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 With a few exceptions, VCFs remain on the tax form until they are repealed by a sunset date or fail to generate a minimum contribution amount.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 If FTB estimates that a VCF will fail to meet its minimum contribution amount, that VCF is repealed for the following calendar year.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 SB 997 - 4/7/14 -- Page 5 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 SB 997 - 4/7/14 -- Page 6 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 SB 997 - 4/7/14 -- Page 7 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.