BILL ANALYSIS                                                                                                                                                                                                    Ó




                     SENATE GOVERNANCE & FINANCE COMMITTEE
                            Senator Lois Wolk, Chair
          

          BILL NO:  SB 997                      HEARING:  4/24/14
          AUTHOR:  Morrell                      FISCAL:  Yes
          VERSION:  4/7/14                      TAX LEVY:  No
          CONSULTANT:  Urquiza                  

                            VOLUNTARY CONTRIBUTIONS:
                       CALIFORNIA FUND FOR SENIOR CITIZENS
          

          Eliminates the minimum contribution requirement for the  
          California Fund for Senior Citizens.


                           Background and Existing Law  

          State law allows taxpayers to contribute money to voluntary  
          contribution funds (VCFs) by checking a box on their state  
          income tax returns.  California law requires contributions  
          made through so-called "check-offs" to be made from  
          taxpayers' own resources and not from their tax  
          liabilities, as is possible on federal tax returns.   
          Check-off amounts may be claimed as charitable  
          contributions on taxpayers' tax returns in the subsequent  
          year. 

          Each VCF is individually added to the tax return through  
          the legislative process.  This year's tax form lists 20  
          VCFs.  With a few exceptions, VCFs remain on the tax form  
          until they are repealed by a sunset date or fail to  
          generate a minimum contribution amount.  In general, the  
          minimum contribution amounts are adjusted annually for  
          inflation.  For most VCFs, the minimum contribution amount  
          is $250,000, beginning in the fund's second year.

          By September 1st of each year, the Franchise Tax Board  
          (FTB) must determine the minimum contribution amount  
          required for each VCF to remain on the form for the  
          following calendar year, and estimate whether contributions  
          to each VCF meet that amount.  If FTB estimates that a VCF  
          will fail to meet its minimum contribution amount, that VCF  
          is repealed for the following calendar year.  Three  
          check-offs do not have a minimum contribution requirement:
                 California Firefighters' Memorial Foundation Fund,
                 California Peace Officer Memorial Foundation Fund,  




          SB 997 - 4/7/14 -- Page 2



               and 
                 California Seniors Special Fund.

          The following list provides information on when the  
          existing tax check-offs first appeared on the tax return,  
          when they will sunset, and their minimum contribution  
          requirements.  



           ------------------------------------------------------------ 
          | Voluntary Contribution  Fund  |Initia|Sunset|2014 minimum  |
          |                               |l Tax | Date | contribution |
          |                               |Return|      |requirement   |
          |                               |      |      |              |
          |-------------------------------+------+------+--------------|
          |Alzheimer's Disease/Related    | 1987 | 2019 |   $347,328   |
          |Disorders Fund                 |      |      |              |
          |-------------------------------+------+------+--------------|
          |CA Breast Cancer Research Fund | 1992 | 2017 |   $371, 724  |
          |-------------------------------+------+------+--------------|
          |CA Cancer Research Fund        | 2008 | 2017 |   $268, 471  |
          |-------------------------------+------+------+--------------|
          |CA Firefighters' Memorial Fund | 1993 | 2015 |  No minimum  |
          |                               |      |      |  requirement |
          |                               |      |      |  unless the  |
          |                               |      |      |  repeal date |
          |                               |      |      |  is deleted  |
          |-------------------------------+------+------+--------------|
          |CA Fund for Senior Citizens    | 1983 | 2019 |   $250,000   |
          |-------------------------------+------+------+--------------|
          |CA Peace Officer Memorial      | 1999 | 2015 |  No minimum  |
          |Foundation Fund                |      |      |  requirement |
          |                               |      |      |    unless    |
          |                               |      |      |  repeal date |
          |                               |      |      |  is deleted  |
          |-------------------------------+------+------+--------------|
          |CA Sea Otter Fund              | 2006 | 2015 |   $277,666   |
          |-------------------------------+------+------+--------------|
          |CA Seniors Special Fund        | 1990 | None |  No minimum  |
          |                               |      |      |  requirement |
          |-------------------------------+------+------+--------------|
          |CA YMCA Youth and Government   | 2012 | 2016 |   $250,000   |
          |Fund                           |      |      |              |
          |-------------------------------+------+------+--------------|
          |CA Youth Leadership Fund       | 2012 | 2016 |   $250,000   |





