Existing law, until January 1, 2016, establishes the California Sea Otter Fund and allows taxpayers to designate on their income tax returns that a specified amount in excess of their tax liability be transferred to the fund. Existing law requires money in that fund, upon appropriation by the Legislature, to be allocated to the Department of Fish and Wildlife for the purposes of establishing a sea otter fund to be used for sea otter conservation, and to the State Coastal Conservancy for competitive grants and contracts for research, projects, and programs related to the Federal Sea Otter Recovery Plan or improving the nearshore ocean ecosystem.

This bill would extend the operation of these provisions to January 1, 2021.

Existing law, until January 1, 2016, establishes the California Sea Otter Fund and allows taxpayers to designate on their income tax returns that a specified amount in excess of their tax liability be transferred to the fund. Existing law requires money in that fund, upon appropriation by the Legislature, to be allocated to the Department of Fish and Wildlife for the purposes of establishing a sea otter fund to be used for sea otter conservation, and to the State Coastal Conservancy for competitive grants and contracts for research, projects, and programs related to the Federal Sea Otter Recovery Plan or improving the nearshore ocean ecosystem.

This bill would extend the operation of these provisions to January 1, 2021.

Existing law, until January 1, 2016, establishes the California Sea Otter Fund and allows taxpayers to designate on their income tax returns that a specified amount in excess of their tax liability be transferred to the fund. Existing law, on and after January 1, 2015, requires money in that fund, upon appropriation by the Legislature, to be allocated to the Department of Fish and Wildlife for the purposes of establishing a sea otter fund to be used for sea otter conservation, and to the State Coastal Conservancy for competitive grants and contracts for research, projects, and programs related to the Federal Sea Otter Recovery Plan or improving the nearshore ocean ecosystem.

This bill would extend the operation of these provisions to January 1, 2021.

Date of Hearing: July 8, 2015

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Jimmy Gomez, Chair

SBPCA Bill Id:SB 17

Author:(Monning) – As Introduced Ver:December 1, 2014

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill extends, from January 1, 2016 to January 1, 2021, the sunset date for the California Sea Otter Fund (Fund), a voluntary contribution fund on the Personal Income Tax return.

FISCAL EFFECT:

1) Minor and absorbable costs to the Department of Fish and Wildlife and State Coastal Conservancy to administer grant program; insignificant costs to the Franchise Tax Board.

2) Estimated GF revenue decreases of approximately $9,000 in each year the voluntary contribution fund remains on the personal income tax return.

COMMENTS:

1) Purpose. According to the author, reauthorization of the California Sea Otter Fund will ensure continued support for research to protect the keystone species. Supporters assert the Fund has been instrumental in supporting sea otter research, conservation, and education projects, all of which are critical for sea otter recovery. Sea Otter Awareness Week and educational outreach to schools in the Monterey Bay area have also been funded through the program.

2) Cuteness Overload. California's southern sea otters were thought to be extinct a century ago. A small population was discovered in 1938 near Big Sur, and the threatened species has recovered to between 2,000 and 3,000 otters since then. Fund donations have supported, among other things, scientific research into sea otter mortality and identifying diseases, parasites, and toxins derived from pollution that can lead to premature sea otter deaths.

3) Worthy Cause, Modest Support. With few exceptions, voluntary contribution funds remain on the personal income tax return until they are either repealed or fail to meet their minimum contribution amount, typically $250,000 and adjusted for inflation. If the Franchise Tax Board estimates a contribution fund is likely to fail to meet the minimum contribution amount, that fund is repealed effective January 1 of that calendar year.

The Fund's minimum contribution requirement for 2015 is $283,775, and through April the Fund received $228,661. From 2011-2013, the Fund collected between $308,000 and $360,000 per year.

Analysis Prepared by: Joel Tashjian / APPR. / (916) 319-2081

Date of Hearing: June 22, 2015

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Philip Ting, Chair

SBPCA Bill Id:SB 17

Author:(Monning) – As Introduced Ver:December 1, 2014

Majority vote. Fiscal committee.

