BILL ANALYSIS                                                                                                                                                                                                    Ó






                                                                      SB 17


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          Date of Hearing:  June 22, 2015





                     ASSEMBLY COMMITTEE ON REVENUE AND TAXATION


                                 Philip Ting, Chair





          SB  
          17 (Monning) - As Introduced December 1, 2014





          Majority vote.  Fiscal committee.  


          SENATE VOTE:  35-2


          SUBJECT:  California Sea Otter Fund


          SUMMARY:  Extends, from January 1, 2016, to January 1, 2021, the  
          sunset date for the statutory provisions authorizing the  
          California Sea Otter Fund (Fund) as a voluntary contribution  
          fund (VCF) on the Personal Income Tax (PIT) return.  


          EXISTING LAW:  












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          1)Allows taxpayers to contribute to one or more of 18 VCFs on  
            the 2014 PIT return.

          2)Provides a specific sunset date for each VCF, except for the  
            California Seniors Special Fund and the State Parks Protection  
            Fund.

          3)Requires each VCF to meet an annual minimum contribution  
            amount to remain in effect, except for the California  
            Firefighters' Memorial Fund, the California Peace Officer  
            Memorial Foundation Fund, and the California Seniors Special  
            Fund.

          4)Provides that all money transferred to the Fund, upon  
            appropriation by the Legislature, shall first be allocated to  
            the Franchise Tax Board (FTB) and the State Controller for  
            reimbursement of all costs incurred in administering the Fund.  
             The remaining moneys are divided equally between the:

             a)   Department of Fish and Wildlife to establish a sea otter  
               fund used for sea otter conservation, including for  
               increased investigation, prevention, and enforcement  
               actions related to sea otter mortality, and for public  
               outreach activities that encourage taxpayers to make  
               contributions to the Fund; and, 

             b)   State Coastal Conservancy for competitive grants and  
               contracts to public agencies and nonprofit organizations  
               for research, science, protection, projects, or programs  
               related to the Federal Sea Otter Recovery Plan or improving  
               the nearshore ocean ecosystem, including program activities  
               to reduce sea otter mortality, and for public outreach  
               activities that encourage taxpayers to make contributions  
               to the Fund.

          5)Allows a deduction for any contribution made to the Fund.    

          FISCAL EFFECT:  The FTB estimates that this bill would reduce  











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          General Fund revenues by $9,000 per year beginning in fiscal  
          year 2016-17.<1>  This estimate assumes that the Fund will meet  
          its minimum contribution amount each year.  


          COMMENTS:  


          1)The author notes the following in support of this bill:

               Given that the sea otter population remains in trouble, it  
               is important to extend the tax check-off option on the  
               state income tax form in order for Californians to be able  
               to voluntarily assist in helping to protect this keystone  
               species.  The reauthorization of the California Sea Otter  
               Fund will ensure that support for research to protect the  
               sea otter will continue uninterrupted.  

          2)This bill is sponsored by Friends of the Sea Otter, which  
            notes the following:                                     

               The California Sea Otter Fund has been instrumental in  
               supporting sea otter research, conservation, and education  
               projects that are critical for sea otter recovery.  The  
               money raised from the California Sea Otter Fund has  
               supported a long-term study to determine the impacts of  
               toxic chemicals and disease-carrying pollution on sea  
               otters living along the developed areas of the California  
               coast.  While some of these answers are known, researchers  
               were looking for a deeper understanding of the  
               relationships between sea otters and their habitat.  In  
               addition the money from the Fund has led to a project on  
               -------------------------
          <1>


           Approximately 56% of taxpayers who contribute to the VCF  
          itemize their deductions.  The FTB estimates that the average  
          tax rate for these taxpayers is 6%, resulting in an estimated  
          revenue loss of $9,000 annually.  










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               investigating the use of Elkhorn Slough by sea otters.  Sea  
               Otter Awareness Week and educational outreach programs to  
               local schools in the Monterey Bay area have also been  
               funded through the California Sea Otter Fund.  

