Tax Board Moves Against Clubs That Discriminate

SACRAMENTO — Members of private clubs that discriminate on the basis of race, sex or religion will not be able to deduct business expenses at such clubs from their state taxes after this year, under a regulation adopted Tuesday by the Franchise Tax Board.

In the hope of ending the discriminatory practices of prominent private clubs, the board sided with minority and women’s groups who argued that club members’ meals and dues are being subsidized by taxpayers who are barred from joining.

“By allowing this practice to continue unchallenged, the state of California has been subsidizing the discrimination practiced by those clubs,” said board member Conway Collis, who sponsored the regulation.

Among the private clubs that have a reputation for discrimination and could be affected by the regulation are the Jonathon Club and the California Club in Los Angeles, the Bohemian Club and the Pacific Union Club in San Francisco, and the Sutter Club in Sacramento, an aide to Collis said.

These clubs, dominated for decades by white, wealthy men, have long provided a private social setting where major business decisions are often made. In some cases, membership fees can reach $10,000 and monthly dues can cost hundreds of dollars.

John Shiner, a spokesman for the Jonathon Club, questioned whether the board had the legal authority to adopt its regulation. He would not discuss whether the club discriminates against any group but said in a telephone interview, “There is nothing contained in the club’s by-laws which restricts eligibility for membership.”

Before the regulation takes effect on Jan. 1, 1988, the Franchise Tax Board will determine which clubs engage in discriminatory practices by examining their by-laws, monitoring their activities and soliciting information from civil rights and women’s groups. The board will use its findings as a basis for disallowing state tax deductions by club members.

Backers of the measure hope that pressure from members who can no longer claim tax deductions for their expenses will force the clubs to admit women, minorities, Jews and other groups that have been discriminated against in the past.

In cases where clubs abandon their discriminatory practices, normal tax rules would again apply to their members.

Before adoption of the regulation can become final, the Franchise Tax Board must allow 45 days for public comment. The three-member board, which tentatively adopted the regulation by a 2-0 vote Tuesday, must then reaffirm its decision.

State Controller Gray Davis, who serves as chairman of the board, said he expects the rule to be ratified by the board unless some unforeseen legal issue arises.

“We simply can’t ask taxpayers to subsidize discrimination in any form,” Davis said in casting his vote in favor of the regulation.

Groups Give Opinions

Before adopting the rule, the board heard from representatives of a variety of civil rights and women’s groups that favor the regulation, including the Los Angeles chapter of the National Assn. for the Advancement of Colored People, the Women Lawyers’ Assn. of Los Angeles, the Center for Law in the Public Interest, California Women Lawyers and the California Federation of Business and Professional Women.

“The time has come for the complete and total eradication of discriminatory clubs in this country,” Patricia A. Shiu, a spokeswoman for California Women Lawyers, told the board.

A spokesman for the California Club declined to comment on the tax law change. The managers of the Bohemian, Pacific Union and Sutter clubs were unavailable for comment Tuesday. In the past, spokesmen for these clubs have denied that they discriminate against women or minorities but have insisted that they--not government officials--should be able to admit whomever they please.

In Orange County, a spokesman for one male-only eating club said he didn’t know whether the Tax Board ruling would affect his operation. The club, known as the Ritz Brothers, meets at the Ritz restaurant in Newport Beach. Hans Prager said the club he founded nine years ago has 600 members.

“Maybe I should start the Ritz Sisters,” Prager said.

He questioned whether men and women should belong to the same social club. “The Ritz Brothers is a men’s club where about 300 of us get together once a month for camaraderie, food and wine. It’d look kind of funny to have something like 20 women sitting in on a group like this.”

Under Attack

For years, private institutions with reputations for discriminatory membership policies have come under attack as government agencies and a handful of corporations have taken pains to separate themselves from these clubs.

The Los Angeles Community Redevelopment Agency has barred its employees from conducting agency business at such clubs and the Los Angeles County Bar Assn. has long refused to hold meetings in them.

Last year, Atlantic Richfield Co., the largest corporation in Southern California, decided that it would no longer reimburse executives for memberships in the clubs. BankAmerica Corp. has adopted a similar policy.

The California Judges Assn. last year adopted a guideline telling its members that they should not belong to the clubs, and on Saturday, the board of governors of the State Bar of California will consider a rules change that would exclude from participation in the Bar’s annual Conference of Delegates any local bar association that sponsors an event in a discriminatory club.

In a separate action Tuesday, Atty. Gen. John Van de Kamp issued an opinion that the state Department of Alcoholic Beverage Control has the power to revoke liquor licenses of private clubs that discriminate on the basis of race, sex or religion.

ABC Suspends License

In January, the ABC suspended the liquor license of the Red Onion restaurant chain for barring minorities from its discos, the first time the department had taken such action for violations of the state’s Unruh Civil Rights Act.

However, because the act differentiates between public accommodations such as the Red Onion and private groups such as social clubs or country clubs, the ABC has contended that it could not take similar action in response to allegations of discriminatory membership requirements.

Van de Kamp said his office believes that while the ABC is not required to revoke the licenses of clubs that discriminate, the department does have the authority to do so.

The ABC must be able to prove that the discrimination is intentional and “contrary to the public welfare or morals,” according to the opinion.

Legislation that would prohibit the ABC from issuing or renewing a liquor license to a private club that makes membership decisions on the basis of race, sex or religion will be heard by the Assembly Government Organization Committee next month.

Times staff writer Doug Brown contributed to this story.