return to research and tax rates section > return to other surveys

FTA Article on State Check-Off Programs (March, 2001)

Political/Wildlife/Child Check-Off Programs
Various Types of Check-Off Programs

Check-off programs, or programs in which a taxpayer "checks off" a contribution to state programs on the state personal income tax form, have ballooned in scope and popularity over the last decade. However, over the last two years (FTA conducts its survey every two years) the number of check-off boxes is holding fairly steady. On 2000 state income tax returns to be processed in 2001, the survey identified 179 check-off programs available to taxpayers in 41 states and the District of Columbia. Every state with a broad-based income tax has at least one check-off program. This an increased of only 2 programs from the 1998 returns and an increase from 103 in 1989, the first year FTA began tracking such programs.

A good economy helped to increase the revenues reaped from check-off programs, continuing an upward trend first seen in 1998. Taxpayers most recently contributed $27.3 million to the various programs funded by the check-offs. This is a $1.6 million jump from the 1998 survey, though lower than the $2.3 million increase from the 1996 to 1998 survey.

The use of check-off boxes on income tax returns to fund charitable organizations began in 1972, when the federal government allowed taxpayers to designate $1 of their liability to a special presidential campaign fund. States soon followed with their own check-off programs, as Colorado implemented its wildlife check-off program in 1977. However, these state check-off programs differ from the federal program in two ways. First, states generally allow more options, permitting donations to several charitable and social programs. In some states, taxpayers have an extensive list of possible programs to which they can contribute. California provides a list of 14 different programs for taxpayers to choose among. Alabama and Virginia provide a choice of 11 programs. Only four states (and the District) have a single check-off.

Second, most state check-offs reduce the taxpayer’s refund rather than redirecting a part of the liability. With the exception of political campaign funds, all state check-offs are donations from a taxpayer’s refund. Many states limit the donation to the size of the refund, while a few states permit taxpayers to increase their payment to cover check-off donations. On the other hand, the federal check-off and most state political check-offs make the contributions from the taxpayer’s liability. These programs direct the government how to spend a portion of the tax dollars and do not affect the refund or the amount due on the return.

Types of Check-offs. As the accompanying tables illustrate, there are a wide variety of programs funded through state personal income tax check-offs. The most common check-off provides funding to preserve nongame wildlife, with 36 states including this program on their 2000 individual income tax forms. Only six jurisdictions with check-off programs — Arkansas, Hawaii, Maryland, Missouri, West Virginia, and the District of Columbia — do not have nongame wildlife check-offs.

Twenty-one states have check-off programs to contribute to political campaigns, similar to the federal check-off. North Carolina has two political check-off programs. One program type is identical to the federal one in which taxpayers direct $1 ($2 for joint returns) of their tax payments to a political campaign fund. The other program allows taxpayers to donate a portion of the refund.

Another common type of check-off program is for child abuse and neglect prevention, available in 21 states. Eight states have check-off programs to fund state Olympic committees.

There are a number of other programs that benefit from state income tax check-offs. Some examples include:

o Six states have programs to benefit senior citizens, including Alabama, California (2 programs), Louisiana, Missouri, South Carolina, and Virginia.
o Five states have programs for combating homelessness, including Colorado, Delaware, Illinois, Utah, and Virginia.
o A number of programs are aimed at research and prevention for diseases. They include Alzheimer’s Disease in California, Idaho, and Oregon; breast cancer in California, Connecticut, Delaware, Illinois, New Jersey, New York, Oklahoma, and Pennsylvania; and organ transplants/gift of life in Connecticut, Delaware, Massachusetts, Pennsylvania, Rhode Island, South Carolina, and Utah.

Revenues. In 2000, total taxpayer donations to check-off programs reached $27.3 million,, up from $25.7 million recorded in the 1998 survey.

California collected the most revenue, with donations of $3.3 million to a whopping 14 programs. This was followed by Michigan, contributing $2.6 million to three programs, and just under $2 million contributed to two programs in Minnesota. On the other end of the spectrum, Louisiana taxpayers donated only $18,752 to three programs. North Dakota reported donations of $29,160 to two programs, while Arkansas generated $43,446.

Among the individual state programs, Michigan generated $1.18 million for its political check-off, followed by the Minnesota political check-off generating $1.05 million. Maryland was next, contributing $1.02 million to its Chesapeake Bay Fund (up from $875,363 in 1998). At the shallow end, New Mexico rang up only $1,660 for its political fund.

The table presents the average contributions and percentage participation for the three major types of check-off programs. Political campaign contributions have the highest participation rate with a nationwide average of 4.4 percent; they also have the lowest overall average contribution rate of $4.71 (up from $2.20 in the 1998 survey). This reflects two points differentiating political check-offs from other charitable check-offs. First, since most political contributions are taken from a taxpayer’s liability, (not affecting the refund amount), more taxpayers would be expected to participate. Second, the amount of campaign check-offs is often limited to $1 or $2 per return, while other charitable check-offs are limited only by the size of the refund, if at all.

With contributions averaging $10.37 per taxpayer, nongame wildlife check-offs were the most productive programs in 2000. Wildlife check-offs collected $7.2 million from 736,000 returns. Nineteen states reported averaging more than $10 per contributor and three states had participation rates above 2 percent of the taxpayers. The child abuse check-off was almost as productive, with donations averaging $10.32 per contributor. The participation rate for child abuse funds averaged 0.9 percent.

The Arizona Aid to Education Fund check-off reported the highest average contribution rate of $40.10 per contributor, followed by the Arkansas Disaster Relief Fund at $34.63 per contributor. The Maryland Chesapeake Bay Fund, a much more expansive program (2 percent participation rate), was next with $20.49 per contributor. The highest participation rate for a nonpolitical check-off was Minnesota’s nongame wildlife program with 3 percent of taxpayers making a contribution.

Removing Check-offs. The continued growth in state income tax check-off programs leads to questions of how the check-offs can be removed. Good policy would dictate that these programs should be reviewed periodically to determine whether they have met the established goals. However, the survey indicates that only nine states have a procedure to remove old check-off programs. Check-offs in most states are created by the legislature and require new legislation to remove them.

The nine states requiring minimum amounts that must be generated for some check-off programs to remain on the tax return are California, Colorado (10 percent of total contributions), Idaho, Illinois, Louisiana, Montana, Oregon, Utah, and the District of Columbia. Oregon has a special commission that determines how many check-off programs can be on the tax form.

California and Virginia include expiration provisions in the legislation authorizing some of their check-off programs. Also, Michigan’s two check-offs have a maximum amount allowable for the trust fund, which will eliminate the check-off if the trust fund exceeds $20 million.

Administration. State income tax check-offs have proven to be popular ways of funding causes. However, they create some administrative problems for state tax agencies. Indeed, the growth in check-offs has led to crowding problems on some state forms. Some states have even had to create a separate form just for check-offs. This adds to their costs of processing tax returns and can lead to a greater number of errors.