BILL ANALYSIS Ó SB 177 Page 1 Date of Hearing: July 8, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair SB 177 (Wieckowski) - As Amended May 5, 2015 ----------------------------------------------------------------- |Policy |Business and Professions |Vote:|14 - 0 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: YesReimbursable: No SUMMARY: This bill extends the authorization of the Bureau of Security and Investigative Services (Bureau) to issue an alarm company operator license to a limited liability company (LLC) from SB 177 Page 2 January 1, 2016, to January 1, 2019. FISCAL EFFECT: On-going annual costs to the Bureau in the range of $22,000 to $35,000 (Private Security Services Fund) to issue alarm company operator licenses to LLCs beyond the January 1, 2016, sunset date. This fund is self-supporting with fee revenue. COMMENTS: 1)Purpose. According to the author, "When the state first authorized businesses to incorporate as LLCs, alarm companies were one of the businesses prohibited from forming or operating a LLC due to consumer protection concerns. The prohibition was originally targeted at keeping law firms and accounting firms from becoming LLCs. Those professions are now allowed to become Limited Liability Partnerships (LLP). Subsequently, other industries were statutorily authorized to form LLCs as well. Today, [nearly] all other states allow alarm companies to organize as LLCs. This bill extends the sunset date until 2019 to allow alarm companies to continue to organize as LLCs." 2)Background. Unless expressly authorized, boards and bureaus under the Department of Consumer Affairs (DCA) are prohibited from issuing a license, certification or registration to an entity organized as an LLC. The rationale is to ensure that service providers who harm others by their misconduct, incompetence, or negligence should not be able to limit their liability by operating as an LLC. SB 177 Page 3 In 2004 the Attorney General (AG) concluded that a business that provides services requiring a license, certification, or registration pursuant to the Business and Professions Code may conduct its activities as an LLC if the services rendered require only a nonprofessional, occupational license. Since this AG Opinion was released, several statutory changes have been made to incorporate LLCs into the licensure provisions of boards and bureaus regulated by the DCA. In 2012, when alarm companies were first allowed to operate as LLCs, the bill included a three year sunset date to ensure that the required liability insurance levels were sufficient to cover the potential number of claims. Because there is still insufficient data on insurance levels, this bill also contains a three-year sunset date. Of the 2,000 licensed alarm companies, approximately 70 are LLCs. 3)Current Legislation. a) SB 284 (Cannella), pending in this committee, extends the sunset provisions on professional engineer and land surveyor LLPs to January 1, 2019. b) SB 468 (Hill), pending in the Assembly Business and Professions Committee, among other provisions, imposes training, psychological evaluation, and training duties on various security forces, and subjects the Bureau to review SB 177 Page 4 by the appropriate policy committees of the legislature. 1)Prior Legislation. a) AB 1608 (Olsen), Chapter 669, Statutes of 2014, among other provisions, authorized the Bureau, until January 1, 2016, to issue a private investigator's license to LLCs. b) SB 1077(Price), Chapter 291, Statutes of 2012, among other provisions, authorized LLCs, until January 1 2016, to be issued to alarm company operator licenses if specified liability insurance requirements are met. c) SB 469 (Beverly and Killea), Chapter 1200, Statutes of 1994, prohibited a foreign or domestic LLC from rendering professional services in this state unless expressly authorized under applicable provisions of law. Analysis Prepared by:Jennifer Swenson / APPR. / (916) 319-2081 SB 177 Page 5