BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 515| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 515 Author: Eggman (D), et al. Amended: 8/17/15 in Senate Vote: 21 SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 7/1/15 AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/27/15 AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen ASSEMBLY FLOOR: 78-0, 6/1/15 - See last page for vote SUBJECT: Income taxes: credits: food bank donations SOURCE: Author DIGEST: This bill expands the existing food donation tax credit program, under the Personal Income Tax Law and Corporation Tax Law, for contributions of qualified donation items to a food bank. ANALYSIS: Existing law: 1)Allows various income tax credits, deductions, and sales and use tax exemptions to provide incentives to compensate AB 515 Page 2 taxpayers that incur certain expenses, such as child adoption, or to influence behavior, including business practices and decisions, such as research and development credits. 2)Allows a 10% tax credit for the donation of fresh fruits or fresh vegetables to food banks located in California. 3)Requires the Department of Finance to annually publish a list of tax expenditures. This bill: 1)Allows a 15% credit under the Personal Income Tax Law and Corporation Tax Law for contributions of qualified donation items to a food bank. 2)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. 3)Lists the following items as qualified donation items under this bill, 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. AB 515 Page 3 Soup, pasta sauce, and salsa. Bread and pasta. Canned meats and canned seafood. 1)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 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. 2)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. 3)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. 4)Renames the State Emergency Food Assistance Program (SEFAP) as the CalFood Program (CFP). 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. Specifies that all monies received by the CFP, upon appropriation by the Legislature, must be allocated to the Department of Social Services (DSS) for allocation to the CFP. 5)Applies to taxable years beginning on or after January 1, 2016, and before January 1, 2021. Comments AB 515 Page 4 1)Author's statement. According to the author, "California is 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, one out of six 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. 4)Section 41 shall not apply. On September 29, 2014, Governor Brown signed SB 1335 (Leno, Chapter 845, Statutes of 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 AB 515 Page 5 R&TC Section 41 shall not apply to this credit. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No According to the Senate Appropriations Committee: 1)The FTB estimates that this bill will result in a General Fund revenue loss of $400,000 in 2015-16, $1.0 million in 2016-17, and $1.4 million in 2017-18. 2)FTB would incur minor costs to administer changes to systems and procedures. 3)Costs to the DSS would be unchanged. DSS costs are reimbursed with federal funds received under the program. SUPPORT: (Verified 8/27/15) Alameda County Community Food Bank California Association of Food Banks California Bean Shippers Association California Catholic Conference, Inc. California Cattlemen's Association California 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 Californians Against Waste 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 County of Tulare Deardorff Family Farms East Valley Business Legislative Advocacy Council AB 515 Page 6 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 AB 515 Page 7 Yolo Food Bank OPPOSITION: (Verified8/27/15) California Department of Finance ARGUMENTS IN SUPPORT: The supporters of this bill argue that this bill will increase access to healthy foods for low income Californians. Further, this bill will help to reduce food insecurity in this state. ARGUMENTS IN OPPOSITION: The opponent of this bill argues that this bill will reduce General Fund revenues and find that valuing items at wholesale value is problematic. ASSEMBLY FLOOR: 78-0, 6/1/15 AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Atkins NO VOTE RECORDED: Obernolte, Wood Prepared by:Myriam Bouaziz / GOV. & F. / (916) 651-4119 8/31/15 12:47:58 **** END **** AB 515 Page 8