SENATE VOTE: 35-2

SUBJECT: California Sea Otter Fund

SUMMARY: Extends, from January 1, 2016, to January 1, 2021, the sunset date for the statutory provisions authorizing the California Sea Otter Fund (Fund) as a voluntary contribution fund (VCF) on the Personal Income Tax (PIT) return.

EXISTING LAW:

1. Allows taxpayers to contribute to one or more of 18 VCFs on the 2014 PIT return.
   
   

2. Provides a specific sunset date for each VCF, except for the California Seniors Special Fund and the State Parks Protection Fund.
   
   

3. Requires each VCF to meet an annual minimum contribution amount to remain in effect, except for the California Firefighters' Memorial Fund, the California Peace Officer Memorial Foundation Fund, and the California Seniors Special Fund.
   
   

4. Provides that all money transferred to the Fund, upon appropriation by the Legislature, shall first be allocated to the Franchise Tax Board (FTB) and the State Controller for reimbursement of all costs incurred in administering the Fund. The remaining moneys are divided equally between the:
   
   

   1. Department of Fish and Wildlife to establish a sea otter fund used for sea otter conservation, including for increased investigation, prevention, and enforcement actions related to sea otter mortality, and for public outreach activities that encourage taxpayers to make contributions to the Fund; and,
      
      

   2. State Coastal Conservancy for competitive grants and contracts to public agencies and nonprofit organizations for research, science, protection, projects, or programs related to the Federal Sea Otter Recovery Plan or improving the nearshore ocean ecosystem, including program activities to reduce sea otter mortality, and for public outreach activities that encourage taxpayers to make contributions to the Fund.
      
      

5. Allows a deduction for any contribution made to the Fund.

FISCAL EFFECT: The FTB estimates that this bill would reduce General Fund revenues by $9,000 per year beginning in fiscal year 2016-17.¹ This estimate assumes that the Fund will meet its minimum contribution amount each year.

COMMENTS:

1. The author notes the following in support of this bill:

Given that the sea otter population remains in trouble, it is important to extend the tax check-off option on the state income tax form in order for Californians to be able to voluntarily assist in helping to protect this keystone species. The reauthorization of the California Sea Otter Fund will ensure that support for research to protect the sea otter will continue uninterrupted.

2. This bill is sponsored by Friends of the Sea Otter, which notes the following:

The California Sea Otter Fund has been instrumental in supporting sea otter research, conservation, and education projects that are critical for sea otter recovery. The money raised from the California Sea Otter Fund has supported a long-term study to determine the impacts of toxic chemicals and disease-carrying pollution on sea otters living along the developed areas of the California coast. While some of these answers are known, researchers were looking for a deeper understanding of the relationships between sea otters and their habitat. In addition the money from the Fund has led to a project on investigating the use of Elkhorn Slough by sea otters. Sea Otter Awareness Week and educational outreach programs to local schools in the Monterey Bay area have also been funded through the California Sea Otter Fund.

3. This bill is supported by Insurance Commissioner Dave Jones, who notes the following:

The California Sea Otter Fund was created in 2006 through Assembly Bill 2485, which was jointly authored by me and Secretary (then Assemblymember) John Laird, in order to study and protect the threatened population of sea otters in California which had significantly declined in the early 1990s [sic] due to hunting and the emergence of diseases, parasites, and toxicants that kill sea otters. Today, California's sea otter population is still one-fifth of its historic population and the fund is the primary source of funding for sea otter research and conservation efforts.

The Sea Otter tax fund check-off is the main source for all sea otter funding in California. The fund has raised more than $2.3 million in the past eight years enabling the Department of Fish and Wildlife and the California State Coastal Conservancy to study the threats sea otters face, promote awareness, and work on sea otter restoration.

4. Committee Staff Comments
   
   

   1. California's sea otters: California's southern sea otters (Enhydra lutris nereis) were thought to be extinct during the early 20^th century. In 1938, however, a small population was discovered near Big Sur. In 1977, the species was listed as threatened under the federal Endangered Species Act. The animals are also protected by the federal Marine Mammal Protection Act and have California's fully protected species status.

