BILL ANALYSIS Ó
AB 1399
Page 1
Date of Hearing: April 13, 2015
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Philip Ting, Chair
AB 1399
(Baker) - As Introduced February 27, 2015
Majority vote. Fiscal committee. Tax levy.
SUBJECT: Corporation tax law: credits: domestic violence
shelters
SUMMARY: Provides a credit under the Corporation Tax (CT) Law
in the amount of 50% of the contributions made to a domestic
violence shelter service provider or emergency shelter, not to
exceed $200,000. Specifically, this bill:
1)Provides, beginning on or after January 1, 2016, and before
January 1, 2021, a credit against the "tax," as defined under
the CT Law, in the amount of 50% of contributions made to a
domestic violence shelter service provider or emergency
AB 1399
Page 2
shelter.
2)Provides that the credit shall not exceed $200,000 per
taxpayer, per taxable year.
3)Provides that the credit is in lieu of any other credit or
deduction that the taxpayer may otherwise claim for
contributions made to a domestic violence shelter service
provider or emergency shelter.
4)Provides that the credit shall be claimed on a timely filed
original return.
5)Requires the Franchise Tax Board (FTB), upon application by
the taxpayer, to certify contributions meeting the
requirements of this bill.
6)Provides that if the credit exceeds the taxpayer's liability,
the excess credit amount may be carried over to the following
year, and succeeding five years, if necessary until the credit
is exhausted.
7)Provides that the credits shall be awarded on a
first-come-first-serve basis, and that the aggregate amount of
credit shall not exceed $50 million for each calendar year.
8)Defines a "domestic violence shelter service provider" as
having the same meaning as provided for under the
Comprehensive Statewide Domestic Violence Program.
9)Defines an "emergency shelter" as having the same meaning, and
AB 1399
Page 3
eligible for financial or technical assistance pursuant to the
Comprehensive Statewide Domestic Violence Program.
10)Defines a "program" as having the same meaning under the
Comprehensive Statewide Domestic Violence Program.
11)Provides that the FTB and the Office of Emergency Services
(OES) shall administer the credit provided for by this bill.
12)Provides that the FTB shall perform all of the following:
a) Adopt rules and regulations as necessary or appropriate
to implement this credit.
b) Establish application forms and procedures.
c) Track credits claimed.
d) Post aggregate totals of the credits claimed on the
Internet Web site of the FTB.
e) Determine when the aggregate total of credits reaches
$50,000,000 for a calendar year.
f) Certify that a contribution meets the requirements as
set forth in this bill based on the list provided by the
OES.
13)Requires that the OES annually submit to the FTB a list of
AB 1399
Page 4
those domestic violence shelter service providers and
emergency shelters eligible for a grant award or technical and
financial assistance pursuant to the Comprehensive Statewide
Domestic Violence Program.
14)Provides that the Administrative Procedures Act shall not
apply to the rules or regulations adopted pursuant to this
section.
15)Provides that this section shall remain in effect only until
December 1, 2021, and as of that date is repealed.
16)Provides that it is the intent of the Legislature to make the
findings required by the Revenue & Tax Code (RTC) Section 41.
17)Provides that, as a tax levy, this act go into effect
immediately.
EXISTING LAW:
1)Provides various tax credits to encourage socially-beneficial
behavior or to provide relief to taxpayers who incur specified
expenses. Or to influence behavior, including business
practices and decisions. These credits generally are designed
to provide incentives for taxpayers to perform various actions
or activities that they may not otherwise undertake.
2)Allows generally for, taxpayers engaged in a trade or business
may deduct all expenses considered ordinary and necessary in
conducting that trade or business.
3)Allows corporations that are members of the same unitary
combined reporting group to assign "eligible" credits to other
AB 1399
Page 5
members of the group. An "eligible" credit is any credit
earned by the taxpayers in a taxable year beginning on or
after July 1, 2008, or any credit earned in any taxable year
beginning before July 1, 2008, that was eligible to be carried
forward to the first taxable year beginning on or after July
1, 2008. The credit assignment is made by an irrevocable
election. The assignor and assignee taxpayers must be members
of the same combined reporting for the taxable year in which
the credit is earned and the taxable year the credit is
assigned.
