BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON GOVERNANCE AND FINANCE
                         Senator Robert M. Hertzberg, Chair
                                2015 - 2016  Regular 

                              
          
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          |Bill No:  |AB 485                           |Hearing    | 7/1/15  |
          |          |                                 |Date:      |         |
          |----------+---------------------------------+-----------+---------|
          |Author:   |Williams                         |Tax Levy:  |No       |
          |----------+---------------------------------+-----------+---------|
          |Version:  |6/19/15                          |Fiscal:    |Yes      |
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          |Consultant|Bouaziz                                               |
          |:         |                                                      |
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             PERSONAL INCOME TAXES:  VOLUNTARY CONTRIBUTIONS:  PREVENTION  
                       OF ANIMAL HOMELESSNESS AND CRUELTY FUND



          Authorizes the addition of the Prevention of Animal Homelessness  
          and Cruelty Fund (Fund) check-off to the personal income tax  
          return.    


           Background and Existing Law

           Existing 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 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 legislature adds individual VCF's yearly.  With a few  
          exceptions, VCFs remain on the return until they are repealed by  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.  The  
          following check-offs do not have a minimum contribution  
          requirement:








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                 California Firefighters' Memorial Foundation Fund,

                 California Peace Officer Memorial Foundation Fund, and 

                 California Seniors Special Fund.

          When a taxpayer contributes to VCFs, the Franchise Tax Board  
          (FTB) deposits the total of all contributions into the fund  
          created as part of the VCF's legislative authorization.  For  
          some VCFs, such as the Protect Our Coast and Ocean Fund,  
          taxpayers' contributions are allocated to a state agency for use  
          in a state administered grant program.  Other VCFs' authorizing  
          statutes direct administrative agencies to allocate donations to  
          a private organization.  For example, the Office of Emergency  
          Services passes VCF funds to the American Red Cross.  Other  
          funds require the State Controller to send the funds directly to  
          private organizations without passing through an administrative  
          agency, such as the California Fire Foundation.  FTB, the  
          Controller, and an administrative agency may deduct from the  
          amount of donations each VCFs receives for direct costs of  
          administering a fund.  

          There are currently 18 check-offs listed on the tax return form.  
           The tax check-off program collects approximately $5 million in  
          annual contributions for all VCFs.


           


          Proposed Law

           Assembly Bill 485 adds the Prevention of Animal Homelessness and  
          Cruelty Fund (Fund), and allows a taxpayer to make a voluntary  
          contribution to the Fund on the state personal income tax  
          return, beginning once an existing check-off for charitable fund  
          contribution has been removed, or as soon as space is available.  
           The bill requires the Fund to meet a minimum contribution  
          threshold of $250,000, indexed yearly for inflation.

          Additionally, the bill provides that all money transferred to  
          the Fund, upon appropriation by the Legislature, be allocated as  
          follows:









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                 To FTB and the State Controller for reimbursement of all  
               costs incurred in administering the VCF,

                 The first $250,000, shall be distributed by the  
               Department of Food and Agriculture, to a city, county, or  
               city and county animal control agency or for the sole  
               purpose of supporting spay and neuter activities by that  
               entity to prevent and eliminate cat and dog homelessness.

                 Any amount collected over $250,000, shall be distributed  
               by the Department of Food and Agriculture, to be used by  
               programs designed to prevent and eliminate cat and dog  
               homelessness or programs for the prevention, investigation,  
               and prosecution of animal cruelty and neglect. 

          AB 485 provides that the bill automatically sunsets on January 1  
          of the fifth taxable year following the Fund's first appearance  
          on the personal income tax form, or January 1, 2022, whichever  
          occurs first.
             


           State Revenue Impact


           FTB estimates annual revenue losses of roughly $8,000 for every  
          $250,000 contributed to the Fund by taxpayers who itemize.  


           Comments

           1.  Purpose of the bill.   According to the author, "The goal of  
          the new fund proposed in AB 485 is to appeal to a wider  
          selection of contributors by expanding the use of fund dollars  
          to include animal cruelty prevention and investigation.  In the  
          face of recent animal cruelty cases here in Sacramento and the  
          resounding public outcry, there is increased confidence that  
          adding cruelty funding and response to the voluntary check off  
          will draw new donors."

          2.  New check-off?   With few exceptions, voluntary contribution  
          funds remain on the personal income tax return until they are  
          either repealed or fail to meet their minimum contribution  
          amount, typically $250,000.  If FTB estimates a contribution  








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          fund is likely to fail to meet the minimum contribution amount,  
          that fund is repealed effective January 1 of that calendar year.

          A similar VCF, the Municipal Shelter Spay-Neuter Fund, appeared  
          on the 2008 and 2009 tax returns.  This fund received $210,029  
          in 2009 and $194,462 in 2010.  Because the fund failed to meet  
          the minimum contribution threshold in 2010, FTB removed the fund  
          from the income tax return form.

          3.  Is there a better way?   The current tax check-off program  
          generates a relatively small share of statewide contributions to  
          charitable causes.  In 2008, Californians donated more than $17  
          billion to charities.  However, less than 1% of Californians use  
          the tax check-off program to make donations to charitable  
          organizations.  FTB reports that in 2012, 89,335 out of 15  
          million taxpayers contributed a total of $4.8 million to 18  
          check-offs.  Last year, SB 1207 (Wolk) attempted to address this  
          issue and help grow charitable giving by establishing the  
          California Voluntary Contribution Program to promote charitable  
          giving and collect donations.  This would have allowed many more  
          charities to participate in the program, would have screened  
          potential participants before adding them onto the form, and  
          eliminated the need for each organization to go through the  
          Legislative process.  Under SB 1207, charities would instead  
          apply to the office of California Volunteers for placement on  
          the income tax form.  However, SB 1207 (Wolk) was held on  
          suspense in Assembly Appropriations.

          4.  Bills, bills, bills.   Currently, tax check-offs must be added  
          by the Legislature.  In 2008, 11 VCFs appeared on the personal  
          income tax return.  Today, the return contains 18.  With  
          legislation introduced every year to add new VCFs, there is  
          little reason to expect this number to stop growing.  The  
          growing number results in significant costs to the Franchise Tax  
          Board (FTB).  It is estimated that FTB can only handle 12-15  
          more check-offs before it has to redesign its information  
          technology system, at a cost of $800,000 to $1 million.


           Assembly Actions

           Assembly Revenue and Taxation 7-0
          Assembly Appropriations       17-0
          Assembly Floor                77-0








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           Support and  
          Opposition   (6/25/15)


           Support  :  American Society for the Prevention of Cruelty to  
          Animals; Humane Society of the United States; State Humane  
          Association of California.

           Opposition  :  California Department of Finance.



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