BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 1765 HEARING: 6/11/14
AUTHOR: Jones-Sawyer FISCAL: Yes
VERSION: 6/4/14 TAX LEVY: No
CONSULTANT: Ewing
VOLUNTARY CONTRIBUTIONS: HABITAT FOR HUMANITY FUND
Creates the Habitat for Humanity Fund tax check-off on the
Income Tax Form
Background and Existing Law
Existing law allows taxpayers to contribute to one or more
of 20 voluntary contribution funds, known as VCFs or
check-offs, by checking a box on their state income tax
return. California law requires check-off contributions 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 forms 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VCFs remain on the tax form until they either are repealed
by a sunset date or 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its minimum contribution amount, that fund is repealed for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 1765 -- 6/4/14 -- 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
current tax check-offs and how contributions are
administered. This list does not reflect tax contributions
that have been repealed under the terms of their statutes.
------------------------------------------------------------
|Voluntary | 2013 | Contribution Allotment |
|Contribution Fund |Contribution| |
| | s | |
|---------------------+------------+-------------------------|
|Alzheimer's | $405,080 | As many as contract or |
|Disease/Related | | receive grants provided |
|Disorders Fund | | by the monies |
| | | contributed. |
|---------------------+------------+-------------------------|
|American Red Cross, |Initial Tax | To the Office of |
|California Chapter | Return | Emergency Services for |
| | 2013 | distribution to the |
| | | American Red Cross. |
| | | |
|---------------------+------------+-------------------------|
|CA Breast Cancer | $369,425 | As many as apply and |
|Research Fund | | receive grants provided |
| | | from the monies |
| | | contributed. |
|---------------------+------------+-------------------------|
|CA Cancer Research | $389,759 | As many as apply and |
|Fund | | receive grants provided |
| | | from the monies |
| | | contributed. |
|---------------------+------------+-------------------------|
|CA Firefighters' | $126,158 | California Fire |
|Memorial Fund | | Foundation. |
|---------------------+------------+-------------------------|
|CA Fund for Senior | $234,247 | California Senior |
|Citizens | | Legislature. |
|---------------------+------------+-------------------------|
AB 1765 -- 6/4/14 -- Page 3
|CA Peace Officer | $128,581 | California Peace |
|Memorial Foundation | | Officer Memorial |
|Fund | | Commission. |
|---------------------+------------+-------------------------|
|CA Sea Otter Fund | $307,544 | Department of Fish and |
| | | Wildlife, and as many |
| | | as apply for grants and |
| | | contracts provided for |
| | | by 50% of |
| | | contributions. |
|---------------------+------------+-------------------------|
|CA Seniors Special | $60,961 | 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 | $72,435 | The first $300K to the |
|Government Fund | | 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. |
| | | Remaining funds |
| | | allocated to the CA |
| | | YMCA Youth and |
| | | Government Program, |
| | | whose board may award |
| | | additional $10K annual |
| | | grants to additional |
| | | nonprofit civic youth |
| | | organizations. |
|---------------------+------------+-------------------------|
|CA Youth Leadership | $55,505 | To the Department of |
|Fund | | Education to provide |
| | | for the CA Youth |
| | | Leadership Project. |
AB 1765 -- 6/4/14 -- Page 4
|---------------------+------------+-------------------------|
|Child Victims of | $220,119 | As many counseling and |
|Human Trafficking | | prevention centers that |
|Fund | | apply and receive |
| | | grants provided from |
| | | monies contributed. |
|---------------------+------------+-------------------------|
|Emergency Food for | $459,291 | To the Department of |
|Families Fund | | Social Services for the |
| | | Emergency Food |
| | | Assistance Program. |
|---------------------+------------+-------------------------|
|Keep Arts in Schools |Initial Tax | To the Arts Council for |
|Fund | Return | grants to organizations |
| | 2013 | providing parts |
| | | programs in schools. |
|---------------------+------------+-------------------------|
|Municipal Shelter | $217,883 | As many as apply and |
|Spay-Neuter Fund | | receive grants provided |
| | | from the monies |
| | | contributed. |
|---------------------+------------+-------------------------|
| Protect Our Coast | Initial Tax | To the California |
|and Oceans Fund | Return | Coastal Commission to |
| | 2013 | provide grants to |
| | | organizations in |
| | | support of coastal |
| | | resource programs and |
| | | related educational |
| | |activities. |
|---------------------+------------+-------------------------|
|Rare & Endangered | $476,933 | Department of Fish and |
|Species Preservation | | Wildlife endangered |
|Program | | conservation programs. |
|---------------------+------------+-------------------------|
|School Supplies for | $367,868 | As many as apply and |
|Homeless Children | | receive grants provided |
|Fund | | for by the monies |
| | | contributed. |
|---------------------+------------+-------------------------|
|State Children's | $305,438 | To the Department of |
|Trust for the | | Social Services for |
|Prevention of Child | | prevention and |
|Abuse | | intervention programs. |
|---------------------+------------+-------------------------|
|State Parks | $396,921 | As many as purchase a |
|Protection | | parks pass that can be |
|Fund/Parks Pass | | provided from the |
|Purchase | |monies contributed. |
------------------------------------------------------------
Proposed Law
Assembly Bill 1765 adds the "Habitat for Humanity Fund" on
the tax form for voluntary contributions, when space is
available. Contributions received through the fund would
be allocated to the Department of Housing and Community
Development for distribution to the Habitat for Humanity
through a competitive grant process. AB 1765 maintains
existing requirements for tax check-offs, including the
annual reporting by September 1st of each year by the
Franchise Tax Board to determine eligibility for the
following year, and the $250,000 minimum contribution
requirement, beginning in the second year, with annual
adjustments for inflation. AB 1765 includes an automatic
repeal after five years or 2021, whichever comes first.
