BILL ANALYSIS �
AB 554
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Date of Hearing: April 17, 2013
ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW
Jim Frazier, Chair
AB 554 (Mullin) - As Amended: April 9, 2013
SUBJECT : State government: Secretary of State: Business Fees
Fund
SUMMARY : Changes requirements and accounting for expedited
business filing fees and creates a special fund from existing
fees for modernizing the business filing process. Specifically,
this bill :
1)Deposits expedited businesses filing fees in the Business Fees
Fund.
2)Creates a special fund, the Business Programs Modernization
Fund, and deposits a portion of existing disclosure fees from
businesses in this fund.
EXISTING LAW Government Code authorizes the Secretary of State
to collect business filing fees. Amounts for specific filings
like those to establish articles of incorporation or for a
merger of corporations are stated in Government Code. Some fees
charged, including those for expedited filings, cannot exceed a
maximum as specified in code.
FISCAL EFFECT : Unknown
COMMENTS : The Secretary of State's (SOS) Business Programs
Division processes business filings and the SOS is authorized by
Government Code to collect fees, including those for expedited
filings. Businesses have the option of paying expedited filing
fees so their documents are processed more quickly. These fees
range from $350 to $750. Corporations Code requires businesses
to file documents with the Secretary of State in order to
legally operate within the state.
According to the SOS, budget cuts at the agency meant that the
processing time for business filings increased from less than 15
days in May 2009 to more than 120 days at their high point in
January 2012. The agency has explained that its business filing
system is largely paper based and needs to be modernized.
Business filing fees generate more than $70 million per year and
AB 554
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SOS plans to use some of these funds to implements its
California Business Connect project, which will automate the
paper-based filing process and allow for more extensive online
filings and records requests.
Business filing fees that undergo the standard process are
accounted for differently than the filing fees for expedited
filings. Standard process fees are currently paid to SOS's
Business Fees Fund while filings that are expedited are
classified under SOS' account as reimbursements. According to
the agency, this obscures the presentation of the amount of
business fees collected and depositing all business fees to the
same fund would more accurately show how much businesses are
paying towards business filing fees. The bill would change the
accounting practice so fees from expedited filings would also be
deposited to the Business Fees Fund (along with standard process
fees).
Additionally, the bill creates the Business Programs
Modernization Fund in the State Treasury. Current law imposes a
$5 annual disclosure fee on corporations that are filing their
articles of incorporation. Current law states that half of this
fee shall be deposited in the Victims of Corporate Fraud
Compensation Fund and that the other half shall be used for the
SOS' online business database. The SOS online database currently
contains a search function that allows users to view basic
business information like the name, address, and status of
entities.
Under the bill, the $2.50 per disclosure fee slated for the
online database would instead be deposited to the Business
Programs Modernization Fund. Money deposited in this fund, upon
appropriation by the Legislature, could be used for modernizing
the filing system and could include the further development of
the online database. According to SOS, the approximate $1.6
million per year that would be deposited in the new fund would
create a dependable stream of funding to assist with the
California Business Connect modernization project and to prevent
the business filing systems from again becoming antiquated.
REGISTERED SUPPORT / OPPOSITION :
Support
AB 554
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Secretary of State
Opposition
None on File
Analysis Prepared by : Scott Herbstman / A. & A.R. / (916)
319-3600