BILL ANALYSIS
SENATE REVENUE & TAXATION COMMITTEE
Senator Gilbert Cedillo, Chair
AB 1799 - Mullin
Amended: April 12, 2004
Hearing: June 9, 2004 Fiscal: Yes
SUBJECT: Extends the sunset date for the Alzheimer's
disease income tax check-off from January 1, 2005 to
January 1, 2010.
EXISTING LAW
Allows taxpayers to make contributions of their own funds
(not tax liability) on their tax returns to the eleven
voluntary contribution funds listed on the state personal
income tax return. Each fund is individually added to the
tax return through the legislative process. The laws
governing the contributions share the following
requirements:
Once a designation is made it is irrevocable,
The contribution amounts must be in full dollar amounts
and may be made individually by each signatory on a joint
return,
If the payments and credits on a return do not exceed a
taxpayer's liability, the return is treated as if no
designation was made,
If a taxpayer fails to specify a designee, the
contribution is transferred to the General Fund after
reimbursement for FTB's actual costs for collection and
administration of contributions, and
If a taxpayer designates more than one fund, but the
amount available exceeds the total amount designated, the
contribution is distributed among the designees on a pro
rata basis.
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Requires that an existing voluntary contribution fund must
come off the personal income tax return before a new fund
may be added (once the number of the tax form has reached
the maximum 12 spaces). If more than one fund is chaptered
in one year, or funds continue to be in the queue for
subsequent years, each fund is added to the return based on
the year and chaptering order, oldest first. (Since the
queue's inception, no voluntary contribution fund has been
placed in the queue; all enacted funds have been added to
the personal income tax return.)
Each fund is generally required to reimburse FTB and the
Controller for costs incurred in collecting or transferring
the contribution amounts limiting the amounts as follows 3%
in the first fiscal year, and 2% in each fiscal year
thereafter for FTB and 2% in the first fiscal year, and 1%
in each fiscal year thereafter for the Controller.
The following check-offs appeared on the 2003-tax form (for
taxes filed in 2004):
1.CA Fund For Senior Citizens (Has no sunset date)
2.Fish and Game Preservation Fund
3.State Children's Trust Fund
4.CA Alzheimer's Disease and Related Research Fund
5.CA Seniors Special Fund
6.CA Breast Cancer Research Fund
7.CA Firefighters' Memorial Fund (Does not have to meet the
$250,000 minimum requirement)
8.Emergency Food Assistance Program Fund
9.California Peace Officer Foundation Memorial Fund (Does
not have to meet the $250,000 minimum requirement)
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10.California Missions Foundation Fund
11.Asthma & Lung Disease & Research Fund
The current income tax return form only has enough space
for 12 check-offs. Any additional check-offs that exceed
this number would be subject to the queue.
THIS BILL
Extends the sunset date for the Alzheimer's disease income
tax check-off from January 1, 2005 to January 1, 2010.
Updates legislative findings related to statistical
information about Alzheimer's and other dementia related
diseases, including the number of people affected and the
cost of caring for people afflicted by these diseases.
FISCAL EFFECT:
FTB estimates the effect of this bill will be negligible,
less than $32,000.
COMMENTS:
A. Purpose of the bill
According to the author's office: from 1988-2003, the
Alzheimer's Disease check-off has collected $6,785,993,
averaging more than $424,000 annually. Funds are
distributed through grants awarded by the Director of the
California Department of Health Services through a
competitive process utilizing technical review panels.
Contributions have funded 101 research studies on the
cause, diagnosis, treatment, and care of Alzheimer's and
other dementia disorders. All awards are to scientists
based at California public or private non-profit
organizations.
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B. Alzheimer's disease and research
The prevalence of Alzheimer's disease in the United States
will increase 70 %, from an estimated 4.5 million people
affected today to 7.7 million by 2030, when the youngest
baby boomers are over age 65, according to a study
published August 2003, in Archives of Neurology. This data
suggests California can expect to have more than 791,500
residents living with Alzheimer's by 2030.
The public health challenge is to make these projections
obsolete and irrelevant by identifying prevention
strategies through better understanding the disease's
underlying biology and modifiable risk factors. This
knowledge can only come through research. The Alzheimer's
Association has indicated there are 30-40 experimental
treatments and preventive measures now in development-the
scientific opportunities exist to find the answers if
California continues its research investment.
C. Too Many Good Causes
Members of this committee has expressed concern in the past
that there are many good causes that could be funded by the
tax check-off system and that the current system is
subjective. Members of this committee have stated that
the current tax check-off system requires them to choose
between worthy charities and non-profits for a spot on the
tax return form.
Committee members have further noted that during the
state's fiscal crisis, many good organizations will face
budget cuts and that it will be difficult to decide which
groups should be back-filled through the tax check-off
process, especially since space is so limited.
D. Constitutional Questions
Earlier this year an U.S. District Court in California
ruled in Women's Resource Network v. Department of Motor
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Vehicles that the state's process for awarding special
interest license plates is unconstitutional in that it
violates freedom of speech. The court determined that the
law giving the Legislature "unfettered discretion" to
decide which private nonprofit groups would be able to use
special-interest license plates to raise money is
unconstitutional because "the First Amendment does not
allow the government to use a standardless forum to select
private speakers." The court specifically ruled that all
existing plates could continue, but there could be no new
programs.
It is important to note that the same objection could be
raised against the state's existing tax check-off system
because of the way the Legislature and the Governor are
allowed to decide which groups should be allowed to use the
state tax return to raise money.
