BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 554 (Mullin) - Secretary of State: Fees
Amended: April 9, 2013 Policy Vote: GO 11-0
Urgency: No Mandate: No
Hearing Date: August 12, 2013
Consultant: Maureen Ortiz
This bill does not meet the criteria for referral to the
Suspense File.
Bill Summary: AB 554 changes accounting procedures for the
Business Fees Fund administered by the Secretary of State (SOS),
and establishes a new account for the deposit of a portion of
the funds from the existing corporate disclosure fee.
Fiscal Impact:
Minor, absorbable administrative costs to the SOS (General)
AB 554 will redirect approximately $1.6 million annually in
future fee revenue from the Reimbursements Account to the newly
created Business Programs Modernization Fund (Special); and will
redirect approximately $20 million of future expedited fee
revenue from the Reimbursements Account to the Business Fees
Fund (Special).
Background: The Secretary of State is responsible for the
management of over 150 different types of filings of business
entities and receives over one million filings annually. The
Business Programs Division, which is responsible for the
management of the filings, is comprised of three sections: the
Business Entities Section, Notary Public/Special Filings
Section, and the Uniform Commercial Code/Statement of
Information Section. The majority of the filings submitted to
the Secretary of State are currently recorded on index cards
through a labor intensive manual process. The Secretary of
State is in the process of modernizing its business filing
system, entitled California Business Connect, which will
automate the paper-based filing process and allow for more
extensive online filings and records requests.
AB 554 (Mullin)
Page 1
Current law imposes a $5 annual publicly traded disclosure fee
on corporations for filing their articles of incorporation. Of
this fee, $2.50 is deposited in the Victims of Corporate Fraud
Compensation Fund and $2.50 is used for the SOS's administrative
costs, including the development and maintenance of an online
business database. This current system is a very limited online
database that contains a search function allowing users to view
basic business information like the name, address, and status of
entities.
The SOS's Business Programs Division processes business filings
and is authorized to collect a variety of fees, including those
for expedited filings. Businesses have the option of paying
expedited filing fees (ranging from $350 to $750) so their
documents are processed more quickly. According to the SOS,
budget cuts have resulted in the processing time for business
filings increasing from less than 15 days in May 2009 to more
than 120 days in January 2012.
Business filing fees that undergo standard processing are
currently accounted for differently than the filing fees for
expedited filings. Standard process fees are paid to SOS's
Business Fees Fund, while expedited filing fees are classified
as reimbursements to the SOS, which the SOS contends obscures
the presentation of the total amount of business fees collected.
Depositing all business fees to the same fund would more
accurately show how much businesses are paying for filings.
Proposed Law: AB 554 will create the Business Programs
Modernization Fund for the deposit of $2.50 of the existing
disclosure fee, and, upon appropriation by the Legislature, will
be used for modernizing the California Business Connect filing
system, including the further development of the online
database. Approximately $1.6 million will be deposited in the
new fund annually and will 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.
Additionally, AB 554 will require the expedite fees to be
deposited into the Business Fees Fund, instead of being
classified as reimbursements. This provision will become
effective on July 1, 2014.
AB 554 (Mullin)
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Related Legislation: AB 113 (Committee on Budget), Chapter 3,
Statutes of 2013, appropriated $1.6 million to the Secretary of
State to address the backlog associated with the processing of
business filings.
Staff Comments: Under existing practice, the fees from two
businesses filing identical documents go into separate funds,
depending on whether they filed the document using the standard
process or paid an expedite fee to have it filed more quickly.
While immaterial to the businesses filing the documents, the end
result is those expedite fees are counted as reimbursements for
purposes of the Secretary of State's budget. As a result, the
money does not show up in the Business Fees Fund, which obscures
how much money is being collected from businesses and how that
money is spent.
AB 554 directs these expedite fees into the existing Business
Fees Fund where other fees are deposited, and will give the
Legislature and the public a more complete and accurate picture
of the money being paid by businesses to file their documents.