BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |AB 515 |Hearing |7/1/15 |
| | |Date: | |
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|Author: |Eggman |Tax Levy: |No |
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|Version: |5/4/15 |Fiscal: |Yes |
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|Consultant|Bouaziz |
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INCOME TAXES: CREDITS: FOOD BANK DONATIONS
Expands the existing tax credit program under the Personal
Income Tax Law and Corporation Tax Law for contributions of
qualified donation items to a food bank and extends the program
until January 1, 2021.
Background and Existing Law
California law allows various income tax credits, deductions,
and sales and use tax exemptions to provide incentives to
compensate taxpayers that incur certain expenses, such as child
adoption, or to influence behavior, including business practices
and decisions, such as research and development credits. The
Legislature typically enacts such tax incentives to encourage
taxpayers to do something that but for the tax credit, they
would not do. The Department of Finance is required to annually
publish a list of tax expenditures.
In 2011, AB 152 (Fuentes) established a 10% tax credit for the
donation of fresh fruits or fresh vegetables to food banks
located in California. AB 515 seeks to expand on the existing
credit by increasing the credit percentage, and the food items
eligible for the credit.
Proposed Law
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Assembly Bill 515 allows a 15% credit under the Personal Income
Tax Law and Corporation Tax Law for contributions of qualified
donation items to a food bank.
The bill defines qualified taxpayer as a person responsible for
planting a crop, managing the crop, harvesting the crop from
land, growing or raising a qualified donation item, or
harvesting, packing, or processing a qualified donation item.
The following items are qualified donation items under AB 515,
as defined in the Food and Agriculture Code:
Fruits, nuts, or vegetables.
Meat food product.
Poultry.
Eggs.
Fish.
Rice and beans.
Fruit, nuts, and vegetables in canned, frozen, dried,
dehydrated, and 100 percent juice forms.
Any cheese, milk, yogurt, butter, and dehydrated milk.
Infant formula.
Vegetable oil and olive oil.
Soup, pasta sauce, and salsa.
Bread and pasta.
Canned meats and canned seafood.
The bill provides that the allowed credit would be calculated,
not according to inventory costs, but rather as 15% of the
qualified value of the qualified donation items. The qualified
value shall be calculated by using the weighted average
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wholesale sale price based on the qualified taxpayer's total
wholesale sales of the donated item sold within the calendar
month of the donation. If no wholesale sales of the donated
item have occurred in the calendar month of the donation, the
qualified value shall be equal to the nearest regional wholesale
market price for the calendar month of the donation based upon
the same grade products as published by the United States
Department of Agriculture's Agricultural Marketing Service, or
its successor.
AB 515 requires the donor to provide the food bank, the
qualified value, and information regarding where the donation
items were grown and processed. Upon receipt and acceptance of
the donations, the food bank will provide to the donor a
certificate with information, as specified.
The bill requires the Franchise Tax Board (FTB) to include in
its annual report the estimated value of the qualified donation
items, the origin of the qualified donation items, and the month
the donations were made.
The bill renames the State Emergency Food Assistance Program
(SEFAP) as the CalFood Program (CFP). AB 515 requires the CFP
to provide food and funding for the provision of emergency food
to food banks established pursuant to the federal Emergency Food
Assistance Program. The bill specifies that all monies received
by the CFA, upon appropriation by the Legislature, must be
allocated to the State Department of Social Services (SDSS) for
allocation to the CFP.
This bill applies to taxable years beginning on or after January
1, 2016, and before January 1, 2021.
State Revenue Impact
FTB estimates that AB 515 will reduce General Fund revenue by
$400,000 in fiscal year 2015-16, $1 million in 2016-17, and $1.4
million in 2017-18.
Comments
1. Purpose of the bill. According to the author, "California is
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the leader agricultural producer in the U.S., yet many
Californians still suffer from hunger and poor nutrition. AB
515 will broaden the existing state tax credit offered to
agricultural producers for donations to qualified California
non-profits, such as food banks. It expands the list of
eligible products to include other fresh items and a limited set
of core shelf-stable items. It also moves the tax credit to 20%
of the donation items wholesale value, and extends the sunset of
this program to 2021."
2. Legitimate need. According to the California Association of
Food Banks (CAFB), California is ranked 19th for food insecurity
in the nation with a food insecurity rate of 16.2%, translating
into 6.1 million Californians with, on average, 1 out of 6
people in California not knowing where their next meal will come
from. All the more troubling is that the child food insecurity
rate is 26.3%, meaning 2.4 million children in California go to
bed hungry each night. CAFB represents 42 food banks throughout
California that provide food to soup kitchens and food pantries
in schools, churches, and community and senior centers. CAFB
partners with over 100 California growers and packers and has
distributed 140 million pounds of food to people in need.
