BILL ANALYSIS Ó
AB 515
Page 1
Date of Hearing: May 20, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
515 (Eggman) - As Amended May 4, 2015
-----------------------------------------------------------------
|Policy |Revenue and Taxation |Vote:|9 - 0 |
|Committee: | | | |
| | | | |
| | | | |
-----------------------------------------------------------------
Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill expands the scope and size of the existing tax credit
program under the personal income and corporate tax laws for
contributions of items donated to food banks, and extends the
program until January 1, 2021. In summary, this bill:
1)Expands the universe of qualified taxpayers who may claim a
donation credit to include persons responsible for growing or
raising a donated item, or harvesting, packing, or processing
a donated item.
AB 515
Page 2
2)Expands the qualifying items to include, in addition to fresh
fruits and vegetables, certain raw or processed nuts, poultry,
eggs, fish, certain dairy products, rice, beans, vegetable
oils, soup, pasta, pasta sauce, salsa, infant formula, bread,
and other canned meats and seafood.
3)Increases the allowed credit from 10% to 15%, and specifies
the credit value is calculated with reference to the
taxpayer's weighted average wholesale price for the item or,
if unavailable, the nearest regional wholesale price as
published by the US Department of Agriculture's Agricultural
Marketing Service, subject to a minimum credit amount as
available under existing statute.
4)Requires donors to provide item value and information
regarding where the items were grown and processed to food
banks, requires the food banks to issue certificates with
respect to donated items, and authorizes the Franchise Tax
Board (FTB) to request copies of any certificates.
5)Requires FTB to include in its annual report to the
legislature on the utilization of the credit the estimated
value and origin of the donated items, and the month in which
the donations were made.
6)Renames the State Emergency Food Assistance Program as the
"CalFood" program but maintains current administration and
funding with the Department of Social Services (DSS).
FISCAL EFFECT:
1)Potentially significant GF costs to FTB to administer changes
to systems and procedures; no change to DSS costs, which are
AB 515
Page 3
reimbursed with federal funds received under the program.
2)Estimated GF revenue decreases of $0.4 million, $1.0 million,
and $1.4 million in FY 2015-16, FY 2016-17, and FY 2017-18,
respectively.
COMMENTS:
1)Purpose. According to the author, California is the leading
agricultural producing state in the US, yet many Californians
still suffer from hunger and poor nutrition. AB 515 broadens
the existing state tax credit offered to agricultural
producers for donations to qualified non-profits such as food
banks, and expands the list of eligible products to include
other fresh items and a limited selection of core shelf-stable
items. The bill increases the credit amount from 10% to 15%,
and bases the credit's value on the donor's wholesale or
comparable market wholesale price for the items, instead of
the more cumbersome inventory cost measure in the existing
statute.
2)Food Insecurity in California. Food insecurity is generally
defined as being without reliable access to a sufficient
quantity of affordable, nutritious food. According to the
California Association of Food Banks (CAFB), one of the bill's
sponsors, California ranks 19th for food insecurity in the US,
with approximately 6.1 million people, or 16.2% of the
population, facing food insecurity. Among children, this rate
is 26.3%, ranking California 12th in the nation for childhood
food insecurity. CAFB represents over 40 food banks in
California that provide food to soup kitchens, schools,
churches, and community and senior centers, partnering with
AB 515
Page 4
over 100 growers and packers to distribute approximately 140
million pounds of food each year.
3)Is Section 41 Already Doomed? Tax credits are often used to
encourage or influence socially beneficial behavior, and
provide relief to taxpayers who incur expenses from desired
behavior. Tax credits are often more appealing than tax
deductions as the taxpayer may take the same credit regardless
of income. This is particularly true among corporate
taxpayers.
This bill not only broadens the pool of potential participants
and items that may be donated for credit, and reforms the
valuation methods used for calculating credits, it increases
the credit from 10% to 15%. While the expansion will very
likely result in an increase in food donations, it is unclear
whether the increase in credit value is needed to help achieve
that expansion, or whether 15% is the optimal credit amount to
encourage the desired behavior.
This bill does not address the aspirations of Section 41 of
the revenue and taxation code, authorized just last year in SB
1335 (Leno), Statutes of 2014, which requires tax credits to
articulate specific goals, purposes, and objectives for the
credit, as well as establish performance indicators to measure
the credit's success in achieving those goals. While the
policy goals of this bill are certainly laudable, and it may
be argued it is an expansion of an existing credit and not the
creation of a new credit, there is no indication that 15% is
the appropriate credit amount to achieve the desired increase
in donations, and there are no metrics proposed with which to
evaluate whether the credit is achieving its aims. Ensuring
the Legislature conducts some objective and dispassionate
evaluation of tax credits was the goal of SB 1335, and the
Committee might wish to consider whether this is precisely the
type of tax credit for which Section 41 ought to apply.
AB 515
Page 5
Analysis Prepared by:Joel Tashjian / APPR. / (916)
319-2081