BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 295 (De León) - College Access Tax Credit Fund
-----------------------------------------------------------------
| |
| |
| |
-----------------------------------------------------------------
|--------------------------------+--------------------------------|
| | |
|Version: February 23, 2015 |Policy Vote: GOV. & F. 7 - 0 |
| | |
|--------------------------------+--------------------------------|
| | |
|Urgency: No |Mandate: No |
| | |
|--------------------------------+--------------------------------|
| | |
|Hearing Date: May 18, 2015 |Consultant: Robert Ingenito |
| | |
-----------------------------------------------------------------
This bill does not meet the criteria for referral to the
Suspense File.
Bill
Summary: SB 295 would (1) extend the College Access Tax Credit
Fund (CATCF) sunset date to January 1, 2018, and (2) increase
the credit percentage.
Fiscal
Impact:
The Franchise Tax Board (FTB) estimates that the bill
would result in General Fund revenue losses of $50 million
in 2015-16, $85 million in 2016-17, and $65 million in
2017-18.
SB 295 (De León) Page 1 of
?
Estimated revenue gains beyond current law in the
hundreds of millions of dollars over the three-year period,
to be deposited into CATCF.
Costs to the California Educational Facilities Authority
(CEFA) in the range of $108,000 in 2017-18, and $126,000 in
2018-19 to administer the certification of tax credits for
contributions.
FTB administrative costs would be minor and absorbable.
The bill would require funds to be transferred from
CATCF to the General Fund such that the net impact of
College Access Tax Credits on the General Fund would be
zero. Administrative expenses of all affected state
entities would be backfilled by CATCF.
Background: Current state law allows taxpayers to receive a tax credit for
a specified percentage of cash contributions made to CATCF. The
yearly maximum allocation amount is $500 million plus any
carryover of unused funds from the prior year, and the specified
percentage used to calculate the credit is:
60 percent of the amount contributed during the 2014
taxable year.
55 percent of the amount contributed during the 2015
taxable year.
50 percent of the amount contributed during the 2016
taxable year.
CEFA is required to allocate and certify the income tax credit
to personal and corporate taxpayers and provide FTB a copy of
each credit certificate immediately following the year of issue.
The cash contributions are used to find the Cal Grant B
program.
SB 295 (De León) Page 2 of
?
State law precludes any deductions for amounts taken into
account in the calculation of the credit. Applications for the
tax credit are processed on a first come, first served basis.
There is no maximum contribution limit.
Under current law the credit would be repealed as of December 1,
2017.
Proposed Law:
This bill would (1) extend the CATCF repeal date to December 1,
2018, and (2) increase the credit percentage amounts as follows:
60 percent of the amount contributed during the 2015
taxable year.
55 percent of the amount contributed during the 2016
taxable year.
50 percent of the amount contributed during the 2017
taxable year.
Related
Legislation: SB 798 (De Leon, Chapter 367, Statutes of 2014)
created the College Access Tax Credit, an income tax credit for
cash contributions made to an education special fund with an
aggregate credit cap of $500 million per calendar year.
Staff
Comments: SB 295 would encourage taxpayers to contribute to the
state's Cal Grant program through a generous tax credit against
SB 295 (De León) Page 3 of
?
contributions. Depending on the credit amount available in each
of the years in which it is available, and depending on how a
taxpayer files taxes and the tax bracket that applies, a
taxpayer could receive close to 90 percent of his or her
donation back in state tax credits and federal tax deductions
combined. For example, if a taxpayer subject to the Federal
Alternative Minimum Tax (AMT) donates $1,000 to CATCF in 2015,
he or she would receive a $600 state tax credit. The taxpayer
would also receive a federal tax deduction for the $1,000
contribution, reducing federal tax liability by $280 (assuming a
28% marginal rate). AMT filers are not eligible for state tax
deductions related to charitable contributions. On balance, the
taxpayer would receive $880 in reduced tax liability for a
$1,000 contribution, and only be out of pocket a net $120.
The tax benefit related to this bill could result in reduced
contributions directly to education institutions, such as the
University of California and others, and could result in
decreased charitable giving to other causes. As such, this
credit could result in a redirection of charitable giving,
rather than providing "new" money for Cal Grants. The extent of
this potential substitution effect is unknown.
-- END --