SB 323, as introduced, Lara. Taxes: exemptions: prohibited discrimination.
The Sales and Use Tax Law exempts from the taxes imposed by that law the sales of food products, nonalcoholic beverages, and other tangible personal property made or produced by an organization, as defined, but only if sold on an irregular or intermittent basis and the organization’s profits from the sales are used exclusively in furtherance of the purposes of the organization. The Corporation Tax Law, in modified conformity with federal income tax laws, exempts the income of various types of organizations from taxes imposed by that law.
This bill would revise the Sales and Use Tax Law exemption for those organizations, as provided. This bill would also provide that an organization that is a public charity youth organization that discriminates on the basis of gender identity, race, sexual orientation, nationality, religion, or religious affiliation is not exempt from the taxes imposed by that law.
This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIII A of the California Constitution, and thus would require for passage the approval of 2⁄3 of the membership of each house of the Legislature.
This bill would take effect immediately as a tax levy.
Vote: 2⁄3. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 6361 of the Revenue and Taxation Code
2 is amended to read:
(a) Any organization listed or described in subdivision
4(b) is a consumer and shall not be considered a retailer within the
5provisions of this part, of food products, nonalcoholic beverages,
6or other tangible personal property made or produced by members
7of the organization provided, however, that the organization’s sales
8are made on an irregular or intermittent basis, and that the
9organization’s profits from those sales are used exclusively in
10furtherance of the purposes of the organization.
11(b) For purposes of this section, “organization” includes any of
13(1) Any nonprofit organization which meets all of the following
15(A) The organization qualifies for tax-exempt status under
16Section 501(c) of the Internal Revenue Code.
17(B) The organization’s primary purpose is to provide a
18supervised program of competitive sports for youth, or to promote
19good citizenship in youth.
20(C) The organization does not discriminate on the basis of
21 race, sex, nationality,
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23(2) (A) Any youth group sponsored by or affiliated with a
24qualified educational institution, including, but not limited to, any
25student activity club, athletic group, or musical group.
26(B) For purposes of this section, “qualified educational
27institution” means any of the following:
28(i) Any public elementary, secondary, or vocational-technical
29school providing education for kindergarten, grades 1 to 12,
30inclusive, and college undergraduate programs, or any part thereof,
31operated by state or local government.
P3 1(ii) Any nonprofit private educational institution providing
2education for kindergarten, grades 1 to 12, inclusive, and college
3undergraduate programs, or any part thereof, that meets the
4requirements of the State Department of Education for a school.
5“Private educational institution” means any entity providing
6education which satisfies the requirements of state and local laws
7pertaining to private educational institutions in effect on January
81, 1990, and which does not discriminate on the basis of race, sex, nationality,
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11(3) Little League, Bobby Sox, Boy
Scouts, Cub Scouts,
12Girl Scouts, Campfire, Inc., Young Men’s Christian Association,
13Young Women’s Christian Association, Future Farmers of
14America, Future Homemakers of America, 4-H Clubs, Distributive
15Education Clubs of America, Future Business Leaders of America,
16Vocational Industrial Clubs of America, Collegiate Young Farmers,
17Boys’ Clubs, Girls’ Clubs, Special Olympics, Inc., American Youth
18Soccer Organization, California Youth Soccer Association, North,
19California Youth Soccer Association, South, and Pop Warner
24(c) For purposes of this section, “irregular or intermittent” means
25associated directly with a particular event, such as fairs, galas,
26parades, scout-a-ramas, games, and similar activities. That term
27includes refreshment stands or booths that are utilized at scheduled
28events of organized leagues, but does not include storefront or
29mobile retail outlets which ordinarily require local business
Section 23701d of the Revenue and Taxation Code is
32amended to read:
(a) A corporation, community chest or trust, organized
34and operated exclusively for religious, charitable, scientific, testing
35for public safety, literary, or educational purposes, or to foster
36national or international amateur sports competition (but only if
37no part of its activities involved the provision of athletic facilities
38or equipment), or for the prevention of cruelty to children or
39animals, no part of the net earnings of which inures to the benefit
40of any private shareholder or individual, no substantial part of the
P4 1activities of which is carrying on propaganda or otherwise
2attempting to influence legislation, (except as otherwise provided
3in Section 23704.5), and which does not participate in, or intervene
4in (including the publishing or distribution of statements), any
5political campaign on behalf of (or in opposition to) any candidate
6for public office. An organization is not organized exclusively for
7exempt purposes listed above unless its assets are irrevocably
8dedicated to one or more purposes listed in this section. Dedication
9of assets requires that in the event of dissolution of an organization
10or the impossibility of performing the specific organizational
11purposes the assets would continue to be devoted to exempt
12purposes. Assets shall be deemed irrevocably dedicated to exempt
13purposes if the articles of organization provide that upon
14dissolution the assets will be distributed to an organization which
15is exempt under this section or Section 501(c)(3) of the Internal
16Revenue Code or to the federal government, or to a state or local
17government for public purposes; or by a provision in the articles
18of organization, satisfactory to the Franchise Tax Board; that the
19property will be distributed in trust for exempt purposes; or by
20establishing that the assets are irrevocably dedicated to exempt
21purposes by operation of law. The irrevocable dedication
22requirement shall not be a sole basis for revocation of an exempt
23determination made by the Franchise Tax Board prior to the
24effective date of this amendment.