California's southern sea otter population gradually grew to roughly 2,000 animals, and has fluctuated between 2,000 and 3,000 since 1995. According to the Department of Fish and Wildlife, the population has plateaued and the animals are currently "stuck in recovery" largely due to the high death rate of prime-aged adults.

Fund donations have, among other things, supported scientific research that has discovered that a substantial portion of sea otter mortality results from diseases, parasites, and toxins. For example, research has shown that various types of pollution are contributing to the premature deaths of otters that should live longer and produce more pups.

2. Legislative history: The Fund first appeared on the 2006 PIT return. The original legislation provided for the Fund provisions' automatic repeal on January 1 of the fifth taxable year following the Fund's first appearance on the tax return. As such, the original Fund provisions were repealed by their own terms on January 1, 2011. AB 971 (Monning), Chapter 209, Statutes of 2011, then reauthorized the addition of the Fund checkoff to the PIT form beginning with the 2011 return.
   
   

In the last three years alone, the Fund has generated nearly $1 million. Specifically, the Fund received valid contributions of $351,037 in 2012; $307,544 in 2013; and $304,005 in 2014.

3. What would this bill do? As noted by the FTB, this bill would allow the Fund to remain on the PIT returns filed for taxable years 2016 through 2020, provided contributions meet the annual minimum contribution threshold.

The Fund's minimum contribution requirement for 2015 is $283,775, and the Fund has received a total of $228,661 in valid contributions through April of this year. The minimum contribution requirement is adjusted annually for inflation, with the annual inflation adjustment based on the percentage change in the California Consumer Price Index.

4. So many causes, so little space: There are countless worthy causes that would benefit from the inclusion of a VCF on the state's income tax returns. At the same time, space on the returns is limited. Thus, it could be argued that the current system for adding VCFs to the form is subjective and essentially rewards organizations that can convince the Legislature to include their fund on the form.

REGISTERED SUPPORT / OPPOSITION:

Support

Friends of the Sea Otter (Sponsor)

Defenders of Wildlife (Co-Sponsor)

California Association of Professional Scientists

EarthEcho International

Humane Society of the United States

Insurance Commissioner Dave Jones

Monterey Bay Aquarium

National Wildlife Federation

Natural Resources Defense Council

Ocean Conservancy

Oceana

Planning and Conservation League

Sierra Club California

WILDCOAST

Opposition

None on file

Analysis Prepared by: M. David Ruff / REV. & TAX. / (916) 319-2098

 THIRD READING  

Bill No: SB 17

Author: Monning (D), et al.

Introduced: 12/1/14

Vote: 21

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/8/15

AYES: Hertzberg, Nguyen, Bates, Beall, Hernandez, Lara, Pavley

SENATE APPROPRIATIONS COMMITTEE: 6-1, 4/20/15

AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza

NOES: Nielsen

SUBJECT: California Sea Otter Fund

SOURCE: Author

DIGEST: This bill extends the sunset date of the “California Sea Otter Fund” to January 1, 2021.

ANALYSIS:

Existing law:

1. Allows taxpayers to contribute money to voluntary contribution funds (VCFs) by checking a box on their state income tax returns. 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.

2. Requires that each VCF is individually added to the tax return by legislation. 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. 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.

3. Requires the Franchise Tax Board (FTB) to deposit the total of all contributions into the fund created as part of the VCF’s legislative authorization. For some VCFs, such as the Protect Our Coast and Ocean Fund, taxpayers’ contributions are allocated to a state agency for use in a state administered grant program. Other VCFs’ authorizing statutes direct administrative agencies to allocate donations to a private organization. For example, the Office of Emergency Services passes VCF funds to the American Red Cross. Other funds require the State Controller to send the funds directly to private organizations without passing through an administrative agency, such as the California Fire Foundation. The FTB, the Controller, and an administrative agency may deduct from the amount of donations each VCF receives for direct costs of administering a fund.

This bill extends the sunset date of the “California Sea Otter Fund” to January 1, 2021.

Background

There are currently 18 check-offs listed on the tax return form. The tax check-off program typically collects $4-5 million in annual contributions for all VCFs.

