BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 1207 (Wolk) - California Voluntary Contribution Program
Amended: April 28, 2014 Policy Vote: G&F 7-0
Urgency: No Mandate: No
Hearing Date: May 5, 2014 Consultant: Robert Ingenito
SUSPENSE FILE. AS AMENDED.
Bill Summary: SB 1207 would modify the existing voluntary tax
check-off system by establishing the California Voluntary
Contribution Program (Program), which would expand the number of
participating organizations.
Fiscal Impact (as approved on May 23, 2014):
The Franchise Tax Board (FTB) indicates that
implementation of this bill would result in unknown,
potentially significant one-time and ongoing expenses to
implement its provisions of the bill. Impacts to FTB would
include revising tax forms and related publications and
taxpayer outreach. Costs would likely be in the hundreds of
thousands of dollars annually.
Increased costs to the Office of California Volunteers
(OCV) in the low hundreds of thousands of dollars annually
to establish the application procedures and regulations as
specified in the bill.
The Program would ultimately be funded by application
fees and up to five percent of taxpayer donations; however,
General Fund support in the first few years would likely
occur until the Program is fully operational.
Background: Current law allows taxpayers to contribute money to
voluntary contribution funds (VCFs) by checking a box on their
state income tax return. This practice began in 1984, and
designation purposes have included medical research, social
welfare, animal rights welfare, and memorial construction.
Currently, there are 20 VCFs listed on the tax return. Each fund
provides for the reimbursement of the FTB's and State
Controller's Office's costs. Contributions made via the tax
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check-off system are from taxpayers' own funds, not their tax
liability as is the case at the federal level, and can be
deducted on the state income return for the year in which the
contribution is made.
Each VCF is individually added to the tax return through the
legislative process. VCF's generally remain on the tax return
until they are either repealed or fail to meet their minimum
contribution amount. However, three of the funds (The
California Seniors Special Fund, The California Memorial
Firefighters' Fund, and the California Peace Office Memorial
Foundation Fund) do not have a minimum contribution amount, and
the California Fund for Senior Citizens has a minimum
contribution threshold that is fixed at $250,000. With the
exception of the four funds listed above, each fund's minimum
contribution (with one exception) amount is adjusted annually
for inflation based on the percentage change in the California
Consumer Price Index.
FTB is required to make the following two determinations for
each fund by September 1 of each calendar year: (1) the minimum
contribution amount required for the fund to remain on the
return in the subsequent year, and (2) whether estimated
contributions to the fund will be less than the minimum
contribution amount for that calendar year. If the FTB estimates
that contributions to a fund will fail to meet or exceed the
minimum contribution amount for a calendar year, that fund is
repealed effective January 1 of that calendar year.
Under current law, if the number of contingent VCFs that are
eligible to be added to the tax return is greater than the
number of designations removed, then the voluntary contribution
designations may be queued and added to the return in order of
the date of enactment.
Proposed Law: This bill would revise the process of charitable
giving via tax check-offs. Specifically, the bill would create
the California Voluntary Contribution, administered by OCV, to
promote charitable giving and collect donations through the
personal income tax return on behalf of qualified applicants, as
specified. Qualified entities would apply to OCV and must
submit a fee to cover costs of the application process.
The minimum contribution amount for each approved applicant is
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set at $100,000. OCV may adjust this amount every five calendar
years. A qualified applicant may no longer receive voluntary
contributions if either (1) the average amount of contribution
received during three calendar years did not exceed the minimum
amount established by OCV, or (2) it no longer meets the
definition of "qualified applicant."
The bill would establish the California Voluntary Contribution
Fund that would receive all voluntary taxpayer contributions
made to any qualified applicant. All money transferred to the
California Voluntary Contribution Fund will be allocated as
follows (1) to the FTB, the State Controller's Office, and OCV
for reimbursement of costs; and (2) to OCV for distribution to
each qualified applicant designated by a taxpayer. A maximum of
five percent of money from the fund, exclusive of fee revenues,
can be used for administrative purposes beginning in 2020.
The bill would require OCV to do all of the following by January
1, 2017:
Develop application and related materials;
Establish reasonable and necessary application and
renewal fees;
Develop procedures and adopt regulations to inform
taxpayers on how to contribute directly to a charitable
organization or state or local agency that no longer is
eligible to participate in the program after not meeting
the required minimum contribution amount;
Develop policies and procedures to ensure that qualified
applicants are in compliance with relevant statutes
affecting those applicants;
Develop a plan to transition the remaining funds on the
tax return form to the program and submit the plan to the
relevant committees of the Legislature by 2020.
In addition, OCV may also (1) form an advisory body or related
bodies as deemed necessary, (2) contract with other agencies,
public or private, as deemed necessary; (3) adopt regulation
necessary for the administration of the program, and (4) adopt
specified policies and guidelines to regulate the number of
qualified applicants participating in the program.
OCV must report annually to the Legislature summarizing program
goals, a baseline, metrics, and targets to track the
effectiveness of efforts to encourage charitable giving.
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By 2017, FTB must revise the tax form and other related
materials to allow an individual to designate a contribution to
any one of the qualified applicants.
The bill would sunset on January 1, 2030.
Related Legislation: Since 2011, the Governor has signed 15
bills that create new tax check-offs or extend the sunset of
existing ones. Tax check-off bills in the current session
include the following:
AB 1561 (Rodriguez, 2014) would extend the repeal date
from 2016 to 2026 for the California firefighters' and
peace officer memorial funds.
AB 1765 (Jones-Sawyer, 2014) would create the Habitat
for Humanity Fund check-off on the tax form.
AB 1833 (Garcia, 2014) eliminates the minimum
contribution requirement for the California Fund for Senior
Citizens.
AB 2012 (Morell, 2014) eliminates the minimum
contribution requirement for the California Fund for Senior
Citizens.
AB 2326 (Dickinson, 2014) creates the Pet Adoption Cost
Deduction Fund check-off on the tax form.
SB 761 (DeSaulnier, 2014) modifies state administration
of funds received through the School Supplies for Homeless
Children Fund.
SB 782 (DeSaulnier, 2014) creates the California Sexual
Violence Victim Services Fund tax check-off.
SB 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.
Staff Comments: This bill would sharply expand the number of
potential charities that could receive donations through the
income tax form. The resulting impact on the number of taxpayers
participating in the Program is unknown. To the extent that the
additional number of available charities leads to an increase in
taxpayer donations, personal income tax revenues would decline
relative to the current baseline.
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The current tax check-off program generates a relatively small
share of statewide contributions to charitable causes. In 2008,
FTB data indicate that total donations to charity exceeded $17
billion. However, the income tax check-off utilization rate is
less than 1 percent. FTB reports that in 2012, about 90,000 out
of 15 million taxpayers contributed a total of $4.8 million to
the check-offs.
Author's Amendments (1) cap the number of participating
charities to 200, (2) cap the number of charities to which a
taxpayer can donate to five, (3) add a generic charity donation
fund for taxpayers who wish to donate but don't have a specific
charity in mind, (4) allow OCV to work with the Department of
Finance to develop a strategy to propose a continuous
appropriation, and (5) change the bill's sunset date from 2030
to 2023.