4)Applies performance measurement standards to any new tax
credit under either the Personal Income Tax (PIT) or CT Law if
enacted by a bill introduced on or after January 1, 2015.
Specifically, existing law requires the all of the following:
a) Specific goals, purposes, and objectives that the tax
credit will achieve:
b) Detailed performance indicators for the Legislature to
use when measuring whether the tax credit meets the goals,
purposes, and objectives stated in the bill; and,
c) Data collection requirements to enable the Legislature
to determine whether the tax credit is meeting, failing to
meet, or exceeding those specific goals, purposes, and
objectives, including a requirement to specify both of the
following:
i) The baseline data, to be collected and remitted in
each year the credit is effective, for the Legislature to
measure the change in performance indicators; and,
ii) The taxpayers, state agencies, or other entities
required to collect and remit data
FISCAL EFFECT: The FTB estimates a revenue loss of $11 million
in fiscal year (FY) 2015-16, $38 million in FY 2016-17, and $46
million in 2017-18.
AB 1399
Page 6
COMMENTS:
1)Author's Statement . The Author has provided the following
statement in support of this bill:
On just one day in 2013, 5,263 victims and their children
received services as domestic violence programs throughout
the state. On that same day 872 requests for services went
unmet, of which 80% were for housing, largely due to lack
of resources. That means 872 individuals, children, and
families, could not secure a safe place to stay, or receive
vital counseling or resources. Emergency shelter,
transitional housing, and nonresidential services could not
be provided because of lack of resources. Of those unmet
needs, approximately 40% of programs report that victims
return to their abuser, 37% report that victims become
homeless, and 16% report that families end up living in
their car.
AB 1399 will increase available resources to victims of
domestic violence by providing that local business and
corporations who make charitable contributions to domestic
violence programs can receive a 50% tax credit for that
donation. The recipients of the contribution must be
non-profit domestic violence organizations who are grant
recipients under the OES Comprehensive Statewide Domestic
Violence Program.
AB 1399
Page 7
2)Arguments in Support . YWCA of Glendale states that, "Every
day, domestic violence programs . . . struggle to meet the
needs of domestic violence survivors, their children and
communities with limited financial resources at their
disposal. . . . Domestic violence programs rely on a wide
range of funding sources to support their programs,
including corporate donations. Allowing corporations to
claim a tax credit for their donations would help to
encourage these businesses to increase donations to the
domestic violence programs serving their communities. This
bill will benefit domestic violence programs and the
businesses that choose to donate."
3)Arguments in Opposition . The California Tax Reform
Association (CTRA) notes that, "[t]his bill's proposed way
of accomplishing that end is, however, not as meritorious as
its laudable aim." CTRA continues on to say that, "given
the magnitude of the contemplated expenditure, a more
targeted and more accountable approach would be a bill that
appropriates this money from the General Fund to those
programs that the bill already identifies as legitimate
recipients. Second, the bill would provide that the credit
would not exceed $200,000 per corporate taxpayer. However,
many corporations have already zeroed out their tax
liability. Third, and relatedly, the loss of up to $50
million to the General Fund means that other worthy programs
may not be as well funded. Fourth, the exemption from the
Administrative Procedures Act for regulations promulgated
under the legislation is confounding.
4)Domestic Violence Shelters (DVS) . One in four women will
experience domestic violence in their lifetime. (Tjaden,
Patricia & Thoennes, Nancy. National Institute of Justice
and the Centers of Disease Control and Prevention, Extent,
Nature and Consequences of Intimate Partner Violence:
AB 1399
Page 8
Findings from the National Violence Against Women Survey,
2000.) DVSs are essential in supporting victims of domestic
violence because they answer incoming calls, provide
emergency shelters for women and children, and provide much
needed counseling. (Safehorizon. Facts and Stats About
Safehorizon. Web. April 1, 2015.) Moreover, according to a
recent article in Forbes magazine, "Domestic violence costs
$8.3 billion in expenses annually: a combination of higher
medical costs ($5.8 billion) and lost productivity ($2.5
billion)." (Robert Pearl. Forbes. Domestic Violence: The
Secret Killer That Costs $8.3 Billion Annually. December, 5,
2013. Web. April 1, 2015.)
5)What is a "tax expenditure" ? Existing law 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).
