BILL ANALYSIS                                                                                                                                                                                                    



                                                                     AB 871


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          Date of Hearing:  April 29, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          AB  
          871 (Brown) - As Introduced February 26, 2015


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          |Policy       |Banking and Finance            |Vote:|11 - 0       |
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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:


          This bill changes the filing date for statements of information  
          (SOIs) that various corporate entities file annually or  
          biennially with the Secretary of State (SOS) as follows:


          1)Requires all corporations to file by March 15th of each year  
            rather than the calendar month in which the original articles  
            of incorporation (AOI) were filed.


          2)Requires all limited liability companies (LLCs) to file by  
            April 15th biennially rather than the calendar month in which  








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            the original AOIs were filed.


          3)Requires all nonprofit corporations to file by May 15th  
            biennially rather than the calendar month in which to original  
            AOIs were filed.


          FISCAL EFFECT:


          One time GF costs of approximately $2.5 million to implement  
          systems and procedure changes, conduct outreach, and notify  
          businesses; ongoing annual GF costs of approximately $1.0  
          million to staff the peak periods created by the common filing  
          deadlines.


          COMMENTS:


          1)Purpose.  According to the author, allowing businesses to file  
            at the same time each year would eliminate confusion with  
            respect to SOI due dates.  The author believes this change  
            would have a positive impact on small businesses and improve  
            compliance with the SOI filing requirements.





          2)Existing Filing Requirements.  Current law requires corporate  
            entities to file, within 90 days after the filing of its  
            original incorporating documents and annually or biennially  
            thereafter, an SOI with the SOS.  The filing date for  
            subsequent SOIs coincides with the anniversary of the date on  
            which the entity's original incorporating documents were  
            filed.  The SOS provides a notice to each entity to comply  
            with this section approximately three months prior to the  








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            close of the applicable filing period.  As a result, SOI  
            filings with the SOS are spaced relatively evenly over the  
            course of a calendar year.  Currently, the SOS processes over  
            a million SOIs annually.





          3)Penalties for Late Filing.  Failure to file an SOI results in  
            a $250 penalty levied by the Franchise Tax Board and a  
            suspension of the entity by SOS, during which time the limited  
            liability protections afforded to corporate entities are  
            suspended and contracts entered into during the suspension  
            period are potentially null and void.  According to the  
            author, 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.





          4)Prior Legislation.  AB 2180 (Brown) of 2014 would have changed  
            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  
            SOI with the SOS to their respective tax filing day.  AB 2180  
            was held on the Suspense File of this committee.

















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          Analysis Prepared by:Joel Tashjian / APPR. / (916)  
          319-2081