BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |AB 2371 |Hearing |6/29/16 |
| | |Date: | |
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|Author: |Frazier |Tax Levy: |No |
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|Version: |5/12/16 |Fiscal: |Yes |
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|Consultant|Bouaziz |
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Voluntary contributions: Special Olympics Fund
Requires the addition of the Special Olympics 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repealed by a sunset date or fail to generate a minimum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 annualy for inflation. The following check-offs do not
have a minimum contribution requirement:
California Firefighters' Memorial Foundation Fund,
California Peace Officer Memorial Foundation Fund, and
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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 administration 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 2371 adds the Special Olympics Fund (Fund)
check-off, 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
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costs incurred in administering the VCF,
To the State Department of Developmental Services where
the balance shall be disbursed between the Special Olympics
Northern California and Special Olympics Southern
California based on the amount of donations provided by
taxpayers in each organization's jurisdiction based on the
county of the taxpayer contributing, for the purpose of
supporting children and adults with intellectual
disabilities.
The bill prohibits funds to be used for administrative costs by
the Special Olympics Northern California and the Special
Olympics Southern California, and limits the State Department of
Developmental Services to 3% of the moneys allocated to it for
administrative costs. AB 2371 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, "The Special
Olympics Northern California (SONC) and Southern California
(SOSC) provide athletic opportunities to children and adults
with intellectual disabilities, instilling the confidence they
need to succeed in life. Through the power of sports, people
with intellectual disabilities discover new strengths and
abilities, skills and success. SONC and SOSC athletes find joy,
confidence and fulfillment - on the playing field and in life.
They also inspire people in their communities and elsewhere to
open their hearts to a wider world of human talents and
potential. The California Special Olympics divided into two
chapters in 1995, SONC and SOSC. What started originally as a
small grassroots organization has since become a powerful voice
for athletes with intellectual disabilities. SONC and SOSC has
provided athletic opportunities to over 40,000 athletes
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throughout the state. AB 2371 will allow individuals to make a
voluntary contribution in excess of their tax liability, if any,
to the Special Olympics Fund. Contributions to the Special
Olympics Fund shall be used to conduct activities of Special
Olympics Northern California and Special Olympics Southern
California."
2. Special Olympics Fund. The Special Olympics Northern
California (SONC) and Southern California (SOSC) are chapters of
Special Olympics, an organization founded by Eunice Kennedy
Shriver in 1968 that provides year-round sports training and
athletic competition for children and adults with intellectual
disabilities. The Special Olympics' global reach is
approximately 4.4 million athletes. According to the proponents
of this bill, SONC and SOSC serve 59,000 athlete families,
receive assistance from over 45,000 volunteers and 18,000 law
enforcement volunteers, and benefit from 36,000 current donors.
This wide base of support, coupled with a big social media push
during tax season if the voluntary contribution designation is
enacted, would help the Fund meet its minimum contribution
requirement.
3. 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.
4. 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.
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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.
5. Similar Legislation. SB 1476 (Committee on 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 currently on the Assembly Floor.
Assembly Actions
Assembly Revenue and Taxation 9-0
Assembly Appropriations 20-0
Assembly Floor 75-0
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Support and
Opposition (6/22/16)
Support : Association of Regional Center Agencies; Special
Olympics Northern California; Special Olympics Southern
California; The Arc and United Cerebral Palsy California
Collaboration.
Opposition : California Department of Finance.
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