BILL ANALYSIS Ó
AB 2441
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Date of Hearing: May 2, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2441 (Williams) - As Amended: April 19, 2012
Policy Committee: Revenue and
Taxation Vote: 5-2
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill imposes a tax, for the privilege of operating a
sexually oriented business, at the rate of $10 per customer
entry. Specifically, this bill:
1)Provides that the taxes imposed by this measure are intended
to ameliorate the negative secondary effects associated with
the combination of "sexually oriented businesses" and alcohol
so as to promote the health, safety, and welfare of
California's citizens.
2)Defines a "sexually oriented business" as a nightclub, bar,
restaurant, or similar commercial enterprise that provides,
for an audience of two or more individuals, live nude
entertainment or live nude performances and authorizes
on-premises consumption of alcoholic beverages, regardless of
whether the consumption of alcoholic beverages is under a
license or permit issued under the Alcoholic Beverage Control
Act.
3)Prohibits sexually oriented businesses from requiring the tax
to be reimbursed by employees or independent contractors.
Businesses may, however, require the tax to be reimbursed by
customers.
4)Requires the BOE to transmit all payments, less refunds and
their administrative costs, to the Treasurer for deposit in a
newly created Sexual Assault Treatment and Prevention Fund.
5)Provides that moneys in the Sexual Assault Treatment and
Prevention Fund shall, upon legislative appropriation, be used
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by the California Emergency Management Agency (CalEMA) to
award grants for the prevention and treatment of sexual
assault.
FISCAL EFFECT
1)According to BOE there are approximately 80 sexually oriented
businesses that would qualify under the law. BOE estimates
that approximately $35 million would be raised by imposition
of the tax. However, since the patron is likely to face
higher costs, attendance is likely to decline somewhat,
leading to reduced revenues.
2)BOE administration costs are likely to be approximately $1
million annually to initiate the program. Costs to decline
significantly in subsequent years to approximately $500,000.
These will be paid from the proceeds of the tax.
3)CalEMA administration costs will be less than $500,000
annually to initiate the program. Costs will decline in
subsequent years to approximately $250,000. These will be
reimbursed from the Sexual Assault Treatment and Prevention
Fund.
4)Potential General Fund savings to the extent that expenditures
from the Sexual Assault Treatment and Prevention Fund
alleviate pressures on various health and public safety
programs currently supported by the General Fund.
5)Significant litigation costs are likely given the experience
with other measures aimed at adult or sexually oriented
businesses.
6)To the extent this bill increases the state's obligation under
Proposition 98, there could be additional costs to the General
Fund.
COMMENTS
1)Purpose . The author notes sexual assault continues to be a
serious problem in our state and requires financial resources
to combat. The author cites the National Intimate Partner and
Sexual Violence Survey (2010) conducted by the Centers for
Disease Control and Prevention, in which an estimated 2
million people in the state of California are survivors of
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rape, and more than 8,600,000 are survivors of sexual violence
other than rape. The author argues it is clear there are far
more victims of sexual assault than we can currently help with
existing funding.
The author argues that AB 2441 establishes a new funding
stream to support services for these victims. The author also
states the bill provides the strip club the discretion to
determine the manner in which they derive the money required
to pay the tax; but for the exception that the tax may not be
passed on to the entertainer.
2)Support . Supporters, including entities that provide services
to victims of sexual assault, claim the California State
Budget insufficiently supports sexual violence programs, but
in the past year, about 30,000 Californians accessed crisis
intervention services. Supporters argue given the small
amount of funding provided by the state, rape crisis centers
cannot meet the needs of all of the survivors in the state.
3)Opposition . Opponents, including the Howard Jarvis Taxpayers
Association and the Association of Club Executives state no
reasonable person would deny the need to fund programs which
improve services to help victims of crime heal and restore
their lives, however, the approach (and implied link between
violence and adult entertainment) within AB 2441 is on its
face fatally flawed. Opponents argue there is no evidence to
support even the suggestion that adult entertainment causes
crimes against women merely due to the presence of nudity, as
AB 2441 suggests. In fact, to the contrary, numerous
psychological treatments of sexual offenders involves
increased exposure to nudity (primarily films), to desensitize
the offender to sexual issues.
4)Affected taxpayers. This bill affects only a portion of
sexually oriented businesses featuring nude entertainment, as
defined. Those businesses that provide nude entertainment but
do not sell liquor or have a liquor license are not affected
by the legislation. The bill includes businesses that
authorize on-premises consumption of alcoholic beverages,
without having a liquor license. However, such activity is
banned under the business and professions code and any
business that allows such activity is deemed a public
nuisance.
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BOE stated it is not entirely clear which businesses would be
subject to the tax. As an example, if a business occasionally
hosts an event that meets the definition of a sexually
oriented business, such as a club hosting a wet t-shirt
contest, are they subject to the proposed tax? The
opposition argues the definition could include many locations
where women are wearing a dress with a plunging neckline, such
as worn at the Oscars ceremony.
5)Legal issues. Legal precedent appears to draw a distinction
between obscenity, which receives no First Amendment
protection, and more legitimate forms of adult entertainment,
which are protected. The U.S. Supreme Court noted that nude
dancing is expressive conduct, although the court found that
it fell "within the outer ambit of the First Amendment's
protection."
In Combs v. Texas Entertainment Association, Inc. (2011) 347
S.W.3d 277, the Texas Supreme Court reviewed a state statute
requiring any business that offers live nude entertainment and
allows the consumption of alcohol on its premises to remit a
$5 fee for each customer admitted. Specifically, the court
was asked to decide whether the statute violated the right to
freedom of speech guaranteed by the First Amendment. The
Texas Supreme Court upheld the fee as they found it was not a
tax on unpopular speech but a restriction on combining nude
dancing, which unquestionably has secondary effects, with the
aggravating influence of alcohol consumption. Litigation on
other issues continues in Texas.
6)Related legislation .
a) AB 2914 (Calderon, 2008) imposed an adult entertainment
tax to ameliorate the negative secondary effects of the
adult entertainment industry in California. AB 2914 was
held in this committee.
b) AB 847 (Salas, 2009) imposed a 20% adult entertainment
venue tax to ameliorate the negative secondary effects of
these firms. AB 847 failed passage in Assembly Revenue and
Taxation Committee.
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Analysis Prepared by : Roger Dunstan / APPR. / (916)
319-2081