BILL ANALYSIS Ó AB 871 Page 1 Date of Hearing: April 29, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 871 (Brown) - As Introduced February 26, 2015 ----------------------------------------------------------------- |Policy |Banking and Finance |Vote:|11 - 0 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- 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 AB 871 Page 2 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 AB 871 Page 3 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. AB 871 Page 4 Analysis Prepared by:Joel Tashjian / APPR. / (916) 319-2081