BILL ANALYSIS                                                                                                                                                                                                    �




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair


          SB 1526 (La Malfa) - Tax exempt organizations: filing 
          requirements
          
          Amended: April 18, 2012         Policy Vote: G&F 7-0
          Urgency: No                     Mandate: No
          Hearing Date: May 7, 2012       Consultant: Mark McKenzie
          
          This bill meets the criteria for referral to the Suspense File. 

          
          Bill Summary: SB 1526 would expand the current exemption from 
          annual informational return filing requirements for certain 
          small tax-exempt organizations.  Specifically, this bill would 
          increase the filing exemption threshold from $25,000 in annual 
          gross receipts to $50,000.

          Fiscal Impact: The Franchise Tax Board (FTB) estimates an annual 
          revenue loss of $90,000 in 2012-13 and $100,000 annually 
          thereafter (General Fund).  

          Background: Existing law, in general conformity with federal 
          law, exempts certain nonprofit organizations that comply with 
          specified qualification and reporting requirements from income 
          and franchise taxation.  Religious services, educational 
          programs, medical care, fundraising, political activities, among 
          others, generally qualify as exempt-purpose activities.  

          Tax-exempt nonprofit organizations are required to file an 
          annual informational return and pay a $10 filing fee.  Existing 
          law provides specified exemptions from this filing requirement, 
          including an exemption for smaller organizations with normal 
          annual gross receipts of less than $25,000.  Rather than filing 
          the two-page informational return, these exempt organizations 
          submit basic information on a California e-Postcard (Form 199-N) 
          and are relieved from paying the $10 filing fee.  Federal law 
          was recently amended to allow small tax-exempt organizations 
          that have gross receipts of less than $50,000 annually to file 
          the federal e-Postcard rather than an informational return.

          Proposed Law: SB 1526 would expand the exemption that relieves 
          specified tax-exempt organizations from the requirement to file 
          an annual return with FTB for taxable years on or after January 








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          1, 2012.  Specifically, this bill would increase the gross 
          receipts threshold for filing an informational return from 
          $25,000 to $50,000.

          Staff Comments: FTB indicates that this bill would annually 
          impact approximately 10,000 exempt organizations.  The revenue 
          losses noted above are a result of the loss of fees that would 
          otherwise have been paid by these organizations when filing an 
          informational return.