BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1430| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1430 Author: Cooper (D) Amended: 3/26/15 in Assembly Vote: 21 SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 8-0, 6/6/16 AYES: Hill, Bates, Block, Gaines, Galgiani, Hernandez, Mendoza, Wieckowski NO VOTE RECORDED: Jackson ASSEMBLY FLOOR: 76-0, 5/7/15 - See last page for vote SUBJECT: California family owned businesses SOURCE: Family Business Association DIGEST: This bill creates a definition for California family owned business in the Government Code. ANALYSIS: Existing law: 1) Defines a small business as "an independently owned and operated business that is not dominant in the field of operation, the principal office of which is located in California, the officers of which are domiciled in California, and which, together with affiliates, has 100 or fewer employees, and average annual gross receipts of ten million dollars or less over the previous three years, or is AB 1430 Page 2 a manufacturer as specified." (Government Code (GC) § 14837) 2) Defines a microbusiness as "a small business which, together with affiliates, has average annual gross receipts of two million, five hundred thousand dollars or less over the previous three years or is a manufacturer as specified." (GC § 14837) 3) Defines a disabled veteran's business enterprise as "an enterprise that has been certified as meeting the qualifications established by Section 999 of the Military Code." (GC § 14837) This bill: 1) Makes various findings and declarations about California family owned businesses, including recognition that these businesses invest more in their employees in terms of training and benefits, promote more women to high-level management positions, and are less likely to lay off employees or downsize in tough economic times while also outlining the engagement in and commitment to local California communities made by these businesses. 2) Defines a "California family owned business" (CFOB) as a business that meets certain requirements. A CFOB must be organized as a privately held business by one individual or two or more related persons or is a partnership of business entities owned by related persons and must maintain its principal executive office in California and have been in business continuously for more than 10 years. 3) Requires the business, in order to be defined as a CFOB, to also either be owned by a sole proprietorship, be a business entity owned by one individual or two or more related persons domiciled in California who hold a majority of the equity interests, or be a partnership of business entities owned by related persons domiciled in California who hold a majority of the equity interests. AB 1430 Page 3 4) Requires the business, in order to be defined as a CFOB, to be controlled by one individual or two or more related persons who exhibit strategic influence and control of the business by holding it as a sole proprietorship or by holding a majority of the voting interest. 5) Requires that the business, in order to be defined as a CFOB, demonstrates an intent to continuously operate as a family business in the future by either present ownership by two or more related persons, a previous transfer of ownership of equity interests between related persons, or being subject to a written agreement providing for a future transfer between related persons provided that the agreement was executed in good faith. 6) Defines "related person" as a person who is related by a common ancestor, pursuant to state or federal law up to four generations. Provides that any person related by greater than four generations is included if his or her ownership or operational involvement arose from an exercise of continuity across generations. Provides that "related person" also includes a parent, stepparent, brother, sister, stepbrother, stepsister, half-brother, half-sister, adopted person, person born out of wedlock, stepchild, foster child, uncle, aunt, niece, nephew, first cousin, and any person denoted by the prefix "grand" or "great." A spouse, domestic partner, and the spouse or domestic partner of any person that qualifies as a person related by a common ancestor, pursuant to state or federal law up to four generations, is also included within the definition of "related persons" and shall continue to be included in the event of the legal relationship being terminated by death or dissolution. Background The sponsor of this bill is the Family Business Association. According to the author, research has shown that family-owned businesses have unique characteristics that distinguish them from other businesses; however, there is currently no standardized definition for family owned business. The author states that a standardized definition is needed in order to AB 1430 Page 4 recognize the needs and contributions of family owned businesses. An almost identical bill, AB 1260 (Medina, 2013-14 Session), was vetoed in 2014. In his veto message, Governor Brown wrote, "Family-owned businesses have an important role in our state and local economies and I am supportive of efforts that recognize their vital contributions. I am concerned, however, that adding a definition of 'California Family Owned Business' in statute with no legal or programmatic purpose will not achieve the bill's intended purpose." It remains unclear how adding a definition of California family owned business to the statute will provide any benefit to the state or those businesses that fall under the definition. FISCAL EFFECT: Appropriation: No Fiscal Com.:NoLocal: No SUPPORT: (Verified6/7/16) Family Business Association (source) California Asian Pacific Chamber of Commerce OPPOSITION: (Verified6/7/16) None received ARGUMENTS IN SUPPORT: Supporters write that that establishing a statutory definition of a family owned business for the first time is important, in that it more clearly identifies the unique and distinct differences between family-owned enterprises from other businesses and allows decision makers to consider the special aspects of operating these businesses when considering future action. ASSEMBLY FLOOR: 76-0, 5/7/15 AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, AB 1430 Page 5 Bonilla, Bonta, Brough, Brown, Burke, Calderon, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gray, Grove, Hadley, Harper, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins NO VOTE RECORDED: Campos, Gordon, Roger Hernández, Steinorth Prepared by:Nicole Billington / B., P. & E.D. / (916) 651-4104 6/8/16 16:12:01 **** END ****