California lawmaker proposes tax break on veterinary bills

AB 942 goes to hearing Monday

March 23, 2017 (published)
By Edie Lau

Photo courtesy of the Office of Assemblyman Devon Mathis
California lawmaker Devon Mathis and sons play with Gypsy, one of two family dogs. Mathis advocates giving cat and dog owners a state income-tax credit to offset veterinary expenses.

Dog and cat owners in California would be eligible for state income-tax credits of up to $2,000 a year on veterinary medical expenses under legislation scheduled for a public hearing Monday.

AB 942 is sponsored by Assemblyman Devon Mathis, a Republican from Visalia in his second term as a state lawmaker. Mathis described himself as coming from an “animal-lover home” that includes two dogs and two cats. He said the bill was motivated by his desire to help people by supporting care for their “furry family members.”

If it passes, California would be the first jurisdiction in the country to grant a tax break for veterinary expenses, he said.

“We have so many programs out there to help with pet adoption, but once you adopt the pet into the family, what’s there to help you take care of it?” Mathis said in an interview with the VIN News Service. “Everyone I know knows a story of a pet, a cat or a dog, something happens to them, and families get put into these situations where they have to make tough decisions."

The choice can come down to either paying for treatment or euthanasia. "Veterinary costs — no offense to veterinarians out there — they’re very expensive,” he said.

The legislation would allow taxpayers to claim income-tax credits on 50 percent of their qualified veterinary bills up to $2,000 per year. In other words, if a dog or cat owner amassed $4,000 in eligible expenses in a year, she could file for the maximum $2,000 credit. If the taxpayer didn’t owe that much in income tax, she could receive a credit on future taxes.

The bill defines “qualified veterinary costs” as those incurred for medical-related expenses paid to a licensed veterinarian. Care provided by lay practitioners would be ineligible. Expenses paid by pet insurance also would not qualify.

Mathis said the bill specifies that the care be provided by a licensed veterinarian in order to reduce “confusion down the road.” He said, “In rural areas where I live, a lot of people will get vaccinations from feed stores and things like that.” As written, the bill precludes tax credits for such purchases and services provided by someone other than a licensed veterinarian.

In California, 6.9 million households include pets, or about 53 percent of households, according to the 2012 edition of U.S. Pet Ownership & Demographics Sourcebook, published by the American Veterinary Medical Association. Not every pet is a cat or dog, of course, but they are the most popular.

What the proposed tax credit would cost the state won't be calculated until the bill is further along in the legislative process, Mathis said. AB 942 is before the Assembly Revenue and Taxation Committee. If it passes out of that committee, Mathis anticipates that it will move to the Committee on Appropriations. “That’s when the Department of Finance usually weighs in” with a cost estimate, he said.

Whether other members of the Legislature and the governor perceive the state as being able to afford the tax credit is an open question. To date, the bill has no co-sponsors, and Gov. Jerry Brown in January predicted that the state will face a budget deficit of nearly $2 billion unless changes are made in the coming fiscal year. A subsequent report from the Legislative Analyst’s Office suggested that the governor’s assessment, based largely on a projection of revenues from personal income tax, was overly pessimistic, but it nevertheless encouraged lawmakers to “plan for a high level of uncertainty,” especially in light of new federal actions and policy.

Asked about the prospect for enacting a new tax credit in this environment, Mathis said, “With our furry four-legged family members, you hope people have their hearts in the right place and are not worried about nickel-and-diming everything.”

Moreover, he said, money that doesn’t go directly into the state treasury will not be lost: “Say you have several dogs, and you apply for the tax credit. What are you going to do with that money? You’re going to spend it on your pet or something else. It’s going to go right back into the economy.”

According to Mathis, the bill is opposed by the California Tax Reform Association; and favored by the California Veterinary Medical Association, the California Animal Control Directors Association, the Humane Society of the United States, San Diego Humane Society, San Francisco ASPCA and the No Kill Advocacy Center.

Another supporter is Steven Feldman, executive director of the Human Animal Bond Research Institute, which was established in 2010 by the American Pet Products Association, Zoetis and Petco. HABRI funds and publicizes research on the human-animal bond and the beneficial role of companion animals in society.

“Pet ownership is good for human health, so anything we can do to make sure that pet ownership is affordable and that pets are healthy [is good],” Feldman said. “Healthy pets contribute to the human-animal bond, and the human-animal bond makes us healthy, so it’s all connected.”

The California proposal is not the first legislative attempt to grant tax breaks for pet health care. In 2009, a bill in Congress dubbed the Humanity and Pets Partnered through the Years (HAPPY) Act would have allowed pet owners across the country to deduct up to $3,500 in veterinary expenses per year. The bill did not pass.

Currently in New York, bill S3209, would give state taxpayers a personal income-tax credit for uncompensated veterinary care and medication expenses for a companion animal that exceed 7.5 percent of the filer’s adjusted gross income (AGI).

Expenses that top 7.5 percent of a taxpayer’s AGI would be on the steep side. According to data posted by the state Office of Information and Technology Services, the average AGI among all New York tax returns in 2014 was $74,164. So the average filer’s veterinary expenses would have to exceed $5,562.30 before the tax credit would become available.

At the federal level, a few tax allowances already exist for veterinary expenses and other costs of keeping an animal, but generally they apply only to working animals such as guide dogs or workplace guard dogs. An article published by outlines several pet-related tax write-offs.

The California bill would give the tax credit only until Jan. 1, 2023. Mathis said sunset clauses are common in new legislation. “We do that with a lot of new programs,” he said. “That way, we can look and see if the program is working; if it’s done what it’s intended to do. We can always ask to remove the sunset [later].”

In advocating for the tax credit, Mathis pointed out that shelter animals are California's official state pet — a legislative resolution in 2015 declared them as such — but the state doesn't otherwise support family pets. “Once you adopt an animal out of the shelter, then what? The state hasn’t done anything to help people once they go and rescue an animal,” he said.

The credit is limited to veterinary care for cats and dogs, a point that the lawmaker, who also owns horses, has taken some gibes on. “I have friends giving me a hard time: ‘What about our hooven ones?’ ” Mathis said.

His reply: “It’s California and I’m a Republican so … let’s start small and see where we go with this.”

Update: The bill passed the Assembly Revenue and Taxation Committee with amendments that would have allowed the credit only in the tax year in which expenses were incurred, and limited qualified expenses to those that are “medically necessary." However, the legislation then failed to pass the Assembly Appropriations Committee.

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