          SB 997 - 4/7/14 -- Page 3



          |-------------------------------+------+------+--------------|
          |Child Victims of Human         | 2011 | 2015 |   $254,250   |
          |Trafficking Fund               |      |      |              |
          |-------------------------------+------+------+--------------|
          |Emergency Food for Families    | 1998 | 2018 |   $360,179   |
          |Fund                           |      |      |              |
          |-------------------------------+------+------+--------------|
          |Municipal Shelter Spay-Neuter  | 2011 | 2015 |   $254,250   |
          |Fund                           |      |      |              |
          |-------------------------------+------+------+--------------|
          |Rare & Endangered Species      | 1983 | 2017 |   $324, 972  |
          |Preservation                   |      |      |              |
          |Program                        |      |      |              |
          |-------------------------------+------+------+--------------|
          |School Supplies for Homeless   | 2012 | 2016 |   $250,000   |
          |Children Fund                  |      |      |              |
          |-------------------------------+------+------+--------------|
          |State Children's Trust for the | 1983 | 2017 |   $324,972   |
          |Prevention of Child Abuse      |      |      |              |
          |-------------------------------+------+------+--------------|
          |State Parks Protection         | 2012 | None |   $250,000   |
          |Fund/Parks Pass Purchase       |      |      |              |
          |-------------------------------+------+------+--------------|
          |Keep Arts in Schools Fund      | 2013 | 2018 |  No minimum  |
          |                               |      |      |  requirement |
          |                               |      |      |   for 2014   |
          |-------------------------------+------+------+--------------|
          |Protect Our Coast and Oceans   | 2013 | 2017 |  No minimum  |
          |Fund                           |      |      |  requirement |
          |                               |      |      |   for 2014   |
          |-------------------------------+------+------+--------------|
          |American Red Cross, California | 2013 | 2017 |  No minimum  |
          |Chapter                        |      |      |  requirement |
          |                               |      |      |for 2014      |
           ------------------------------------------------------------ 

          The California Fund for Senior Citizens first appeared on  
          the 1983 personal income tax return.  Donations to the  
          California Fund for Senior Citizens supports the ongoing  
          work of the California Senior Legislature (CSL), an  
          organization established by state law to identify, develop,  
          and support legislative proposals that protect and enhance  
          the quality of life of California's seniors.  








          SB 997 - 4/7/14 -- Page 4




          From 1983 through 1999, the California Fund for Senior  
          Citizens was not directly subject to the minimum  
          contribution requirement.  In 1999, AB 1697 (Committee on  
          Aging and Long-Term Care) extended the Fund's sunset date  
          and imposed a minimum contribution requirement of $250,000.  
           In 2006, SB 1249 (Alquist) removed the Fund's annual  
          inflation adjustment.  As a result, the Fund's minimum  
          contribution amount is currently set at $250,000, unlike  
          most other check-offs whose minimum contribution  
          requirement is adjusted for inflation.  Since 2010, the  
          Fund has received the following contributions amounts:

           ----------------------------------------------------------- 
          |     2010     |     2011     |     2012     |     2013     |
          |--------------+--------------+--------------+--------------|
          |   $296,144   |   $308,763   |   $272,742   |$234,247      |
          |              |              |              |              |
           ----------------------------------------------------------- 

          While the Fund received only $234,247 in valid  
          contributions in 2013, the Fund was still placed on the  
          2013 PIT return since FTB had estimated that the Fund would  
          meets its minimum contribution amount.  FTB reports that  
          the Fund has received only $42,135 in valid contributions  
          thus far in 2014, slightly below the $43,174 received by  
          the same point last year.  CSL is concerned that the Fund  
          will not meet the minimum donation requirement this year  
          and will be removed from the income tax form.


                                   Proposed Law  

          SB 997 eliminates the $250,000 minimum contribution  
          requirement for the California Fund for Senior Citizens. 



                               State Revenue Impact
           
          No estimate. 


                                     Comments  

          1.   Purpose of the bill  .  The California Senior Legislature  





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          is primarily funded through the tax check-off program.  CSL  
          works to identify senior concerns, develop proposals, and  
          advocate for the inclusion of those concerns in legislative  
          bills.  Since state law established CSL in 1981, 192 of  
          CSL's proposals have been chaptered into law.  As a result  
          of the economic downturn, CSL has had difficulty meeting  
          the minimum donation requirement of $250,000.  Unlike state  
          agencies, CSL does not receive funding through the General  
          Fund.  SB 997 allows the California Senior Citizens Fund to  
          remain on the tax return.  By preserving the primary source  
          of funding for the California Senior Legislature, SB 997  
          allows the CSL to continue its advocacy on behalf of the  
          state's senior citizens. 

