(NBC News) -- A proposed law in California to remove a state tax exemption for youth groups like the Boy Scouts that don't allow gay members would set a dangerous precedent, according to an association of nonprofits.
The legislation, introduced by Democratic State Sen. Ricardo Lara on Tuesday, would deny exemptions from state corporate taxes and taxes on items such groups sell. It would also require them to pay corporate taxes on donations and other forms of income.
Lara and LGBT advocacy group, Equality California, said the bill was aimed at groups like the Boy Scouts of America, which has faced increasing protests over its longstanding policy banning gay Scouts and leaders. An expert said she believed it was the first time such a law had been proposed, though it follows the loss of corporate sponsorship dollars to the BSA due to the policy.
The California Association of Nonprofits, which has 1,500 member organizations, said it opposed the legislation in its current form, even though the group opposes discrimination based upon sexual orientation or gender identity as outlined in the bill,
SB 323.
" … we are against using the tax exemption as a way to compel change in a nonprofit's policies," Kris Lev-Twombly, the group's director of public policy, wrote late Wednesday in an email. "Stripping nonprofits of tax exemption on ideological grounds is a slippery slope. Nonprofits are the embodiments of free speech in our society. When we disagree with a nonprofit's policies, we should vote by moving our donation dollars and our volunteer feet elsewhere."
The association said it is difficult to estimate how many of California's 50,000 nonprofits could be impacted because there is no reliable data on how many discriminate based upon sexual orientation.
"To lose state tax exemption in California could be significant for a nonprofit organization," he said. "The bill is narrow in the sense that the provision applies specifically to youth organizations, but the question is how many organizations in California might be found to discriminate as outlined in the bill."
The law would require two-thirds approval of both houses of the state legislature to win approval. Lara said the state already bans discrimination based on sexual orientation in public accommodations and government programs.
"Our state values the important role that youth groups play in the empowerment of our next generation; this is demonstrated by rewarding organizations with tax exemptions supported financially by all Californians," he said in a statement. "SB 323 seeks to end the unfortunate discriminatory and outdated practices by certain youth groups by revoking their tax exemption privilege should they not comply with our non-discrimination laws."
The Boy Scouts of America declined to comment on the legislation, which comes about two weeks after it postponed a decision on whether to end the policy at the national level and leave local sponsoring organizations free to decide for themselves whether to admit gay Scouts.
The BSA, a private youth organization, said it had received an outpouring of feedback on the membership guidelines after the potential change was announced in late January, and that it would take action on the issue at its national meeting in May.
More than two-thirds of Scouting groups are affiliated with religious bodies. Among the top religious sponsors, The Church of Jesus Christ of Latter-day Saints have called for more time to discuss the issue, while the Southern Baptists on Tuesday passed a
resolution rejecting the proposed change, according to the Baptist Press.
Pat Read, an independent consultant for nonprofits and foundations nationwide, said she believed such legislation was a first. However, she said there was a precedent, noting a
1983 Supreme Court case in which the IRS said it would no longer provide tax exempt status to private schools that practiced racial discrimination – a fight the federal tax agency won.
Read said the bill would have a financial impact and could potentially deter people from making donations.
"When the federal government or a state government stands up and says that this nonprofit is not a good nonprofit because of some policy it has adopted, it affects the ability of people to support that group, it affects how much money it has available to support its programs versus paying taxes, and it affects public opinion about the value of its work," she said by phone from Boulder, Colo. "And all three things are important and all three things are at stake in this legislation."
She said this legislation could wind up in court if it is approved, noting private organizations would likely object and say, "you have no right to try to tell us what to do."
"Some of them will be saying, you know, 'well tough we don't need the tax exemption,'" she added. "But there will be a price to be paid for that."
