BILL NUMBER: AB 1859 CHAPTERED
BILL TEXT
CHAPTER 416
FILED WITH SECRETARY OF STATE SEPTEMBER 9, 2004
APPROVED BY GOVERNOR SEPTEMBER 9, 2004
PASSED THE ASSEMBLY AUGUST 16, 2004
PASSED THE SENATE AUGUST 10, 2004
AMENDED IN SENATE JULY 27, 2004
AMENDED IN SENATE JUNE 24, 2004
AMENDED IN SENATE JUNE 15, 2004
AMENDED IN ASSEMBLY APRIL 12, 2004
INTRODUCED BY Assembly Member Nakano
FEBRUARY 2, 2004
An act to add Section 17350.5 to the Corporations Code and to
amend Sections 17941 and 17945 of the Revenue and Taxation Code,
relating to limited liability companies.
LEGISLATIVE COUNSEL'S DIGEST
AB 1859, Nakano. Limited liability companies: certificate of
cancellation.
The Beverly-Killea Limited Liability Company Act authorizes the
creation of limited liability companies as a form of business
organization. Existing law imposes a minimum franchise tax on
certain corporations and exempts from the minimum franchise tax for
their first taxable year, corporations that meet specified
requirements, except that this exemption does not apply to certain
types of corporations, including limited liability companies.
Existing law prohibits the term of existence of a limited liability
company being reduced or terminated by a decree of dissolution,
withdrawal, or cancellation unless the company obtains from the
Franchise Tax Board a tax clearance certificate.
This bill would, if a domestic limited liability company has not
conducted any business, provide that a majority of the members, or if
there are no members, the majority of the managers or, if none, the
person or majority of the persons signing the articles of
organization, could execute and acknowledge a certificate of
cancellation of the articles of organization meeting specified
criteria. The bill would require that the certificate of
cancellation be filed with the Secretary of State within 12 months of
the filing of the articles of organization. The bill would provide
that, upon the filing of that certificate of cancellation, a limited
liability company is cancelled and its powers, rights, and privileges
cease. The bill would make the exemption from the minimum franchise
tax applicable to a limited liability company that files a
certificate of cancellation, but would not entitle the company to a
reimbursement of any annual taxes or fees already paid. The bill
would also exempt the limited liability company from the requirement
to obtain a tax clearance certificate and would require the Secretary
of State to notify the Franchise Tax Board of that cancellation.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 17350.5 is added to the Corporations Code, to
read:
17350.5. (a) Notwithstanding any other provision of this
division, if a domestic limited liability company has not conducted
any business, only a majority of the members, or, if there are no
members, the majority of the managers, if any, or if no members or
managers, the person or a majority of the persons signing the
articles of organization, may execute and acknowledge a certificate
of cancellation of articles of organization, on a form prescribed by
the Secretary of State, stating all of the following:
(1) The name of the domestic limited liability company and the
Secretary of State's file number.
(2) That the certificate of cancellation is being filed within 12
months from the date the articles of organization were filed.
(3) That the limited liability company does not have any debts or
other liabilities, except as provided in paragraph (4).
(4) That the tax liability of the limited liability company will
be satisfied on a taxes-paid basis or that a person, limited
liability company, or other business entity assumes the tax
liability, if any, of the dissolving limited liability company as
security for the issuance of a tax clearance certificate from the
Franchise Tax Board and is responsible for additional taxes or fees,
if any, that are assessed under the Revenue and Taxation Code and
become due after the date of the assumption of tax liability.
(5) That the final tax return has been filed with the Franchise
Tax Board, as required under Part 10.2 (commencing with Section
18401) of Division 2 of the Revenue and Taxation Code.
(6) That the known assets of the limited liability company
remaining after payment of, or adequately providing for, known debts
and liabilities have been distributed to the persons entitled thereto
or that the limited liability company acquired no known assets, as
the case may be.
(7) That the limited liability company has not conducted any
business from the time of the filing of the articles of organization.
(8) That a majority of the managers or members voted, or, if no
managers or members, the person or a majority of the persons signing
the articles of organization, voted to dissolve the limited liability
company.
(9) If the limited liability company has received payments for
interests from investors, that those payments have been returned to
those investors.
