BILL ANALYSIS Ó
AB 1529
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Date of Hearing: May 14, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1529 (John A. Pérez) - As Amended: May 1, 2014
Policy Committee: Banking &
FinanceVote: 11-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill establishes an administrative dissolution process and
an administrative surrender process for nonprofit corporations.
In summary, this bill:
1)Creates a mechanism for dissolving or surrendering nonprofit
corporations that have had their corporate powers suspended or
forfeited by the Franchise Tax Board (FTB) or have failed to
file a statement of information (SOI) with the Secretary of
State (SOS), in each case for a period of not less than 48
continuous months.
2)Establishes procedures for notice of pending dissolution or
surrender to nonprofit corporations and allows those nonprofit
corporations an opportunity to provide written objections to
dissolution or surrender.
3)Allows a nonprofit corporation that has objected to
dissolution or surrender a period of 90 days to satisfy any
and all outstanding debts and file a current SOI with the SOS,
failing which the FTB or SOS may proceed with the dissolution
or surrender of the entity. The FTB and SOS are given
flexibility to extend this 90 day period for an additional 90
days.
4)Creates a mechanism for voluntary dissolution of a nonprofit
corporation upon certification of certain matters by the
entity.
5)Specifies that any liability to creditors of the nonprofit
corporation is not discharged as a result of dissolution or
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surrender, and clarifies that dissolution or surrender does
not diminish or adversely affect the ability of the Attorney
General to enforce liabilities.
6)Requires the FTB to abate, upon written request by nonprofit
corporations that had their tax-exempt status revoked or never
conducted business in California at any time following its
incorporation, unpaid California taxes, interest, and
penalties for the taxable years the nonprofit corporation
certifies under penalty of perjury that it was not doing
business, provided that the nonprofit corporation must
dissolve within 12 months of requesting the abatement.
7)Allows the FTB to prescribe rules and regulations as
necessary.
FISCAL EFFECT
1)One-time GF costs of approximately $750,000 to the FTB and SOS
to update systems and implement new processes; potential
long-term savings from no longer having to track and issue
notices to defunct nonprofit businesses.
2)No impact to state income tax revenues.
COMMENTS
1) Purpose. The goal of AB 1529 is to streamline the dissolution
process for nonprofit corporations. According to the author,
the new process allows FTB and SOS to dissolve nonprofits that
have been inactive for quite some time. Many of these
nonprofit corporations have been disbanded years earlier by
their Board of Directors but never took the proper steps to
dissolve the entity, thus causing years of fees and fines to
build up and unnecessary time spent by FTB and SOS staff to
proceed through the dissolutions process. AB 1529 will help
FTB and SOS administratively clear away the backlog of
inactive nonprofit corporations.
According to the findings and declarations in the bill, every
year, hundreds of nonprofit corporations seek administrative
changes to expand their mission or alter their tax status,
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and, in some cases, to even go out of existence. The current
dissolution process, which involves the winding down of the
nonprofit corporation's affairs, is very cumbersome and
protracted.
Not only is it in the public's interest to establish a
streamlined process to efficiently dissolve a nonprofit
corporation, but doing so will relieve the citizens of
California from unknowingly donating to a nonprofit
corporation that is not complying with the laws of the state.
2) Background. According to the findings and declarations in the
bill, there are more than 144,000 nonprofit corporations in
California that provide a variety of programs and services in
areas as diverse as education, recreation, health care, legal,
job training, and housing to millions of Californians. These
organizations, depending on their formation status, are
required to register with the office of the SOS, the FTB, and
the office of the Attorney General.
Analysis Prepared by : Joel Tashjian / APPR. / (916) 319-2081