BILL ANALYSIS �
AB 1589
Page 1
Date of Hearing: May 7, 2012
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
AB 1589 (Huffman) - As Amended: April 30, 2012
2/3 vote. Urgency. Fiscal committee.
SUBJECT : State Parks: sustainability and protection.
SUMMAR : Enacts the California State Parks Stewardship Act of
2012 (Act) that, among other things, establishes the California
State Parks Protection Fund (Fund), authorizes an individual to
purchase one or more state parks day use annual pass (annual
pass) by making a specified designation on his/her personal
income tax (PIT) return, and allows an income tax deduction for
the purchase price of the annual pass. Specifically, the
tax-related provisions of this bill :
1)Allow an individual taxpayer to purchase one or more annual
passes by making a designation on the PIT return, for taxable
years beginning on or after January 1, 2012, and before
January 1, 2018. Specifically, the individual may designate
that an amount equal to the total price of one or more annual
passes be deposited into the Fund. The designation amount
must be in excess of the individual's tax liability, if any.
2)Specify that the payments and credits reported on the PIT
return, together with any other credits associated with the
individual taxpayer's account, shall be applied in the
following order:
a) Existing income or franchise tax liability, including
penalties and interest, if any;
b) Qualified use tax;
c) Voluntary contributions designated on the individual
taxpayer return pursuant to Revenue and Taxation Code
(R&TC) Chapter 3 of Part 10.2 (commencing with Section
18711);
d) An amount designated for the purchase of an annual pass.
3)Provide that, if the amount of payments and credits reported
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on the return or associated with the taxpayer's account is
less than the total amount designated for the purchase of
annual passes, the designation amount shall be reduced to an
amount equal to the purchase price of one or more single
annual passes. If the amount of those payments and credits is
less than the amount of one annual pass, the return shall be
treated as though no purchase designation has been made.
4)State that an annual pass will provide the taxpayer with
unlimited day use access to state parks and is valid for one
calendar year, beginning January 1 of the calendar year
immediately following the calendar year in which the annual
pass is purchased.
5)Allow a deduction under the PIT Law, for each taxable year
beginning on or after January 1, 2013, and before January 1,
2018, in an amount equal to the amount paid for a single
annual pass by an individual taxpayer during the taxable year.
6)Establish the Fund to receive the proceeds from purchases of
annual passes made by individuals on their PIT returns.
7)Require the Franchise Tax Board (FTB) to do all of the
following:
a) Revise the PIT return form for taxable years beginning
on or after January 1, 2012, and before January 1, 2018, to
allow individual taxpayers to purchase annual passes by
making a specified designation on their PIT returns, as
specified.
b) Provide necessary information to the Department of Parks
and Recreation (DPR), including the names and addresses of
individual taxpayers who made the designation to purchase
an annual pass.
c) Notify the State Controller and the DPR of the amount of
money taxpayers paid in excess of their tax liability and
the refund amount taxpayers designated on PIT returns to be
transferred to the Fund.
8)Require the DPR to do all of the following:
a) Provide to the FTB, on or before August 1, 2012, and
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each calendar year thereafter, the price of an annual pass
to be included on the PIT return form for that year.
b) Contact individuals who purchased annual passes on their
PIT returns.
c) Implement a procedure for the distribution of annual
passes to those individuals.
9)Require the State Controller to transfer the amounts
designated by individuals for the purchase of annual passes
from PIT Fund to the Fund.
10)Provide that all moneys transferred to the Fund, upon
appropriation by the Legislature, shall be allocated to the:
a) FTB and the State Controller for reimbursement of all
costs incurred in connection with their duties under this
bill; and,
b) DPR to cover the costs of the issuance of the annual
passes to individuals who made a specified designation on
their PIT returns and for purposes related to the
protection and preservation of state parks.
11)Remain in effect only until January 1, 2020, and as of that
date is repealed, unless a later enacted statute deletes or
extends that date.
12)State that, upon repeal, any designated amounts and any
annual pass purchase made prior to the repeal date shall
continue to be transferred and disbursed, whichever is
applicable, as provided immediately prior to the repeal.
EXISTING FEDERAL AND STATE LAWS:
1)Allow individuals to deduct certain expenses, such as medical
expenses, charitable contributions, interest, and taxes, as
itemized deductions. Certain expenses are considered
miscellaneous itemized deductions and only the portion that
exceeds 2% of adjusted gross income (AGI) may be deducted.
2)Limit itemized deductions for high-income taxpayers.
FISCAL EFFECT : The FTB estimates that this bill would result in
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the following revenue losses: $0 in FY 2012-13; $50,000 in FY
13-14; and $60,000 in FY 14-15.
COMMENTS :
1) The author has provided the following statement in support of
this bill:
"The purpose of the bill is to enhance the capacity of the
state to protect its valued state parks and the natural and
cultural resources they contain, and to keep the parks open
and accessible to the people of the state. To do that,
this bill identifies new revenue enhancement opportunities
for state parks including enhanced fee collection at state
parks, a new state park environmental license plate, and
tax incentives for purchase of state park access passes,
the proceeds of which would be dedicated to �?]
California's state parks. This bill also creates a state
park enterprise fund, requires DPR to develop a revenue
enhancement plan, modifies the criteria and public
transparency required for state park closure decisions,
places a cap on the number of state parks that may be
closed without legislative approval, and states legislative
intent that a multidisciplinary independent assessment be
undertaken on additional ways to provide for sustainable
long term management of California's state park system."
