BILL ANALYSIS Ó
SB 1476
Page 1
SENATE THIRD READING
SB
1476 (Committee on Governance and Finance)
As Amended June 16, 2016
Majority vote
SENATE VOTE: 37-0
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Revenue & |9-0 |Ridley-Thomas, | |
|Taxation | |Brough, Dababneh, | |
| | |Gipson, Mullin, | |
| | |O'Donnell, Patterson, | |
| | |Quirk, Wagner | |
| | | | |
| | | | |
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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.
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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
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.
7)Specifies that these requirements only apply to new or
extended VCFs that take effect on or after January 2, 2017.
EXISTING LAW:
1)Allows taxpayers to contribute amounts in excess of their PIT
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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
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: None
COMMENTS:
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1)Life Cycle of a VCF: On December 9, 2015, the Senate
Committee on Governance and Finance held an oversight hearing
on VCF programs. The hearing 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. 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
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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.
2)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
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
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intended charitable purpose, if desired.
3)Committee Policy on VCFs: The number of VCF "checkoffs" on
the PIT return has grown dramatically in recent years,
prompting the Assembly Committee on Revenue and Taxation
(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 minimum contribution
threshold of $250,000 and does not require the threshold to be
adjusted yearly for inflation, deviating from current practice
and the 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.
Analysis Prepared by:
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Irene Ho / REV. & TAX. / (916) 319-2098 FN:
0003478