Amended in Senate June 15, 2014

Amended in Assembly May 15, 2013

Amended in Assembly May 2, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 296

Introduced by Assembly Member Wagner

February 11, 2013

begin delete An act to amend Section 6062 of the Business and Professions Code, relating to attorneys. end delete begin insert An act to amend Section 16350 of the Probate Code, relating to trusts, and declaring the urgency thereof, to take effect immediately. end insert

LEGISLATIVE COUNSEL’S DIGEST

AB 296, as amended, Wagner. begin delete Attorneys. end delete begin insert Trusts. end insert

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Existing law generally requires a trustee to allocate money received from an entity to income. However, existing law requires a trustee to allocate to principal money received from an entity that is a regulated investment company or a real estate investment trust if the money distributed is a capitol gain dividend for federal income taxes. Existing law also requires an allocation to principal of money received in total or partial liquidation of an entity. Existing law provides that money is to be treated as received in partial liquidation to the extent the amount received from the distributing entity is attributable to the proceeds from a sale by the distributing entity, or by the distributing entity’s subsidiary or affiliate, of a capital asset, as defined.

end insert begin insert

This bill would provide that an allocation to principal of money received in total or partial liquidation of an entity does not include a net short-term capital gain distribution from a regulated investment company or a real estate investment trust.

end insert begin insert

This bill would declare that it is to take effect immediately as an urgency statute.

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Existing law, the State Bar Act, provides for the licensure and regulation of attorneys by the State Bar of California, a public corporation. Existing law requires, among other requirements, that an individual who has been admitted to practice law in a sister state, United States jurisdiction, possession, territory, or dependency the United States may acquire, pass the general bar examination, or Attorneys’ Examination, as specified, to be certified to the Supreme Court for admission, and a license to practice law. Existing law requires an individual who has been admitted to practice law in a jurisdiction other than a sister state, United States jurisdiction, possession, or territory, to have passed the general bar examination, as specified, among other requirements.

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This bill would authorize a person who is an active member in good standing of the bar of a sister state or United States jurisdiction, possession, or territory to apply and be eligible to be certified to the Supreme Court for provisional admission and to receive a provisional license to practice law in California if the applicant meets certain requirements, including, among others, supplying evidence satisfactory to the State Bar that he or she is married to, or in a domestic partnership or other legal union with, an active duty member of the Armed Forces of the United States who is assigned to a duty station in California under official active duty military orders. The bill would require an applicant for a provisional license or a provisional licenseholder to take the first general bar examination or Attorneys’ Examination, as specified, administered after the date the active duty member must report to a duty station in the state, except as provided. The bill would require the provisional licenseholder to abide by all the laws, rules, and regulations that govern fully licensed members of the State Bar and would also subject him or her to the same duties, responsibilities, and obligations and confer the same rights and benefits, as fully licensed members of the State Bar, except as provided. The bill would subject the provisional licenseholder to certain disclosure requirements and would authorize him or her to practice law in California only under the supervision of an attorney who is an active member in good standing of the State Bar of California. The bill would provide for the automatic and immediate termination of the provisional license under specified circumstances.

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Vote:  begin delete majority end delete begin insert ²⁄₃ end insert . Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

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begin insert SECTION 1. end insert   

end insert

begin insert Section 16350 of the end insert begin insert Probate Code end insert begin insert is amended
to read: end insert

16350.  

(a) For the purposes of this section:

(1) “Entity” means a corporation, partnership, limited liability
company, regulated investment company, real estate investment
trust, common trust fund, or any other organization in which a
trustee has an interest other than a trust or decedent’s estate to
which Section 16351 applies, a business or activity to which
Section 16352 applies, or an asset-backed security to which Section
16367 applies.

(2) “Capital asset” means a capital asset as defined in Section
1221 of the Internal Revenue Code.

(b) Except as otherwise provided in this section, a trustee shall
allocate to income money received from an entity.

(c) A trustee shall allocate to principal the following receipts
from an entity:

(1) Property other than money.

(2) Money received in one distribution or a series of related
distributions in exchange for part or all of a trust’s interest in the
entity.

(3) Money received in total liquidation of the entity or in partial
liquidation of the entity, as defined in subdivision (d) begin insert , except for
money received from an entity that is a regulated investment
company or a real estate investment trust if the money distributed
is a net short-term capital gain distribution end insert .

(4) Money received from an entity that is a regulated investment
company or a real estate investment trust if the money distributed
is a capital gain dividend for federal income tax purposes. begin insert A capital
gain dividend shall not include money received as a net short-term
capital gain distribution from a regulated investment company or
real estate investment trust. end insert

(d) For purposes of paragraph (3) of subdivision (c), money
shall be treated as received in partial liquidation to the extent the
amount received from the distributing entity is attributable to the
proceeds from a sale by the distributing entity, or by the distributing
entity’s subsidiary or affiliate, of a capital asset. The following
shall apply to determine whether money is received in partial
liquidation:

(1) A trustee may rely without investigation on a written
statement made by the distributing entity regarding the receipt.

