Amended in Senate April 16, 2013

Senate Bill No. 323

Introduced by Senator Lara

(Principal begin delete coauthor: Senator end delete begin insert coauthors: Senators end insert DeSaulnier begin insert and Lieu end insert )

(Coauthors: Senators De León, begin insert Hancock, Hill, end insert Leno, begin delete and Monning end delete begin insert Monning, and Yee end insert )

(Coauthors: Assembly Members Ammiano, begin insert Atkins, end insert Bloom, begin insert Buchanan, end insert Eggman, Garcia, Gomez, Gordon, Lowenthal, Mitchell, and Rendon)

February 19, 2013

An act to amend Sections 6361 and 23701d of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

SB 323, as amended, 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 1.  

Section 6361 of the Revenue and Taxation Code
is amended to read:

6361.  

(a) Any organization listed or described in subdivision
(b) is a consumer and shall not be considered a retailer within the
provisions of this part, of food products, nonalcoholic beverages,
or other tangible personal property made or produced by members
of the organization provided, however, that the organization’s sales
are made on an irregular or intermittent basis, and that the
organization’s profits from those sales are used exclusively in
furtherance of the purposes of the organization.

(b) For purposes of this section, “organization” includes any of
the following:

(1) Any nonprofit organization which meets all of the following
conditions:

(A) The organization qualifies for tax-exempt status under
Section 501(c) of the Internal Revenue Code.

(B) The organization’s primary purpose is to provide a
supervised program of competitive sports for youth, or to promote
good citizenship in youth.

(C) The organization does not discriminate on the basis of
gender identity, race, sex, sexual orientation, nationality, religion,
or religious affiliation.

(2) (A) Any youth group sponsored by or affiliated with a
qualified educational institution, including, but not limited to, any
student activity club, athletic group, or musical group.

(B) For purposes of this section, “qualified educational
institution” means any of the following:

(i) Any public elementary, secondary, or vocational-technical
school providing education for kindergarten, grades 1 to 12,
inclusive, and college undergraduate programs, or any part thereof,
operated by state or local government.

(ii) Any nonprofit private educational institution providing
education for kindergarten, grades 1 to 12, inclusive, and college
undergraduate programs, or any part thereof, that meets the
requirements of the State Department of Education for a school.
“Private educational institution” means any entity providing
education which satisfies the requirements of state and local laws
pertaining to private educational institutions in effect on January
1, 1990, and which does not discriminate on the basis of gender
identity, race, sex, sexual orientation, nationality, religion, or
religious affiliation.

(3) (A) Little League, Bobby Sox, Boy Scouts, Cub Scouts,
Girl Scouts, Campfire, Inc., Young Men’s Christian Association,
Young Women’s Christian Association, Future Farmers of
America, Future Homemakers of America, 4-H Clubs, Distributive
Education Clubs of America, Future Business Leaders of America,
Vocational Industrial Clubs of America, Collegiate Young Farmers,
Boys’ Clubs, Girls’ Clubs, Special Olympics, Inc., American Youth
Soccer Organization, California Youth Soccer Association, North,
California Youth Soccer Association, South, and Pop Warner
football.

(B) An organization listed above shall not discriminate on the
basis of gender identity, race, sexual orientation, nationality,
religion, or religious affiliation.

(c) For purposes of this section, “irregular or intermittent” means
associated directly with a particular event, such as fairs, galas,
parades, scout-a-ramas, games, and similar activities. That term
includes refreshment stands or booths that are utilized at scheduled
events of organized leagues, but does not include storefront or
mobile retail outlets which ordinarily require local business
licenses.

SEC. 2.  

Section 23701d of the Revenue and Taxation Code is
amended to read:

23701d.  

(a) A corporation, community chest or trust, organized
and operated exclusively for religious, charitable, scientific, testing
for public safety, literary, or educational purposes, or to foster
national or international amateur sports competition (but only if
no part of its activities involved the provision of athletic facilities
or equipment), or for the prevention of cruelty to children or
animals, no part of the net earnings of which inures to the benefit
of any private shareholder or individual, no substantial part of the
activities of which is carrying on propaganda or otherwise
attempting to influence legislation, (except as otherwise provided
in Section 23704.5), and which does not participate in, or intervene
in (including the publishing or distribution of statements), any
political campaign on behalf of (or in opposition to) any candidate
for public office. An organization is not organized exclusively for
exempt purposes listed above unless its assets are irrevocably
dedicated to one or more purposes listed in this section. Dedication
of assets requires that in the event of dissolution of an organization
or the impossibility of performing the specific organizational
purposes the assets would continue to be devoted to exempt
purposes. Assets shall be deemed irrevocably dedicated to exempt
purposes if the articles of organization provide that upon
dissolution the assets will be distributed to an organization which
is exempt under this section or Section 501(c)(3) of the Internal
Revenue Code or to the federal government, or to a state or local
government for public purposes; or by a provision in the articles
of organization, satisfactory to the Franchise Tax Board; that the
property will be distributed in trust for exempt purposes; or by
establishing that the assets are irrevocably dedicated to exempt
purposes by operation of law. The irrevocable dedication
requirement shall not be a sole basis for revocation of an exempt
determination made by the Franchise Tax Board prior to the
effective date of this amendment.

