BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 976 (Steinorth) - Personal income tax: deductions:
qualified pet adoption costs
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|Version: May 7, 2015 |Policy Vote: GOV. & F. 7 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: July 6, 2015 |Consultant: Robert Ingenito |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 976 would allow an income tax deduction, not to
exceed $100, for qualified costs paid or incurred adopting a pet
from a qualified animal rescue organization, as defined.
Fiscal
Impact: The Franchise Tax Board (FTB) estimates that the bill
would result in annual General Fund revenue losses of $100,000
for fiscal years 2016-17 through 2018-19. The bill would not
impact FTB's administrative costs.
Background: Current law permits 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 engage in some sort of behavior that would not have
AB 976 (Steinorth) Page 1 of
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occurred on the natural.
California law allows various deductions under the personal
income tax (PIT), in modified conformity with federal income tax
laws, including miscellaneous itemized deductions that are
allowed only to the extent that the aggregate amount of those
deductions exceed 2 percent of adjusted gross income (AGI).
These deductions are referred to as "below-the-line" deductions.
State law also allows for the deduction of certain expenses to
arrive at a taxpayer's adjusted gross income. These expenses
include certain trade and business expenses, losses from the
sale or exchange of certain property, alimony, and moving
expenses. Taxpayers with these types of expenses receive the
benefit of a deduction, regardless of whether the taxpayer
itemizes deductions or uses the standard deduction. These
deductions are known as "above-the-line" deductions.
Proposed Law:
This bill would allow a below-the-line deduction equal to the
qualified costs paid or incurred by a taxpayer for the adoption
of a qualified pet (as defined) from a qualified animal rescue
organization (as defined). The deduction would be claimed as a
miscellaneous itemized deduction and would be limited to $100
per taxable year. The bill would (1) take effect immediately as
a tax levy, and (2) apply to taxable years 2016 through 2020.
Related Legislation: AB 2326 (Dickinson, 2014), also would have
allowed taxpayers a
miscellaneous itemized deduction, up to $100 per taxable year,
for the qualified costs paid or incurred for the adoption of
pets from a qualified animal rescue organization. AB 2326 was
held on suspense by the Assembly Appropriations Committee.
Staff
Comments: FTB's revenue estimate is based on an assumption that
100,000 qualified pets would be adopted in 2016. In addition,
AB 976 (Steinorth) Page 2 of
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FTB assumes that (1) 60 percent of adopters would itemize their
deductions, and (2) 30 percent of itemizers exceed the two
percent floor for miscellaneous deductions. Consequently,
approximately 18,000 taxpayers would take the proposed
deduction.
As noted above, Tax expenditures such as the one proposed in
this bill typically are enacted to encourage socially beneficial
behavior that would not exist without financial incentive.
However, because this bill caps its deduction at $100, the
decrease in a taxpayer's tax liability would be roughly $10,
which could limit its impact with respect to increased animal
adoptions over what would happen on the natural.
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