BILL ANALYSIS Ó
AB 2180
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Date of Hearing: April 28, 2014
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Roger Dickinson, Chair
AB 2180 (Brown) - As Introduced: February 20, 2014
SUBJECT : Business filings: statement of information.
SUMMARY : Changes the filing period when a corporation, a
nonprofit public benefit corporation, a nonprofit mutual benefit
corporation, a consumer cooperative corporation a limited
liability company, foreign limited liability company, and a
credit union files a statement of information (SOI) with the
Secretary of State (SOS). Specifically, this bill :
1)Requires the filing date to be at the same time the
corporations listed above, file tax returns, excluding
extensions, rather than file in the calendar month in which
the original statement was filed.
2)Provides that if a nonprofit public benefit corporation does
not file a tax return with the Franchise Tax Board (FTB) then
the filing period is May 15 and the preceding five calendar
months.
EXISTING LAW
1)Requires every corporation to file, within 90 days after the
filing of its original articles and annually thereafter during
the applicable filing period, on a form prescribed by the SOS,
a statement. Specifies the filing period for a corporation
shall be the calendar month which its original articles were
filed and the immediately preceding five calendar months. The
SOS provides a notice to each corporation to comply with this
section approximately three months prior to the close of the
applicable filing period. [Corporations Code, Section 1502]
2)Requires every nonprofit public benefit corporation, nonprofit
mutual benefit corporation, limited liability company and
foreign limited liability company to within 90 days after the
filing of its original articles and biennially thereafter
during the applicable filing period to file with the SOS.
[Corporations Code, Sections 6210, 8210, and 17702.09]
3)Requires every consumer cooperative corporation and credit
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union to file within 90 days after its original articles and
annually thereafter during the applicable filing period each
year a form prescribed by the SOS. [Corporations Code, Section
12570 and Financial Code, Section 14101.6]
FISCAL EFFECT : Unknown.
COMMENTS :
This measure requires nonprofit public benefit corporations,
nonprofit mutual benefit corporations, consumer cooperatives,
limited liability companies, foreign limited liability
companies, and credit unions to file their annual or biennially
SOI with the SOS during the calendar month of their tax filing
with the FTB. For nonprofit public benefit corporations, if the
corporation does not have to file with the FTB then that
corporation is required to file its statement of information by
May 15th or within the preceding 5 months. Currently these
businesses file the SOI annually or biennially from the date the
original articles were filed with the SOS. As of April 2014,
the SOS has almost a million active corporations and over
600,000 active LLCs. Depending on whether the entity is
required to file annually or biennially, this measure will
require well over a million SOI to be filed in one period rather
than spreading out the filing through the course of a year. The
exact need for this change especially when California Business
Connect (CBC) is impending is not clear. By potentially
depending on a tax professional to let a business know the SOI
is also due at the same time taxes are filed may allow tax
professionals to charge a business an additional fee to file an
SOI, whether or not this is a concern by the entities affected
by the measure is not clear.
CBC
By June 30, 2016, the SOS must launch CBC. CBC will:
Automate paper-based processes and allow businesses to file
and request copies of records online 24 hours a day.
Provide access to SOS records for the public and government
agencies to perform functions in a more efficient manner.
Allow fee payments to be processed within one business day.
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CBC is a six-year project that aims to increase efficiency by
eliminating paper-based manual transactions and associated risk
of loss to vital state records. CBC will also minimize
processing delays through the creation of a uniform data entry
platform. Businesses that use CBC will be able to do many of
their transactions online, without delay and without paying an
additional fee.
According to the author," the date and timing for statement of
information filings vary between entities because the date is
tied to the specific date that a corporation is formed.
Reminders to file from the SOS appear as junk mail and are often
missed. As a result, many businesses miss filing their statement
of information and become non-compliant and penalized; sometimes
without the business' knowledge. A business that fails to file
its SOI becomes a suspended entity with the SOS and FTB. In
addition to the suspension, the FTB levies a $250 penalty on the
business. Once this occurs, the legal protections provided to
these businesses cease to function and all contracts become null
and void. In addition, any contracts entered into during a
period of suspension are null and void. Approximately 141,000
entities were assessed a penalty for not filing their annual SOI
between 2010 and 2011. Of these businesses, 25,000 were
suspended."
Arguments in support
The sponsor of the measure, the California Society of Enrolled
Agents, states, "AB 2180 addresses the problem by changing the
filing time to coincide with the entities tax filing with the
FTB. All businesses, except religious corporations, have such
an FTB filing requirement, they know about it and when that
filing is due. By streamlining the FTB and SOS/SOI filing dates
and allowing a five month window to file preceding the due date
there will be no confusion as to when the SOI is due.
Additionally tax practitioners can remind their clients while
working on their tax filing that the SOI filing is also due.
Compliance would increase and businesses would not become
suspended or have to suffer the consequences of the suspended
status."
Arguments in opposition
According to the SOS, Debra Bowen, "By making every corporation
file documents on their tax filing deadline, AB 2180 would
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effectively collapse 12 months of filings into just few tax
deadlines. This is a change that provides no public benefit,
will cost millions of dollars to implement and millions more
each year on an ongoing basis to staff the "peak and valley"
filing system it creates, and makes it more difficult for
corporations to file documents in a predictable, timely fashion.
RELATED LEGISLATION
SB 1041 (Jackson) makes various technical, non-substantive, and
clarifying changes throughout the Corporations Code in
preparation for the SOS automated filing system. These changes
include, among other things: requiring that the SOS prescribe
forms for the resignation of agents for service of process;
harmonizing statutes relating to the resignation of agents for
service of process to provide consistency across different types
of business entities; authorizing the SOS to remove and destroy
records relating to agent resignations if a new agent for
service of process is designated, as specified; clarifying the
necessary signatures for various business filings; clarifying
when foreign limited liability company registration
cancellations are effective; clarifying situations wherein a
penalty for otherwise delinquent annual statements would not be
applied; striking requirements for the provision of additional
copies of specified filings; and correcting various internal
cross references. Pending in Senate Appropriations, set for
hearing on April 28, 2014.
PREVIOUS LEGISLATION
SB 1532 (Pavley, Ch. 494, Stats. 2012) was enacted to implement
changes necessary for the California Business Connect automated
system. Specifically, the bill specified that the required
address information in business filings is the street address
and required business entities to provide a mailing address if
not the same as the street address. SB 1532 also revised
requirements with respect to the maintenance of forms filed with
the SOS, revised provisions relating to the assignment of filing
dates and fees by the SOS, repealed specified provisions
relating to special purpose corporations, and made other
technical changes.
RecommendED Amendments :
AB 2180
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1)On page 5, delete line 22, delete, "If the"
2)On page 5, delete lines 23-24
3)On page 5, delete "immediately preceding five calendar
months."
4)On page 8, line 25, strikeout "Part 10.2" and insert "Part 11"
5) On page 12, line 33, strikeout "Part 10.2" and insert "Part
11"
REGISTERED SUPPORT / OPPOSITION :
Support
California Society of Enrolled Agents (CSEA) Sponsor
CalChamber
Opposition
California Secretary of State
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081