California Democrats Seek to End Tax-Exempt Status of Patriot Groups

The California State Capitol building in Sacramento on April 18, 2022. John Fredricks/The Epoch Times

California Democrats appear to be using the Jan. 6 hearings in Washington D.C. as a catalyst to push legislation aimed at targeting the tax-exempt status of patriot groups in the state. The legislation suggests these groups might pose a threat of “insurrection.”

Senate Bill 834 would authorize state Attorney General Rob Bonta to review non-profit groups and refer cases to the California Franchise Tax Board to possibly remove their tax-exempt status supposedly to protect against “insurrection.”

The bill, authored by state Sen. Scott Wiener (D-San Francisco), would empower the attorney general to determine whether or not a non-profit organization “has actively engaged in, or incited the active engagement in, acts or conspiracies” and require the attorney general to notify the California Franchise Tax Board—the state equivalent of the IRS—to revoke the tax-exempt status of any organization found to be in violation.

The bill would grant too much power to the attorney general and could be used to weaponize the California Franchise Tax Board against conservative groups, a person familiar with the California legislature who spoke on condition of anonymity, told The Epoch Times.

“Removing tax-exempt status by AG determination without a method to redress, basically makes the AG the judge, jury, and executioner for nonprofits and their tax-exempt status in the state, all under the guise of Jan. 6,” the person said, who declined to give his name out of fear of reprisal.

Catherine Engelbrecht, founder of True the Vote, questioned why—if the bill is non-political as Democrats claim—don’t its supporters mention violent leftwing nonprofit groups.

“So, are they referring to Black Lives Matter and Antifa, the organizations that have wreaked so much havoc and caused so much destruction?” she asked.

“We are at a sobering moment in America, where the political echo chamber in places like California and others where there is very little divergence of thought tolerated quickly morphs from a republic to tyranny,” she told The Epoch Times. “It should be a sobering warning to any Californian with a pro-liberty mindset. It sounds like they’re being marked for takedown.”

True the Vote founder and president Catherine Engelbrecht makes a point during a presentation on ballot trafficking at the Arizona statehouse on May 31, 2022. Seated next to her is True the Vote data investigator Gregg Phillips. Allan Stein/The Epoch Times

Engelbrecht hopes that “cooler heads prevail” and the bill is rejected.

“We’re at a point where you have to dig deep to know why you believe what you believe and then stand fast to that because things are just going to get weirder and weirder,” she said. “It’s just some kind of bizarre brainwashing that that seems to have taken hold where up is down and two plus two is five. We’re in very dangerous times.”

The IRS Scandal

The bill seems to propose legalizing tactics eerily similar to those used by the Internal Revenue Service (IRS) during former President Barack Obama’s administration to target patriot groups, including the Tea Party.

News of the IRS scandal broke in May 2013, but the nefarious activities of the agency had begun more than three years prior. In August 2010, the IRS made a list of groups to target, especially those with “Tea Party, Patriots, or 9/12 in their names,” according to a Treasury Inspector General report released on May 14, 2013.

IRS Commissioner Doug Shulman testified there was “absolutely no targeting” of conservative groups but later stepped down. Shortly after, his replacement Steven Miller also resigned.

Lois Lerner, the IRS director responsible for the oversight of tax-exempt groups, had met with Department of Justice (DOJ) officials about targeting conservative groups. Initially, Lerner claimed she was innocent but later took the fifth. She was placed on administrative leave, and the U.S. House of Representatives held her in contempt of Congress. Lerner later resigned and retired with a full pension.

Demonstrators gather at a T.E.A. (Taxed Enough Already) Party in Santa Monica, Calif., on April 15, 2009. David McNew/Getty Images

Tea Party Patriots

Dan Farley, a Tea Party organizer, told The Epoch Times that SB 834 is an attempt by the California Democrats to bolster its left-wing power base in the state.

“Would the AG be pursuing those Democrat mules and Soros nonprofits exposed by geo-tracking like in the movie 2000 Mules, or patriot groups that the current CA AG hates?” he posted on Facebook.

“Our founders put in many layers to our government for a reason, so it wouldn’t be easy to centralize power and create tyranny quickly. This is your warning to take notice that big government likely intends to weaponize the CA AG’s office to crush all those who would like to shrink the size and impact of government in our lives,” he wrote in the post.

