The Senate Governance and Finance Committee voted 5 to 2 on Wednesday. The legislation now goes on to another committee for review.
SB 323, also called the Youth Equality Act, would deny tax-exempt status to nonprofit youth groups that discriminate based on gender identity, race, sexual orientation, nationality, religion or religious affiliation.
This means that those organizations would have to pay corporate taxes on donations, membership dues, camp fees and other sources of income - including sales on food, beverages and homemade items sold at fundraisers.
Long Beach Democrat Sen. Ricardo Lara spearheaded SB 323. He says the bill "seeks to end the unfortunate discriminatory and outdated practices by certain youth groups."
The Boy Scouts of America reaffirmed the Texas-based organization's ban on openly gay members last summer then announced in January that it was revisiting the decision. They have yet to comment following Wednesday's vote.
The Associated Press contributed to this report.