BILL ANALYSIS Ó
SB 1476
Page 1
Date of Hearing: June 13, 2016
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Sebastian Ridley-Thomas, Chair
SB
1476 (Committee on Governance and Finance) - As Amended April
14, 2016
Majority vote. Non-fiscal.
SENATE VOTE: 37-0
SUBJECT: Income taxation: voluntary contributions
SUMMARY: Establishes general requirements for all new or
extended voluntary tax contribution funds (VCFs). Specifically,
this bill:
1)Requires the words "voluntary tax contribution" to be included
as part of the name of the fund.
2)Requires the administering agency's Internet Web site to
report the process for awarding money, the amount of money
spent on administration, and an itemization of how program
funds were awarded by the agency, including information
SB 1476
Page 2
regarding recipients of funds.
3)Defines an "administering agency" as the state agency or other
governmental entity, other than the Franchise Tax Board (FTB)
and the State Controller, to which funds are allocated to
accomplish the purposes of the voluntary tax contribution
designation.
4)Provides, unless otherwise specified, for each VCF's automatic
sunset on January 1 of the seventh calendar year following the
VCF's first appearance on the personal income tax (PIT)
return.
5)Requires each VCF to meet a minimum contribution threshold of
$250,000 each calendar year to remain on the PIT return.
6)Requires contributions made to each VCF to be continuously
appropriated to the administering agency to be spent, as
specified.
EXISTING LAW:
1)Allows taxpayers to contribute amounts in excess of their PIT
liability to one or more of 19 VCFs on the 2015 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, adjusted annually for inflation
SB 1476
Page 3
based on the percentage change in the California Consumer
Price Index, except for the California Firefighters' Memorial
Fund, the California Peace Officer Memorial Foundation Fund,
and the California Seniors Special Fund.
4)Provides that upon repeal of a VCF, any contribution
designated on a timely filed original return for the taxable
year immediately preceding the date of repeal shall continue
be transferred and disbursed, as specified.
5)Specifies how contributions shall be allocated in the event
that no designee fund is specified, or if an individual
designates a contribution to more than one fund and the amount
available is insufficient to satisfy the total amount
designated.
6)Specifies the order by which new contingent VCFs are eligible
to be added to the PIT return.
FISCAL EFFECT: Unknown
COMMENTS:
1)Author's Statement : The author has provided the following
statement in support of this bill:
On December 9, 2015 [the Senate Committee on 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
SB 1476
Page 4
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.
2)Arguments in Support : Proponents of this bill state that
maintaining a uniform seven-year sunset date and $250,000
minimum contribution threshold for VCFs will "reduce the
legislative and administrative burdens on these programs"
while "avoiding threats to their longevity [that] imposing an
ever-increasing benchmark [creates]." Additionally,
providing continuous appropriation of contributed funds to the
administering agency will "reduce administration costs and
make funds available up to one year earlier than current law
allows."
3)Life Cycle of a VCF : The Senate Committee on Governance and
Finance's oversight hearing on VCF programs outlined the
process by which a taxpayer's voluntary contribution on his or
her PIT return is eventually allocated to the designated
charitable fund. The current process starts with legislation
enacting a VCF to be established on the PIT return. Next, a
taxpayer contributes to an established VCF on the PIT return.
The contribution is collected by the FTB and distributed to
the State Controller by June 15th each year (contributions
made after June are not distributed to the State Controller
until the following year). The State Controller then
distributes the money according to the enacting legislation,
which generally requires an appropriation by the Legislature.
SB 1476
Page 5
As a result, the administering agency generally must submit a
budget change proposal (BCP) to the Department of Finance
(DOF). Once the DOF approves the BCP, the appropriation is
placed into a bill to be approved by the Legislature. The
State Controller can only transfer money in the fund to the
administering agency to effectuate its charitable purpose
after the Governor signs the appropriations bill. Overall,
years may pass before a charitable donation made to a VCF is
put toward its intended use.
When a VCF's its automatic sunset date is not renewed or fails
to meet its minimum contribution threshold, the VCF is removed
from the PIT return. However, any contribution designated on
a timely filed original return for the taxable year
immediately preceding the date of repeal must continue to be
transferred and disbursed in accordance with the legislation
that enacted the VCF. In other words, the balance of the VCF
should eventually reach zero as any remaining moneys in the
fund are allocated to the intended recipient. After four
years of inactivity, all governmental funds, including VCFs,
are slated for abolishment by the DOF, with any unspent money
in the fund reverting to the General Fund. The DOF must first
send the Joint Legislative Budget Committee (JLBC) a letter
detailing all funds to be abolished, giving JLBC the
opportunity to object to any funds' abolishment. However, the
letter does not specify the type of fund being abolished and
only lists the name of the funds. Thus, it is often unclear
whether the fund proposed for abolishment is a general
government fund or a privately funded VCF with remaining
disbursements intended for a specific non-governmental
charitable purpose.
