BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 1286 HEARING: 6/26/13
AUTHOR: Skinner FISCAL: No
VERSION: 5/8/13 TAX LEVY: No
CONSULTANT: Ewing
VOLUNTARY CONTRIBUTIONS: CALIFORNIA BREAST CANCER RESEARCH
FUND
Suspends for two years the annual adjustment of minimum
contribution level for the California Breast Cancer
Research Fund tax check-off.
Background and Existing Law
Existing law allows taxpayers to contribute to one or more
of 18 voluntary contribution funds, known as VCFs or
check-offs, by checking a box on their state income tax
return. California law requires contributions made through
check-offs to be made from taxpayers' own resources and not
from their tax liability, as is possible on federal tax
returns. Check-off amounts may be claimed as charitable
contributions on taxpayers' tax returns in the subsequent
year.
The Franchise Tax Board (FTB) designs tax returns to
provide for the designation of contributions to specified
funds either on the return itself or on a separate schedule
that must be attached to the return. With a few
exceptions, VCFs remain on the return until they are either
repealed by a sunset date, or if they fail to meet a
minimum contribution amount. Minimum contribution amounts
are adjusted annually for inflation, with specific
exceptions. For most VCFs, the minimum contribution amount
is $250,000, beginning in the fund's second year.
By September 1st of each year, the FTB must determine the
minimum contribution amount required for each fund to
remain on the form for the following calendar year and
estimate whether contributions to each fund meet that
amount. If the FTB estimates that a fund will fail to meet
its minimum contribution amount, that fund is repealed for
the following calendar year.
AB 1286 -- 5/8/13 -- Page 2
The following check-offs do not have a minimum contribution
requirement:
California Firefighters' Memorial Foundation Fund;
California Peace Officer Memorial Foundation Fund,
and
California Seniors Special Fund.
Proceeds from tax check-offs are dedicated to a range of
programs. The following list provides information on all
the check-offs as well as how many groups are eligible to
receive funding. Some of the funds have been repealed by
the terms of their authorizing statutes.
------------------------------------------------------------
|Voluntary | 2012 | Contribution Allotment |
|Contribution Fund |Contribution| |
| | Totals | |
|---------------------+------------+-------------------------|
|ALS/Lou Gehrig's | $137,290 |As many as apply and |
|Disease Research | |receive grants provided |
|Fund | |for by the monies |
| | |contributed. |
|---------------------+------------+-------------------------|
|Alzheimer's | $466,485 |As many as contract or |
|Disease/Related | |receive grants provided |
|Disorders Fund | |by the monies |
| | |contributed. |
|---------------------+------------+-------------------------|
|Arts Council Fund | $165,647 |As many as apply and |
| | |receive grants provided |
| | |by the monies |
| | |contributed. |
|---------------------+------------+-------------------------|
|CA Breast Cancer | $440,771 |As many as apply and |
|Research Fund | |receive grants provided |
| | |from the monies |
| | |contributed. |
|---------------------+------------+-------------------------|
|CA Cancer Research | $432,355 |As many as apply and |
|Fund | |receive grants provided |
| | |from the monies |
| | |contributed. |
|---------------------+------------+-------------------------|
|CA Firefighters' | $152,004 |1 Group: California Fire |
AB 1286 -- 5/8/13 -- Page 3
|Memorial Fund | |Foundation. |
|---------------------+------------+-------------------------|
|CA Fund for Senior | $272,742 |1 Group: California |
|Citizens | |Senior Legislature. |
|---------------------+------------+-------------------------|
|CA Peace Officer | $136,172 |1 Group: California |
|Memorial Foundation | |Peace Officer Memorial |
|Fund | |Commission. |
|---------------------+------------+-------------------------|
|CA Police Activities | $67,202 |The state CALPAL and |
|League (CALPAL) Fund | |county CALPAL chapters. |
|---------------------+------------+-------------------------|
|CA Sea Otter Fund | $351,037 |Department of Fish and |
| | |Wildlife, and as many as |
| | |apply for grants and |
| | |contracts provided for |
| | |by 50% of contributions. |
|---------------------+------------+-------------------------|
|CA Seniors Special | $61,315 |The first $80K to the |
|Fund | |Area Agency on Aging |
| | |Advisory Council of |
| | |California and the rest |
| | |to area agencies as |
| | |allocated by the |
| | |California Department of |
| | |Aging. |
|---------------------+------------+-------------------------|
|CA YMCA Youth and |Initial Tax |The first $300K to the |
