BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1476|
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THIRD READING
Bill No: SB 1476
Author: Committee on Governance and Finance
Amended: 4/14/16
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/20/16
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach,
Pavley
SUBJECT: Income taxation: voluntary contributions
SOURCE: Author
DIGEST: This bill establishes general provisions for voluntary
contribution funds.
ANALYSIS:
Existing law:
1)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.
2)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return until they are repealed by a sunset date or fail to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
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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.
3)Requires the Franchise Tax Board (FTB) to deposit the total of
all contributions 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 FTB, the Controller, and an administrative agency may
deduct from the amount of donations each VCF receives for
direct costs of administering a fund.
This bill:
1)Establishes the following general provisions for all tax
check-offs:
a) Sets a minimum contribution amount of $250,000 beginning
the second calendar year after the first appearance of the
fund on the income tax return, and eliminates the inflation
adjustment in subsequent years.
b) Lengthens the current standard five year sunset to seven
years.
c) Requires the administering agency to post online the
process for awarding money, the amount of money spent on
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administration, and an itemization of how program funds
were awarded by the agency, including, but not limited to,
information regarding recipients of funds,
d) Provides that funds shall be continuously appropriated
to the administering agency to be spent as prescribed in
the bill that enacts the voluntary contribution.
e) Includes the words "voluntary tax contribution" in the
name of the fund,
2)Applies to all voluntary contribution funds established or
extended after January 1, 2017.
Background
SB 1476 results from extensive research and an oversight hearing
which identified best practices and reforms needed to ensure
that taxpayers' voluntary contributions are being put toward
charitable purposes in a transparent and timely fashion.
The current tax check-off process starts with the Legislature
enacting legislation. Next, a taxpayer contributes to an
established tax check-off on the income tax form. The donation
is collected by FTB and distributed to the State Controller by
June 15th each year. Contributions made after June are not
distributed to the State Controller's Office until the following
year. The State Controller then distributes the funds according
to the enacting statute, which generally requires an
appropriation by the Legislature. Next, the administering
agency generally must submit a budget change proposal (BCP) to
the Department of Finance. Once the Department of Finance
approves the BCP, the appropriation is placed into a bill to be
approved by the Legislature. After the Governor signs that
bill, only then can the Controller transfer the donation to the
administering agency. This process can take years.
When a tax check-off is repealed, or fails to meet the minimum
contribution limit, the check-off fund is removed from the
income tax form. After four years of inactivity the tax
check-off fund is abolished, and unused funds revert to the
General Fund at the direction of the Department of Finance.
Before the Department of Finance abolishes a tax check-off fund,
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the Department sends a letter to the Joint Legislative Budget
Committee informing the Committee of all funds slated to be
abolished. At that time, the Joint Legislative Budget Committee
has the opportunity to object to the check-off fund's
abolishment. The letter from the Department of Finance does not
specify the type of fund being abolished; the letter only lists
names of funds. Thus, it is unclear from the face of the letter
if an abolished fund is a privately-funded taxpayer check-off
fund or a government fund.
SB 1476 will ensure timely use of tax check-off funds by
eliminating the current requirement of "appropriation by the
Legislature" of funds. Elimination of requiring an
appropriation by the Legislature for each tax check-off will
result in funds arriving to the administering agency at least a
year earlier than under the current process. This bill also
protects tax check-off funds from reverting to the General Fund
by requiring tax check-off funds to include "voluntary
contribution fund" in their names so that the Legislature,
Department of Finance, and the Joint Legislative Budget
Committee are aware when a tax check-off fund is slated for
abolishment and reversion to the General Fund. Lastly, this
bill includes reporting requirements by the administering
agency. This serves as a safeguard against eliminating the
appropriation by the Legislature requirement. Instead of the
intended use of the funds only being available to the Department
of Finance in a BCP, the use of the funds will be online
available to everyone.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified4/27/16)
Breast Cancer Action
Breast Cancer Fund
California Breast Cancer Organizations
K to College
University of California
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West Fresno Family Resource Center
OPPOSITION: (Verified4/27/16)
None received
ARGUMENTS IN SUPPORT: According to the author, On December
9, 2015 Senate Governance and Finance held an oversight hearing
titled "California's Tax Check-off Program: Room for
Improvement?" The hearing reviewed the current status of
California's tax check-off funds and found a framework was
needed to improve our current tax check-off system.
Specifically, the Committee found that donated funds could take
years to reach the intended recipient, or worse yet the money
ends up in state coffers. The Legislature created California's
tax check-off system in 1982 with a noble intention: to make it
easier for Californians to donate to charitable causes. To
date, tax check-offs have raised over $102 million for various
charitable causes, including social services, public health, and
environmental protection. SB 1476 seeks to streamline the tax
check-off process to ensure all funds reach their intended
recipient as quickly as possible, and address administrative
burdens tax check-off recipients have faced.
Prepared by:Myriam Bouaziz / GOV. & F. / (916) 651-4119
4/27/16 15:57:35
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