Arden Carmichael, Inc. v. County of Sacramento

This case presents two principal issues: (1) Did a fee imposed by the County of Sacramento (the County) upon a nonprofit organization based on a percentage of the gross receipts of bingo games violate California’s Constitution? (2) Does Penal Code section 326.5 prohibit a nonprofit organization from using bingo proceeds to pay attorney fees associated with the bingo operation? We conclude that the fee was unlawful, and that the statute does not prohibit payment of attorney fees from bingo proceeds.

Article XIII, section 26, subdivision (d) of the California Constitution states: “A nonprofit organization ... is exempt from any business license *1073 tax or fee measured by income or gross receipts that is levied by a county . . . .” Despite this clear constitutional provision, the County, relying on former subdivision (/)(2) of Penal Code section 326.5, a statute which has now been amended, required nonprofit organizations to pay a fee of 1 percent of monthly gross bingo receipts over $5,000. That fee, however, violated article XIII, section 26, subdivision (d) and was, therefore, invalid.

Subdivision (b) of Penal Code section 326.5 prohibits payment to any person of a…