Check-Offs for Charity

How does a special fund get its spot on your state income-tax form?

On this year’s California state tax form, individuals can for the first time choose to donate money to a “sea otter fund.” Early filers have already donated $78,042 to the marine mammal. Similar check-off programs in South Carolina already allow taxpayers to give to the War Between the States Heritage Trust Fund; in Oklahoma, residents get to chip in for the Junior Livestock Auction Scholarship Fund. How’d these causes get their premium placement?

Organizations have to lobby state legislatures to pass bills. This means finding a sponsor, drafting a law with the sponsor, and then building support for the legislation. Any fund that makes it onto the tax form is likely to get a big pile of cash, especially in big states like California. But competition can be fierce: States can cap the number of funds that get check-offs because additional funds reduce the amount each cause raises, and also because they have limited space on their tax forms. (Oregon plans to install an application process for all would-be check-offs that requires each group to collect 10,000 signatures and meet financial requirements.)

California’s sea otter fund was an unusual case. Instead of a charity turning to legislators for support, it was a legislator who decided on his own to help protect the creature—after a   trip to the Monterey Bay Aquarium with his 5-year-old son. The process wasn’t without controversy, though. Lawmakers debated whether cuteness was enough to justify a tax check-off.

Some states are particularly friendly to charities raising funds through the state tax form—California lists more than a dozen causes and Virginia more than two dozen. But 15 states list four or fewer charities. On the other hand, Indiana and West Virginia each only have one fund. Some states require funds to raise a minimum amount of money every year in order to stay on the tax form. (In Virginia, you have to make at least $10,000 each year over three years; a California charity must earn more than $250,000 in its second year.) Sometimes just the opposite happens. In 2000, Michigan removed the Michigan Children’s Trust Fund and the Nongame Fish and Wildlife Trust Fund after the groups had raised $14.7 million and $9.4 million, respectively, over the previous two decades.

Charity check-off boxes at the state level got their start in 1977 when Colorado, following the federal check-off for donations to presidential campaign election funds, established a program for wildlife preservation. As of 2002, 35 states used check-offs to protect nongame animals. (That year, taxpayers distributed $32.8 million across 210 funds in the country.) Political campaigns, breast cancer, and child abuse are also check-off staples.

In recent years, funds for military families have come into vogue, making appearances on tax forms in Rhode Island, Arkansas, Colorado, Connecticut, and other states. New York Gov. George Pataki added a World Trade Center memorial fund to New York’s list of check-offs in 2006; last year, the fund raised $194,000. Similarly, Oklahoma has an Oklahoma City Bombing memorial fund. Funds to support Olympic teams, on the other hand, have fallen out of favor and lost spots in Colorado and Pennsylvania.

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Explainer thanks Colin Grinnell of the Revenue and Taxation Committee of the California State Senate, John Paul Jones of the Oregon Department of Revenue, and Ralph Tower of Wake Forest University.