Millions Donated at Tax Time Don't Reach Their Target

Tuesday, September 01, 2015

Californians have generously donated $35 million to charities over the past decade using a check-off on their tax return. Unfortunately, $10 million of that money never made it to the intended recipients, according to a review of documents by the Associated Press.

“This is just embarrassing. It's unacceptable,” state Senator Bob Hertzberg told the AP. The chairman of the Senate Governance and Finance committee said he was “going to jump on it.”

The news organization looked at records for 29 funds eligible to be chosen on the forms by taxpayers. A dozen of them used less than half the money available. Hundreds of thousands of dollars in additional money ended up being returned to state coffers.

California now has the nation’s largest voluntary tax contribution program, with 18 funds currently listed on the state Franchise Tax Board (FTB) website out of 36 that have appeared on tax forms over the years.

The lowlights of the AP investigation begin with the California Military Family Relief Fund (pdf), established by the Legislature in 2004 to assist dependents of National Guard troops who are deployed overseas. The check-off raised $1.5 million, of which $1.2 million went unspent. Lawmakers transferred the money to another military fund in January to avoid it ending up in the General Fund upon expiration of the family relief fund’s authorization.

None of the $235,000 collected for California Colorectal Cancer Prevention Fund was spent on cancer. A third of the $800,000 donated to the California Asthma and Lung Disease Research Fund (pdf) wasn’t spent and defaulted back to the General Fund. $88,000 raised to help disadvantaged youth develop by teaching them leadership skills and giving them scholarships was deemed too insignificant to allocate and ended up in the state coffers.

Folks who donated $635,000 over two years to the School Supplies for Homeless Children Fund still might have their money spent on the purpose they envisioned, but for now it’s been transferred to the Department of Social Services for distribution there. Analysts calculated that it would have cost $150,000 just to distribute the money otherwise.

California isn’t the only state struggling to spend charitable money gathered at tax time. New Yorkers have contributed more than $51 million (pdf) the past three decades to eight check-off funds, but $14.6 million remained unspent in six of them, according to a 2014 report by the state comptroller. The other two, the Conservation Fund and the World Trade Center Memorial Fund, are excluded for technical reasons. The Conservation Fund is by far the largest, receiving $29.7 million. 

There is no rule in California about which organizations get a spot on tax forms from lawmakers. There is also not much oversight in determining which charities can participate. That is left to a free-for-all in the Legislature, where charitable interests vie for favor.

Legislation introduced in February 2014 by state Senator Lois Wolk to centralize control of the tax check-off process under the office of California Volunteers passed unanimously in the Senate but couldn’t get out of committee in the Assembly.

–Ken Broder


To Learn More:

Chairman Promises Review of Unspent Charity (by Fenit Nirappil, Associated Press)

New York’s Tax Check-off Funds: Good Intentions on Hold (New York State Comptroller) (pdf)

Check-off Programs See Strong Growth (Federation of Tax Administrators)

California Tax Donations Lost in Bureaucracy (by Fenit Nirappil, Associated Press)

A Look at Some of the Funds Receiving Tax Checkoff Donations (Associated Press)

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