3. The right incentive? Each year, more and more interest
groups are seeking ways to increase funding through alternative
means such as tax check-offs and tax credits. Tax credits are
generally used to change or influence behavior for an intended
statewide impact. While this credit is limited in scope and
fiscal impact, and focuses only on food donated, the Committee
may wish to consider whether the tax code is the best way to
subsidize the food banks, and whether these growers would donate
the food without this tax credit.
4. Original return. This bill does not require a taxpayer to
claim the credit on a timely original return, meaning a taxpayer
could donate food without knowledge of the credit, then amend
past tax returns to claim the credit. This is problematic
because this tax credit is meant to incentivize behavior, not
reward individuals who are engaging in behavior they would have
otherwise engaged in. The Committee may wish to consider
amending the bill to limit the credit to timely filed original
returns.
5. Section 41 shall not apply. On September 29, 2014, Governor
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Brown signed SB 1335 (Leno, 2014), which added R&TC Section 41.
SB 1335 recognized that the Legislature should apply the same
level of review used for government spending programs to tax
preference programs, including tax credits. Thus, Section 41
requires any bill introduced on or after January 1, 2015 that
allows a new income tax credit to contain specific goals,
purposes, and objectives that the tax credit will achieve. In
addition, Section 41 requires detailed performance indicators
for the Legislature to use when measuring whether the tax credit
meets the goals, purposes, and objectives. This bill provides
that R&TC Section 41 shall not apply to this credit. The
Committee may wish to consider the appropriateness of this
Section 41 exemption.
6. Let's get technical. FTB has proposed the following
clarifying amendments:
Replace the words "donor" or "donors" with "qualified
taxpayer" throughout the bill.
On page 5, between line 14 and line 15, insert: "(i) The
amendments to this section by the act adding this
subdivision shall apply to taxable years beginning on or
after January 1, 2016."
On page 7, between line 21 and line 22, insert: "(g) The
amendments to this section by the act adding this
subdivision shall apply to taxable years beginning on or
after January 1, 2016."
Assembly Actions
Assembly Revenue and Taxation9-0
Assembly Appropriations 17-0
Assembly Floor 78-0
Support and
Opposition (6/24/15)
Support : Alameda County Community Food Bank; California
Association of Food Banks
California Bean Shippers Association; California Catholic
Conference, Inc.; California Cattlemen's Association; California
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Citrus Mutual; California Farm Bureau Federation; California
Food Policy Advocates; California Fresh Fruit Association;
California Head Start Association; California Hunger Action
Coalition; California League of Food Processors; Center for
Human Services; Community Action Agency of Butte County;
Community Action Partnership of Kern County; Community Action
Partnership of Orange County; Community Food and Justice
Coalition; Community Food Bank of Fresno; Deardorff Family
Farms; East Valley Business Legislative Advocacy Council;
Emergency Food Bank of Stockton; Feeding America - Riverside/San
Bernardino Counties; Feeding America San Diego; FIND Food Bank,
Riverside; Food Access Coalition - Orange County; Food Bank
Coalition of San Luis Obispo County; Food Bank of Contra Costa &
Solano Counties; Food Bank of El Dorado County; Food Bank of
Santa Barbara County; Food for People, Inc., Humboldt; Food
Share, Inc., Ventura; FoodLink for Tulare County; Fowler
Packing; Hunger Advocacy Network; Imperial Valley Food Bank;
Interfaith Council of Amador; Jewish Family Service of Los
Angeles; Los Angeles Regional Food Bank; Lundberg Family Farms;
Marin Organic; Mazon - A Jewish Response to Hunger; Natural
Resources Defense Council; Prima Frutta Packing, Inc.; Prima
Noce Packing; Redwood Empire Food Bank; Resource Connection Food
Bank, Calaveras; Roots of Change; Sacramento Food Bank & Family
Services; San Diego Food System Alliance; San Diego Hunger
Coalition; San Luis Obispo County Food System Coalition; Second
Harvest Food Bank - San Joaquin & Stanislaus Counties; Second
Harvest Food Bank - San Jose & San Carlos; Second Harvest Food
Bank - Santa Cruz County; Second Harvest Food Bank of Orange
County; SF-Marin Food Bank; Sierra Orchards; SoCal Harvest, Long
Beach; St. Anthony's Foundation, San Francisco; The Jacobs &
Cushman San Diego Food Bank; Van Groningen & Sons, Inc.; Western
Center on Law and Poverty; Western Growers Association; Western
United Dairymen; Yolo Food Bank.
Opposition : California Department of Finance.
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