(b) A certificate of cancellation executed and acknowledged
pursuant to subdivision (a) shall be filed with the Secretary of
State within 12 months from the date that the articles of
organization were filed. The Secretary of State shall file the
certificate of cancellation without the tax clearance certificate
specified in Section 17945 of the Revenue and Taxation Code, and
shall notify the Franchise Tax Board of the cancellation.
(c) Upon filing a certificate of cancellation pursuant to
subdivision (a), a limited liability company shall be cancelled and
its powers, rights, and privileges shall cease.
(d) A domestic limited liability company that filed articles of
organization on or after January 1, 2004, and that meets all of the
conditions described in subdivision (a) may file a certificate of
cancellation under this section.
SEC. 2. Section 17941 of the Revenue and Taxation Code is amended
to read:
17941. (a) For each taxable year beginning on or after January 1,
1997, a limited liability company doing business in this state (as
defined in Section 23101) shall pay annually to this state a tax for
the privilege of doing business in this state in an amount equal to
the applicable amount specified in paragraph (1) of subdivision (d)
of Section 23153 for the taxable year.
(b) (1) In addition to any limited liability company that is doing
business in this state and is therefore subject to the tax imposed
by subdivision (a), for each taxable year beginning on or after
January 1, 1997, a limited liability company shall pay annually the
tax prescribed in subdivision (a) if articles of organization have
been accepted, or a certificate of registration has been issued, by
the office of the Secretary of State. The tax shall be paid for each
taxable year, or part thereof, until a certificate of cancellation
of registration or of articles of organization is filed on behalf of
the limited liability company with the office of the Secretary of
State.
(2) If a taxpayer files a return with the Franchise Tax Board that
is designated as its final return, the Franchise Tax Board shall
notify the taxpayer that the annual tax shall continue to be due
annually until a certificate of cancellation is filed with the
Secretary of State pursuant to Section 17356 or 17455 of the
Corporations Code.
(c) The tax assessed under this section shall be due and payable
on or before the 15th day of the fourth month of the taxable year.
(d) For purposes of this section, "limited liability company"
means an organization, other than a limited liability company that is
exempt from the tax and fees imposed under this chapter pursuant to
Section 23701h or Section 23701x, that is formed by one or more
persons under the law of this state, any other country, or any other
state, as a "limited liability company" and that is not taxable as a
corporation for California tax purposes.
(e) Notwithstanding anything in this section to the contrary, if
the office of the Secretary of State files a certificate of
cancellation pursuant to Section 17350.5 of the Corporations Code for
any limited liability company, then paragraph (1) of subdivision (f)
of Section 23153 shall apply to that limited liability company as if
the limited liability company were properly treated as a corporation
for that limited purpose only, and paragraph (2) of subdivision (f)
of Section 23153 shall not apply. Nothing in this subdivision
entitles a limited liability company to receive a reimbursement for
any annual taxes or fees already paid.
SEC. 3. Section 17945 of the Revenue and Taxation Code is amended
to read:
17945. No decree of dissolution, withdrawal, or cancellation
shall be made and entered by any court, nor shall the county clerk of
any county or the Secretary of State file any decree of dissolution,
withdrawal, or cancellation or any other document by which the term
of existence of the limited liability company shall be reduced or
terminated, except as provided in subdivision (b) of Section 17350.5
of the Corporations Code, nor shall the Secretary of State file any
certificate of the surrender or cancellation by a foreign limited
liability company of its rights to do intrastate business in this
state unless the limited liability company obtains from the Franchise
Tax Board and files with the court, county clerk, or Secretary of
State, as the case may be, a tax clearance certificate indicating
that the Franchise Tax Board is satisfied from the available evidence
that all taxes and fees imposed by this chapter or all taxes imposed
by Part 11 (commencing with Section 23001) have been paid or are
secured by bond, deposit, or otherwise. Within 30 days after
receiving a request for a certificate, the Franchise Tax Board shall
either issue the certificate or notify the person requesting the
certificate of the amount of tax or fees that must be paid or the
amount of bond, deposit, or other security that must be furnished as
a condition of issuing the certificate. The issuance of the
certificate shall not relieve the taxpayer or any individual, bank,
or corporation from liability for any taxes, fees, penalties, or
interest imposed by this part or Part 11 (commencing with Section
23001). The Franchise Tax Board shall furnish a copy of the tax
clearance certificate to the Secretary of State.
SEC. 4. The amendments to Section 17941 of the Revenue and
Taxation Code made by this act shall apply to taxable years beginning
on or after January 1, 2005.