BILL ANALYSIS Ó
SB 284
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Date of Hearing: July 8, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
SB 284
(Cannella) - As Amended May 5, 2015
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill would extend the authorization for licensed engineers
and land surveyors to operate as limited liability partnerships
(LLPs) from January 1, 2016, to January 1, 2019.
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FISCAL EFFECT:
Unknown, but likely minor costs to the Board for Professional
Engineers, Land Surveyors, and Geologists (Professional
Engineer's and Land Surveyor's Fund) to license and regulate
engineer and land surveyor LLPs beyond the January 1, 2016
sunset date. This fund is self-supporting with fee revenue.
COMMENTS:
1)Purpose. According to the author, "Next January, without SB
284, engineers and land surveyors up and down the state will
no longer have the flexibility they need to form [a LLP],
should they desire to do so?. 3.4 million California small
businesses account for 99 percent of the state's employers and
employ 52 percent of the workforce. Small businesses are the
backbone to any economy. Small business owners know their
business best and should have every tool available to them to
be successful in California. Engineers and land surveyors are
a foundation for businesses growth in California and
continuing to extend the same flexibility to form limited
liability partnerships as architects allows them to contribute
to business and job growth throughout the state."
This bill would extend the sunset for engineer and land
surveyor LLPs, and the requisite liability insurance
provisions, by an additional three years, to January 1, 2019.
2)Background. Existing law authorizes licensed engineers and
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land surveyors to organize and operate as LLPs, subject to
certain insurance liability coverage and other requirements,
until January 1, 2016. This authority also exists for
architects, accountants, and attorneys. All of these
professional entities must meet certain requirements,
including minimum security or liability coverage for claims
arising out of the partnership's professional practice.
Engineering and land surveyor LLPs must maintain minimum
liability insurance coverage of $2 million for companies with
five or fewer licensees, with an additional $100,000 required
for each additional licensee, up to a maximum of $5 million in
liability coverage. As an option to insurance coverage, the
LLP can instead maintain that same level of security in the
form of escrow, cash, US Treasury obligations, bank letters of
credit, among other instruments.
Since there is a lack of sufficient data to ensure that
insurance requirements are appropriate, the policy committees
only authorized a three-year sunset extension to allow for a
future review. There are more than 82,000 professional
engineers and land surveyors licensed to practice in
California. It is unknown how many of those operate as LLPs.
3)Current Legislation. SB 177 (Wieckowski), also on today's
agenda, extends the authorization of the Bureau of Security
and Investigative Services to issue an alarm company operator
license to a limited liability company until January 1, 2019.
4)Prior Legislation.
a) SB 1008 (Padilla), Chapter 634, Statutes of 2010,
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authorized, until January 1, 2016, licensed engineers and
land surveyors to organize and operate as LLPs and requires
engineers and land surveyors organizing as LLPs to carry
insurance liability coverage.
b) AB 180 (Jerome Horton) of 2005, would have authorized
the organization of engineers and land surveyors as LLPs,
and contained a sunset date. This bill was ultimately
amended to deal with a different topic.
c) AB 1265 (Benoit) of 2003, would have permitted
professional engineers and land surveyors to organize as a
LLP and would have required that, depending on the number
of partners, the LLP have between $500,000 and $5 million
in insurance. This bill was held in the Senate Judiciary
Committee.
d) SB 469 (Beverly and Killea, Ch. 1200, Stats. 1994)
enacted the Beverly-Killea Limited Liability Company (LLC)
Act, under which a foreign or domestic limited liability
company is prohibited 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 284
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