BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 323|
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THIRD READING
Bill No: SB 323
Author: Lara (D), et al.
Amended: 4/16/13
Vote: 27
SENATE GOVERNANCE & FINANCE COMMITTEE : 5-2, 4/10/13
AYES: Wolk, Beall, DeSaulnier, Hernandez, Liu
NOES: Knight, Emmerson
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Taxes: exemptions: prohibited discrimination
SOURCE : Equality California
DIGEST : This bill revokes charitable tax exemptions for youth
organizations that discriminate on the basis of gender identity,
race, sexual orientation nationality, religion or religious
affiliation.
ANALYSIS : In California, nonprofit corporations are not
necessarily tax-exempt ones, regardless of federal status. All
nonprofits must apply to the Franchise Tax Board (FTB) for
tax-exempt status, or provide FTB with a copy of the Internal
Revenue Service's (IRS's) determination that the organization is
tax-exempt under the Internal Revenue Code (AB 897 [Houston],
Chapter 238, Statutes of 2008). FTB then notifies the
organization of its determination, or its acknowledgement of the
IRS determination, either of which entitles the organization to
an exemption from both the Corporation Tax and the Minimum
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Franchise Tax. Nonprofits that do not obtain approval from FTB
for their tax-exempt application are subject to tax regardless
of its use of its money. After FTB determination or
acknowledgement, all non-church charities must annually file a
simple form with FTB, known as from the E-Postcard (Form 199N)
with basic information about the organization. Tax-exempt
organizations with average gross receipts over $50,000 per year
must file a more comprehensive annual return (Form 199).
Churches don't have to complete either form.
The Sales and Use Tax Law deems as consumers, not retailers,
nonprofit organizations that intermittently or irregularly sell
food, nonalcoholic beverages, and other property made by the
organization's members. The organization must use the proceeds
from the sale to further its objectives, and also:
Qualify under IRC 501(c) as tax-exempt,
Have as its primary purpose a supervised program of
competitive sports for youth or promote good citizenship among
youth,
Not discriminate on the basis of race, sex, nationality or
religion,
Is any youth group sponsored by or affiliated with a qualified
educational institution, subject to the requirement that the
affiliated institution does not discriminate on the basis of
race, sex, nationality or religion, or
Is one of a list of statutorily enumerated groups, currently
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
Educational 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 and South, and Pop Warner football.
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As consumers, these organizations neither need to hold seller's
permits nor collect and remit the sales or use tax when
reselling tangible personal property under the exemption.
Instead, the tax is deemed paid when the organization initially
buys the items it subsequently plans to sell on resale.
This bill:
1. Provides that 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 the Minimum Franchise Tax and the
Corporation Tax.
2. Amends the Sales and Use Tax Law to preclude organizations
that discriminate on the basis of gender identity, sexual
orientation, and religious affiliation from being considered
a nonprofit organization. Organizations that so discriminate
would be considered retailers, not consumers, for purposes of
the Sales and Use Tax Law, therefore obligating them to
obtain sellers' permits, and collect and remit the sales and
use tax on its sales of currently exempt items of tangible
personal property.
3. Provides that any nonprofit private educational institution
that sponsors a currently exempt youth group must also not
discriminate on the basis of gender identity, race, sexual
orientation, nationality, religion or religious affiliation
for its sponsored group to retain exempt status.
Additionally, any of the groups spelled out in law as exempt,
must not discriminate based on gender identity, race, sexual
orientation, nationality, religion, or religious affiliation
to retain exempt status.
4. Requires FTB to determine compliance with the provisions of
this bill prior to informing the taxpayer that it
acknowledges IRS's tax-exemption determination, and allows
California not to recognize the IRS determination should
discrimination exist.
5. Provides that taxpayers that have their status revoked, and
subsequently end discriminatory behavior, can regain exempt
status.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 5/1/13)
Equality California (source)
ACLU
AFSCME
California Immigrant Policy Center
California National Organization for Women (California NOW)
California Tax Reform Association
City of West Hollywood
Courage Campaign
Gay and Lesbian Community Services Center of Orange County
Gay-Straight Alliance Network
Humboldt County Board of Supervisors
Los Angeles Gay and Lesbian Center
SEIU California
OPPOSITION : (Verified 5/1/13)
Board of Equalization Member, George Runner
Calvary Assembly of God
Capitol Resource Institute
Church State Council
First Christian Church
Pacific Justice Institute
Traditional Values Coalition
ARGUMENTS IN SUPPORT : According to the author, "Despite
California's non-discrimination policy for state-supported
programs and activities, some youth organizations still exclude
potential participants and other organizations could do so in
the future. Even more troubling is that youth groups that
discriminate now, or could in the future, rather than being
penalized, are rewarded with special tax breaks in the form of
exemptions from taxes on items they sell and on their income.
California, and the nation, must take action to stop the
exclusion of LGBT youth. Therefore, California should lead the
way and not reward these practices with special tax privileges.
SB 323 makes clear that, in accordance with existing California
law prohibiting discrimination in state-supported programs
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activities, youth organizations that exclude potential
participants based on their sexual orientation, gender identity
or religious affiliation will no longer be rewarded with state
support in the form of these special tax exemptions."
ARGUMENTS IN OPPOSITION : The opposition state that this bill
is designed to pressure youth groups to recant their values and
beliefs, and it takes the unprecedented and alarming step of
wielding the tax power as a weapon directed at the political
enemies of the lesbian, gay, bisexual, and transgender lobby.
In the name of fighting discrimination, this legislation would
actually discriminate against organizations that have
faith-based convictions. They further contend that it is an
attack on organizations that have a long and honored tradition
of serving youth and developing leadership skills. Government
should not be in the business of dictating the policies and
religious convictions of private groups and charities. This
bill threatens non-profits with being taxed and having current
tax exemptions striped if they do not accept and embrace the
state's ideas on sexual orientation and gender identity, and if
they do not incorporate them into their hiring, practices,
membership, objectives or activities. The opposition further
notes that while supporters contend that they are not dictating
the views of a non-profit organization, they are doing so
indirectly by rewarding only non-profits that adopt their
viewpoint on sexual orientation and gender identity with tax
exemptions.
AGB:d 5/1/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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