Assembly Standing Committee on Revenue and Taxation

Ready? Okay. Good afternoon, everybody, and welcome to this hearing of the Assembly Committee on Revenue and Taxation. As a reminder to those in the room and watching remotely, please make sure to submit your position letters at least one week prior to have your letter reflected in the Bill's analysis.

Additionally, pursuant to our Committee rules, Bills with a fiscal impact of plus or minus 150,000 will be referred to our suspense file, which will be taken up at a later hearing. Finally, file item number three, SJR 14 by Senator Becker, has been pulled by the author. It looks like we have a quorum. Miss Highland, Please call the roll.

[Roll Call]

Unfortunately, you can keep sitting here, but we want to let you go free until the Senators decide to grace us with their presence. Alright. And with that, we are on recess.

All right, we are ready to go back in session, and we'll move to the first item on our agenda, which is File Item One: SB 2030 by Senator Seyarto. 230. SB 230.

But it is not. It's 3:00.

And you may begin whenever you're ready.

Well, thank you very much, Madam Chair. I'm here to present SB 230. This bill, in partial conformity with federal tax law, would allow income-eligible taxpayers to claim a tax deduction equal to the amount the taxpayer contributes to an HSA, which is a health savings account.

The bill limits the deduction to individuals and households at or below estimated median incomes. I also want to thank the committee for their helpful feedback with some of the particulars of the language.

Should this bill move forward, and I hope it does, I plan on introducing amendments that would make 2025 the first tax year for implementation and would ensure an appropriate penalty for non-qualified distributions. I also want to clarify an important issue relating to the purpose of this bill.

It is true that in order to open an HSA, the account owner must be enrolled in a high deductible health plan. But let me be clear: the bill does not promote or incentivize individuals to enroll in high deductible health care plans. It gives relief specifically to lower income individuals who already have these high deductible health plans because that's all they can afford, because high deductibles mean lower premiums, and so that's what they wind up with, and this helps them get relief from that.

To this point, California has not conformed to federal tax law relating to HSAs because of equity concerns around higher income individuals, using these accounts as a loophole to shield their taxable income.

The income limits on this bill address this concern and make sure that the optional tax relief is available to sub-median income individuals should they decide that it meets their needs and fits their circumstances. And when the time comes, I would appreciate an aye vote.

Thank you very much. Do you have any witnesses in support?

I did not bring any witnesses today.

All right. And then we have witnesses in the room in support.

Thank you, Madam Chair. Tim Madden, representing the California Chapter of the American College of Emergency Physicians. We're in support, and in listening to emergency physicians, we are seeing as a center outline more people moving towards those high deductible plans, and to the extent that this tax break would incentivize them to then put some money away to help them pay those portions that are covered is a good thing. For those reasons, we respectfully ask for your aye vote.

Thank you.

Faith Borges, on behalf of California Agents and Health Insurance Professionals, also in support for the reason stated.

Thank you.

Good afternoon, Chair and Members. Jennifer Tannehill with Aaron Read and Associates, on behalf of the California Society of Enrolled Agents, also in support. Thanks.

Thank you. Do we have any witnesses in opposition? Afternoon.

Good afternoon, Chair and Members. Diana Douglas with Health Access California, the statewide health care consumer advocacy coalition. I am here in opposition to SB 230. We do appreciate that the author had previously taken some of our concerns and amended the language of the bill to add income limits to the tax deduction.

However, Health Access California remains opposed to this bill. Health savings accounts themselves do not provide health care coverage, but instead are linked to high deductible health plans. These types of health plans are unaffordable as consumers will have to pay potentially thousands of dollars in deductible costs before their plan covers anything.

In 2023, the minimum deductible for a high deductible health plan was 1,500, and many ranged up to 4,000 dollars. Health savings accounts are linked to these plans with the original and misguided intention that it would increase cost consciousness within health coverage.

Instead, HSAs have only acted as a band-aid, while health care costs and annual deductibles keep increasing annually. Providing this deduction does not address systemic affordability issues and instead only encourages reliance on these low-value plans that can really have catastrophic financial impacts on enrollees who need care, especially at the lower income levels.

