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TO BE PUBLISHED IN THE OFFICIAL REPORTS
 

OFFICE OF THE ATTORNEY GENERAL
 

State of California
 

DANIEL E. LUNGREN
 

Attorney General
 

OPINION : 

: No. 95-513 

of : 

: August 23, 1995 

DANIEL E. LUNGREN : 

Attorney General : 

: 

CLAYTON P. ROCHE : 

Deputy Attorney General : 

: 

THE HONORABLE SAL CANELLA, MEMBER OF THE CALIFORNIA 

ASSEMBLY, has requested an opinion on the following question: 

May a city or county impose a fee upon a tax exempt nonprofit organization measured 

as a percentage of the gross receipts derived from the operation of bingo games? 

CONCLUSION 

A city or county may not impose a fee upon a tax exempt nonprofit organization 

measured as a percentage of the gross receipts derived from the operation of bingo games. 

ANALYSIS 

Article IV, section 19 of the Constitution states that "the Legislature by statute may 

authorize cities and counties to provide for bingo games, but only for charitable purposes." The 

Legislature has implemented this constitutional provision by enacting a comprehensive statutory 

scheme authorizing cities and counties to allow specified nonprofit organizations, mobilehome park 

associations, and senior citizens organizations to conduct bingo games for charitable purposes. Penal 

Code section 326.51 provides: 

1

All references hereafter to the Penal Code are by section number only. 

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"(a) Neither this chapter [prohibiting lotteries] nor Chapter 10 [prohibiting 

gaming] . . . applies to any bingo game which is conducted in a city, county, or city and 

county pursuant to an ordinance enacted under Section 19 of Article IV of the State 

Constitution, provided that the ordinance allows games to be conducted only by 

organizations exempted from the payment of the bank and corporation tax by Sections 

23701a, 23701b, 23701d, 23701e, 23701f, 23701g, and 23701l of the Revenue and 

Taxation Code and by mobilehome park associations and senior citizens organizations; 

and provided that the receipts of those games are used only for charitable purposes. 

". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

"(f) An organization authorized to conduct bingo games pursuant to subdivision 

(a) shall conduct a bingo game only on property owned or leased by it, or property 

whose use is donated to the organization, and which property is used by that 

organization for an office or for performance of the purposes for which the organization 

is organized. Nothing in this subdivision shall be construed to require that the property 

owned or leased by, or whose use is donated to, the organization be used or leased 

exclusively by, or donated exclusively to, that organization. 

"(g) All bingo games shall be open to the public, not just to the members of the 

authorized organization. 

"(h) A bingo game shall be operated and staffed only by members of the 

authorized organization which organized it. Those members shall not receive a profit, 

wage, or salary from any bingo game. Only the organization authorized to conduct a 

bingo game shall operate such a game, or participate in the promotion, supervision, or 

any other phase of such a game. This subdivision does not preclude the employment 

of security personnel who are not members of the authorized organization at such a 

bingo game by the organization conducting the game. 

"(i) No individual, corporation, partnership, or other legal entity, except the 

organization authorized to conduct a bingo game, shall hold a financial interest in the 

conduct of such a bingo game. 

"(j) With respect to organizations exempt from payment of the bank and 

corporation tax by Section 23701d of the Revenue and Taxation Code, all profits 

derived from a bingo game shall be kept in a special fund or account and shall not be 

commingled with any other fund or account. Those profits shall be used only for 

charitable purposes. 

"(k) With respect to other organizations authorized to conduct bingo games 

pursuant to this section, all proceeds derived from a bingo game shall be kept in a 

special fund or account and shall not be commingled with any other fund or account. 

Proceeds are the receipts of bingo games conducted by organizations not within 

subdivision (j). . . . 

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"(l) (1) A city, county, or city and county may impose a license fee on each 

organization which it authorizes to conduct bingo games. The fee, whether for the 

initial license or renewal, shall not exceed fifty dollars ($50) annually, except as 

provided in paragraph (2). If an application for a license is denied, one-half of any 

license fee paid shall be refunded to the organization. 

"(2) In lieu of the license fee permitted under paragraph (1), a city, county, or 

city and county may impose a license fee of fifty dollars ($50) paid upon application. 

If an application for a license is denied, one-half of the application fee shall be refunded 

to the organization. An additional fee of one percent of the monthly gross receipts over 

five thousand dollars ($5,000) derived from bingo games shall be collected monthly by 

the city, county, or city and county issuing the license." 

". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ." 

(Italics added.) 

We are asked to determine whether the component of the alternative fee of section 326.5, subdivision 

(l)(2), of "one percent of the monthly gross receipts over five thousand dollars ($5,000) derived from 

bingo games" may continue to be collected from certain nonprofit organizations in light of a recent 

amendment to the Constitution. In 1994 the electorate adopted Proposition 176, adding subdivision (d) 

to section 26 of article XIII of the Constitution as follows: 

"A nonprofit organization that is exempted from taxation by Chapter 4 

(commencing with Section 23701) of Part II of Division 2 of the Revenue and Taxation 

Code or Subchapter F (Commencing with Section 501) of Chapter 1 of Subtitle A of 

the Internal Revenue Code of 1986, or the successor of either, is exempt from any 

business license tax or fee measured by income or gross receipts that is levied by a 

county or city, whether charter or general law, a city and county, a school district, a 

special district, or any other local agency." 

We conclude that nonprofit organizations specified in the new constitutional amendment may not be 

charged the alternative fee of section 326.5, subdivision (l)(2). 

In 78 Ops.Cal.Atty.Gen. ___ (1995), we recently examined in detail the language of the 

1994 constitutional amendment. We found the language "clear and unambiguous" (id., at p. __), 

quoting from Delaney v. Superior Court (1990) 50 Cal.3d 785, 798, as follows: 

"`We begin with the fundamental rule that our primary task is to determine the 

lawmakers' intent. (Brown v. Kelly Broadcasting Co. (1989) 48 Cal.3d 711, 724.) In 

the case of constitutional provisions adopted by the voters, their intent governs. 

(Kaiser v. Hopkins (1936) 6 Cal.2d 537, 538; Armstrong v. County of San Mateo 

(1983) 146 Cal.App.3d 597, 618.) To determine intent, "`The court turns first to the 

works themselves for the answer.'" (Brown v. Kelly Broadcasting Co., supra, 48 

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Cal.3d 711, 724, quoting Moyer v. Workmen's Comp. Appeals Bd. (1973) 10 Cal.3d 

222, 230.) "If the language is clear and unambiguous there is no need for construction, 

nor is it necessary to resort to indicia of the intent of the Legislature (in the case of a 

statute) or of the voters (in the case of a provision adopted by the voters)." (Lungren v. 

Deukmejian (1988) 45 Cal.3d 727, 735.)'" (Id., at p. __.) 

We concluded: 

". . . The apparent intent of the voters in adopting Proposition 176 was thus to 

prohibit the imposition of a business license tax upon nonprofit organizations when it is 

measured by income or gross receipts. The voters in no way purported to affect the 

ability of local agencies under proper constitutional or statutory authority to levy such 

taxes, in the words of the Legislative Analyst, `based on other methods.' In fact the 

Legislative Analyst even pointed out some other methods, such as `a percentage of 

payroll . . . number of employees or business square footage.'" (Id., at p. ___.) 

Here the Legislature has provided cities and counties statutory authority to levy fees upon 

nonprofit organizations without violating the new constitutional exemption. Such authority is found in 

section 326.5, subdivision (l)(1), the alternative license fee of "fifty dollars ($50) annually." 

Of course, a city or county may continue to impose the alternative fee of section 326.5, 

subdivision (l)(2), upon organizations that are not specified in the constitutional exemption. As 

previously quoted, subdivision (a) of 326.5 allows bingo games to be conducted "by organizations 

exempted from the payment of the bank and corporation tax by Section 23701a, 23701b, 23701d, 

23701e, 23701f, 23701g, and 23701l of the Revenue and Taxation Code and by mobilehome park 

associations and senior citizens organizations." The constitutional exemption, on the other hand, is for 

nonprofit organizations "exempted from taxation by [sections 237701-23710] . . . of the Revenue and 

Taxation Code or [sections 501-528] . . . of the Internal Revenue Code . . . ." While an overlap is 

clearly present, the two provisions are not identical in scope. 

Hence, there is no need for the Legislature to repeal subdivision (l)(2) of section 326.5 

in light of the new constitutional exemption. The alternative license fee may still be charged those 

entities not covered by the constitutional provision. In this manner both provisions may be harmonized 

and given effect. (Cf. Long Beach Police Officers Assn. v. City of Long Beach (1988) 46 Cal.3d 736, 

744; Lungren v. Deukmejian (1988) 45 Cal.3d 727, 735.) 

