Amended in Senate April 6, 2015

Senate Bill No. 2

Introduced by Senators Anderson and Vidak

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(Principal coauthor: Senator Morrell)

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(Coauthors: Senators begin insert Bates, Fuller, end insert Gaines begin delete and end delete begin insert , Galgiani, Huff, end insert Nielsen begin insert , end insert begin insert Nguyen, Pan, and Stone end insert )

(Coauthors: Assembly Members Achadjian, Travis Allen, begin insert Baker, end insert Bigelow, begin insert Brough, end insert Brown, begin insert Chang, Chávez, Cooley, Dahle, end insert Beth Gaines, begin insert Gallagher, Cristina  end insert begin insert Garcia, end insert Grove, begin insert Hadley, Harper, Jones, Lackey, end insert Linder, begin insert Maienschein, Mathis, McCarty, end insert Melendez, begin insert Olsen, Patterson, Steinorth, Wagner, Waldron, end insert and Wilk)

December 1, 2014

An act to amend Section 215.1 of the Revenue and Taxation Code, relating to taxation, to take effect immediately, tax levy.

LEGISLATIVE COUNSEL’S DIGEST

SB 2, as amended, Anderson. Property taxation: exemptions: veterans’ organizations.

Existing property tax law establishes a veterans’ organization exemption under which property is exempt from taxation if, among other things, that property is used exclusively for charitable purposes and is owned by a veterans’ organization.

This bill would provide that the veterans’ organization exemption shall not be denied to a property on the basis that the property is used for fraternal, lodge, or social club purposes, and would make specific findings and declarations in that regard. The bill would also provide that the exemption shall not apply to any portion of a property that consists of a bar where alcoholic beverages are served.

Section 2229 of the Revenue and Taxation Code requires the Legislature to reimburse local agencies annually for certain property tax revenues lost as a result of any exemption or classification of property for purposes of ad valorem property taxation.

This bill would provide that, notwithstanding Section 2229 of the Revenue and Taxation Code, no appropriation is made and the state shall not reimburse local agencies for property tax revenues lost by them pursuant to the bill.

This bill would take effect immediately as a tax levy.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

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begin insert SECTION 1. end insert   

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The Legislature finds and declares all of the
following:

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(a) (1) Since 1899 congressionally chartered veterans’
organizations have provided a valuable service to our nation’s
returning service members. These organizations help preserve the
memories and incidents of the great hostilities fought by our nation,
and preserve and strengthen comradeship among members.

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(2) These veterans’ organizations also own and manage various
properties including lodges, posts, and fraternal halls. These
properties act as a safe haven where veterans of all ages and their
families can gather together to find camaraderie and fellowship,
share stories, and seek support from people who understand their
unique experiences. This aids in the healing process for these
returning veterans, and ensures their health and happiness.

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(b) As a result of congressional chartering of these veterans’
organizations, the United States Internal Revenue Service created
a special tax exemption for these organizations under Section
501(c)(19) of the Internal Revenue Code.

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(c) Section 501(c)(19) of the Internal Revenue Code and related
federal regulations provide for the exemption for posts or
organizations of war veterans, or an auxiliary unit or society of,
or a trust or foundation for, any such post or organization that,
among other attributes, carries on programs to perpetuate the
memory of deceased veterans and members of the Armed Forces
and to comfort their survivors, conducts programs for religious,
charitable, scientific, literary, or educational purposes, sponsors
or participates in activities of a patriotic nature, and provides
social and recreational activities for their members.

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(d) Section 215.1 of the Revenue and Taxation Code stipulates
that all buildings, support and so much of the real property on
which the buildings are situated as may be required for the
convenient use and occupation of the buildings, used exclusively
for charitable purposes, owned by a veterans’ organization that
has been chartered by the Congress of the United States, organized
and operated for charitable purposes, when the same are used
solely and exclusively for the purpose of the organization, if not
conducted for profit and no part of the net earnings of which
ensures to the benefit of any private individual or member thereof,
are exempt from taxation.

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(e) The Chief Counsel of the State Board of Equalization
concluded, based on a 1979 appellate court decision, that only
parts of American Legion halls are exempt from property taxation
and that other parts, such as billiard rooms, card rooms, and
similar areas, are not exempt.