(2) A trustee may rely without investigation on other information
actually known by the trustee regarding whether the receipt is
attributable to the proceeds from a sale by the distributing entity,
or by the distributing entity’s subsidiary or affiliate, of a capital
asset.

(3) With regard to each receipt from a distributing entity, if
within 30 days from the date of the receipt the distributing entity
provides no written statement to the trustee that the receipt is a
distribution attributable to the proceeds from a sale of a capital
asset by the distributing entity or by the distributing entity’s
subsidiary or affiliate and the trustee has no actual knowledge that
the receipt is a distribution attributable to the proceeds from a sale
of a capital asset by the distributing entity or by the distributing
entity’s subsidiary or affiliate, then the following shall apply:

(A) The trustee shall have no duty to investigate whether the
receipt from the distributing entity is in partial liquidation of the
entity.

(B) If, on the date of receipt, the receipt from the distributing
entity is in excess of 10 percent of the value of the trust’s interest
in the distributing entity, then the receipt shall be deemed to be
received in partial liquidation of the distributing entity, and the
trustee shall allocate all of the receipt to principal. For purposes
of this subparagraph, the value of the trust’s interest in the
distributing entity shall be determined as follows:

(i) In the case of an interest that is a security regularly traded
on a public exchange or market, the closing price of the security
on the public exchange or market occurring on the last business
day before the date of the receipt.

(ii) In the case of an interest that is not a security regularly traded
on a public exchange or market, the trust’s proportionate share of
the value of the distributing entity as set forth in the most recent
appraisal, if any, actually received by the trustee and prepared by
a professional appraiser with a valuation date within three years
of the date of the receipt. The trustee shall have no duty to
investigate the existence of the appraisal or to obtain an appraisal
nor shall the trustee have any liability for relying upon an appraisal
prepared by a professional appraiser. The term “professional
appraiser” shall refer to an appraiser who has earned an appraisal
designation for valuing the type of property subject to the appraisal
from a recognized professional appraiser organization.

(iii) If the trust’s interest in the distributing entity cannot be
valued under clause (i) or clause (ii), the trust’s proportionate share
of the distributing entity’s net assets, to be calculated as gross
assets minus liabilities, as shown in the distributing entity’s yearend
financial statements immediately preceding the receipt.

(iv) If the trust’s interest in the distributing entity cannot be
valued under clause (i), (ii), or (iii), the federal cost basis of the
trust’s interest in the distributing entity on the date immediately
before the date of the receipt.

(e) If a trustee allocates a receipt to principal in accordance with
subdivision (d), or allocates a receipt to income because the receipt
is not determined to be in partial liquidation under subdivision (d),
the trustee shall not be liable for any claim of improper allocation
of the receipt that is based on information that was not received
or actually known by the trustee as of the date of allocation.

(f) (1) Notwithstanding anything to the contrary in subdivision
(d), if the receipt was allocated between December 2, 2004, and
July 18, 2005, a trustee shall not be liable for allocating the receipt
to income if the amount received by the trustee, when considered
together with the amount received by all owners, collectively,
exceeded 20 percent of the entity’s gross assets, but the amount
received by the trustee did not exceed 20 percent of the entity’s
gross assets.

(2) Money is not received in partial liquidation, nor may it be
taken into account under subdivision (d), to the extent that it does
not exceed the amount of income tax that a trustee or beneficiary
is required to pay on taxable income of the entity that distributes
the money.

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begin insert SEC. 2. end insert   

end insert begin insert

This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:

end insert begin insert

In order to clarify state law relative to federal tax law regarding
capital gain dividends from a mutual fund or real estate investment
trust, it is necessary that this act take effect immediately.

end insert

begin delete

SECTION 1.  

Section 6062 of the Business and Professions Code
is amended to read:

6062.  

(a) To be certified to the Supreme Court for admission,
and a license to practice law, a person who has been admitted to
practice law in a sister state, United States jurisdiction, possession,
territory, or dependency the United States may hereafter acquire,
shall:

(1) Be at least 18 years of age.

(2) Be of good moral character.

(3) Have passed the general bar examination given by the
examining committee. However, if that person has been an active
member in good standing of the bar of the admitting sister state
or United States jurisdiction, possession, or territory for at least
four years immediately preceding the first day of the examination
applied for, he or she may elect to take the Attorneys’ Examination
rather than the general bar examination. Attorneys admitted less
than four years and attorneys admitted four years or more in another
jurisdiction but who have not been active members in good
standing of their admitting jurisdiction for at least four years
immediately preceding the first day of the examination applied for
must take the general bar examination administered to general
applicants not admitted as attorneys in other jurisdictions.

(4) Have passed an examination in professional responsibility
or legal ethics as the examining committee may prescribe.