2)Arguments in Support . Proponents of this bill state that AB
1589 would offer several funding opportunities and additional
creative strategies to help prevent state parks form being
closed. Proponents believe that the California State Parks
Stewardship Act of 2012 is a necessary step to ensure the
viability of state parks for many years to come. They point
out that the travel and tourism sectors generate more than
$87.7 billion for California's economy, employ over 881,100
Californians directly and bring in approximately $1.9 billion
in local taxes and $3.4 billion in state taxes. Park closures
would reduce the number of tasting room visitors and winery
revenue because of lost sales, affecting the broader local
economy as well as state and local tax receipts. Proponents
argue that state parks play a vital role within California and
its local economies.
3)The Purchase of State Parks Passes on PIT Returns: a New
Concept. AB 1589 creates a unique five-year program by
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allowing an individual taxpayer to purchase one or more annual
passes via his/her PIT returns, beginning with the 2012
taxable year. The purchase proceeds will be deposited into
the Fund to be used, after reimbursements for administrative
costs and upon appropriation by the Legislature, for purposes
related to the protection and preservation of state parks.
The amount of the purchase price for a single pass would be
deductible, as a miscellaneous deduction, for purposes of the
PIT Law. While taxpayers may purchase as many passes as they
wish, the deduction will only cover the cost of one annual
pass.
If the amount of payments and credits reported on the return is
not enough to cover the total number of annual passes
purchased, then the number of passes purchased will be
reduced. If there are remaining funds, the monies will be
refunded to the taxpayer. Similarly, the FTB would have to
refund the purchase designation to the taxpayer, if the
purchase designation is not enough to cover the cost of at
least one annual pass. Thus, the return will be treated as
though no purchase designation has been made.
In order to implement this new program, AB 1589 would require
FTB to revise the PIT return forms and to collect and keep
track of the money designated by individual taxpayers who
purchase annual passes. The FTB would also be required to
provide the DPR with necessary information, i.e. addresses and
names of the taxpayers who purchased the passes, so that the
DPR may contact the purchasers and distribute the passes
accordingly.
4)Requiring a State Tax Agency to Act as a Retailer . The author
indicates that one purpose of this bill is to increase the
number of state park annual passes sold in efforts to increase
funding for California's parks. While Committee staff fully
appreciates this goal, it questions establishing a precedent
of requiring an already overburdened state tax agency, focused
on tax administration, to act as a retailer. The FTB is
responsible for administering two of California's major tax
programs: Personal Income Tax and Corporation Tax. It also
administers eight other nontax programs and delinquent debt
collection programs. By allowing taxpayers to purchase a
state park annual pass when they file their state tax return,
this bill is essentially turning the FTB, a state tax agency,
into a retailer. Additionally, in its staff analysis, the FTB
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notes that Florida, Illinois, Massachusetts, Michigan,
Minnesota, and New York, all states with similar laws to
California's income tax laws, do not allow a taxpayer to
purchase items on his/her tax return. The Committee may wish
to consider whether alternative methods for increasing sales
of annual passes or additionally funding state parks via a
voluntary contribution fund would be more effective and less
burdensome for the FTB.
5)Will the Sales of State Parks Access Pass Increase ? According
to the author's office, Maine implemented a successful pilot
program that allowed taxpayers to purchase a state park access
pass through their state tax return. The author's office
states that the number of passes sold increased significantly,
growing from 5,000 in 1997, when the pilot program was
implemented, to 11,000 in 2011. The author's office also
notes that Maine's tax board keeps $4.50 for each pass sold as
an administrative fee. It is difficult to know if the same
result would occur in California. Furthermore, it is unclear
whether the benefits resulting from allowing taxpayers to
purchase annual passes will outweigh the costs associated with
having FTB act as a retailer.
6)Miscellaneous Deductions . Under both federal and state income
tax laws, individuals are allowed to deduct either a fixed
amount, indexed for inflation, known as the standard
deduction, or the amount of a taxpayer's itemized deductions,
whichever is greater. Certain expenses, such as medical
expenses, charitable contributions, interest, and taxes, are
deductible as itemized deductions. The laws also provide for
"miscellaneous itemized deductions", which are those itemized
deductions not specifically listed in Internal Revenue Code
Section 67(b). As a general rule, miscellaneous itemized
deductions are allowed only to the extent that the aggregate
of such deductions exceeds 2% of AGI.
A deduction authorized by this bill for the purchase of an
annual pass would be a miscellaneous deduction subject to 2%
of AGI. Thus, it will benefit only those taxpayers who
itemize their deductions, provided that the aggregate of their
miscellaneous deductions exceeds 2% of their AGI.
7)FTB's Implementation Concerns . The FTB staff notes, in its
staff analysis, that this bill would:
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a) Provide taxpayers "with the unprecedented ability to
purchase something from a state agency on the personal
income tax return," which could establish "a precedent for
the inclusion of a variety of other items on the tax
return, thereby complicating tax administration for non-tax
reasons."
b) Create differences "between federal and California tax
law by allowing a taxpayer to exclude the cost of a parks
pass that is purchased on his or her tax return, thereby
increasing the complexity of California tax return
preparation."
8)Double-referral . This bill is double-referred with the
Assembly Committee on Water, Parks and Wildlife and passed out
of that Committee with a 12-0 vote. For a more comprehensive
analysis of this bill, please refer to that Committee's
analysis.
REGISTERED SUPPORT / OPPOSITION :
Support
Born Free USA
California League of Conservation Voters
California State Parks Foundation
California Travel Association
Family Winemakers of California
Mendocino County board of Supervisors
Sierra Club California
The Humane society of the Untied States
Trust for Public Land
Opposition
None on file
Analysis Prepared by : Rosailda Perez/ Oksana Jaffe / REV. &
TAX. / (916) 319-2098