BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
SB 782 (DeSaulnier) - Sexually Oriented Business Tax
Amended: May 7, 2013 Policy Vote: G&F 5-2, Public
Safety 5-2
Urgency: No Mandate: No
Hearing Date: May 23, 2013 Consultant: Robert Ingenito
SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Bill Summary: SB 782 would, until January 1, 2024, impose a tax
on sexually oriented businesses, the proceeds of which would be
used to fund sexual violence prevention programs.
Fiscal Impact: The Board of Equalization (BOE) estimates that
this measure could result in annual revenue gains of $35 million
(special funds). However, this estimate is subject to
considerable uncertainty, due to data limitations regarding (1)
the number of establishments affected, and (2) customer
attendance (see Staff Comments).
BOE would incur unknown substantial costs, likely in low
millions of dollars annually, to implement the provisions of the
bill. Costs would include: taxpayer identification,
notification, and registration; regulation development; manual
and publication revisions; tax return design; computer
programming; audit and collection tasks; staff training; and
public inquiry responses. Ongoing costs of administration would
likely be somewhat lower.
Additionally, the Office of Emergency Services (CalEMA)
estimates increased costs of $1.5 million to implement its
provisions.
Proposed Law: SB 782 would, until January 1, 2024, impose a tax
on persons who operate a sexually oriented business, as defined,
equal to ten dollars per customer visit to the business. The
sexually oriented business must authorize on-premises
consumption of alcoholic beverages to be subject to the tax.
BOE would administer and collect the tax in compliance with the
Fee Collection Procedures Law. BOE would create returns and
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adopt regulations to administer the tax, and would deposit the
tax proceeds into the Sexual Assault Treatment and Prevention
Fund, which the bill creates. Revenues (net of BOE
administrative costs and refunds) would be allocated as follows:
At least 90 percent would be made available to CalEMA,
in collaboration with the State Advisory Committee on
Sexual Assault Victim Services, to provide grants for a
variety of prevention, intervention, and treatment
programs, as specified.
No more than 10 percent would be available to fund
administrative and implementation costs.
The sexually oriented business operator must register with BOE,
supply specified information, and record daily the number of
persons admitted to the business in the manner required by BOE.
The operator cannot require any employees or independent
contractors to provide reimbursement for the tax. The operator
may require customers to provide reimbursement.
CalEMA would allocate funds for grants for intervention services
related to sexual assault survivors and rape prevention programs
provided by rape crisis centers, as specified in the Penal Code.
CalEMA could award funds based on a competitive request for
proposal process for:
Civil legal services to sexual assault survivors.
Coordination of sexual assault response teams.
Culturally and linguistically appropriate intervention
services to sexual assault survivors from underrepresented
or underserved communities.
Grants to reimburse the payment of adult and adolescent
sexual assault forensic exams.
Grants to nonprofit, community-based organizations to
support intervention and treatment services for victims of
sexual exploitation of human trafficking. Community-based
organizations that provide services for victims of sexual
and domestic and work to end and prevent sexual and
domestic violence are also eligible for these grants.
CalEMA must receive approval from the State Advisory Council on
Sexual Assault Victim Services to award grants and contracts as
a result of a competitive request for proposal process with:
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A statewide 501(c)(3) organization that has the primary
purpose of ending sexual violence in the state for programs
for the intervention and prevention of sexual violence,
outreach programs, training, and technical assistance to
and support of California rape crisis centers.
Other organizations to prevent and intervene in sexual
violence in underserved communities.
Nonprofit, community-based organizations to support the
intervention and treatment services for victims of sexual
assault as part of dating or domestic violence, including
sexual assault victims services as specified in the Penal
Code.
The bill also makes a $200,000 biennial appropriation to CalEMA
to provide a report on or before July 1, 2015, and biennially
thereafter, regarding:
Deficiencies with respect to research, prevention,
response, victim services, adjudication, and incarceration
related to sexual assaults at state and local levels.
Effectiveness of appropriations made under the bill,
Recommendations for performance measures to assess and
respond to the status of sexual assault prevention in this
state.
The bill defines the term "nude" to mean clothed in a manner
that leaves uncovered or visible through less than fully opaque
clothing, any portion of the genitals or, in the case of a
female, any portion of the breasts below the top of the areola
of the breasts.
The bill defines the term "sexually oriented business" to mean a
nightclub, bar, restaurant, or similar commercial enterprise
that does both of the following.
Provides for an audience of two or more individuals live
nude entertainment or live nude performances where the
nudity is a function of everyday business operations and
where nudity is a planned and intentional part of the
entertainment or performance.
Authorizes on-premises alcoholic beverage consumption
regardless of whether the consumption is under an Alcoholic
Beverage Control Act license or permit.
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Related Legislation: AB 2441 (Williams, et al, 2012) would have
imposed a $10 per customer visit tax upon an operator. That bill
was held in the Assembly Revenue and Taxation Committee.
Staff Comments: A credible revenue estimate for this bill
requires verifiable data regarding (1) the number of sexually
oriented businesses (not all businesses that provide nude
entertainment serve alcohol on premise), and (2) customer
attendance data for sexually oriented businesses. Unfortunately,
the requisite data do not exist. The BOE revenue estimate ($35
million annually) assumes 80 sexually oriented businesses, with
an average clientele of 120 persons daily.
The number of affected sexually oriented businesses in the State
could be lower than 80, because (1) some establishments could
have closed operations due to economic conditions, and (2) they
might not meet the bill's definition of sexually oriented
business, because nude performances are not offered every day.
To the extent that either of these circumstances applies,
revenues from the bill would be lower.
With respect to customer patronage, attendance at sexually
oriented businesses will vary around the State, as some are
located in urban locations with large population centers, while
others are in more rural parts of the State. Assuming the 80
establishments in the BOE estimate, if average daily attendance
increased or decreased by 10 persons, revenues would swing up or
down by about $3 million.
Additionally, this revenue estimate does not account for any
changes in economic activity that may or may not result from
enactment of the proposed law. Assuming the $10 tax is passed on
to consumers, they could respond to the tax increase with fewer
visits, which would result in lower revenues (as well as lower
alcohol excise tax revenues).
Author Amendments would (1) delay the bill's operative date, (2)
impose the $10 tax on owners of sexually oriented businesses (as
opposed to operators), (3) delete authorized reimbursement
language, and (4) clarify the type of sexual forensic exams
being funded.
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