In an effort to reduce a burgeoning budget deficit in the State of California, legislators have proposed two massive new tax packages that will affect private golf and country clubs. The proposals will apply the state’s sales tax to private club activities. As such, initiation fees and dues could soon be hit with this tax.
The first bill, AB 2540, imposes California’s sales tax on 27 services that are currently not taxed by the state, including access to country clubs through the imposition of a charge. This is a direct attack on the private club industry. Indeed, the legislation’s author, Assemblyman Mike Gatto (D-Burbank), has acknowledged that the purpose of his bill is to target private clubs and their members.
The second bill, AB 1963, actually seeks to lower the overall sales tax rate but also expand it to cover services not currently taxed. Unfortunately, this expansion would include all private club fees and services. While the bill’s sponsor, Assemblywoman Alyson Huber (D-El Dorado Hills), has correctly acknowledged that California’s sales tax is too high, her bill would significantly impact the bottom line of many California clubs.
As you are aware, California requires a two-thirds majority vote in both chambers of the legislature for any tax increase to pass and there is very little chance that Republicans will sign-off on either of these measures. However, it would only take one Republican vote in the State Assembly and two in the State Senate to pass these bills. If that happens, Governor Jerry Brown (D) will sign them into law.
It goes without saying that raising taxes during a recession is the wrong way to balance a budget. The imposition of state and local sales taxes on initiation fees and dues will cause many prospective members to think twice about joining a club and that will cost our industry and the state jobs. Without a doubt, that is something California just cannot afford.
NCA is working with our member clubs and the California State Club Association to ensure that these bills do not reach the Governor’s desk. As always, we will keep you informed of the actions taken by the California Legislature in the days and weeks to come.
Should you have any questions or concerns regarding these proposals, please do not hesitate to contact NCA’s Vice President of Government Relations and General Counsel, Brad D. Steele, at [email protected].
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