BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |AB 924 |Hearing |6/17/15 |
| | |Date: | |
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|Author: |Cooley |Tax Levy: |No |
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|Version: |4/29/15 |Fiscal: |Yes |
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|Consultant|Bouaziz |
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PERSONAL INCOME TAX: VOLUNTARY CONTRIBUTIONS: STATE
CHILDREN'S TRUST FUND
Reauthorizes the addition of the State Children's Trust 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.
Each VCF is individually added to the tax return by legislation.
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repealed by a sunset date or fail to generate a minimum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:
California Firefighters' Memorial Foundation Fund,
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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. The 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 typically collects $4-5 million in
annual contributions for all VCFs.
Proposed Law
Assembly Bill 924 reauthorizes the addition of the State
Children's Trust 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:
To FTB and the State Controller for reimbursement of all
costs incurred in administering the VCF,
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Up to 10% to the State Department of Social Services
(CDSS) to pursue public education about child abuse,
neglect prevention, and early intervention to encourage
voluntary contributions to the Fund. The CDSS may delegate
these duties by entering into a contract with a designated
private entity that has demonstrated experience in
education and promotion and,
The remainder to the CDSS for innovative child abuse,
neglect prevention, and intervention programs operated by
private nonprofit organizations or public institutions of
higher education with recognized expertise, in fields
related to child welfare and for evaluation, research, or
dissemination of information concerning existing program
models.
AB 924 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.
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, "Over the last
five years the Trust Fund received between $305,000 and $760,000
from voluntary check-off contributions annually. The
contributions each year have represented roughly 52 percent of
the revenue deposited into the fund, a critically important
source of funding activities. The loss of this funding stream
is resulting in fewer prevention programs that directly target
child abuse and neglect receiving funds. To ensure these
programs remain supported, AB 924 reinstates the State
Children's Trust Fund as a donation option for a person to make
in completing their taxes, if they expect a refund."
2. Hitting the reset button. The State Children's Trust Fund
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first appeared on the 1983 personal income tax return. By 2014,
the inflation-adjusted minimum contribution threshold was
$324,972, but the fund only received contributions of
approximately $303,000. As a result, the fund was not included
on the 2014 personal income tax return (which is filed in 2015)
and discontinued. Reauthorizing the Fund effectively resets the
minimum contribution to $250,000 in contravention of the general
policy for voluntary contribution funds.
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. 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 74-0
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Support and
Opposition (6/11/15)
Support : California Family Resource Association; Child Abuse
Prevention Center; Child Abuse Prevention Council of Sacramento;
Children's Bureau of Southern California; Insights Counseling
Group; Kern County Network for Children; Kids First; Local
Planning Council for Child Care & Development in Del Norte
County; North County Rape Crisis & Child Protection Center;
Orangewood Children's Foundation; Plumas Crisis Intervention and
Resource Center; Prevent Child Abuse California; Roundhouse
Council; Santa Maria Valley Youth & Family Center; The
Partnership for Safe Families & Communities of Ventura County.
Opposition : California Department of Finance.
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