BILL ANALYSIS Ó
AB 515
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CONCURRENCE IN SENATE AMENDMENTS
AB
515 (Eggman)
As Amended August 17, 2015
Majority vote
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|ASSEMBLY: | 78-0 |(June 1, 2015) |SENATE: |40-0 |(September 1, |
| | | | | |2015) |
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Original Committee Reference: REV. & TAX.
SUMMARY: Expands the existing tax credit program under the
Personal Income Tax (PIT) Law and Corporation Tax (CT) Law for
contributions of qualified donation items to a food bank
("program") and extends the program until January 1, 2021.
The Senate Amendments:
1)Require that the tax credit for contributions of qualified
donation items to a food bank be claimed on a timely filed
original tax return.
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2)Clarify that the amount of the new expanded tax credit allowed
to a taxpayer may not be less than the amount that otherwise
would have been calculated and allowed under the existing tax
credit program.
AS PASSED BY THE ASSEMBLY, this bill:
1)Revised the definition of a "qualified taxpayer" (QT) to
include persons responsible for growing or raising a qualified
donation item, or harvesting, packing, or processing a
qualified donation item.
2)Revised the definition of "qualified donation item" (QDI) to
include, in addition to fresh fruits and vegetables, the
following raw agricultural products or processed foods, as
specified:
a) "Fruit, nuts or vegetables" as defined in Food and
Agricultural Code (F&AC) Section 42510;
b) "Meat food product" as defined in F&AC Section 18665;
c) "Poultry" as defined in F&AC Section 18675;
d) "Eggs" as defined in F&AC Section 75027;
e) "Fish" as defined in F&AC Section 58609; and,
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f) Any cheese, milk, yogurt, butter, and dehydrated milk
meeting the requirements in F&AC Division 15.
g) All of the following food items as defined in Health and
Safety Code Section 109935:
i) "Rice";
ii) "Beans";
iii) "Fruit, nuts, and vegetables in canned, frozen,
dried, dehydrated, and 100% juice forms";
iv) "Vegetable oil and olive oil";
v) "Soup, pasta sauce, and salsa";
vi) "Infant formula";
vii) "Bread and pasta"; and,
viii) "Canned meats and canned seafood."
3)Increased the existing tax credit rate from 10% to 15% and
specified that the credit value is calculated, with reference
to the qualified value (QV) of the QDI, instead of inventory
costs.
4)Defined a "qualified value" as either of the following:
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a) The weighted average wholesale sale price based on the
QT's total wholesale sales of the donated item sold within
the calendar month of the QTs donation; or,
b) If no wholesale sales of the donated item have occurred
in the calendar month of the QT's donation, the QV 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.
5)Required donors to provide item value and information
regarding where the donation items were grown or processed to
food banks and requires the food banks to issue certificates
with respect to donated items.
6)Authorized the Franchise Tax Board (FTB) to request copies of
any certificates.
7)Required the FTB to include in its annual report the estimated
value of the QDIs, the origin of the QDIs, and the month the
donations were made.
8)Renamed, on or after January 1, 2016, the State Emergency Food
Assistance Program (SEFAP) as the CalFood Program (CFP).
9)Required 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.
10) Specified 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
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the CFP.
11) Repealed the tax credit program on December 1, 2021.
FISCAL EFFECT: According to the Senate Appropriations
Committee:
1)The Franchise Tax Board (FTB) estimates that this bill would
result in a General Fund revenue loss of $400,000 in 2015-16,
$1 million in 2016-17, and $1.4 million in 2017-18.
2)The FTB would incur minor costs to administer changes to
systems and procedures.
3)Costs to the Department of Social Services (DSS) would be
unchanged. DSS costs are reimbursed with federal funds
received under the program.
COMMENTS:
1)Author's Statement: The author has provided the following
statement in support of this bill:
California is the leader agricultural producer in
the U.S. [United States], 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
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20% of the donation items wholesale value, and
extends the sunset of this program to 2021.
2)Existing Tax Credit Program. Under PIT and the CT laws, a
qualified taxpayer is allowed a tax credit, in an amount
equal to 10% of the inventory costs of the fresh fruits or
fresh vegetables donated to food banks located in
California. (AB 152 (Fuentes), Chapter 503, Statutes of
2011.) According to the Capital Area Food Bank's (CAFB) Web
site, California is ranked 19th for food insecurity
nationwide, with a food insecurity rate of 16.2%, which
translates into 6.1 million Californians with, on average,
one-in-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, or
more than one-in-four children, in California may 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 distributed 140 million pounds of food to people
in need.
3)The Scope of this Bill. This bill broadens the scope of
what would be considered a qualified donation item and
redefines the computation of the credit amount. This bill
also increases the rate of the credit from 10% to 15% and
expands the definition of a qualified taxpayer. The
proposed expanded scope of the program would theoretically
increase donations simply by widening the available pool of
both participants and products, even without the higher
credit rate. In some cases, a qualified taxpayer may be
more inclined to contribute a QDI simply because he/she is
not able to make a profit by selling his/her products. In
those instances, receiving the current 10% credit would be
enough of an incentive. Receiving a larger credit may go
beyond what is needed to encourage the desired result.
4)Tax Expenditure vs. Direct Expenditure. Existing law
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provides various credits, deductions, exclusions, and
exemptions for particular taxpayer groups. In the late
1960s, United States Treasury officials began arguing that
these features of the tax law should be referred to as
"expenditures" since they are generally enacted to
accomplish some governmental purpose and there is a
determinable cost associated with each (in the form of
foregone revenues).
As the Department of Finance notes in its annual Tax
Expenditure Report, there are several key differences
between tax expenditures and direct expenditures. First,
tax expenditures are reviewed less frequently than direct
expenditures once they are put in place. Second, there is
generally no control over the amount of revenue losses
associated with any given tax expenditure. Finally, absent
a sunset date, a two-thirds vote is required to rescind an
existing tax expenditure once enacted.
Tax credits are generally used to encourage socially
beneficial behavior, to provide relief to taxpayers who
incur specified expenses, or to influence behavior
(including business practices). In contrast to the value of
a deduction to a taxpayer, the value of a tax credit is the
same, regardless of the tax rate. Thus, a tax credit is
generally more appealing to taxpayers. Furthermore,
charitable deductions allowed to corporate taxpayers are
limited to 10% of the taxpayer's net income and thus a tax
credit for the same donations will be more valuable to a
corporate taxpayer.
5)Qualified Taxpayers Outside California. This bill provides
that a credit equal to 15% will be given to qualified
taxpayers that donate qualified items to food banks in
California. Qualified taxpayers located in as well as
outside of California are able to claim the credit as long
as they meet the applicable requirements and donate
qualified items. It is unclear whether the benefits of
potentially increasing the amount of donated food outweighs
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the costs of subsidizing producers located, and economic
activities performed, outside of California.
Analysis Prepared by:
Oksana Jaffe / REV. & TAX. / (916) 319-2098 FN:
0001729