BILL ANALYSIS Ó
AB 2472
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Date of Hearing: May 25, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2472 (Linder) - As Amended May 18, 2016
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill allows a credit under the Personal Income Tax (PIT)
Law for disabled veterans with a disability rating of 30% or
higher for the cost of ownership and maintenance of a service
animal. Specifically, this bill:
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1)Allows a credit worth 50% of qualified costs, not to exceed
$1,500, against PIT liability, from tax years beginning on or
after January 1, 2017 and before January 1, 2019
2)Specifies that the availability of this this credit is
contingent upon an appropriation to the Franchise Board (FTB)
to implement the credit.
3)Specifies that the size of the credit will depend on the
"adjustment factor" established during the annual budget
process, but that the default is 0%.
FISCAL EFFECT:
1)Annual GF cost pressure of up to $29 million in FY 2017-18 and
$18 million in FY 2018-19. The costs of this credit depend on
the adjustment factor set during the annual budget process.
2)Minor and absorbable administrative costs to FTB to change
existing tax forms, instructions, and information systems.
COMMENTS:
1)Purpose. AB 2472 is intended to be a modest tax credit that
assists with the high costs of service animals for disabled
veterans. The author argues that veterans face significant
challenges when they re-enter society after their time in
service, and this bill is in a response to the growing body of
research that demonstrated the many health benefits of service
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animals.
2)Background. There are approximately 1.8 million veterans
living in California. Of that number, it is estimated that
approximately 270,000 have service-related disability ratings
that would make them eligible for the credit proposed in AB
2497 (a rating of 30% or higher).
3)The cost of service animals. AB 2472 was amended on May 18 to
limit the size of the credit, bringing it more in line with
the expected costs of providing for and caring for a service
animal. Previous versions of the bill had a credit cap of
$2,000, which assumed that costs incurred caring for a service
animal amount to $4,000 annually (the credit is worth 50% of
the costs to take care of a service animal). The May 18
amendment now assumes the costs of caring for a service animal
to be closer to $3,000 annually. According to the American
Kennel Club, the average cost the first year raising a dog is
estimated to be $3,085.
4)How would this credit work? The bill was amended policy
committee with two provisions that affect the availability and
size of the credit. Specifically:
a) The availability of the credit is contingent upon an
appropriation to FTB to administer the credit. While
administrative costs are expected to be minor, there must
nevertheless be a specific appropriation for the agency to
administer the service animal credit. Without one, the
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credit is not made available to qualified taxpayers.
b) The Budget Act must set an adjustment factor for the
credit, which determines its size. Similar to the
California earned income tax credit (EITC), the size of the
service animal credit would be based on the size of this
adjustment factor. The adjustment factor is set at a
default of 0%, meaning that unless otherwise specified
through the budget process, this credit is not available.
An adjustment factor of 0.5 would mean that the credit
would be half of large as it normally would be (up to a
$750).
These amendments will help policymakers manage costs and
require a newly created tax expenditure to be considered along
with other spending items. Generally, tax expenditures are
considered outside the budget process, even though they have a
direct impact on the availability of funds for other programs.
These amendments also create practical complications for
ensuring the credit is effective. New tax credits can take
some time to get started in part because taxpayers need to be
educated about the program and FTB needs time to develop
systems and processes. If the availability and size of the
credit change annually, this can undermine the goal of
providing relief to disabled veterans.
Analysis Prepared by:Luke Reidenbach / APPR. / (916)
319-2081
AB 2472
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