BILL ANALYSIS                                                                                                                                                                                                    Ó



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

                              
          
           ------------------------------------------------------------------ 
          |Bill No:  |AB 2371                          |Hearing    |6/29/16  |
          |          |                                 |Date:      |         |
          |----------+---------------------------------+-----------+---------|
          |Author:   |Frazier                          |Tax Levy:  |No       |
          |----------+---------------------------------+-----------+---------|
          |Version:  |5/12/16                          |Fiscal:    |Yes      |
           ------------------------------------------------------------------ 
           ----------------------------------------------------------------- 
          |Consultant|Bouaziz                                               |
          |:         |                                                      |
           ----------------------------------------------------------------- 

                    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          repealed by a sunset date or fail to generate a minimum  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 







          AB 2371 (Frazier) 5/12/16                               Page 2  
          of ?
          
          

                 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  








          AB 2371 (Frazier) 5/12/16                               Page 3  
          of ?
          
          
               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  








          AB 2371 (Frazier) 5/12/16                               Page 4  
          of ?
          
          
          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.   








          AB 2371 (Frazier) 5/12/16                               Page 5  
          of ?
          
          
          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
































          AB 2371 (Frazier) 5/12/16                               Page 6  
          of ?
          
          
           

          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.











                                       - END -