BILL ANALYSIS Ó SENATE COMMITTEE ON GOVERNANCE AND FINANCE Senator Robert M. Hertzberg, Chair 2015 - 2016 Regular ------------------------------------------------------------------ |Bill No: |AB 1789 |Hearing |6/15/16 | | | |Date: | | |----------+---------------------------------+-----------+---------| |Author: |Santiago |Tax Levy: |No | |----------+---------------------------------+-----------+---------| |Version: |3/17/16 |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant|Bouaziz | |: | | ----------------------------------------------------------------- Personal income taxes: voluntary contributions: School Supplies for Homeless Children Fund Extends the sunset date for the School Supplies for Homeless Children Fund tax check-off on 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 With a few exceptions, VCFs remain on the return until they are repealed by a sunset date or fail to generate a minimum contribution amount.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 1789 (Santiago) 3/17/16 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 1789 extends the sunset for the School Supplies for Homeless Children Fund to January 1, 2022. State Revenue Impact FTB estimates that this bill would reduce General Fund revenues by $10,000 in fiscal year (FY) 2017-18 and $15,000 in FY 2018-19. Comments AB 1789 (Santiago) 3/17/16 Page 3 of ? 1. Purpose of the bill. According to the author, "Homelessness is prevalent in urban and rural areas of California. The Los Angeles School District has the highest number of homeless students (14,323) and Sacramento ranks among the top six districts in overall number of homeless students and as a county has more homeless students than any other in Northern California. A significant barrier to success homeless students face is access to basic materials such as school supplies, hygienic and dental products and other basic necessities. Lack of basic material needs accompanied with low self-esteem lead to absenteeism and truancy, which prevents homeless students from obtaining the education that is their best opportunity to escape poverty. The School Supplies for Homeless Children Fund addresses the basic necessities these children need to succeed." 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. School Supplies for Homeless Children Fund. The School Supplies for Homeless Children Fund was originally authorized by AB 1789 (Santiago) 3/17/16 Page 4 of ? SB 1571 (DeSaulnier) in 2012 to help provide essential school supplies to homeless children. To date, the Fund has established a successful record of generating taxpayer contributions. Specifically, the Fund received $337,949 in valid contributions in 2014, and $398,900 in 2015. 5. 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 9-0 Assembly Appropriations 20-0 Assembly Floor 78-0 Support and Opposition (6/8/16) Support : California Catholic Conference, Inc.; California State PTA; California Teachers Association; Common Sense Kids Action; Give Something Back Office Supplies; K to College. Opposition : California Department of Finance. -- END --