BILL ANALYSIS �
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THIRD READING
Bill No: AB 554
Author: Mullin (D)
Amended: 4/9/13 in Assembly
Vote: 21
SENATE GOVERNMENTAL ORGANIZATION COMMITTEE : 11-0, 6/25/13
AYES: Wright, Nielsen, Berryhill, Calderon, Cannella, Correa,
De Le�n, Galgiani, Hernandez, Lieu, Padilla
SENATE APPROPRIATIONS COMMITTEE : 5-0, 8/12/13
AYES: De Le�n, Gaines, Hill, Lara, Steinberg
NO VOTE RECORDED: Walters, Padilla
ASSEMBLY FLOOR : 75-0, 5/9/13 (Consent) - See last page for vote
SUBJECT : State government: Secretary of State: fees
SOURCE : Author
DIGEST : This bill changes accounting procedures for the
Business Fees Fund at the Secretary of State (SOS), and
establishes a new account for deposit of a portion of funds from
the existing corporate disclosure fee.
ANALYSIS :
Existing law:
1. Authorizes the SOS to collect business filing fees, and
directs the SOS to utilize the Business Fees Fund to perform
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business-related functions for the state.
2. Specifies maximum fees that may be charged for expedited
filings, the filing of articles of incorporation, and for
mergers of corporations. Some fees charged, including those
for expedited filings, cannot exceed the maximum specified in
statute.
This bill changes accounting procedures for the Business Fees
Fund at the SOS, and establishes a new account for deposit of a
portion of funds from the existing corporate disclosure fee.
Specifically, this bill:
1. Authorizes the SOS to adopt regulations establishing fees to
be charged and collected for copying and special handling in
connection with filing documents, issuing of certificates,
and other services performed by the SOS, but that such fees
shall approximate the estimated cost of copying and special
handling.
2. Specifies that fees charged for preclearance of documents and
expedited filings may be in different amounts, not to exceed
$1,000.
3. Deposits revenues from expedited business fees filings into
the Business Fees Fund rather than accounting for these
revenues as reimbursements to the SOS.
4. Deposits one-half of the existing $5 disclosure fee into the
newly created Business Programs Modernization Fund.
Background
Business entity filings generally . The SOS is responsible for
the management of over 150 different types of filings of
business entities and receives over one million filings
annually. The majority of the filings submitted to the SOS are
recorded on index cards. 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 SOS's Business Programs Division processes business filings
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and is authorized to collect 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
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. The SOS indicates 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 plans to
use a portion of these revenues to implement its California
Business Connect project, which will automate the paper-based
filing process and allow for more extensive online filings and
records requests.
Accounting change . 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 will more accurately show how much businesses are
paying for filings.
New fund created . Existing law imposes a $5 annual disclosure
fee on corporations for filing their articles of incorporation.
Half of this fee is deposited in the Victims of Corporate Fraud
Compensation Fund and half is used for the SOS's administrative
costs, including maintaining an online business database. This
rather limited online database contains a search function
allowing users to view basic business information like the name,
address, and status of entities. Under this bill, this half of
the fee will instead be deposited to the Business Programs
Modernization Fund, and, upon appropriation by the Legislature,
could be used for modernizing the filing system, including the
further development of the online database. According to SOS,
the approximate $1.6 million per year that will be deposited in
the new fund 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.
Recent legislation approved to reduce backlog . Earlier this
year, the Legislature approved AB 113 (Assembly Budget
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Committee, Chapter 3, Statutes of 2013), which appropriates $1.6
million to the SOS to end a two-month backlog in processing
business filings in California. According to the SOS, state
budget cuts were largely responsible for creating the conditions
that caused backlog of 122,000 applications. The SOS must
process the forms before businesses can hire employees. The
$1.6 million granted to the SOS by AB 113 will let the office
hire temporary employees and pay for overtime to process
thousands of business applications.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, minor,
absorbable administrative costs to the SOS (General).
SUPPORT : (Verified 8/14/13)
Secretary of State
ARGUMENTS IN SUPPORT : According to the SOS, "due to a quirk
of statute, two businesses filing identical documents have the
fees they pay 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. 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...it
will give the Legislature and the public a more complete and
accurate picture of the money being paid by businesses to file
their documents."
ASSEMBLY FLOOR : 75-0, 5/9/13
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,
Buchanan, Ian Calderon, Campos, Chau, Ch�vez, Chesbro, Conway,
Cooley, Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier,
Beth Gaines, Garcia, Gatto, Gomez, Gordon, Gorell, Gray,
Grove, Hagman, Hall, Harkey, Roger Hern�ndez, Jones,
Jones-Sawyer, Levine, Linder, Lowenthal, Maienschein, Mansoor,
Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi,
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Nazarian, Nestande, Olsen, Pan, Patterson, Perea, V. Manuel
P�rez, Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone,
Ting, Torres, Wagner, Weber, Wieckowski, Wilk, Williams,
Yamada, John A. P�rez
NO VOTE RECORDED: Donnelly, Holden, Logue, Waldron, Vacancy
MW:d 8/14/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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