(b) A person who is an active member in good standing of the
bar of an admitting sister state or United States jurisdiction,
possession, or territory may apply and shall be eligible to be
certified to the Supreme Court for provisional admission, and to
receive a provisional license to practice law in California, if the
applicant meets all of the following requirements:

(1) Is at least 18 years of age.

(2) Files an Application for Determination of Moral Character
with the State Bar of California and is determined to be of good
moral character.

(3) Has passed an examination in professional responsibility or
legal ethics as the examining committee may prescribe.

(4) Supplies evidence satisfactory to the State Barthat he or she
is married to, or in a domestic partnership or other legal union
with, an active duty member of the Armed Forces of the United
States who is assigned to a duty station in California under official
active duty military orders.

(5) Establishes that he or she is an active member in good
standing entitled to practice law in another state, United States
jurisdiction, possession, or territory.

(6) Establishes that he or she has never been subject to lawyer
discipline and is not the subject of a pending disciplinary matter
in any jurisdiction.

(c) (1) An applicant for a provisional license or a provisional
licenseholder as described in subdivision (b) shall apply for and
take the general bar examination administered by the examining
committee, except as provided in paragraph (2).

(2) An applicant or provisional licenseholder who meets the
requirements to take the Attorneys’ Examination as specified in
paragraph (3) of subdivision (a) may elect to apply for and take
the Attorneys’ Examination rather than the general bar
examination.

(3) An applicant or provisional licenseholder shall apply for
and take the general bar examination or Attorneys’ Examination
pursuant to paragraphs (1) and (2), in compliance with the
following:

(A) Except as provided in subparagraphs (B) and (C), an
applicant or provisional licenseholder shall apply for and take the
first general bar examination or Attorneys’ Examination
administered after the date the active duty member of the Armed
Forces of the United States must report to a duty station in
California under official active duty military orders.

(B) If the general bar examination or Attorneys’ Examination
is administered less than 90 days after the date the active duty
member of the Armed Forces of the United States must report to
a duty station in California under official active duty military
orders, the applicant or provisional licenseholder shall apply for
and take one of the following:

(i) The first general bar examination or Attorneys’ Examination
administered after the date the active duty member of the Armed
Forces of the United States must report to a duty station in
California under official active duty military orders.

(ii) The first general bar examination or Attorneys’ Examination
administered after the examination described in clause (i).

(C) If the active duty member of the Armed Forces of the United
States reported to a duty station in California under official active
duty military orders before January 1, 2014, the applicant or
provisional licenseholder shall apply for and take the general bar
examination or Attorneys’ Examination no later than July 2014.

(d) A provisional licenseholder shall abide by all of the laws,
rules, and regulations that govern fully licensed members of the
State Bar of California, including payment of annual bar
membership dues and compliance with the Minimum Continuing
Legal Education requirements.

(e) A provisional licenseholder shall be subject to the same
duties, responsibilities, and obligations as fully licensed members
of the State Bar of California and shall be conferred the same rights
and benefits as fully licensed members of the State Bar of
California subject to the following:

(1) A provisional licenseholder may not advertise, hold out to
the public, or otherwise represent that he or she is admitted or
licensed to practice law in California unless the provisional
licenseholder concurrently states that he or she is admitted to
practice in California under a provisional license only.

(2) A provisional licenseholder shall state in all written fee
agreements and other contracts for legal services that he or she is
admitted to practice in California under a provisional license only.

(3) A provisional licenseholder may practice law in California
only under the supervision of an attorney who is an active member
in good standing of the State Bar of California.

(f) A provisional license shall automatically and immediately
terminate upon the earliest of any of the following:

(1) Failure of the applicant or provisional licenseholder to apply
for, take, and pass the general bar examination or Attorneys’
Examination as required under subdivision (c).

(2) A change resulting in the active duty member of the Armed
Forces no longer being assigned to a duty station in California
under official active duty military orders.

(3) Divorce, dissolution, or legal termination of the marriage,
domestic partnership, or other legal union with the active duty
member of the Armed Forces of the United States who is assigned
to a duty station in California under official active duty military
orders.

(g) A provisional license shall automatically be superseded and
immediately terminate upon the issuance of a full license to practice
law in California to the provisional licenseholder.

(h) To be certified to the Supreme Court for admission, and a
license to practice law, a person who has been admitted to practice
law in a jurisdiction other than in a sister state, United States
jurisdiction, possession, or territory shall:

(1) Be at least 18 years of age.

(2) Be of good moral character.

(3) Have passed the general bar examination given by the
examining committee.

(4)  Have passed an examination in professional responsibility
or legal ethics as the examining committee may prescribe.

(i) The amendments to this section made at the 1997-98 Regular
Session of the Legislature shall be applicable on and after January
1, 1997, and do not constitute a change in, but are declaratory of,
existing law.

end delete