The California Sea Otter Fund check-off was initially established in 2006 (AB 2485, Jones and Laird, Chapter 296). The California Sea Otter Fund first appeared on the 2007 return, and is subject to a minimum contribution amount that is adjusted annually for inflation. In 2011, the Fund’s repeal date was extended from January 1, 2011, to January 1, 2016, (AB 971, Monning, Chapter 209).

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee, FTB estimates that this bill will result in an annual revenue loss of $9,000 (General Fund) beginning in 2016-17. Both FTB and the Controller’s Office will be reimbursed for related administrative costs.

SUPPORT: (Verified 4/22/15)

California Insurance Commissioner Dave Jones

Defenders of Wildlife

EarthEcho International

Friends of the Sea Otter

Midpeninsula Regional Open Space District

Monterey Bay Aquarium

National Wildlife Federation, California

Natural Resources Defense Council

Oceana

Oceana Conservancy

The Humane Society

WiLDCOAST

OPPOSITION: (Verified 4/22/15)

None received

ARGUMENTS IN SUPPORT: Supporters note that the California Sea Otter Fund supports researchers and managers in their efforts to study and protect the threatened population of sea otters in California, which were decimated by the early 1900s. Today, fewer than 3,000 sea otters exist along the state’s coastline. To date, the Fund has supported the advancement of a long-term study to identify impacts to sea otter health, including chemical and pathogen pollution that is prominent off the developed areas of the California Coast. This bill will continue to provide crucial funding to help scientists examine and understand causes of sea otter mortality, identify key factors limiting population growth and recovery, and work cooperatively and collaboratively with stakeholders to help mitigate and prevent environmental degradation and pollution of the near-shore marine ecosystem.

Prepared by: Myriam Bouaziz / GOV. & F. / (916) 651-4119

4/22/15 16:19:56

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SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular

SB 17 (Monning) - California Sea Otter Fund

This bill does not meet the criteria for referral to the Suspense File.

Bill Summary: AB 17 would extend the sunset date for the California Sea Otter Fund (Fund) for taxable years 2016 through 2020.

Fiscal Impact: The Franchise Tax Board (FTB) estimates that this bill would result in an annual revenue loss of $9,000 (General Fund) beginning in 2016-17. Both FTB and the State Controller’s Office would be reimbursed for related administrative costs.

Background: Current law allows taxpayers to contribute money to one or more of 18 voluntary contribution funds during the process of filing their state income tax return (tax check-off). These contributions are made from taxpayers' own resources, not from their tax liability, which is permitted on federal tax returns. Check-off amounts are deductible as charitable contributions on taxpayers' returns during the subsequent tax year. With some exceptions, each voluntary contribution fund has a sunset date and is required to meet a minimum contribution amount of $250,000, adjusted annually for inflation.

The California Sea Otter Fund support research to study and protect the threatened population of sea otters in California, which reportedly number less than 3,000. To date, the Fund has supported the advancement of a long-term study to identify impacts to sea otter health, including chemical and pathogen pollution that is prominent off the developed areas of the California coast. The Fund first appeared on the 2007 return, and its 2014 minimum contribution amount was $277,666. Contributions to the Fund have declined since 2011, but have exceeded $300,000 between 2011 and 2013.

Proposed Law: This bill would extend the California Sea Otter Fund check-off on the personal income tax form for an additional five years, through 2020.

Related Legislation: SB 971 (Monning, Chapter 209, Statutes of 2011) extended the repeal date of the Fund’s voluntary contribution check-off from January 1, 2011, to January 1, 2016.

Staff Comments: FTB data indicate that roughly one-half of taxpayers who contribute to the Fund itemize their deductions. The average tax rate for these taxpayers is about six percent, which produces the $9,000 annual revenue loss. In 2012, about 89,000 out of 15 million taxpayers (or less than one percent) utilized one or more of the 18 check-offs; aggregate contributions totaled $4.8 million.

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Robert M. Hertzberg, Chair

2015 - 2016 Regular

VOLUNTARY CONTRIBUTIONS: CALIFORNIA SEA OTTER FUND

Extends the sunset date of the “California Sea Otter Fund” to January 1, 2021.