“The Dems did it under Obama with weaponizing the IRS and we all agreed that was wrong. How is this any different?” he asked.

Farley suggested Bonta should be more concerned with “bringing law and order to the streets,” and demanding the Biden administration secure the southern border.

Referring to the recently released Dinesh D’Souza documentary “2000 Mules”, which was based on research by True the Vote, Farley said Bonta should be focused on “prosecuting those who intentionally cheated in elections using the same approach True the Vote did with geo-tracking.”

“Why give someone who isn’t even doing the basics of his job more power?” he said.

California Attorney General Rob Bonta speaks at a news conference in Sacramento on Aug. 17, 2021. Rich Pedroncelli/AP Photo

True the Vote

Nearly a decade ago, Engelbrecht testified about the unfair targeting of so-called patriot groups. She went public about the IRS scandal and described how her business and the Tea Party group King Street Patriots, which she also founded, were targeted by the IRS.

She accused the Obama administration of “constant government persecution” and sued the IRS, forcing it to admit they had systematically targeted conservative organizations.

“The federal court found that what happened to us was, in fact, not just a miscarriage of justice, but an abridgment of our civil rights,” she said.

The bill should serve as a “warning shot to all California nonprofits about what’s coming next.”

“It’s a disturbing reality check,” Englebrecht said. “If California were to pass something like this, it should send a chill down the spine of every Californian to know that government is intent upon silencing individuals and organizations based upon this presupposed political narrative.

“Having been through this machine once before with the IRS,” she said, “no good comes from the abridgment of free speech and the targeting nonprofit organizations on the basis of perceived political identity.”

Senate Committee Hearing

The California Assembly tax and revenue committee passed the bill to the Assembly public safety committee. Republican committee members abstained from the vote.

SB 834 passed the Senate floor 28-12 on May 23. It must pass the Assembly public safety and appropriations committees before it can advance to the Assembly floor and then California Gov. Gavin Newsom’s desk to be signed into law

Sen. Wiener told the committee the intent of the bill is to expand the California Franchise Tax Board’s authority “to revoke the tax-exempt status of nonprofits if the attorney general determines that the nonprofit has engaged in or incited various crimes including treason, insurrection, and seditious conspiracy.”

Wiener said SB 834 would fill an important gap in the law.

“While the Franchise Tax Board is currently directed by statute, to suspend the tax-exempt status of nonprofits supporting international terrorism, there is no explicit authority concerning nonprofits that attacked our democracy and literally tried to overthrow our government,” he said.

Sen. Scott Wiener (D-San Francisco) at the Equality California Los Angeles Equality Awards 20th Anniversary event at JW Marriott Los Angeles on Sept. 28, 2019. Amanda Edwards/Getty Images

“We know from Jan. 6—we’re hearing more about it in recent days—that there was a very organized effort to prevent the peaceful transition of power and to overthrow our government. And tragically, there were nonprofits involved. And we want to make sure that going forward, that these nonprofits do not get tax subsidies from California taxpayers,” Wiener said.

Two main witnesses spoke in favor of the bill. No one opposed it.

One witness representing a group called Indivisible California State Strong, claimed her group represents 80,000 activists across the states. The groups formed across the country after the 2016 presidential election “to oppose the bigoted and tyrannical Trump administration,” she said.

“Acts in support of an insurrection are already illegal. But also, it is of course the opposite of charitable to foment an attempted coup based upon the big lie about the known valid results of the 2020 election,” she said.

Beth Holtzman, western states civil rights counsel at the Anti-Defamation League (ADL) told the committee that “after a cursory investigation, we uncovered evidence that a range of groups may be making misrepresentations in their tax filings in order to secure tax-exempt status.”

Holtzman accused some organizations of paying their leaders excessive salaries and diverting funds to enrich friends and family members at the expense of the tax-exempt entity.

“In addition, hateful groups with tax-exempt status, maybe using that status to raise money for violent and illegal purposes,” she said.

ADL has expertise in “tracking and exposing extremist threats across the ideological spectrum,” she said.

“In the wake of the Jan. 6 attack on the U.S. Capitol and the rising tide of hate and extremism across the country, we’ve become increasingly concerned about the ways in which extremist and hateful groups operating as charitable nonprofits may be abusing their tax-exempt status to further their violent or hateful objectives.”