BILL ANALYSIS
SB 1158
Date of Hearing: June 19, 1995
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
JUANITA M. McDONALD, Chairwoman
SB 1158 (Johannessen) - As Amended: April 18, 1995
SUBJECT
Income taxes: designations: California Military Museum.
DIGEST
Fiscal committee.
Existing law permits taxpayers to voluntarily make donations in
excess of their tax liability to a variety of funds designated on
their personal income tax returns. These designations, called
"check-off" programs, are tax deductible as charitable
contributions.
Currently there are eleven funds to which taxpayers may
contribute:
1) California Alzheimer's Disease and Related Disorders Fund
2) California Fund for Senior Citizens
3) Rare and Endangered Species Preservation Program
4) State Children's Trust Fund for the Prevention of Child Abuse
5) California's Breast Cancer Research Fund
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6) Veterans Memorial Account
7) California Seniors Special Fund
8) California Olympic Training Fund
9) California Public School Library Protection Fund
10) California Firefighters Memorial Fund
11) California Election Campaign Fund
The California Fund for Senior Citizens has no sunset date. The
Breast Cancer Research Fund and the Olympic Training Fund sunset
January 1, 1998; The Firefighters Memorial Fund and the Public
School Library Protection Fund sunset January 1, 1999; and the
other funds all sunset January 1, 1997.
The following provisions generally apply to all check-off
programs:
i) If the repeal date is deleted, and the Franchise Tax Board
(FTB) by September 1, estimates that annual contributions are less
than $250,000, the check-off is repealed for tax years beginning
on and after January 1 of that calendar year.
ii) The contribution designation must be made on the taxpayer's
original tax
return, and once made is irrevocable.
iii) The FTB is required to include a line on the income tax form
specifically titled for each fund, and provide instructions which
inform taxpayers of the purpose of each fund.
iv) The FTB is also required to determine the amount of
contributions designated to these funds by taxpayers and report
that amount to the State Controller. The contributions are then
transferred from the Personal Income Tax Fund to the appropriate
fund by the State Controller. Both the FTB and Controller are
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reimbursed for the administrative costs incurred by the
contributions.
This bill:
1) Creates the California Military Museum Fund check-off program
for inclusion on the state tax return;
2) Provides the check-off sunsets on January 1, 2000.
3) Provides in any calendar year, should the FTB determine by
September 1, the fund shall not receive at least $250,000 in
annual contributions, the check-off shall be deleted from the tax
form;
4) Provides the check-off shall not be operative until an audit
of the California Military Museum is submitted to and approved by
the Joint Legislative Audit Committee.
FISCAL EFFECT
State: The Franchise Tax Board estimates that the additional
charitable donations resulting from this measure will generate
annual General Fund revenue losses of less than $20,000 due
to charitable donation deductions from taxable income.
Local: None.
COMMENTS
1) The Purpose Of The Bill Is Raise Additional Funds For
California Military
Museum.
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SB 1158 is intended to increase contributions for the operating
costs of the California Military Museum located in Sacramento
by allowing taxpayers to contribute to the Museum when their
file their tax returns. The museum, which is operated by the
California National Guard Historical Society,
opened in 1990. The principal funding source for the Museum is
admissions revenue, which generates approximately $12,000
annually.
2) Military Museum Fund May Not Appear On 1995 Tax Return.
The bill provides that the California Military Museum Fund
shall not appear on the tax return until an audit of the museum
is submitted to and approved by the Joint Legislative Audit
Committee. It is not known when the audit is to begin, and tax
forms annually go to print in October or November of each year.
If the audit has not been approved by the Joint Legislative
Audit Committee by that time, the FTB indicates the Military
Museum Fund cannot appear on the tax return.
3) Is The Tax Return An Appropriate Vehicle To Solicit Voluntary
Contributions?
The tax return was originally designed to only collect and
provide tax data. Voluntary check-off programs began in 1982
with the California Election Campaign Fund, and for those
successful check-offs proposed in later years the tax return
has become a simple alternative to conventional fundraising
practices. While these voluntary contributions provide a
valuable benefit, is the tax return the appropriate vehicle to
solicit charitable contributions?
4) Should The State Charge For The Use Of The Tax Return As A
Fundraising
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Mechanism?
The state tax forms are mailed annually to over 14 million
California taxpayers and the check-off programs are an
effective, low-cost method of raising funds for a variety of
purposes. Currently, only the actual costs to the Franchise
Tax Board and the State Controller for are reimbursed from
gross proceeds to offset processing. Typically, these combined
costs equal 2-3% of the funds raised, far less than the rates
nonprofit organizations might otherwise expect to pay for their
fundraising.
Perhaps the state should consider being a bit more aggressive
about charging private organizations for this service -- i.e.,
a flat fee plus a percentage of all revenues over a certain
dollar amount. While these charges would not solve the state's
current fiscal problem, they would make check-off programs
operate a bit more like private fundraising operations.
5) Are Check-offs Too Numerous To Be Effective?
With eleven check-off programs on the state tax return, has a
saturation point been reached where the total number of
charitable designations decreases the effectiveness of all
check-off programs? According to the Franchise Tax Board, many
funds have not experienced increasing contributions. Should
some check-off programs be allowed to sunset for the benefit of
those that remain?
Attachment 1 shows the amount of 1994 voluntary contributions
made to check-off programs as of January 1995.
6) Similar Legislation.
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SB 209 (Solis) would allow the Firefighters Memorial Fund
check-off program to remain on the tax return without regard to
the minimum contribution amount of $250,000 unless the sunset
date is deleted. SB 209 passed this committee on June 12, 1995
and awaits hearing in the Assembly Appropriations Committee.
SB 1153 (O'Connell) would create the D.A.R.E. check-off
program. SB 1153 passed this committee on June 12, 1995, and
awaits hearing in the Assembly Appropriations Committee.
POSITIONS
Support
California Military Museum
Sixth Region Association of the United States Army
California Veterans Board
California Marine Corps League
Veterans Advisory Council of Orange County
California National Guard Historical Society
Los Angeles County Department of Military and Veterans Affairs
California State Commanders Veterans Council
Opposition
Department of Finance
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