Background and Existing Law

Existing state law allows taxpayers to contribute money to voluntary contribution funds (VCFs) by checking a box on their state income tax returns. 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 by legislation. 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. 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.

When a taxpayer contributes to VCFs, the Franchise Tax Board (FTB) deposits the total of all contributions into the fund created as part of the VCF’s legislative authorization. For some VCFs, such as the Protect Our Coast and Ocean Fund, taxpayers’ contributions are allocated to a state agency for use in a state administered grant program. Other VCFs’ authorizing statutes direct administrative agencies to allocate donations to a private organization. For example, the Office of Emergency Services passes VCF funds to the American Red Cross. Other funds require the State Controller to send the funds directly to private organizations without passing through an administrative agency, such as the California Fire Foundation. The FTB, the Controller, and an administrative agency may deduct from the amount of donations each VCFs receives for direct costs of administering a fund.

There are currently 18 check-offs listed on the tax return form. The tax check-off program typically collects $4-5 million in annual contributions for all VCFs. The following table provides information on the current tax check-offs.

The California Sea Otter Fund check-off was initially established in 2006 (AB 2485, Jones and Laird). The California Sea Otter Fund first appeared on the 2007 return, and is subject to a minimum contribution amount that is adjusted annually for inflation. In 2011 the Fund’s repeal date was extended from January 1, 2011, to January 1, 2016, (AB 971, Monning). This bill seeks to extend the repeal date once more.

Proposed Law

Senate Bill 17 extends, from January 1, 2016 to January 1, 2021, the repeal date for the California Sea Otter Fund tax check-off on the income tax form.

State Revenue Impact

FTB estimates revenue losses of $9,000 in (FY) 2016-17, $9,000 in 2017-18, and $9,000 in 2018-19. The estimate assumes that the fund will meet the minimum contribution amount each year.

Comments

1. Purpose of the bill. The California Sea Otter Fund supports researchers and managers in their efforts to study and protect the threatened population of sea otters in California, which were decimated by the early 1900’s. Today, fewer than 3,000 sea otters exist along the state’s coastline. To date, the Fund has supported the advancement of a long-term study to identify impacts to sea otter health, including chemical and pathogen pollution that is prominent off the developed areas of the California Coast. This bill will continue to provide crucial funding to help scientists examine and understand causes of sea otter mortality, identify key factors limiting population growth and recovery, and work cooperatively and collaboratively with stakeholders to help mitigate and prevent environmental degradation and pollution of the near-shore marine ecosystem.

2. Is there a better way? The current tax check-off program generates a relatively small share of statewide contributions to charitable causes. In 2008, Californians donated more than $17 billion to charities. However, less than 1% of Californians use the tax check-off program to make donations to charitable organizations. FTB reports that in 2012, 89,335 out of 15 million taxpayers contributed a total of $4.8 million to 18 check-offs. Last year SB 1207 (Wolk) attempted to address this issue and help grow charitable giving by establishing the California Voluntary Contribution Program to promote charitable giving and collect donations. This would have allowed many more charities to participate in the program, would have screened potential participants before adding them onto the form, and eliminated the need for each organization to go through the Legislative process. Under SB 1207, charities would instead apply to the office of California Volunteers for placement on the income tax form. SB 1207 (Wolk) was held on suspense in Assembly Appropriations.

3. Bills, bills, bills. Currently, tax check-offs must be added by the Legislature. In 2008, 11 VCFs appeared on the personal income tax return. Today, the return contains 18. With legislation introduced every year to add new VCFs, there is little reason to expect this number to stop growing. The growing number results in significant costs to the Franchise Tax Board (FTB). It is estimated that FTB can only handle 12-15 more check-offs before it has to redesign its information technology system, at a cost of $800,000 to $1 million.

Support and Opposition

(4/2/15)

Support: California Insurance Commissioner Dave Jones; Defenders of Wildlife; EarthEcho International; Friends of the Sea Otter; The Humane Society; Monterey Bay Aquarium; National Wildlife Federation, California; Natural Resources Defense Council; Oceana; Oceana Conservancy; WiLDCOAST.

Opposition: Unknown.

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