|Government Fund |Return 2012 |CA YMCA Youth and |
| | |Government Program. The |
| | |rest is allocated in |
| | |$10K annual grants to |
| | |the: African American |
| | |Leaders for Tomorrow |
| | |Program, Asian Pacific |
| | |Youth Leadership |
| | |Project, Chicano Latino |
| | |Youth Leadership |
| | |Project. The money is |
| | |to be used to support |
| | |program participation. |
| | |Remaining funds |
| | |allocated to the CA YMCA |
| | |Youth and Government |
| | |Program, whose board may |
| | |award additional $10K |
AB 1286 -- 5/8/13 -- Page 4
| | |annual grants to |
| | |additional nonprofit |
| | |civic youth |
| | |organizations. The funds |
| | |distributed to the CA |
| | |YMCA Youth and |
| | |Government Program are |
| | |to be used for |
| | |program-related |
| | |expenses. |
|---------------------+------------+-------------------------|
|CA Youth Leadership |Initial Tax |1 group: Department of |
|Fund |Return 2012 |Education to provide for |
| | |the CA Youth Leadership |
| | |Project. |
|---------------------+------------+-------------------------|
|CA Veterans Homes | $210,078 |The number of |
|Fund | |established veteran's |
| | |homes (7). |
|---------------------+------------+-------------------------|
|Child Victims of | $35,317 |As many counseling and |
|Human Trafficking | |prevention centers that |
|Fund | |apply and receive grants |
| | |provided from monies |
| | |contributed. |
|---------------------+------------+-------------------------|
|Emergency Food for | $551,515 |1 group: Department of |
|Families Fund | |Social Services for the |
| | |Emergency Food |
| | |Assistance Program. |
|---------------------+------------+-------------------------|
|Municipal Shelter | $244,701 |As many as apply and |
|Spay-Neuter Fund | |receive grants provided |
| | |from the monies |
| | |contributed. |
|---------------------+------------+-------------------------|
|Rare & Endangered | $558,681 |1 group: Department of |
|Species Preservation | |Fish and Wildlife |
|Program | |endangered conservation |
| | |programs. |
|---------------------+------------+-------------------------|
|Safely Surrendered | $158,645 |1 group: Department of |
|Baby Fund | |Social Services for |
| | |Safely Surrender Baby |
| | |Law awareness programs. |
|---------------------+------------+-------------------------|
AB 1286 -- 5/8/13 -- Page 5
|School Supplies for |Initial Tax |As many as apply and |
|Homeless Children |Return 2012 |receive grants provided |
|Fund | |for by the monies |
| | |contributed. |
|---------------------+------------+-------------------------|
|State Children's | $376,243 |1 group: Department of |
|Trust for the | |Social Services for |
|Prevention of Child | |prevention and |
|Abuse | |intervention programs. |
|---------------------+------------+-------------------------|
|State Parks |Initial Tax |As many as purchase a |
|Protection |Return 2012 |parks pass that can be |
|Fund/Parks Pass | |provided from the monies |
|Purchase | |contributed. |
------------------------------------------------------------
Proposed Law
Assembly Bill 1286 suspends, for the 2014 and 2015 calendar
years, the annual adjustment of the minimum contribution
amount for the California Breast Cancer Research Fund tax
check off.
State Revenue Impact
The FTB estimates that this bill will not impact the
state's income tax revenues.
Comments
1. Purpose of the bill . Assembly Bill 1286 would freeze,
for two years, the minimum contribution level for the tax
check off in support of the California Breast Cancer
Research Fund. Established in 1993, this tax check off has
provided more than $8 million for breast cancer research
and grants. The economic downturn has impacted charitable
giving, resulting in reduced donations to the fund and
potentially jeopardizing the fund's ability to meet its
minimum contribution levels in the coming years. AB 1286
would temporarily suspend the annual adjustment of the
fund's minimum contribution level and allow the program to
regain its momentum as the economy improves.
AB 1286 -- 5/8/13 -- Page 6
2. Level the field . The economic downturn has impacted
all charities. The annual inflation adjustment to the
minimum contribution level was put in place in recognition
of the limited space on the tax form for many worthy
causes. The adjustment creates an annual market test for
the continued public support for specific programs that
compete for space on the form. For the 2013 calendar year,
four tax check-offs have been removed from the tax form
because they did not meet their annual minimum contribution
levels. Lowering the minimum contribution level for one
tax check-off, without doing so for the rest, creates bias
and could unfairly disadvantage other charities that
compete for limited donations.
