BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
------------------------------------------------------------------
|Bill No: |SB 1416 |Hearing |4/20/16 |
| | |Date: | |
|----------+---------------------------------+-----------+---------|
|Author: |Stone |Tax Levy: |No |
|----------+---------------------------------+-----------+---------|
|Version: |3/28/16 |Fiscal: |Yes |
------------------------------------------------------------------
-----------------------------------------------------------------
|Consultant|Bouaziz |
|: | |
-----------------------------------------------------------------
Personal income taxes: voluntary contribution: the Salton
Sea
Authorizes the addition of the Revive the Salton Sea 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repealed by a sunset date or fail to generate a minimum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, and is
adjusted yearly for inflation thereafter. The following
check-offs do not have a minimum contribution requirement:
California Firefighters' Memorial Foundation Fund,
SB 1416 (Stone) Page 2
of ?
California Peace Officer Memorial Foundation Fund, and
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 administrations 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
Senate Bill 1416 adds the Revive the Salton Sea Fund (Fund), and
allows a taxpayer to make a voluntary contribution to the Fund
on the state personal income tax return.
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,
To Revive the Salton Sea, a California non-profit
corporation, to be used to fund or supplement funding of
state, county, and local agencies and projects identified
SB 1416 (Stone) Page 3
of ?
as necessary for the restoration and maintenance of the
Salton Sea, including projects identified by the Salton Sea
Authority.
Up to 5 percent of the funds allocated to the Revive the
Salton Sea Fund shall be used for the development of a
mechanism to provide ongoing public awareness through
activities that will promote the charitable tax deduction
for the fund and seek continued contributions.
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, "One of the
most critical issues facing residents of Southern California and
the 28th Senate District is the restoration of the Salton Sea.
In May of 2015, Governor Brown created the Salton Sea Task Force
to begin the important work of implementing the Salton Sea
management plan, and create short and long term goals protect
the regional air quality and the natural resources at the Sea.
SB 1416 is designed to complement the on-going work of the Task
Force by creating the Revive the Salton Sea Fund, which would be
a tax check-off fund found on one's State Income Tax Form. The
money collected from the check-off would be used to help fund
the restoration and maintenance of the Salton Sea, and provide
public awareness."
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
SB 1416 (Stone) Page 4
of ?
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
estimated that FTB can only handle 8 or 9 more check-offs before
FTB has to create a separate tax schedule.
4. Not like the others . Generally, tax check-offs are
administered by a state agency, have a five year sunset, and are
subject to a yearly minimum contribution threshold that begins
the second year a tax check-off is on the income tax form and is
adjusted yearly for inflation. These provisions ensure
transparency, viability, and allow the Legislature to review tax
check-offs periodically. SB 1416 does not contain any of these
provisions. The Committee may wish to consider amending the
bill to include an administering state agency, a sunset, and a
minimum contribution amount.
5. Related Legislation . SB 1476 (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 set to be heard in this Committee on April 20, 2016.
Support and
Opposition (4/13/16)
SB 1416 (Stone) Page 5
of ?
Support : Unknown.
Opposition : Unknown.
-- END --