BILL ANALYSIS �
AB 2421
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Date of Hearing: August 6, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 2421 (Nestande) - As Amended: August 4, 2014
Policy Committee: Revenue &
Taxation Vote: 6-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill allows a credit under the corporation tax law of up to
$200,000, for taxable years beginning on or after January 1,
2105 and before January 1, 2020, equal to 50% of a taxpayer's
contributions made during the taxable year to a qualified
K-College education scholarship organization to fund education
scholarships for specified pupils. In summary, this bill:
1)Defines "specified pupil" as an individual who has either been
placed in foster care or with a relative caretaker through
child protective services at any time prior to graduating high
school, or who was at any time prior to graduating high school
or is currently a homeless youth as defined under state or
federal statute.
2)Defines "qualified K-College education scholarship
organization" as a nonprofit that provides qualified K-College
education scholarships to specified pupils attending a public,
charter, or private school in California; requires those
scholarships to be available to students of more than one
school; and requires the organizations to maintain audited
financial records and reports and submit those accounts and
reports to the Department of Education (CDE).
3)Defines "qualified K-College education scholarship" as
financial assistance to pay fees or expenses associated with:
a) Transportation to attend a public, charter, or private
school or to attend school-related activities and other
educationally beneficial programs.
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b) Purchasing books, computers, software, tutoring, or
other academic materials not provided by the federal
McKinney-Vento Homeless Assistance Act of 1987.
c) Attending college courses after graduation from a high
school provided by any public or independent, nonprofit
college where the student has been admitted.
4)Specifies CDE shall develop rules, forms, and procedures for
tax credit applications; certify, issue, and verify credits;
review, audit, and design eligible scholarship organizations;
maintain and publish online a list of qualifying
organizations; and communicate issued tax credits to the
Franchise Tax Board (FTB).
5)Requires a taxpayer to apply to CDE for certification that a
contribution meets the requirements for a credit, specifies
that credits will be issued on a first-come, first-served
basis, and specifies that tax credits issues shall be lieu of
any other credit or deduction.
6)Limits the aggregate amount of tax credits allowed to $10
million for each calendar year.
FISCAL EFFECT
1)Unknown but substantial GF costs to CDE, likely in the high
hundreds of thousands of dollars annually, to develop the
expertise, systems, and procedures to implement and administer
the organization eligibility and audit functions as well as
issue and verify credits.
2)Potentially significant GF costs to FTB to administer the
changes to forms and systems.
3)Estimated GF revenue decreases of $1.6 million, $6.1 million,
and $8.3 million in FY 2014-15, FY 2015-16, and FY 2016-17,
respectively.
COMMENTS
1) Purpose. According to the author, this bill will incentivize
corporate donations to provide education resources to foster
and homeless youth. These vulnerable populations face unique
challenges in obtaining a quality education without the
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support that traditionally comes from families. The author
contends AB 2421 will provide college scholarships to help
bridge the gap between the full cost of attending college and
the financial aid currently available, and lower the costs of
transportation and school supplies for K-12 students.
2) Tax Incentives vs Investment in Education. Opponents argue
K-12 education has endured budget cuts of $20 billion over the
last few years, and that additional revenues should be used to
restore those budgets instead of tax incentives. This may be
particularly true for tax incentives that benefit students of
private schools, which effectively spend public funds on
private and/or religious education. The Committee may wish to
consider whether increased funding to existing programs would
be a more efficient approach to achieving these goals.
3) School Fees. AB 1575 (Lara) of 2012 codified the
constitutional prohibition on the imposition of pupil fees and
established compliance procedures. Since passage, many public
schools have stopped imposing fees for participation and, in
some cases, are paying for items that were traditionally paid
for by pupils and parents. Those items include several of the
eligible expenses included in the scholarships provided by
this bill. As a result, expenses relating to transportation,
books, services, and other educational materials covered by
the scholarships will likely be those imposed by private
schools.
4) CDE vs The California Student Aid Commission. CDE currently
lacks the expertise or capability to fulfill many of the
functions required of it in this bill, contributing to costs
and potentially complicating implementation. The California
Student Aid Commission is the principal state agency
responsible for administering financial aid programs for
students attending public and private universities, colleges,
and vocational schools in California, including the Cal Grant
and California Chafee Grant for Foster Youth programs. The
Commission may be better suited to administer and promote this
program along with other various scholarships available to
foster and homeless youth. The author and Committee may wish
to consider having this bill administered by the Commission
instead of CDE.
Analysis Prepared by : Joel Tashjian / APPR. / (916) 319-2081
AB 2421
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