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(f) In a 1994 memorandum, the State Board of Equalization’s
legal division further concluded that the areas normally considered
eligible for exemptions are the office areas used to counsel veterans
and the area used to store veterans’ records, but that the meeting
hall and bar found in most of the facilities are not considered used
for charitable purposes.

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(g) Tax-exempt status is intended to provide economic incentive
and support to veterans’ organizations to provide for the social
welfare of the community of current and former military personnel.

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(h) The State Board of Equalization’s constriction of the tax
exemption has resulted in an onerous tax burden on California
veteran service organizations posts or halls, hinders the posts’
ability to provide facilities for veterans, and threatens the economic
viability of many local organizations.

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(i) The charitable activities of a veteran service organizations
post or hall are much more than the counseling of veterans. The
requirements listed for qualification for the federal tax exemption
clearly dictate a need for more than just an office.

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(j) Programs to perpetuate the memory of deceased veterans
and members of the Armed Forces and to comfort their survivors
require the use of facilities for funerals and receptions.

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(k) Programs for religious, charitable, scientific, literary, or
educational purposes require space for more than 50 attendees.

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(l) Activities of a patriotic nature need facilities to accommodate
hundreds of people.

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(m) Social and recreational activities for members require
precisely those areas considered “not used for charitable
purposes” by the State Board of Equalization.

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(n) The State Board of Equalization’s interpretation of the
Revenue and Taxation Code reflects a lack of understanding of
the purpose and programs of the veterans service organizations
posts or halls and is detrimental to the good works performed in
support of our veteran community.

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begin insert SEC. 2. end insert   

Section 215.1 of the Revenue and Taxation Code is
amended to read:

215.1.  

(a) All buildings, and so much of the real property on
which the buildings are situated as may be required for the
convenient use and occupation of the buildings, used exclusively
for charitable purposes, owned by a veterans’ organization that
has been chartered by the Congress of the United States, organized
and operated for charitable purposes, and exempt from federal
income tax as an organization described in Section 501(c)(19) of
the Internal Revenue Code when the same are used solely and
exclusively for the purpose of the organization, if not conducted
for profit and no part of the net earnings of which inures to the
benefit of any private individual or member thereof, shall be
exempt from taxation.

(b) The exemption provided for in this section shall apply to
the property of all organizations meeting the requirements of this
section, subdivision (b) of Section 4 of Article XIII of the
California Constitution, and paragraphs (1) to (4), inclusive, (6),
and (7) of subdivision (a) of Section 214.

(c) (1) The exemption specified by subdivision (a) shall not be
denied to a property on the basis that the property is used for
fraternal, lodge, or social club purposes.

(2) With regard to this subdivision, the Legislature finds and
declares all of the following:

(A) The exempt activities of a veterans’ organization as
described in subdivision (a) qualitatively differ from the exempt
activities of other nonprofit entities that use property for fraternal,
lodge, or social club purposes in that the exempt purpose of the
veterans’ organization is to conduct programs to perpetuate the
memory of deceased veterans and members of the Armed Forces
and to comfort their survivors, to conduct programs for religious,
charitable, scientific, literary, or educational purposes, to sponsor
or participate in activities of a patriotic nature, and to provide social
and recreational activities for their members.

(B) In light of this distinction, the use of real property by a
veterans’ organization as described in subdivision (a), for fraternal,
lodge, or social club purposes is central to that organization’s
exempt purposes and activities.

(C) In light of the factors set forth in subparagraphs (A) and
(B), the use of real property by a veterans’ organization as
described in subdivision (a) for fraternal, lodge, or social club
purposes, constitutes the exclusive use of that property for a
charitable purpose within the meaning of subdivision (b) of Section
4 of Article XIII of the California Constitution.

(d) The exemption provided for in this section shall not apply
to any portion of a property that consists of a bar where alcoholic
beverages are served. The portion of the property ineligible for
the veterans’ organization exemption shall be that area used
primarily to prepare and serve alcoholic beverages.

(e) An organization that files a claim for the exemption provided
for in this section shall file with the assessor a valid organizational
clearance certificate issued pursuant to Section 254.6.

(f) This exemption shall be known as the “veterans’ organization
exemption.”

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Notwithstanding Section 2229 of the Revenue and
Taxation Code, no appropriation is made by this act and the state
shall not reimburse any local agency for any property tax revenues
lost by it pursuant to this act.

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This act provides for a tax levy within the meaning of
Article IV of the Constitution and shall go into immediate effect.