BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 2430| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 2430 Author: Beth Gaines (R) Amended: 4/27/16 in Assembly Vote: 21 SENATE GOVERNANCE & FIN. COMMITTEE: 5-0, 6/29/16 AYES: Hertzberg, Nguyen, Beall, Hernandez, Moorlach NO VOTE RECORDED: Lara, Pavley SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/1/16 AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen ASSEMBLY FLOOR: 76-0, 5/23/16 - See last page for vote SUBJECT: Voluntary contributions: Type 1 Diabetes Research Fund SOURCE: Author DIGEST: This bill requires the addition of the Type 1 Diabetes Research Fund (Fund) check-off to the personal income tax return. ANALYSIS: Existing law: 1)Allows taxpayers to contribute money to voluntary contribution funds (VCFs) by checking a box on their state income tax AB 2430 Page 2 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. 2)Allows contribution amounts to be claimed as charitable contributions on taxpayers' tax returns in the subsequent year. 3)Requires that 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 With a few exceptions, VCFs remain on the return until they are repealed by a sunset date or fail to generate a minimum contribution amount.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 amounts are adjusted annually for inflation. For most VCFs, the minimum contribution amount is $250,000, beginning in the fund's second year. The following check-offs do not have a minimum contribution requirement: a) California Firefighters' Memorial Foundation Fund, b) California Peace Officer Memorial Foundation Fund, and c) California Seniors Special Fund. This bill: AB 2430 Page 3 1)Adds the Type 1 Diabetes Research Fund (Fund), 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. 2)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 3)Provides that all money transferred to the Fund, upon appropriation by the Legislature, be allocated as follows: a) To the Franchise Tax Board (FTB) and the State Controller's Office (SCO) for reimbursement of all costs incurred in administering the VCF. b) 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. 4)Allows the UC and the authorized research organizations to use up to 5% of the grant money for administrative costs. AB 2430 Page 4 5)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. Background Current law allows taxpayers to contribute money to one or more of 19 voluntary contribution funds (VCFs) during the process of filing their state income tax return. These contributions are made from taxpayers' own resources, not from their tax liability, as is the case with federal tax returns. Check-off amounts are deductible as charitable contributions on taxpayers' returns during the subsequent tax year. With some exceptions, each voluntary contribution fund has a sunset date and is required to meet a minimum contribution amount of $250,000, adjusted annually for inflation. When a taxpayer contributes to VCFs, 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. The authorizing statutes of other VCFs 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 VCFs require the SCO to send the funds directly to private organizations without passing through an administrative agency, such as the California Fire Foundation. SCO and administrative agencies may deduct administration fees from the amount of donations each VCF receives. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No AB 2430 Page 5 According to the Senate Appropriations Committee: FTB estimates that, beginning in 2017- 18, this bill would result in an annual revenue loss of $8,000 (General Fund) for every $250,000 contributed by itemizing taxpayers. The UC, SCO, and FTB would be reimbursed for related administrative costs. SUPPORT: (Verified8/3/16) None received OPPOSITION: (Verified8/3/16) California Department of Finance ARGUMENTS IN SUPPORT: 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 AB 2430 Page 6 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 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." ARGUMENTS IN OPPOSITION: Opponent argues that the bill is of limited value and results in a loss to the General Fund. Additionally, it is unclear why special preference should be given to one organization over the countless others that are not on the tax form. ASSEMBLY FLOOR: 76-0, 5/23/16 AYES: Achadjian, Alejo, Travis Allen, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gray, AB 2430 Page 7 Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon NO VOTE RECORDED: Arambula, Eggman, Gordon, Patterson Prepared by:Myriam Bouaziz / GOV. & F. / (916) 651-4119 8/3/16 18:11:10 **** END ****