          3)This bill is supported by Insurance Commissioner Dave Jones,  
            who notes the following:

               The California Sea Otter Fund was created in 2006 through  
               Assembly Bill 2485, which was jointly authored by me and  
               Secretary (then Assemblymember) John Laird, in order to  
               study and protect the threatened population of sea otters  
               in California which had significantly declined in the early  
               1990s [sic] due to hunting and the emergence of diseases,  
               parasites, and toxicants that kill sea otters.  Today,  
               California's sea otter population is still one-fifth of its  
               historic population and the fund is the primary source of  
               funding for sea otter research and conservation efforts. 

               The Sea Otter tax fund check-off is the main source for all  
               sea otter funding in California.  The fund has raised more  
               than $2.3 million in the past eight years enabling the  
               Department of Fish and Wildlife and the California State  
               Coastal Conservancy to study the threats sea otters face,  
               promote awareness, and work on sea otter restoration.  

          4)Committee Staff Comments

              a)   California's sea otters  :  California's southern sea  
               otters (Enhydra lutris nereis) were thought to be extinct  
               during the early 20th century.  In 1938, however, a small  
               population was discovered near Big Sur.  In 1977, the  
               species was listed as threatened under the federal  
               Endangered Species Act.  The animals are also protected by  
               the federal Marine Mammal Protection Act and have  
               California's fully protected species status.  
                
                California's southern sea otter population gradually grew  
               to roughly 2,000 animals, and has fluctuated between 2,000  











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               and 3,000 since 1995.  According to the Department of Fish  
               and Wildlife, the population has plateaued and the animals  
               are currently "stuck in recovery" largely due to the high  
               death rate of prime-aged adults.  

               Fund donations have, among other things, supported  
               scientific research that has discovered that a substantial  
               portion of sea otter mortality results from diseases,  
               parasites, and toxins.  For example, research has shown  
               that various types of pollution are contributing to the  
               premature deaths of otters that should live longer and  
               produce more pups.   
                
              b)   Legislative history  :  The Fund first appeared on the  
               2006 PIT return.  The original legislation provided for the  
               Fund provisions' automatic repeal on January 1 of the fifth  
               taxable year following the Fund's first appearance on the  
               tax return.  As such, the original Fund provisions were  
               repealed by their own terms on January 1, 2011.  AB 971  
               (Monning), Chapter 209, Statutes of 2011, then reauthorized  
               the addition of the Fund checkoff to the PIT form beginning  
               with the 2011 return.  

               In the last three years alone, the Fund has generated  
               nearly $1 million.  Specifically, the Fund received valid  
               contributions of $351,037 in 2012; $307,544 in 2013; and  
               $304,005 in 2014.  

              c)   What would this bill do  ?  As noted by the FTB, this bill  
               would allow the Fund to remain on the PIT returns filed for  
               taxable years 2016 through 2020, provided contributions  
               meet the annual minimum contribution threshold.   
           
           The Fund's minimum contribution requirement for 2015 is  
          $283,775, and the Fund has received a total of $228,661 in valid  
          contributions through April of this year.  The minimum  
          contribution requirement is adjusted annually for inflation,  
          with the annual inflation adjustment based on the percentage  
          change in the California Consumer Price Index.  











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              d)   So many causes, so little space  :  There are countless  
               worthy causes that would benefit from the inclusion of a  
               VCF on the state's income tax returns.  At the same time,  
               space on the returns is limited.  Thus, it could be argued  
               that the current system for adding VCFs to the form is  
               subjective and essentially rewards organizations that can  
               convince the Legislature to include their fund on the form.

          REGISTERED SUPPORT / OPPOSITION:




          Support


          Friends of the Sea Otter (Sponsor)


          Defenders of Wildlife (Co-Sponsor)


          California Association of Professional Scientists





          EarthEcho International


          Humane Society of the United States


          Insurance Commissioner Dave Jones


          Monterey Bay Aquarium











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          National Wildlife Federation


          Natural Resources Defense Council


          Ocean Conservancy


          Oceana 


          Planning and Conservation League


          Sierra Club California


          WILDCOAST




          Opposition


          None on file




          Analysis Prepared by:M. David Ruff / REV. & TAX. / (916)  
          319-2098















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