California Passes Bill To Pull Insurrectionists’ Tax-Exempt Status
California Passes Bill To Pull Insurrectionists’ Tax-Exempt Status

A bill calling for revocation of the tax-exempt status of any California nonprofit whose members engage in or incite acts of government insurrection has passed both houses of the state legislature and is being sent to Gov. Gavin Newson for his signature.

State Sen. Scott Wiener (D-San Francisco) sponsored the bill as a reaction to the Jan. 6, 2021 attack on the Capitol in Washington, D.C., while Congress convened to certify the results of the 2020 presidential election.

CalNonprofits Chief Executive Officer Jan Masaoka said she opposes Senate Bill 834 – dubbed “No Tax Exemption for Insurrection Act” – saying it is too vague, lacking in clarity and open to abuse by individuals or groups who oppose the missions of certain nonprofits.

“We respect the intent of the bill but there’s a lot of language in it that’s vague and confusing. We feel the law could be used for political purposes. Treason is already against the law so you don’t need this law,” Masaoka said.

For instance, Masaoka said that not clearly addressed is whether a nonprofit would be held accountable for the unsanctioned actions of members. Also unclear, she said, is a standard of proof required to strip a nonprofit of its tax exemption.

CalNonprofits did not take a formal stand or commit to opposition, working instead with bill sponsor Wiener and his staff, Masaoka said. A few tweaks to the bill resulted from discussions but the final product is still too vague, she said.

The bill is not specifically targeting any nonprofit in California. According to the California Franchise Tax Board website, tax-exempt status has been revoked for 114,020 nonprofits since the 1970s for various reasons unrelated to the elements of the new bill.   

If signed by Newsom, the act would:

  • Amend the California Franchise Tax Board’s (FTB) authority to revoke tax-exempt statuses of nonprofit organizations if the state Attorney General (AG) determines that the nonprofit has actively engaged in or incited treason, misprision of treason (concealing knowledge of treason), insurrection, seditious conspiracy, advocating overthrow of the government or government of any state, or advocating mutiny by members of the military or naval forces.
  • Authorize the state Attorney General to make a finding that a tax-exempt organization has actively engaged in the above events.
  • Deny out-of-state nonprofits that engage in or incite insurrection the right to raise money in California.

The bill authorizes the AG and the FTB to draw up rules, guidelines and procedures to carry out the act.

According to California Senate minutes posted online, 85 groups formally supported the bill and two individuals opposed it. Most of the formal support for the act is from California chapters of Indivisible, a pro-Democratic grassroots organization whose website states it is working to promote democracy and prevent re-election of former President Donald Trump.

Wiener posted frequently on his legislative website about movement with the bill, taking the opportunity to lay blame for the insurrection on Donald Trump and political extremists. “Trying to overturn elections and violently attacking our legislators fits the bill. SB 834 will ensure that these organizations no longer claim this financial advantage,” Wiener has stated via a press release.

California Senate committee minutes showed that at least one group with nonprofit status was alleged to be tied by the U.S. Department of Justice to the Capitol insurrection: Elmer Stewart Rhodes III, founder and leader of The Oath Keepers, is charged with seditious activity in connection with Jan. 6, 2021. The Oath Keepers was founded by Rhodes in 2009. According to information from the Anti-Defamation League, federal authorities arrested at least 25 people associated with the Oath Keepers, charging them in connection with their efforts to impede the processes governing the transfer of presidential power in the lead up to and during the January 6 insurrection. 

Some 19 people are charged with conspiracy to obstruct an official proceeding and conspiring to prevent an officer of the U.S. from discharging a duty, and of these, 11 – including Rhodes – are also charged with seditious conspiracy.