BILL ANALYSIS �
SB 323
Page 1
Date of Hearing: August 21, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 323 (Lara) - As Amended: August 14, 2013
Policy Committee: JudiciaryVote:6-3
Revenue and Taxation 6-3
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill provides that any organization operated exclusively as
a "public charity youth organization" shall not be exempt from
the Corporation Tax Law if it discriminates on the basis of
gender identity, race, sexual orientation, nationality,
religion, or religious affiliation. Specifically, this bill:
1)Defines a "public charity youth organization" to include,
without limitation, all of the following: "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."
2)Provides that specified youth organizations set forth in
Revenue and Taxation Code Section 6361 shall not be entitled
to preferential status under the Sales and Use Tax Law if they
discriminate on the basis of gender identity, race, sexual
orientation, nationality, religion, or religious affiliation,
meaning they must collect sales tax for the items they sell.
3)Takes immediate effect as a tax levy.
FISCAL EFFECT
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1) The Franchise Tax Board (FTB) does not know how many
organizations would be affected by the provisions of this
bill. They did note that, for each organization determined
to discriminate, it is estimated the revenue generated per
taxpayer would be approximately $1,000 per open tax year.
Taxpayers generally have one to four open tax years,
depending on when they were organized and when they filed
their returns.
2) The State Board of Equalization (BOE), in turn,
estimates that if the Boy Scouts of America (BSA) were to
have its preferential status revoked, it could increase
state and local sales and use tax revenues by approximately
$250,000 annually.
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COMMENTS
1) Purpose . 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. The author states even more troubling is
that youth groups that discriminate, 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. The author argues California, and the nation, must
take action to stop the exclusion of lesbian, gay, bisexual
and transgender (LGBT) youth by specifying youth
organizations that exclude potential participants based on
sexual orientation, gender identity or religious
affiliation will no longer be rewarded with state support
in the form of special tax exemptions.
2) Sponsor . The sponsor of this bill, Equality California,
notes existing California law does not allow
state-supported programs and activities to exclude
potential participants based on sexual orientation, gender
identity or religious affiliation (see Government Code
Section 11135). Unfortunately, certain youth-based
organizations continue to discriminate in their membership
policies. According to Equality California, the most
egregious example is the Boy Scouts of America (BSA), which
currently excludes participation by LGBT adults in staff or
volunteer roles. Under this bill, private youth groups
that discriminate, like BSA, will no longer receive the
benefit of state support in the form of special tax
exemptions.
3) Opposition . Opponents of this bill note SB 323 is a
punitive measure targeted primarily at BSA, but impacting
other private entities that provide youth programs,
including private schools. They argue this attempt to
force private groups to conform to a specific and
controversial code is itself discriminatory. Opponents
also note SB 323 discriminates against organizations that
hold to a moral or religious foundation that differs from
that of its proponents, as many youth groups and many
private schools are based on religious values or moral
principles. They argue nonprofit organizations are
structured around different and sometimes controversial
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ideologies and visions, about which people may disagree,
but they are all afforded tax-exempt status.
Opponents conclude the First Amendment guarantees the right
to freedom of association; in Boy Scouts of America et al.
v. Dale the U.S. Supreme Court held that this right
"plainly presupposes a freedom not to associate."
Opponents argue attempting to force a private organization
or a private school to change its
constitutionally-guaranteed principles through threats of
financial harm is a gross overreach by the state.
4) The BSA is a private, not-for-profit organization
dedicated to instilling its system of values in young
people. The BSA seeks to accomplish this goal by having
its adult leaders spend time with youth members, engaging
them in activities like camping, archery and fishing. The
BSA also has a long and well-documented history of
discriminating against individuals based on their sexual
orientation. Specifically, the BSA has historically
asserted that "homosexual conduct" is inconsistent with the
values it seeks to instill. Within the past few months,
however, the BSA has taken significant steps to modify its
membership policies, approving a resolution providing that
youth may not be denied membership in the BSA based on
sexual orientation or preference alone. The BSA has,
however, elected to retain its discriminatory membership
policy for all adult leaders, including scouts who reach
the age of 18.
5) Application of the Bill. Because BSA's IRS exemption
affects both it and its subsidiary units down to its
district councils, those entities would be taxed as
corporations in future years if tax-exempt status is
revoked, directing money away from BSA to the state and
imposing a burden to comply with the tax. BSA National and
district councils would also have to obtain seller's
permits and collect sales and use tax on any sale of
currently exempt items. However, the smaller BSA units,
such as troops, packs, and teams, are likely covered by
their chartered organization's tax exemption. As many
chartered organizations are churches that don't have to
report to FTB, finding any potential discrimination among
their sponsored BSA troops may be difficult. Additionally,
some smaller units and chartered organizations may not
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adhere to BSA National's membership policy, and may not
discriminate.
6) Where to Draw the Line. It should be noted that, while
this bill would revoke the tax-exempt status of youth
organizations that discriminate based on sexual
orientation, it would have no effect on the numerous other
organizations that continue to receive preferential tax
status despite their discriminatory policies. For example,
many churches refuse to ordain female priests and pastors,
while still others refuse to officiate same-sex marriages.
Another example is private social clubs that openly
discriminate. Nevertheless, the state continues to afford
these organizations exempt status under the tax code,
indirectly subsidizing their conduct.
In addition, while this bill would revoke the tax-exempt
status of discriminatory youth organizations, the FTB notes
that it would not impact a donor's ability to receive a
charitable deduction for contributions to the very same
organizations. This would result in the continuation of an
indirect and arguably more significant governmental subsidy
to discriminatory youth organizations.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081