2. Is there a better way ? Each year, the Committee
considers several bills relating to tax check-offs.
Previous committee analyses expressed concern over
establishing new tax check-offs or adopting special
legislation for a specific charity or program. The
Legislature has chosen to encourage charitable giving by
allowing organizations to receive funding through
check-offs and taxpayers to receive credit for charitable
giving on their tax return. The current design and
administration of the existing tax check-off program raises
a number of concerns that suggest the need for a different
approach to tax check-offs.
The current program generates a relatively small
share of statewide contributions.
The Franchise Tax Board reports that in 2012, 89,335
taxpayers contributed around $4.7 million to
California's tax check-off programs. Out of
approximately 15 million tax filers, less than 1% of
Californians are utilizing the tax check-off program
to make donations to charitable organizations. Data
from 2008, as analyzed by the Chronicle of
Philanthropy, indicate that in that year Californians
donated more than $17 billion to charities, ranking
the state first in the nation for sources of
charitable contributions and accounting for $1 in
every $8 donated in the U.S. In light of the low
participation rate among tax filers, and relatively
small level of funds contributed through tax
check-offs it is not clear that the tax check-off
program, as currently administered, is an efficient
and effective strategy to connect donors with
AB 1286 -- 5/8/13 -- Page 7
charitable organizations.
Increasing demand from charitable organizations
that want to participate in the program may soon
generate significant costs.
Prior to a redesign of tax forms, and movement toward
greater use of electronic filings, there were more tax
check-off programs that could be accommodated on the
tax forms. While changes to the tax forms has
accommodated more tax check-offs, the FTB reports that
it can accommodate 12-15 additional tax check-offs
before its information technology system will need to
be redesigned, at a cost of between $800,000 and $1
million. Depending on the number of additional tax
check-offs approved by the Legislature each year, it
could be two-five years before the FTB's systems must
be upgraded.
The current tax check-off program lacks monitoring
to ensure that charities comply with state
requirements.
In authorizing tax check-offs, with some exceptions,
the Legislature has required that check-offs must
generate contributions that exceed a specified minimum
to remain on the tax form. This policy decision was
largely driven by competition for limited space on the
tax form. Other than the requirements to meet the
minimum contribution threshold, there are no specific
requirements in the tax code that govern participation
in a tax check-off program. For instance, charitable
organizations are required to meet numerous reporting
and filing requirements consistent with their
charitable status. SB 1262 (Sher, 2004) established
requirements for charitable organizations making
contracts for fundraising, including requirements for
those charities, register with the Office of the
Attorney General. There is no requirement under the
tax check-off statutes that the FTB or other agencies
administering tax check-off funds confirm that
recipient charities comply with these and other state
rules and regulations.
The Committee may wish to consider directing committee
staff to develop and submit proposals to revise the design
AB 1286 -- 5/8/13 -- Page 8
and administration of the tax check-off program to:
Continue to encourage charitable giving
Streamline the process for charitable organizations
and donors
Establish clear and consistent standards in statute
for including a tax check-off in the new program
Designate an administering agency to implement the
program, enforce standards, and monitor program
effectiveness.
4. Related legislation . AB 1286 is not the only bill
dealing with tax check-offs this legislative session:
Assembly Bill 247 (Wagner) extends the repeal date from
2015 to 2020 for the "California Fund for Senior
Citizens" tax check-off on the tax form.
Assembly Bill 394 (Yamada) extends the repeal date from
2015 to 2020 for the "California Alzheimer's Disease and
Related Disorders Research Fund" tax check-off on the tax
form.
Assembly Bill 511 (Pan) creates the "American Red Cross,
California Chapters Fund" check-off on the tax form.
Assembly Bill 754 (Muratsuchi) creates the "Protect Our
Coast and Oceans Fund: check-off on the tax form.
Senate Bill 116 (Liu) extends the repeal date from 2014
to 2019 for the "Emergency Food Assistance Program" check
off on the tax form.
Senate Bill 571 (Price) creates the "Art for Kids Fund"
check-off on the tax form.
Assembly Actions
Assembly Revenue and Taxation Committee8-0
Assembly Floor 72-1
Support and Opposition (6/20/13)
Support : American Cancer Society Cancer Action Network;
Breast Cancer Action; Breast Cancer Fund; California Breast
Cancer Organizations; University of California.
Opposition : Unknown.
AB 1286 -- 5/8/13 -- Page 9