Additionally, SB 250 is projected to cost California's General Fund in lost tax revenue during a difficult budget year when the state is already facing potential cuts to our health care safety net programs that are designed to serve exactly these people. Policies like these that bolster HSAs only serve to support high-value or high-cost, low-value health care options. As such, I thank you for your time and ask for your no vote on this bill.

Thank you. Do we have any other witnesses in opposition?

Good afternoon, Chair and Members. Beth Malinowski with SEIU California, on behalf of our 700,000 members and their families, here in opposition today.

Good afternoon, Madam Chair and Members. Bryant Miramontes with AFSCME California, in respectful opposition.

Do we have any questions or comments from the committee? I just have one question. Usually we--you do conformity to decrease confusion. Do you think that--obviously, we want to have income limits here, and I appreciate you addressing that in your bill--do you think that, though, these income limits that are different than what's happening, then the income limits at the federal level will cause additional confusion and people won't figure it out until they realize they're not eligible?

Well, most of the people that are figuring that out enroll the services of tax people that know these laws, and they're kept up to date on them yearly, and so that would be an issue that they'd have to take up with a tax person if they missed it.

But I doubt that they would because the enrolled agents--I'm married to one--are well aware of the new laws that come out, especially as they pertain to some of their lower income clients and their needs to try and find as many tax deductions as they can so that they can have affordable health care for them or at least have health care at all, because a lot of times their option is not to have it at all, and we don't want to leave them with that option.

All right. Well, thank you very much, Senator Seyarto. Would you like to close?

No, I think that can be my closing. I've already addressed the issues related to the concerns that the opponents have said. You know, bottom line is when people can barely afford premiums, they go to the higher health care deduction type of plans, and those are federally, you know, those are legal federally. We're not going to change that in this bill, but certainly we can help people that are kind of mired in having to do that, having to make those premiums by giving them this option to help reduce their taxes a little.

All right, very good. And without objection, this bill is going to be referred to our suspense file. Thank you. Next up, we have file item two, SB 1172, by Senator Grove. Whenever you are ready.

Thank you, Madam Chair. I appreciate the opportunity to present SB 1172, which is sponsored by the American Cancer Society Cancer Action Network and the University of California. Donations to the California Breast Cancer Research Fund and California Cancer Research Fund can be used as a tax donation checkoff list on your taxes. The California Breast Cancer Research Fund supports new approaches to diagnose, treat, and prevent breast cancer, including investigating the cancer causes of breast cancer and improving support networks for underserved Californians.

The California Cancer Research Fund supports researching relating causes of detection, prevention of cancer, and including expanding community based education for cancer and providing prevention and awareness activities in the communities. Both funds are currently expected to expire in 2025. SB 1172 would extend the date for this cancer checkoff for your income taxes until 2032. With me today to testify is the sponsor of the bill, Jennifer Chase with the University of California.

Good afternoon, Chair and Members. Jen Chase on behalf of the University of California. UC is proud to co-sponsor SB 1172 with the American Cancer Society Cancer Action Network. The UC administers the California Breast Cancer Research Fund and the California Cancer Research Fund.

Each fund provides approximately $450,000 annually, and the funding is distributed through a competitive grant process to support high impact research. These funds have supported investigations on topics like identifying and eliminating environmental factors that may cause breast cancer and developing a robotic, steerable surgical tool to remove brain tumors. SB 1172 will extend these important tax checkout programs and ensure that critical funding to support breast cancer and cancer research remains in place. We respectfully ask for your aye vote. Thanks.

Thank you. Do we have any other witnesses in support? Witnesses in opposition? Comments from the committee? All right, we have a motion. All right, a motion and a second. Would you like to close?

Thank you, Madam Chair and Members. It's just an option for people to donate or get a tax deduction off their taxes for giving money to this wonderful organization. Respectfully ask for an aye vote.

All right. Thank you very much. And we had a motion by Assembly Member Ta and a second by Assembly Member Bains. And the motion is do pass to Appropriations. Ms. Highland, please call the roll.

On SB 1172, the motion is do pass to Appropriations. [Roll Call] That bill passes.

Thank you.

That bill is out, six to zero. All right, why don't we give... Who? Okay, so this is... Mr. Patterson will not be returning. All right, and with that, our meeting is adjourned.