Senator Wiener’s SB 834, the No Tax Exemption for Insurrection Act, Passes Assembly

SACRAMENTO - Senator Scott Wiener (D-San Francisco)’s Senate Bill 834, the No Tax Exemption for Insurrection Act, passed the Assembly by a vote of 59-2. It will now head to the Senate for final sign-off before it goes to Governor Newsom’s desk.

SB 834 is a first-in-the-nation bill that will revoke the California tax-exempt status of nonprofit organizations that participate in or incite efforts to overthrow the United States government or any state government. Nonprofit organizations have used the “Big Lie” – the fraudulent notion that the 2020 election was stolen – to fundraise for and funnel money to extremist and anti-democratic initiatives like the January 6 insurrection. Tax-exempt status is a privilege, not a right, and organizations that engage in or incite insurrection or conspiracy to commit insurrection – both of which are illegal – should not be given this special status to help them fundraise. Moreover, non-California nonprofits should not be able to register to raise money in California if they are engaging in or inciting insurrection.

“Taxpayers should not be subsidizing organizations that are seeking to overthrow the U.S. government or overturn our democratic elections,” said Senator Wiener. “Insurrection is against the law, and these organizations have forfeited their privilege of tax-exempt status.”

The January 6, 2021, insurrection took place when pro-Trump extremists – in response to the false narrative that the Democrats “stole” the 2020 election and incited by then-President Donald Trump – breached the United States Capitol. Five people were killed as a result of this insurrection, and hundreds were injured. Vice President Pence and Speaker Pelosi were specific targets of this violent attack on our democracy. Many nonprofits that supported the insurrection and continue to perpetuate lies about the 2020 election in hopes of overturning the results still operate with tax-exempt status, both at the federal and state level. 

SB 834 clarifies the Franchise Tax Board’s authority to revoke the California tax-exempt status of a nonprofit organization if the California Attorney General determines that the nonprofit has actively engaged in, or incited: treason, misprision of treason, insurrection, seditious conspiracy, advocating overthrow of the government or the government of any State, or advocating mutiny by members of the military or naval forces of the United States. Under SB 834, if the Attorney General finds that a nonprofit organization has incited, or actively engaged in actions that are directed to or likely to imminently violate one or more of these crimes, they will notify the FTB, which then will have the ability to revoke the nonprofit’s tax-exempt status.

Under SB 834, out-of-state nonprofits that engage in or incite insurrection may have their right to raise money revoked or denied in California.

The United States Supreme Court has ruled that the purpose of charitable organizations claiming tax-exempt status “may not be illegal or contrary to public policy." 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.

Tax-exempt nonprofits are not required to pay corporate income taxes and may be exempt from other taxes as well. Additionally, donations to many nonprofits are deductible from income taxes, and private foundations and donor-advised funds can only donate to tax-exempt nonprofits. Private foundations and donor-advised funds represent a major funding source for many nonprofits. 

Authoritarian and anti-democratic organizations have increasingly used the “Big Lie” to fundraise, and this narrative has driven millions of dollars in tax-exempt donations. And many new organizations have cropped up in the past year, hoping to ride the coattails of the insurrection and cash in. These include California nonprofits and nonprofits registered in other states that fundraise in California. These organizations, which are fundamentally undermining our democracy and cheering for the destruction of free and fair elections in America, should not be allowed to operate with advantages like tax-exempt status. 

For example, the leader of the “Oath Keepers,” a national militia movement, was charged with seditious conspiracy.  While the Oath Keepers does not have California tax-exempt status, it has an “educational foundation” with federal exempt status and tax-exempt branches in several states.  In the words of one expert, “It can only be presumed that [funds contributed to the Oath Keepers], which [donors were] able to deduct from their federal taxes, went to transporting and lodging members of the group slated to participate in the ensuing riots.” These organizations should not be allowed, under any circumstances, to use tax write-offs to help fund illegal activities. 

There is precedent for making this distinction in California’s tax code. Under federal and California law, for instance, if a nonprofit organization supports terrorism, its tax-exempt status is suspended. The nonprofit organizations that support insurrection should receive the same treatment.

SB 834’s co-authors include Senators Josh Becker (D-Peninsula), Sydney Kamlager (D-Long Beach), Dave Min (D-Irvine), Josh Newman (D-Fullerton), Anthony Portantino (D-La Cañada Flintridge), Tom Umberg (D-Orange County), Henry Stern (D-Los Angeles), and Bob Hertzberg (D-Van Nuys), as well as Assemblymembers Buffy Wicks (D-Oakland), Phil Ting (D-San Francisco), Cristina Garcia (D-Bell Gardens), Matt Haney (D-San Francisco), Marc Berman (D-Menlo Park), and Kevin Mullin (D-San Mateo).