This bill would enact a new tax expenditure program, in the
form of a tax credit for corporations who make contributions
to qualified DVS.
6)How is a tax expenditure different from a direct
expenditure ? 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, it should also be noted that, once
enacted, it takes a two-thirds vote to rescind an existing
AB 1399
Page 9
tax expenditure absent a sunset date. This bill shall
remain in effect until December 1, 2021.
7)Considerations . A tax credit for 50% of the monetary
contributions to a DVS service provider or emergency shelter
is relatively high as compared to other credits in existing
law. Therefore, it is reasonable to assume that this would
indeed incentivize corporations to continue/increase their
contributions to DVSs; however, the incentive is only
temporary and the increased available funding would also be
highly volatile depending on the amount of contributions
made throughout the year. This variability could eventually
lead to planning complications and potential underfunding
for shelters that have over-expanded their services in
response to a temporary increase in funding.
Moreover, simply creating a greater incentive for corporations
to make donations does not necessarily address the issue
regarding the lack of funding; this bill does not consider
where funding is needed most or how an increase in funding
would be most efficiently utilized. Larger DVS would most
likely receive the lion's share of the increased funding
solely due to their notoriety. However, smaller and newer
shelters (who may have a greater need for funding) may be
entirely neglected and unable to meet their demands.
Therefore, regardless of the aggregate increase in funding,
if the funding is not distributed efficiently the intended
purpose of the author could be met with frustration.
8)Compliance with Section 41 of the RTC . It is unclear as to
whether the requirements under Section 41, have been met to
the required extent. First, although the author states that
the this bill's effect will be an increase in funding
available to DVSs, this bill does not articulate any
specific goal, purpose or objective of this bill. Second,
AB 1399
Page 10
although this bill requires the FTB's to administer this
credit, it does not provide for the required performance
indicators or data collection necessary to measure the
success of the tax credit.
9)Alternatives : The author states the effect of this bill is
to increase the available funding to the DVS. Whereas this
tax credit may incentivize corporations to that end, the
revenue loss associated with this tax credit may be better
justified and the assumed goal of the bill more efficiently
achieved through a direct expenditure.
10)Implementation Considerations : The FTB noted the
following:
This bill lacks [the] administrative details necessary to
implement the bill and determine its impacts to the
department's systems, forms, and processes. The bill is
silent on the following issues:
When and what information would the OES
report to the FTB?
Would the first-come, first-served basis of
allocating the credit be based on contribution date?
Date the application was filed with the FTB?
AB 1399
Page 11
How and when would a taxpayer request and
receive notification of an allocation?
Would a reallocation of any unallocated
amount or unused allocated amount for a fiscal year
be allowed?
A funding mechanism for the FTB's start-up
and on-going costs to administer the certification
and reporting process provisions of this bill.
Absence of a funding mechanism could delay
implementation or require diversion of resources
from existing revenue generating workloads.
REGISTERED SUPPORT / OPPOSITION:
Support
Alliance for Community Transformation
California Partnership to End Domestic Violence
California Communities United Institute
AB 1399
Page 12
Family Services Supporting Tulare County
Los Angeles Center for Law and Justice
Member of Domestic Violence Services
Monarch Services
Mountain Crisis Services in Mariposa
Safe Alternatives to Violent Environments
Shepherd's Door Domestic violence Resource Center
STAND! For Families Free of Violence
WEAVE, Inc
Wild Iris Family Counseling & Crisis Center
YWCA of Glendale
41 private individuals
Opposition
AB 1399
Page 13
American Federation of State, County, and Municipal Employees
California Tax Reform Association
Analysis Prepared by:Carlos Anguiano / REV. & TAX. / (916)
319-2098