(b) (1) In the case of a qualified amateur sports organization--

(A) The requirement of subdivision (a) that no part of its
activities involves the provision of athletic facilities or equipment
shall not apply.

(B) That organization shall not fail to meet the requirements of
subdivision (a) merely because its membership is local or regional
in nature.

(2) For purposes of this subdivision, “qualified amateur sports
organization” means any organization organized and operated
exclusively to foster national or international amateur sports
competition if that organization is also organized and operated
primarily to conduct national or international competition in sports
or to support and develop amateur athletes for national or
international competition in sports.

(c) (1) Notwithstanding subdivisions (a), (b), and (c) of Section
23701, an organization organized and operated for nonprofit
purposes in accordance with this section shall be exempt from
taxes imposed by this part, except as provided in this article or in
Article 2 (commencing with Section 23731), upon its submission
to the Franchise Tax Board of one of the following:

(A) A copy of the determination letter or ruling issued by the
Internal Revenue Service recognizing the organization’s exemption
from federal income tax under Section 501(a) of the Internal
Revenue Code, as an organization described in Section 501(c)(3)
of the Internal Revenue Code.

(B) A copy of the group exemption letter issued by the Internal
Revenue Service that states that both the central organization and
all of its subordinates are tax-exempt under Section 501(c)(3) of
the Internal Revenue Code and substantiation that the organization
is included in the federal group exemption letter as a subordinate
organization.

(2) Upon receipt of the documents required in subparagraph
(A) or (B) of paragraph (1), the Franchise Tax Board shall issue
an acknowledgment that the organization is exempt from taxes
imposed by this part, except as provided in this article or in Article
2 (commencing with Section 23731). The acknowledgment may
refer to the organization’s recognition by the Internal Revenue
Service of exemption from federal income tax as an organization
described in Section 501(c)(3) of the Internal Revenue Code and,
if applicable, the organization’s subordinate organization status
under a federal group exemption letter. The effective date of an
organization’s exemption from state income tax pursuant to this
subdivision shall be no later than the effective date of the
organization’s recognition of exemption from federal income tax
as an organization described in Section 501(c)(3) of the Internal
Revenue Code, or its status as a subordinate organization under a
federal group exemption letter, as applicable.

(3) If, for federal income tax purposes, an organization’s
exemption from tax as an organization described in Section
501(c)(3) of the Internal Revenue Code is suspended or revoked,
the organization shall notify the Franchise Tax Board of the
suspension or revocation, in the form and manner prescribed by
the Franchise Tax Board. Upon notification, the board shall
suspend or revoke, whichever is applicable, for state income tax
purposes, the organization’s exemption under paragraph (1) of this
subdivision.

(4)  begin insert (A) end insert begin insert   end insert This subdivision shall not be construed to prevent the
Franchise Tax Board from revoking the exemption of an
organization that is not organized or operated in accordance with
this chapter or Section 501(c)(3) of the Internal Revenue Code.

begin insert

(B) This subdivision shall not prevent the Franchise Tax Board
from confirming that an organization is in compliance with
subdivision (d) prior to issuing an acknowledgment described in
paragraph (2).

end insert

(5) If the Franchise Tax Board suspends or revokes the
exemption of an organization pursuant to paragraph (3) or
begin insert subparagraph (A) of paragraph end insert (4), the exemption shall be
reinstated only upon compliance with Section 23701, regardless
of whether the organization can establish exemption under
paragraph (1).

(d) (1) Notwithstanding any other law, an organization
organized and operated exclusively as a public charity youth
organization that discriminates on the basis of gender identity,
race, sexual orientation, nationality, religion, or religious affiliation
shall not be exempt from taxes imposed by this part.

(2) For purposes of this subdivision, a “public charity youth
organization” includes, but is not limited to, those organizations
listed in subparagraph (A) of paragraph (3) of subdivision (b) of
Section 6361.

(e) The Franchise Tax Board may prescribe rules and regulations
to implement this section.

SEC. 3.  

This bill would take effect immediately as a tax levy.