BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1207|
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THIRD READING
Bill No: SB 1207
Author: Wolk (D) et al.
Amended: 5/27/14
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 7-0, 4/9/14
AYES: Wolk, Knight, Beall, DeSaulnier, Hernandez, Liu, Vidak
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/23/14
AYES: De Le�n, Walters, Gaines, Hill, Lara, Padilla, Steinberg
SUBJECT : California Voluntary Contribution Program
SOURCE : Author
DIGEST : This bill creates an administrative process for
charitable organizations and state and local agencies to receive
taxpayers voluntary contributions through the state income tax
form.
ANALYSIS : Existing state law allows taxpayers to contribute
money to voluntary contribution funds (VCFs) by checking a box
on their state income tax return. California law requires
contributions made through so-called "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.
Each VCF is individually added to the tax return through the
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legislative process. With a few exceptions, VCFs remain on the
return until they are repealed by a sunset date or fail to
generate a minimum contribution amount. In general, the minimum
contribution amounts are adjusted annually for inflation. For
most VCFs, the minimum contribution amount is $250,000,
beginning in the fund's second year.
This bill revises the process to allow charitable organizations
and state and local agencies to receive taxpayers' voluntary
contributions. This bill establishes the California Voluntary
Contribution Program to promote charitable giving and collect
donations through the personal income tax return on behalf of
qualified applicants. The office of California Volunteers is
responsible for administering the program.
This bill defines a "qualified applicant" as either a local
agency or state agency, or a 501 (c)(3) charitable organization
that meets all the following requirements:
Has registered with the Attorney General's Registry of
Charitable Trusts for each of the three years prior to the
date of application and has met the necessary requirements of
the Registry;
Has submitted required annual returns or statements with the
FTB for each of the three years prior to the date of
application;
Has average annual total revenues in excess of $100,000, as
calculated from each of the three years prior to the date of
application.
The number of qualified applicants that may participate in the
program each taxable year shall be no more than 200.
Qualified applicants may apply to California Volunteers to
receive voluntary contributions through the income tax form.
The applicant must submit evidence to California Vounteers to
show qualifications and an application fee, as established by
the administering agency, to cover costs of the application
process.
The minimum contribution amount for each approved qualified
applicant is set at $100,000. California Volunteers may adjust
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the minimum contribution amount beginning on January 1, 2020. A
qualified applicant may no longer receive voluntary
contributions if:
The average amount of contribution received during three
calendar years did not equal the minimum contribution
requirement;
The designee no longer meets the definition of "qualified
applicant."
A qualified applicant that loses eligibility for the program may
reapply after three years.
Any taxpayer may designate on the personal income tax return
that a contribution in excess of the tax liability, if any, be
made to either: 1) up to five specific qualified applicants or
2) to a generic charity, the Charitable Giving Fund, established
within the State Treasury to receive contributions and to
distribute the funds to charitable organizations. If the
payments and credits on a return do not exceed a taxpayer's
liability, the return is treated as if no designation was made.
This bill establishes in the State Treasury the California
Voluntary Contribution Fund that will receive all voluntary
taxpayer contributions made to any qualified applicant and the
Charitable Giving Fund. All money transferred to the California
Voluntary Contribution Fund and the Charitable Giving Fund will
be allocated as follows:
To the FTB, the Controller, and California Volunteers for
reimbursement of costs; and
To California Volunteers for distribution to each qualified
applicant designated by a taxpayer.
From the Charitable Giving Fund, to the office of California
Volunteers for distribution according to the regulation
established for distribution.
On and after January 1, 2020, no more than 5% of money from the
funds, exclusive of fee revenues, can be used for administrative
purposes. If a taxpayer fails to specify a designee, the
contribution is transferred to California Volunteers after
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reimbursing FTB and the Controller for the actual costs for
collection and administration of contributions. If a taxpayer
designates more than one fund, but the amount available exceeds
the total amount designated, the contribution is distributed
among the designees on a pro rata basis.
No later than January 1, 2017, California Volunteers must:
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;
Work in consultation with the Department of Finance to develop
a strategy to propose to the Legislature for a continuous
appropriation to distribute taxpayers' contributions to the
designated qualified applicants.
