BILL ANALYSIS                                                                                                                                                                                                    Ó

                                                                  AB 1529
                                                                  Page  1

          Date of Hearing:   May 14, 2014

                                  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


          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  

          4)Creates a mechanism for voluntary dissolution of a nonprofit  
            corporation upon certification of certain matters by the  

          5)Specifies that any liability to creditors of the nonprofit  
            corporation is not discharged as a result of dissolution or  


                                                                  AB 1529
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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  

           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.


          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  

            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