 | 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 | $70,298 | The first $300K to the | |Government Fund | | 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. | | | | Remaining funds | | | | allocated to the CA | | | | YMCA Youth and | | | | Government Program, | | | | whose board may award | | | | additional $10K annual | | | | grants to additional | | | | nonprofit civic youth | | | | organizations. | |---------------------+------------+-------------------------| |CA Youth Leadership | $54,210 | To the Department of | |Fund | | Education to provide | | | | for the CA Youth | | | | Leadership Project. | |---------------------+------------+-------------------------| |Child Victims of | $214,985 | As many counseling and | |Human Trafficking | | prevention centers that | |Fund | | apply and receive | | | | grants provided from | SB 782 -- 1/6/14 -- Page 4 | | | monies contributed. | |---------------------+------------+-------------------------| |Emergency Food for | $420,719 | To the Department of | |Families Fund | | Social Services for the | | | | Emergency Food | | | | Assistance Program. | |---------------------+------------+-------------------------| |Municipal Shelter | $212,657 | As many as apply and | |Spay-Neuter Fund | | receive grants provided | | | | from the monies | | | | contributed. | |---------------------+------------+-------------------------| |Rare & Endangered | $441,809 | Department of Fish and | |Species Preservation | | Wildlife endangered | |Program | | conservation programs. | |---------------------+------------+-------------------------| |School Supplies for | $360,676 | As many as apply and | |Homeless Children | | receive grants provided | |Fund | | for by the monies | | | | contributed. | |---------------------+------------+-------------------------| |State Children's | $297,668 | To the Department of | |Trust for the | | Social Services for | |Prevention of Child | | prevention and | |Abuse | |intervention programs. | |---------------------+------------+-------------------------| |State Parks |$366,504 | As many as purchase a | |Protection | | parks pass that can be | |Fund/Parks Pass | | provided from the | |Purchase | |monies contributed. | |---------------------+------------+-------------------------| |Keep Arts in Schools |Initial Tax | To the Arts Council for | |Fund | Return | grants to organizations | | | 2013 | providing parts | | | | programs in schools. | |---------------------+------------+-------------------------| |Protect Our Coast |Initial Tax | To the California | |and Oceans Fund | Return | Coastal Commission to | | | 2013 | provide grants to | | | | organizations in | | | | support of coastal | | | | resource programs and | | | | related educational | | | | activities. | |---------------------+------------+-------------------------| |American Red Cross, |Initial Tax | To the Office of | SB 782 -- 1/6/14 -- Page 5 |California Chapter | Return | Emergency Services for | | | 2013 | distribution to the | | | | American Red Cross. | | | | | ------------------------------------------------------------ Proposed Law Senate Bill 782 adds the "California Sexual Violence Victim Services Fund" on the tax form for voluntary contributions, when space is available. Contributions received through the fund would be distributed to the EpiCenter of the Safe and Active Communities Branch of the State Department of Public Health for allocation to the California Coalition Against Sexual Assault (CALCASA) for the awarding of grants to support CALCASA rape crisis programs for victims of rape and sexual assault. The bill maintains existing requirements for the program, including the annual reporting by September 1st of each year by the Franchise Tax Board 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 No estimate. Comments 1. Purpose of the bill . Senate Bill 782 would establish a tax check-off program, consistent with existing tax check-off programs, to support programs for victims of rape and sexual assault. Including this fund on state tax forms will increase awareness of the significance of rape and sexual assault programs as well as enhance charitable giving for these essential programs. 2. Trying again . In 2005 the Legislature enacted legislation to establish the California Sexual Violence Victims Services Fund (AB 190, Negrete McLeod). The fund was added to the tax form in 2006 and received $199,900 in contributions. In 2007, the fund received $184,980 in SB 782 -- 1/6/14 -- Page 6 taxpayer contributions. The enacting statute required the fund to meet a minimum contribution level of $250,000 or it would be repealed. The fund did not meet the required threshold and the fund was removed from the tax form. The Committee may wish to consider whether the same check-off will be successful when it failed to meet statutory requirements in the past. 3. 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 a deduction for charitable giving on their tax return. However, 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 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. SB 782 -- 1/6/14 -- Page 7 Prior to a redesign of tax forms, and movement toward greater use of electronic filings, there were more tax check-off programs than 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 between two and 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 to 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 revising the design and administration of the tax check-off program to: Continue to encourage charitable giving, Expand access to a tax check-off to all eligible charities, Streamline the process for charitable organizations and donors, Establish clear and consistent standards for tax SB 782 -- 1/6/14 -- Page 8 check-offs, Designate an administering agency to implement the program, enforce standards, and monitor program effectiveness. 4. Let's be clear . Funds received through California's various tax check-off funds are administered in a range of ways. Some, such as the Protect Our Coast and Oceans Fund (AB 754, Muratsuchi, 2013) are allocated to a state department for use in a state-administered grant program. Others, such as the American Red Cross, California Chapters Fund (AB 511, Pan, 2013), are allocated to a state agency for distribution to a non-profit organization, with a requirement that the recipient organization submit to the state a plan for the use of the contribution and that the state agency conduct oversight. Further, it is not clear how the state agency would respond should the organization specific in the bill not be able to receive the funds, due to dissolution, a name change or other factors. The Committee may wish to consider amending the bill to require CALCASA to: Submit a plan for use of the contributions it receives, Require the administering agency to conduct oversight of the funds it distributes, Provide the administering agency flexibility to hold or direct the funds to other recipients providing rape and sexual abuse crises services if CALCASA is unable to receive the funds. 5. Technical amendment . SB 782 specifies that the California Sexual Violence Victim Services Fund shall not be added to the tax form until another voluntary contribution designation is removed. Recent revisions to the tax form may result in sufficient space to add funds to the tax form without first removing an existing fund. The Committee may wish to consider amending SB 782 to permit the fund to be added when another fund is removed or as soon as space is available. 6. Related legislation . SB 782 is not the only bill dealing with tax check-offs this legislative session: Assembly Bill 247 (Wagner, Chapter 670, 2013) extends the repeal date from 2015 to 2020 for the California Fund for Senior Citizens tax check-off on the tax form. SB 782 -- 1/6/14 -- Page 9 Assembly Bill 394 (Yamada, Chapter 671, 2013) 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, Chapter 451, 2013) creates the American Red Cross, California Chapters Fund check-off on the tax form. Assembly Bill 1286 (Skinner, Chapter 664, 2013) 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, Chapter 222, 2013) extends the repeal date from 2014 to 2019 for the Emergency Food Assistance Program check off on the tax form. Senate Bill 571 (Liu, Chapter 430, 2013) creates the Art for Kids Fund check-off on the tax form. Senate Bill 761 (DeSaulnier, 2014) would modify state administration of funds received through the School Supplies for Homeless Children Fund. Support and Opposition (1/9/14) Support : Unknown. Opposition : Unknown.