BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON GOVERNANCE AND FINANCE
                         Senator Robert M. Hertzberg, Chair
                                2015 - 2016  Regular 

                              
          
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          |Bill No:  |AB 1789                          |Hearing    |6/15/16  |
          |          |                                 |Date:      |         |
          |----------+---------------------------------+-----------+---------|
          |Author:   |Santiago                         |Tax Levy:  |No       |
          |----------+---------------------------------+-----------+---------|
          |Version:  |3/17/16                          |Fiscal:    |Yes      |
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          |Consultant|Bouaziz                                               |
          |:         |                                                      |
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               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          repealed by a sunset date or fail to generate a minimum  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,







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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, 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









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           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  








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          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.



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