BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |AB 2430 |Hearing |6/29/16 |
| | |Date: | |
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|Author: |Beth Gaines |Tax Levy: |No |
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|Version: |4/27/16 |Fiscal: |Yes |
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|Consultant|Bouaziz |
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Voluntary contributions: Type 1 Diabetes Research Fund
Requires the addition of the Type 1 Diabetes Research 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repealed by a sunset date or fail to generate a minimum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,
adjusted annually 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 2430 adds the Type 1 Diabetes Research 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
costs incurred in administering the VCF,
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To the University of California (UC) for distribution of
grants to authorized diabetes research organizations. Both
the UC and the authorized research organizations may also
use up to 5% of the grant moneys for administrative cost.
The bill allows the UC and the authorized research organizations
to use up to 5% of the grant money for administrative costs. AB
2430 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, "Diabetes
has reached epidemic levels in California. As of 2012,
about one in seven adult Californians have diabetes and as
many as one in three will be diagnosed in the near future.
The total cost for treatment of diabetes in California
exceeds $24.5 billion dollars. This dollar amount includes
hospitalization, outpatient treatment, disability payments,
loss of individual productivity, and more. As the number
of those affected increases, so too will the cost. A
January 2015 audit, requested by our office, of the
Department of Public Health indicated that, at a funding
level of three cents per capita, California has the lowest
per capita funding for diabetes prevention in the nation.
As California and its Legislature debates how to address
this shortfall in diabetes funding, diabetics are seeing
their costs skyrocket on a daily basis. Recently, a lot of
attention has been given to the study coming out of UCLA in
March of 2016 on prediabetes, which generally could result
in a diagnosis of Type 2 diabetes. However, little to no
attention is given to Type 1 diabetes, which used to be
referred to as 'juvenile diabetes' given its high incidence
in children. In California, there is an estimated 190,000
people diagnosed as type 1 diabetic. While it certainly
seems to be a small percentage compared to the 8 million+
of the diabetic population, the costs associated with Type
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1 diabetes are immensely disproportionate. Because Type 1
diabetes is an autoimmune disease in which a person's
pancreas stops producing insulin, Type 1 diabetics have to
have to carefully balance insulin doses (either by
injections multiple times a day or continuous infusion
through a pump) with eating and other activities throughout
the day and night on a daily basis. They must also measure
their blood-glucose level by pricking their fingers for
blood six or more times a day. These tools (the pump, the
sharps, the blood glucose meters, the testing strips, etc.)
are not cheap and as technology evolves, they get more
expensive. AB 2430 seeks to create a voluntary tax
contribution designation on a state income tax deduction
form so that taxpayers can directly donate to the Juvenile
Diabetes Research Foundation (JDRF), who is the leading
global organization funding Type 1 diabetes research. JDRF
is the only global organization with a strategic plan to
bring those living with Type 1 diabetes a continuous flow
of life-changing therapies and, ultimately, a cure for the
disease."
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
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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 (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 Taxation9-0
Assembly Appropriations 20-0
Assembly Floor 76-0
Support and
Opposition (6/22/16)
Support : Unknown.
Opposition : California Department of Finance.
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