          2.   Unfair advantage  .  Since 2003, 15 check-offs have been  
          removed from the tax form as a result of failing to meet  
          the minimum donation requirement.  Eliminating the minimum  
          contribution level for one tax check-off, without doing so  
          for the rest, creates bias and could unfairly disadvantage  
          other charities that compete for limited donations.   
          Additionally, eliminating the minimum donation requirement  
          will open the door for other check-offs to pursue a  
          suspension or elimination of the minimum contribution  
          thresholds.  

          3.   Intent of minimum contribution  .  One purpose of the  
          minimum contribution threshold is to ensure that only  
          check-offs with substantial public support remain on the  
          tax return form.  The other purpose is to limit the number  
          of check-offs on the tax form.  The Legislature imposed a  
          minimum contribution requirement for the California Senior  
          Legislature specifically in response to concerns that the  
          tax form was in danger of expanding to three pages because  
          of the proliferation of tax check-offs.  In 2012, FTB  
          created a separate page to accommodate all of the  
          check-offs, including those that had been on a "waiting  
          list" to appear on the form.  The redesign of the form also  
          will allow the form to accommodate additional check-offs.   
          Given that the economic downturn has impacted overall  
          charitable giving and FTB has created a separate page to  
          accommodate a growing number of check-offs, the committee  
          may wish to consider the efficacy of the $250,000 minimum  
          contribution requirement.

          4.   Who's special  ?  In 2000, SB 2175 (Burton) eliminated  
          the minimum contribution requirement for the California  





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          Peace Officers Memorial Foundation Fund and the California  
          Firefighters' Memorial Fund after these funds were in  
          danger of not meeting the minimum contribution requirement.  
           Donations to these funds are used to support the memorials  
          in Capitol Park and recognize the contributions of fallen  
          firefighters and peace officers.  The California Senior  
          Special Fund appeared on the tax form in 1990 and has never  
          been required to meet the minimum contribution amount, nor  
          does it have a sunset date.  The California Senior Special  
          Fund supports the Area Agency of Aging Councils, which  
          provide advice on and sponsorship of senior citizen issues.  
           Only taxpayers or spouses who claim the senior exemption  
          credit on their California return may contribute to the  
          Senior Special Fund.  The committee may wish to consider  
          whether the California Fund for Senior Citizens is  
          distinctive enough to be included on the list of check-offs  
          without a minimum contribution requirement.

          5.   Related legislation  .  
                 AB 1833 (Garcia, 2014) contains provisions  
               identical to SB 997.  AB 1833 is awaiting a hearing in  
               the Assembly Revenue & Taxation Committee which has a  
               policy of not extending VCFs that have failed to meet  
               their minimum donation requirement. 
                 SB 1207 (Wolk, 2014) would redesign the tax  
               check-off process and lower the minimum contribution  
               requirement to $100,000.   

          6.   Gut-and-amend  .  As introduced, SB 1249 contained  
          language relating to corporate taxes.  The Committee never  
          heard that version of the bill.  The February 13 amendments  
          deleted the bill's contents and inserted language relating  
          the California Fund for Senior Citizens. 


                         Support and Opposition  (4/21/14)

           Support  :  California Senior Legislature; California Retired  
          Teachers Association; California State Retirees; Elder  
          Financial Protection Network; Vicent & Jeanne Agor; Garilee  
          Cave, Senior Assembly Member; Charlotte A. Dorsey; Marcia  
          Gould, Senior Assembly Member; Ken Hengst, Senior Assembly  
          Member; Rick Kaplowitz; Linda Matulich, Amador County  
          Commission on Aging; Wesley K. Mukoyama; Gloria Plasencia,  
          Senior Senator; Jean Robinson, Executive Director  
          Fresno-Madera Area Agency on Aging; Rabon Saip, Member  





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          Sonoma County Area Agency on Aging Advisory Council;  Jane  
          R. Schwickerath, Board member of the Senior Council of  
          Santa Cruz and San Benito Counties; Richard Shontz, Senior  
          Assembly Member; Bruce S Steir; Leo Sullivan, Senior  
          Assembly Member; Susan V. Walker, Senior Assembly Member;  
          Alexis Wiser, Senior Senator; William J. Witt. 

           Opposition  :  Unknown.