A "business license tax" is typically defined as a "levy upon the privilege of doing 

business within the taxing jurisdiction." (Weekes v. City of Oakland (1978) 21 Cal.3d 386, 394; 78 

Ops.Cal.Atty.Gen., supra, ___.) The operation of bingo games under the terms of section 326.5 is 

obviously a "business" as that term is normally defined. (See Webster's Third New Internat. Dict. 

(1971) p. 302 ["commercial or mercantile activity customarily engaged in as a means of livelihood and 

typically involving some independence of judgment and power of decision"]; Evid. Code, ' 1270 

["every kind of business, governmental activity, profession, occupation, calling, or operation of 

institutions, whether carried on for profit or not"]; Lab. Code, ' 350, subd. (f) ["any business 

establishment, or enterprise, regardless of where conducted"]; Rev. & Tax. Code, ' 6013 ["any activity 

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engaged in by any person or caused to be engaged in by him with the object of gain, benefit, or 

advantage, either direct or indirect"].) 

Significantly the "business" of operating bingo games in California must have as its 

purpose the raising of revenues "only for charitable purposes." (Cal. Const., art. IV, ' 19; ' 326.5, 

subd. (a).) It is apparent that the framers of Proposition 176, as well as the electorate, were primarily 

concerned with preventing the reduction of funds available for the charitable purposes of nonprofit 

organizations caused by the imposition of local taxes. (Ballot Pamp., Prim. Elec. (June 7, 1994) pp. 

10-13.) 

As we indicated in our recent opinion, business license taxes may have both regulatory 

and revenue raising purposes. (78 Ops.Cal.Atty.Gen., supra, ___; see Bus. & Prof. Code, ''

16000-16100; Gov. Code, '' 37100.5, 37101; Rev. & Tax. Code, '' 7284, 7284.1.) If a city or county 

is dissatisfied with the fees generated from nonprofit organizations under the terms of section 326.5, 

subdivision (l)(1), it may seek a statutory increase from the Legislature. (See Cal. Const., art. IV, ' 19; 

City and County of San Francisco v. Workers' Comp. Appeals Bd. (1978) 22 Cal.3d 103, 113; County 

of Los Angeles v. Sasaki (1994) 23 Cal.App.4th 1442, 1453-1454.) Of course, its final recourse would 

be to prevent bingo games from being conducted within its jurisdiction. If it determined, for example, 

that the fees collected did not cover the regulatory expenses involved, the city or county need only 

repeal its ordinance allowing the operation of bingo games. 

We recognize that "[c]onstitutional provisions and statutes granting exemption from 

taxation are strictly construed to the end that such concession will be neither enlarged not extended 

beyond the plain meaning of the language employed." (Cedars of Lebanon Hosp. v. County of L.A. 

(1950) 35 Cal.2d 729, 734.) Moreover, the framers of Proposition 176 and the electorate were most 

likely unaware of the alternative license fee of section 326.5, subdivision (l)(2), when the constitutional 

amendment was approved last year. (Ballot Pamp., Prim. Elec. (June 7, 1994) pp. 10-13; see 

Legislature v. Eu (1991) 54 Cal.3d 492, 504-505; Raven v. Deukmejian (1990) 52 Cal.3d 336, 349; In 

re Lance (1985) 37 Cal.3d 873, 889; Mosk v. Superior Court (1979) 25 Cal.3d 474, 495; Amador 

Valley Joint Union School District v. State Board of Equalization (1978) 22 Cal.3d 208, 245-246.) 

Nevertheless, we find the language of the Constitution to be clear and unambiguous 

with respect to the question presented. The 1994 constitutional amendment is self-executing (see 

Flood v. Riggs (1978) 80 Cal.App.3d 138, 154) and binds the Legislature (see People v. Navarro 

(1972) 7 Cal.3d 248, 260; Pooled Money Investment Bd. v. Unruh (1984) 153 Cal.App.3d 155, 160; 

Molar v. Gates (1979) 98 Cal.App.3d 1, 24). The alternative license fee of section 326.5, subdivision 

(l)(2), may still be imposed with respect to those entities not specified in the constitutional provision. 

Moreover, cities and counties may continue to levy business license fees against nonprofit 

organizations under the express terms of section 326.5, subdivision (l)(1). 

We conclude that a city or county may not impose a fee upon a tax exempt non-profit 

organization as a percentage of the gross receipts derived from the operation of bingo games. 

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