AB 1765 -- 6/4/14 -- Page 9
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . Assembly Bill 1765 would
establish a tax check-off program, consistent with existing
tax check-off programs, to support home construction and
related programs offered by Habitat for Humanity.
Including this fund on state tax forms will increase
awareness of the need for affordable housing and enhance
charitable giving for housing programs operated by this
charity.
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 a deduction for
charitable giving on their tax return. However, 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 since 1982, tax
check-offs have raised more than $109 million for
charitable causes. Donations have averaged $4.3
million per year since 2000 and brought in $4.7
million in 2013. Yet only a small percentage
California's 15 million tax filers, less than 400,000,
are utilizing the tax check-off program to donate to
charitable causes. Federal tax return data from 2010,
as reported by the Urban Institute, National Center
for Charitable Statistics, indicates that Californians
donated more than $21 billion to charities, as
reflected on their tax returns. In light of the low
AB 1765 -- 6/4/14 -- Page 10
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 is an efficient and effective strategy to
connect donors with charitable organizations.
Charities struggle to comply with the requirements
of the tax check-off program.
Since 1982 the Legislature has authorized 45
individual tax check-offs on the tax form. Among
those, more than one-third failed to remain on the tax
form beyond its initial year. Just 10 of the 45 have
met their statutory standards to remain on the tax
form for 10 years or more. The Legislature has
authorized 20 tax check-offs since 2005. Half of
those recently enacted tax check-offs failed to meet
statutory minimum contribution levels to remain on the
tax form.
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 than could be accommodated on the
tax forms. While changes to the tax forms have
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. Depending on the number of additional
tax check-offs approved by the Legislature each year,
it could be between two and 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 was largely
driven by competition for limited space on the tax
form. Other than the requirements to meet the minimum
AB 1765 -- 6/4/14 -- Page 11
contribution threshold, there are no specific
requirements in the tax code that govern participation
in a tax check-off program. For instance, SB 1262
(Sher, Chapter 1262, 2004) established requirements
for charitable organizations to register with the
Office of the Attorney General, if they contract for
fundraising services. 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.
3. Related legislation . AB 1765 is not the only bill
dealing with tax check-offs this legislative session:
Assembly Bill 247 (Wagner, Chapter 670, 2013)
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, Chapter 671, 2013)
extends the repeal date of the California Alzheimer's
Disease and Related Disorders Research Fund tax
check-off on the tax form from 2015 to 2020.
Assembly Bill 511 (Pan, Chapter 451, 2013) creates
the American Red Cross, California Chapters Fund
check-off on the tax form.
Assembly Bill 1286 (Skinner, Chapter 664, 2013)
temporarily suspends the annual inflation adjustment
for minimum contribution levels for the California
Breast Cancer Research Fund check-off on the tax form.
Assembly Bill 1561 (Rodriguez, 2014) extends the
repeal date from 2016 to 2026 for the California
firefighters' and peace officer memorial funds.
Assembly Bill 1833 (Garcia, 2014) eliminates the
minimum contribution requirement for the California
Fund for Senior Citizens.
Assembly Bill 2012 (Morrell, 2014) eliminates the
minimum contribution requirement for the California
Fund for Senior Citizens.
Senate Bill 116 (Liu, Chapter 222, 2013) extends
the repeal date from 2014 to 2019 for the Emergency
Food Assistance Program check off on the tax form.
Senate Bill 571 (Liu, Chapter 430, 2013) creates
the Art for Kids Fund check-off on the tax form.
Senate Bill 761 (DeSaulnier, 2014) modifies state
AB 1765 -- 6/4/14 -- Page 12
administration of funds received through the School
Supplies for Homeless Children Fund.
Senate Bill 761 (DeSaulnier, 2014) modifies state
administration of funds received through the School
Supplies for Homeless Children Fund.
Senate Bill 782 (DeSaulnier, 2014) creates the
California Sexual Violence Victim Services Fund tax
check-off.
Senate Bill 987 (Monning, 2014) requires that the
cost incurred by the Department of Fish and Wildlife
in taking measures to encourage taxpayers to make
contributions on their tax return be paid for with
money allocated to the California Sea Otter Fund.
Senate Bill 1207 (Wolk, 2014) establishes an
administrative procedure for qualified charities to
apply and receive donations through a tax check-off.
Assembly Actions
Assembly Revenue and Taxation Committee:8-0
Assembly Appropriations Committee: 17-0
Assembly Floor: 74-0
Support and Opposition (6/5/14)
Support : Habitat for Humanity California; Habitat for
Humanity East Bay/Silicon Valley; Habitat for Humanity
Fresno County; Habitat for Humanity Hemet / San Jacinto;
Habitat for Humanity Santa Cruz County; Habitat for
Humanity of Coachella Valley; Habitat for Humanity of
Orange County; Habitat for Humanity of Southern Santa
Barbara County; Habitat for Humanity of Tulare County;
Habitat for Humanity of Ventura County; Habitat for
Humanity San Gorgonio Pass Area; Habitat for Humanity
Riverside; Habitat for Humanity Santa Cruz County; Jerome
E. Horton, Chair, Board of Equalization; Nevada County
Habitat for Humanity; Pomona Valley Habitat for Humanity;
San Gabriel Valley Habitat for Humanity.
Opposition : Unknown.
AB 1765 -- 6/4/14 -- Page 13