4)Continuous Appropriation : Current practice generally requires
a specific appropriation by the Legislature to allocate money
from a VCF to the FTB and the State Controller for
reimbursement of costs associated with administering the VCF,
with the balance allocated to the administering agency. To
SB 1476
Page 6
streamline the process by which taxpayers' voluntary
contributions are put toward their charitable purpose, this
bill provides that a continuous appropriation shall be made
from all prospective VCFs to the applicable administering
agency in accordance with the legislation that enacted the
VCF. Money allocated to the FTB and the State Controller will
still be subject to a specific appropriation by the
Legislature.
According to the author, a continuous appropriation to
administering agencies will result in speedier allocation of
money for ongoing VCFs, and help ensure that any remaining
money in the fund upon repeal of a VCF will still be disbursed
as required to achieve its intended charitable purpose. In an
attempt to maintain checks and balances on continuously
appropriated VCFs, this bill creates new online reporting
requirements for administering agencies so the public can
easily discern how the money is awarded and spent, including
how much money is first absorbed by the administering agency
on operating costs. This bill also aims to prevent VCF money
from reverting to the General Fund by requiring the words
"voluntary tax contribution" in the name of the fund so the
JLBC is clearly notified when a VCF is slated for abolishment
and can take measures to redirect the money towards its
intended charitable purpose, if desired.
5)Committee Policy on VCFs : The number of VCF "checkoffs" on
the PIT return has grown dramatically in recent years,
prompting this Committee to adopt specific rules regarding VCF
legislation. The policy requires all new checkoffs and
existing checkoffs seeking reauthorization to have sunset
dates and meet a $250,000 minimum contribution threshold
adjusted for inflation in subsequent years, among other
provisions. This bill provides that all prospective VCFs have
a seven-year sunset date, two years longer than current
practice generally granting VCFs a five-year sunset date.
This bill also provides that all prospective VCFs meet a
SB 1476
Page 7
minimum contribution threshold of $250,000 and does not
require the threshold to be adjusted yearly for inflation,
deviating from current practice and this Committee's policy.
According to the author, these changes are intended to ease
administrative burdens on long-standing VCFs by reducing the
burden on non-profits that must otherwise seek new legislation
every five years, and leveling ever-increasing minimum
contribution amounts successful VCFs must meet to stay on the
PIT return. While there are countless worthy causes that
would benefit from the inclusion of a VCF on the PIT return,
space on the return 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. To the extent
that VCFs are able to remain on the PIT return for a longer
period of time, it may come at the expense of other charitable
causes seeking the same opportunity.
6)Technical Amendments : According to the author, this bill is
intended to apply to prospective VCF legislation and not to
current VCF legislation that may become law if signed by the
Governor this year. The Committee may wish to consider
specifying that this bill applies to legislation introduced on
or after January 1, 2017.
Committee staff also suggests adoption of the following
amendments:
a) On Page 2, Line 6, insert "any" between "of" and
"existing";
b) On Page 2, Line 16, insert "the" between "than" and
"Franchise";
SB 1476
Page 8
c) On Page 3, Line 18, strike "Funds contributed" and
insert "Contributions made", and strike "tax check-off""
and insert "voluntary tax contribution"; and,
d) On Page 3, Line 19, insert "from the fund" between
"appropriated" and "to".
1)Related Legislation :
a) AB 1399 (Baker) would add a voluntary contribution for
the California Domestic Violence Fund. AB 1399 is pending
hearing by the Senate Committee on Governance and Finance.
b) AB 1789 (Santiago) would extend the voluntary
contribution for the School Supplies for Homeless Children
Fund. AB 1789 is pending hearing by the Senate Committee
on Governance and Finance.
c) AB 2371 (Frazier) would add a voluntary contribution for
the Special Olympics Fund. AB 2371 is pending hearing by
the Senate Committee on Governance and Finance.
d) AB 2430 (Beth Gaines) would add a voluntary contribution
for the Juvenile Diabetes Research Fund. AB 2430 is
pending hearing by the Senate Committee on Governance and
Finance.
e) AB 2497 (Wagner) would repeal the voluntary contribution
for the California Senior Legislature Fund and replace it
with a voluntary contribution for the California Senior
SB 1476
Page 9
Citizen Advocacy Fund. AB 2497 is pending hearing by the
Senate Committee on Governance and Finance.
f) SB 1416 (Jeff Stone) would add a voluntary contribution
for the Revive the Salton Sea Fund. SB 1416 is pending
hearing by this Committee.
2)Prior Legislation : SB 1207 (Wolk), of the 2013-14 Legislative
Session, would have modified the current voluntary
contribution designation process by establishing the
California Voluntary Contributions Program administered by the
Office of California Volunteers and requiring charitable
organizations to meet certain standards before they could
participate in the program. SB 1207 was held on the Assembly
Appropriations Committee's Suspense File.
REGISTERED SUPPORT / OPPOSITION:
Support
American Cancer Society Cancer Action Network
Asian & Pacific Islander American Health Forum
Breast Cancer Action
Breast Cancer Fund
SB 1476
Page 10
K to College
University of California
West Fresno Family Resource Center
Two individuals
Opposition
None on file
Analysis Prepared by:Irene Ho / REV. & TAX. / (916)
319-2098