BILL ANALYSIS Ó SENATE COMMITTEE ON GOVERNANCE AND FINANCE Senator Robert M. Hertzberg, Chair 2015 - 2016 Regular ------------------------------------------------------------------ |Bill No: |AB 1399 |Hearing |6/8/16 | | | |Date: | | |----------+---------------------------------+-----------+---------| |Author: |Baker |Tax Levy: |No | |----------+---------------------------------+-----------+---------| |Version: |2/10/16 |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant|Bouaziz | |: | | ----------------------------------------------------------------- Income taxes: voluntary contributions: California Domestic Violence Fund Authorizes the addition of the California Domestic Violence Fund (Fund) check-off to the personal income tax return. Background 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 With a few exceptions, VCFs remain on the return until they are repealed by a sunset date or fail to generate a minimum contribution amount.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 amount is $250,000, beginning in the fund's second year, and is adjusted yearly for inflation thereafter. The following check-offs do not have a minimum contribution requirement: California Firefighters' Memorial Foundation Fund, AB 1399 (Baker) 2/10/16 Page 2 of ? 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, less an administrative fee, 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 Controller and administrative agencies may deduct administrations fees from the amount of donations each VCF receives. There are currently 19 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 1399 adds the California Domestic Violence 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 in the second calendar year the Fund appears on the tax form, and the amount is 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 AB 1399 (Baker) 2/10/16 Page 3 of ? costs incurred in administering the VCF, To the Office of Emergency Services for distribution to domestic violence programs in California that are in active status, exempt from federal income taxation as an organization described in Section 501(c)(3) of the Internal Revenue Code, and are active grant recipients under the Comprehensive Statewide Domestic Violence Program within the Office of Emergency Services. The bill prohibits funds to be used for administrative costs by both the grant recipients and the Office of Emergency Services. AB 1399 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, "On just one day in 2014, 5,784 victims and their children received services at domestic violence programs throughout the state. On that same day 1, 2016 request for services went unmet, of which 55% were for housing, largely due to lack of resources. That means 1,216, 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 a lack of resources. Of those unmet needs, approximately 49% 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. The cause for these unmet needs are reduced government funding (37%) cuts from private funding (25%) lack of staff (23%) and a reduction in individual donations (13%.). By providing additional opportunities for donations to domestic violence programs in own communities, we can better provide a safe haven for families." AB 1399 (Baker) 2/10/16 Page 4 of ? 2. 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. In 2014, 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. However, SB 1207 (Wolk) was held on suspense in Assembly Appropriations. 3. 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 19. With legislation introduced every year to add new VCFs, there is little reason to expect this number to stop growing. It is estimated that FTB can only handle 8 or 9 more check-offs before FTB has to create a separate tax schedule. 4. Similar Legislation. SB 1476 (Governance and Finance) establishes general provisions for voluntary contribution funds. Specifically, the bill establishes a seven year sunset, requires a minimum contribution amount of $250,000 beginning in the fund's second year, and each year thereafter, requires funds to be continuously appropriated, and requires administering agencies to post information online about the use of the funds. SB 1476 is set to be heard in the Assembly Committee on Revenue and Taxation on June 13, 2016. Assembly Actions Assembly Revenue and Taxation 8-0 Assembly Appropriations 17-0 Assembly Floor 78-0 AB 1399 (Baker) 2/10/16 Page 5 of ? Support and Opposition (6/2/16) Support : Alliance for Community Transformations; California Partnership to End Domestic Violence; Center for Community Solutions; Center for Domestic Peace; Contra Costa County Board of Supervisors; Contra Costa District Attorney's Office; Fiona Ma, State Board of Equalization Chairwoman; Safe Alternatives to Violent Environments-SAVE. Opposition : California Department of Finance. -- END --