Leslie Gielow Jacobs, a professor at the McGeorge School of
Law says that "letting lawmakers promote pet charities on
the state tax forms could run into constitutional
pitfalls," such as the above referenced case. Jacobs notes
that lawmakers should not control which viewpoints can be
expressed. Instead, there should be a separate agency that
selects which groups qualify based on objective rules and
standards.
E. Should the Check-Off System be Changed?
SB 1736 (Bowen) which failed passage in this committee
proposed changing the tax check-off system by: (1) moving
the tax check-offs from the tax return into the tax
information booklet with spaces on the return; (2)
requiring objective criteria in order to be placed in the
booklet; (3) requiring the FTB to administer the program.
F. Is the Tax Form Too Long?
The Franchise Tax Board noted a policy concern that the
placement of non-tax related voluntary contribution funds
on the tax return limits the amount of space available for
tax-related items. The inclusion of these check-offs and
other non-tax related information might ultimately impair
tax collection and reduce administrative efficiency.
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G. Existing Check-Offs
The check-offs currently listed on the income tax return
raise between $3.4-$3.9 million per year from approximately
140,000 taxpayers. The following is the amount of revenue
generated by the existing check-offs for 2003 (the Mission
Fund data is for 2004):
Fund Volume Amount
1) California Seniors Special Fund 12,135$58,041
2) Alzheimer's Disease/Related Disorders Fund
51,998$571,457
3) California Fund for Senior Citizens 38,123$296,087
4) Rare and Endangered Species Preservation 55,827$673,981
5) State Children's Trust Fund, 62,403
$674,783
6) California Breast Cancer Research Fund
58,570$646,664
7) California Firefighters' Memorial Fund
28,688$206,112
8) Emergency Food Assistance Program Fund 39,842$395,003
9) California Peace Officer Memorial Foundation
24,302$179,444
10) Asthma and Lung Disease Research Fund 31,016$216,390
11) California Missions Foundation Fund 3,039 $22,124
Currently the state tax return has enough lines to hold 12
tax check-offs.
H. Other States
Florida, Illinois, Massachusetts, Michigan, Minnesota, and
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New York laws do not provide a voluntary contribution
process comparable to the process proposed by this bill.
Illinois, Massachusetts, Michigan, Minnesota, and New York
allow for taxpayer contribution designations on the
personal income tax returns via the legislative process.
Florida does not have a personal income tax but allows
contribution designations via the legislative process on
the state's motor vehicle registration and renewal forms.
The laws of these states were reviewed because their tax
laws are similar to California's income tax laws.
Oregon has a seven-member commission, the Oregon Charitable
Check-off Commission, which determines the qualification of
entities wishing to receive contribution designations via
the tax process either by listing on the tax return, or
listing in the Oregon Department of Revenue instructions.
The Oregon Department of Revenue notifies the commission of
the number of lines available for the inclusion of eligible
entities, without adding a page to the various personal
income tax forms. The commission limits the number of
entries to be listed on the form. To remain listed in the
instructions, the entity must meet the minimum contribution
amount in at least one of the two preceding biennial tax
years, and generally continue to meet the original
qualifying criteria. The designations also have a six-year
repeal date.
How Does Oregon Work?
The Oregon Department of Revenue notifies the commission of
the number of lines available for the inclusion of eligible
entities, without adding a page to the various personal
income tax forms. The commission limits the number of
entries to be listed on the form.
To remain listed in the instructions, the entity must meet
the minimum contribution amount in at least one of the two
preceding biennial tax years, and generally continue to
meet the original qualifying criteria. The designations
also have a six-year repeal date
I. Legislative History
There have been a number of bills related to the
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Alzheimer's check-off, as follows:
AB 160 (Alquist, Stats. 1999, Ch. 315) extends the
operation of the California Alzheimer's Disease and Related
Research Fund to January 1, 2005.
SB 1447 (Alquist, Stats. 1996, Ch. 494) extended the repeal
date of the Alzheimer's Disease Fund from January 1, 1997,
to January 1, 2000.
SB 214 (Mello, Stats. 1987, Ch. 944) enacted the California
Alzheimer's Disease and Related Research Fund that appeared
on the return from January 1, 1987, to January 1, 1999.
J. Related Legislation
There are eight other bills related to tax check-offs
currently pending approval:
1.SB 1736 (Bowen). Changes the system for tax check-off
placement in the tax booklet. This bill failed passage
in this committee
2.AB 658 (Nakano). Creates a check-off for a new California
Prostate Cancer Research Fund.
3.AB 1283 (Kehoe). Creates a check-off for the California
Arts Council.
4.AB 1799 (Mullin). Extends the Alzheimer's check-off
sunset day from 2005 to 2010.
5.AB 1928 (Parra). Creates a check-off for a new California
Military Family Relief Fund to provide money to
reservists or members of the National Guard who are
called up to duty.
6.AB 1994 (Berg). Modifies the allocation of money for the
senior funds.
7.AB 2346 (Corbett). Creates a check-off for a new the
Police Activities League Fund.
8.AB 2886 (Corbett). Creates a check-off for a new Drug
Abuse Resistance Education (D.A.R.E.) Fund.
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The following bills were set for hearing in this committee;
all three authors requested the bills not be heard:
1.SB 1131 (Ortiz). Creates a check-off for a new
International World Peace Rose Gardens Fund.
2.SB 1433 (Romero). Creates a check-off for a new Trauma
Care Fund to pay for emergency room care.
3.SB 1576 (Perata). Creates a check-off for the California
Children's Health Foundation.
Support and Opposition
Support:Older Women's League of California
Alzheimer's Association of California
Alzheimer's Association of Los Angeles
6 Individuals
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Consultant: Gayle Miller
06/08/04 09:13