BILL ANALYSIS �
SB
323
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SENATE THIRD READING
SB 323 (Lara)
As Amended August 14, 2013
2/3 vote
SENATE VOTE :27-9
REVENUE & TAXATION 6-3 APPROPRIATIONS 12-5
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|Ayes:|Bocanegra, Gordon, |Ayes:|Gatto, Bocanegra, |
| |Mullin, Pan, | |Bradford, |
| |V. Manuel P�rez, Ting | |Ian Calderon, Campos, |
| | | |Eggman, Gomez, Hall, |
| | | |Holden, Pan, Quirk, Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Dahle, Harkey, Nestande |Nays:|Harkey, Bigelow, |
| | | |Donnelly, Linda, Wagner |
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SUMMARY : Provides that, for taxable years beginning on or
after January 1, 2014, any "public charity youth
organization" shall not be exempt from the Corporation Tax
(CT) 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."
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2)Specifies that a public charity youth organization
discriminates if the organization either has a formal
policy of discrimination or refuses to provide the
Franchise Tax Board (FTB) written assurance of a formal
policy barring discrimination.
3)Provides that specified youth organizations set forth in
Revenue and Taxation Code Section 6361 shall not be
entitled to preferential "consumer" status under the
Sales and Use Tax (SUT) Law if they discriminate on the
basis of gender identity, race, sexual orientation,
nationality, religion, or religious affiliation.
4)Takes immediate effect as a tax levy.
EXISTING LAW exempts, in modified conformity with federal
income tax law, the income of various types of
organizations from taxes imposed by the CT Law.
FISCAL EFFECT : The FTB has provided the following revenue
estimate for the income tax provisions of this bill:
While it is estimated that there are approximately
7,400 organizations that could potentially be affected
by this bill, staff was unable to determine the number
that discriminate upon the basis specified in this
proposal. 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.
The State Board of Equalization, in turn, estimates that if
the Boy Scouts of America (BSA) were to have its
preferential consumer status revoked, it could increase
state and local SUT revenues by as much as $251,372 in
fiscal year (FY) 2013-14, $251,560 in FY 2014-15, and
$251,729 in FY 2015-16.
COMMENTS :
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What would this bill do ?: This bill contains two
provisions. Under the first, this bill would deny
tax-exempt status to any public charity youth organization,
as defined, that discriminates on the basis of gender
identity, race, sexual orientation, nationality, religion,
or religious affiliation. This bill's second provision
would deny specified youth organizations preferential
consumer status under the SUT Law if they discriminate on
any of the grounds listed above. Based on the statements
provided by both this bill's author and sponsor, it would
appear that this measure is plainly directed at the
discriminatory policies and practices of the BSA.
The BSA : 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. Boy Scouts of America v. Dale
(2000) 530 U.S. 640, 644.
Within the past few months, however, the BSA has taken
significant steps to modify its membership policies. On
May 23, 2013, 1,232 voting members of the BSA voted on a
resolution maintaining the organization's existing
membership policy for adult leaders, but providing that
youth may not be denied membership in the BSA based on
sexual orientation or preference alone. The resolution
passed with a 61% majority.
The only certainties in life are death, taxes, and
litigation : The weight of case law suggests that
California would be well within its rights to end its tax
subsidies to youth organizations that discriminate based on
sexual orientation. It is nevertheless likely that this
bill's application would be challenged on First Amendment
grounds. The state, in turn, would likely defend against
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any such challenge by arguing that this bill is content
neutral. Specifically, the state would argue that this
legislation seeks to end governmental subsidies to youth
organizations that engage in discriminatory conduct based
on sexual orientation, and does not seek to suppress any
particular viewpoint afforded constitutional protection.
The perennial question of 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. 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 at
least an indirect governmental subsidy to discriminatory
youth organizations.
Analysis Prepared by : M. David Ruff / REV. & TAX. /
(916) 319-2098
FN: 0001851