25(b) (1) In the case of a qualified amateur sports organization--
26(A) The requirement of subdivision (a) that no part of its
27activities involves the provision of athletic facilities or equipment
28shall not apply.
29(B) That organization shall not fail to meet the requirements of
30subdivision (a) merely because its membership is local or regional
32(2) For purposes of this subdivision, “qualified amateur sports
33organization” means any organization organized and operated
34exclusively to foster national or international amateur sports
35competition if that organization is also organized and operated
36primarily to conduct national or international competition in sports
37or to support and develop amateur athletes for national or
38international competition in sports.
39(c) (1) Notwithstanding subdivisions (a), (b), and (c) of Section
4023701, an organization organized and operated for nonprofit
P5 1purposes in accordance with this section shall be exempt from
2taxes imposed by this part, except as provided in this article or in
3Article 2 (commencing with Section 23731), upon its submission
4to the Franchise Tax Board of one of the following:
5(A) A copy of the determination letter or ruling issued by the
6Internal Revenue Service recognizing the organization’s exemption
7from federal income tax under Section 501(a) of the Internal
8Revenue Code, as an organization described in Section 501(c)(3)
9of the Internal Revenue Code.
10(B) A copy of the group exemption letter issued by the Internal
11Revenue Service that states that both the central organization and
12all of its subordinates are tax-exempt under Section 501(c)(3) of
13the Internal Revenue Code and substantiation that the organization
14is included in the federal group exemption letter as a subordinate
16(2) Upon receipt of the documents required in subparagraph
17(A) or (B) of paragraph (1), the Franchise Tax Board shall issue
18an acknowledgment that the organization is exempt from taxes
19imposed by this part, except as provided in this article or in Article
202 (commencing with Section 23731). The acknowledgment may
21refer to the organization’s recognition by the Internal Revenue
22Service of exemption from federal income tax as an organization
23described in Section 501(c)(3) of the Internal Revenue Code and,
24if applicable, the organization’s subordinate organization status
25under a federal group exemption letter. The effective date of an
26organization’s exemption from state income tax pursuant to this
27subdivision shall be no later than the effective date of the
28organization’s recognition of exemption from federal income tax
29as an organization described in Section 501(c)(3) of the Internal
30Revenue Code, or its status as a subordinate organization under a
31federal group exemption letter, as applicable.
32(3) If, for federal income tax purposes, an organization’s
33exemption from tax as an organization described in Section
34501(c)(3) of the Internal Revenue Code is suspended or revoked,
35the organization shall notify the Franchise Tax Board of the
36suspension or revocation, in the form and manner prescribed by
37the Franchise Tax Board. Upon notification, the board shall
38suspend or revoke, whichever is applicable, for state income tax
39purposes, the organization’s exemption under paragraph (1) of this
P6 1(4) This subdivision shall not be construed to prevent the
2Franchise Tax Board from revoking the exemption of an
3organization that is not organized or operated in accordance with
4this chapter or Section 501(c)(3) of the Internal Revenue Code.
5(5) If the Franchise Tax Board suspends or revokes the
6exemption of an organization pursuant to paragraph (3) or (4), the
7exemption shall be reinstated only upon compliance with Section
823701, regardless of whether the organization can establish
9exemption under paragraph (1).
20 The Franchise Tax Board may prescribe rules and regulations
21to implement this section.
This bill would take effect immediately as a tax levy.