A bill to end state tax-exempt status for nonprofit organizations that “participate in or incite efforts to overthrow the United States government or any state government” was vetoed by Governor Newsom on Thursday following polarizing votes in both houses of the legislature last month.
Senate Bill 834, authored by Senator Scott Wiener (D-San Francisco), would specifically authorize the Attorney General to make a finding that a tax-exempt organization has actively engaged in, or incited the active engagement in, acts or conspiracies defined as criminal under specified federal law, and likely to produce imminent violation of that federal law. In addition, SB 834 would require the Attorney General to notify the Franchise Tax Board (FTB) of such a finding, and would state the existing authority of the Franchise Tax Board to revoke the tax-exempt status of the organization found to be in violation.
The bill, also known as the No Tax Exemption for Insurrection Act, would also ultimately block out-of-state non-profits from raising money in California should they be found in violation.
Senator Wiener authored the bill in response to the January 6, 2021 storming of the U.S. Capitol, which he called an “insurrection.” In a statement earlier this year, Wiener said that many non-profits had supported the “insurrection” by “pro-Trump extremists” who were responding to a “false narrative that the Democrats stole the 2020 election and incited by then-President Donald Trump”. He also noted that many of these groups that “supported the insurrection and continue to perpetuate lies about the 2020 election in hopes of overturning the results” still have tax-exempt status at both the federal and state level, despite breaking numerous laws that should have taken it away.
“On January 6, 2021, the peaceful transfer of power in our democracy was threatened,” said Senator Wiener in a statement. “And for the first time since the Civil War, people died as a result. We cannot and will not let organizations that aid and abet insurrection – that break the law by trying to overthrow the U.S. government – operate with tax-exempt status. The people of California should not be subsidizing insurrection.”
A polarizing bill ultimately vetoed
“It’s amazing how many laws SB 834 breaks,” noted one constitutional lawyer who wished to remain anonymous to the Globe on Friday. “Ignoring the fact that they aren’t even trying to hide the fact that they have a clear agenda and bias, did they not think to ask, I don’t know, any lawyer about this first? Any constitutional lawyer worth their salt could easily pick this bill apart. Some of the lawyers in my firm call a bill like this DOP – dead on passage. There’s a right way to go after tax-exempt status on groups that are actually breaking laws. This is not even close to that. Again, you can see this bill has an agenda. You can see it from space.”
In the final Assembly vote last month, SB 834 passed with a 59-2 vote, but with 19 Assemblymembers, all GOP, refusing to vote. The Senate had a similar outcome, passing 31-0, but with 9 not voting. Many expected Governor Newsom to follow up by signing the bill into law, but surprised many on Thursday by vetoing it. In a veto message on Thursday, Newsom said that, despite his belief that the groups involved with antigovernmental acts during the January 6th incident should be investigated, this was a matter for the courts to handle. Newsom even specifically noted how the groups deserved due process and a right to a hearing.
“Without question, extremist groups that participate in anti-government acts such as those that took place during the insurrection on January 6, 2021 should be renounced and investigated for their participation,” wrote Newsom in his veto message. “However, these are issues that should be evaluated through the judicial system with due process and a right to a hearing.
“For these reasons, I am returning SB 834 without my signature.”
While many did note of the judicial reasons for Newsom’s veto, others did give another likely reason for the veto.
“Newsom is looking at becoming president, and like anyone running for president, he wants to piss as few people off as possible and not be the one holding the blame at the end of the day,” explained Michael Delgado, a political analyst in Washington, to the Globe on Friday. “Him vetoing this, you’re right, it is an indication that he is prepping for a 2024 run. In fact, keep an eye on the rest of his vetos this year. I guarantee you that you’ll see a pattern emerge.”
Governor Newsom is expected to sign into law or veto bills going into next week.
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