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 to the program and submit the plan to the relevant
committees of the Legislature by 2020.
The office of California Volunteers may also:
Form an advisory body or related bodies as deemed necessary;
Contract with other agencies, public or private, as deemed
necessary;
Adopt regulation necessary for the administration of the
program;
Establish policies and guidelines that may include application
cut off dates, first-come-first-served system or a lottery, to
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limit the number of participating qualified applicants, within
the specified number, of the program based on capacity and
appropriation.
The office must annually provide to the Legislature, and make
publicly available, a report of the program, including goals, a
baseline, metrics, and targets to track the effectiveness of
efforts to encourage charitable giving and the Charitable Giving
Fund.
The 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.
This bill sunsets on January 1, 2023.
Comments
The current tax check-off system limits charitable
organizations' participation due to limited space on the tax
form, a high annual minimum donation requirement, and the need
for legislative approval. Since 2003, 15 VCFs have fallen off
the form due to failure to meet the annual minimum donation
threshold. Previous committee analyses also have expressed
concern that there are many worthy causes that could be funded
by the tax check-off system, but the current system is
subjective and requires the Legislature to choose between
charities for a spot on the tax return form. This bill expands
access to taxpayers' donations to all eligible charities,
streamlines the process for charitable organizations and donors,
establishes clear standards, and designates an administering
agency to implement the program, enforce standards, and monitor
effectiveness.
Related legislation
AB 1561 (Rodriguez, 2014) extends the repeal date from 2016 to
2026 for the California firefighters' and peace officer memorial
funds.
AB 1765 (Jones-Sawyer, 2014) creates the Habitat for Humanity
Fund check-off on the tax form.
AB 1833 (Garcia, 2014) eliminates the minimum contribution
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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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
The Franchise Tax Board (FTB) indicates that
implementation of this bill will result in unknown,
potentially significant one-time and ongoing expenses to
implement its provisions. Impacts to FTB will include
revising tax forms and related publications and taxpayer
outreach. Costs will likely be in the hundreds of
thousands of dollars annually.
Increased costs to the office of California Volunteers
in the low hundreds of thousands of dollars annually to
establish the application procedures and regulations as
specified in the bill.
The Program will ultimately be funded by application
fees and up to five percent of taxpayer donations; however,
General Fund support in the first few years will likely
occur until the Program is fully operational.
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SUPPORT : (Verified 5/27/14)
Acci�n Latina
ALS (Amyotrophic Lateral Sclerosis) Association Golden West
Chapter
American Lung Association in California
California Association of Nonprofits
California Taxpayers Association
Lupus Foundation of America
March of Dimes California Chapter
OPPOSITION : (Verified 5/27/14)
American Cancer Society Cancer Action Network
CAL FIRE Local 2881
California Association of Food Banks
California Professional Firefighters
Peace Officers Research Association of California
ARGUMENTS IN SUPPORT : The California Association of
Nonprofits states, "SB 1207 strikes a good balance to allow more
nonprofit organizations to receive contributions and allow
taxpayers to pursue charitable giving that matches their
interests and values, while ensuring that nonprofits are in good
standing and that contributions will be of a great enough
magnitude to make the system cost-effective in administering.
We are hopeful that this balance will foster an increase [in]
charitable giving in a way that is more meaningful for donors
and more effective for nonprofit organizations."
ARGUMENTS IN OPPOSITION : The California Professional
Firefighters state, "SB 1207 would overhaul the existing process
by which charitable organizations ate listed on the income tax
form and are administered with regard to the voluntary check-off
contribution program. We are gratified to know that the author
shares in our goal of promoting and growing the participation of
taxpayers in California's income tax check-off program through
their charitable contributions. And, while we share her goal of
increasing charitable giving in California, we do not share her
enthusiasm for the proposed solution contained in in SB 1207.
Policy concerns aside, we believe that SB 1207 may cost too much
and further erode the net receipts from charitable giving
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through the tax check-off program."
AB:nl 5/27/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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