BILL ANALYSIS Ó SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Isadore Hall, III Chair 2015 - 2016 Regular Bill No: SB 777 Hearing Date: 5/12/2015 ----------------------------------------------------------------- |Author: |Lara | |-----------+-----------------------------------------------------| |Version: |4/6/2015 | ----------------------------------------------------------------- ------------------------------------------------------------------ |Urgency: |No |Fiscal: |No | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Felipe Lopez | | | | ----------------------------------------------------------------- SUBJECT: Gambling Control Act: corporations DIGEST: This bill makes various changes to laws regarding corporate ownership of a gambling establishment. Specifically, the bill specifies that in order to be eligible to receive a gambling license as the owner of a gambling enterprise, a corporation shall supply information with the initial application to the Department of Justice (DOJ) on bonuses paid as compensation for services to all officers, directors, and underwriters; requires that applicants must report the amount of remuneration to persons other than directors and officers in excess of $95,000 per year; and requires that information provided by a corporation to include a copy of the corporation's annual federal income tax return, within 30 business days after that return is filed with the Internal Revenue Service. ANALYSIS: Existing law: 1)Provides, under the Gambling Control Act, for the licensure and regulation of various legalized gambling activities and establishments by the California Gambling Control Commission (CGCC) and the investigation and enforcement of those activities and establishments by DOJ. 2)Requires a corporation to comply with specified requirements in order to obtain a gambling license, including a requirement SB 777 (Lara) Page 2 of ? that the corporation register as a corporation with DOJ and supply specified supplemental information to DOJ with the initial application and upon request of DOJ, such as remuneration as compensation for services to specified individuals and the amount of remuneration to persons other than directors and officers in excess of $100,000. 3)Requires that information provided by a corporation to include a copy of the corporation's annual federal income tax return, within 30 calendar days after that return is filed with the Internal Revenue Service. This bill: 1)Specifies that, in order to be eligible to receive a gambling license as the owner of a gambling enterprise, a corporation shall supply information with the initial application to DOJ on bonuses paid as compensation for services to all officers, directors, and underwriters. 2)Requires that applicants must report the amount of remuneration to persons other than directors and officers in excess of $95,000 per year. 3)Requires the corporation to supply a copy of its annual federal income tax return within 30 business days after that return is filed. Background Purpose of the bill: According to the author, this bill makes small technical changes to ensure that corporations supply accurate information when requested by DOJ. In addition, the author argues that this bill would permit annual profit-and-loss statements, annual balance sheets, and copies of annual federal income tax returns to be filed within 30 business days, rather than calendar days, after the federal income tax return is filed with the Internal Revenue Service. This bill provides corporations with more work days to prepare financial statements and documents to ensure accuracy. Finally, the author argues that by requiring information of those that earn more than $95,000 and those that get paid bonuses to be included in the initial application and thereafter by request, we are ensuring that DOJ has additional important SB 777 (Lara) Page 3 of ? financial documentation to ensure that corporations are suitable to hold a gambling license. The Gambling Control Act: The Gambling Control Act, established in 1998, created a comprehensive scheme for statewide regulation of legal gambling under a bifurcated system of administration involving the Bureau of Gambling Control (Bureau) within the Attorney General's Office and the five-member CGCC appointed by the Governor. The CGCC is authorized to establish minimum regulatory standards for the gambling industry and to ensure that the state gambling licenses are not issued to or held by unsuitable or unqualified individuals. The Bureau monitors the conduct of gaming operations to ensure compliance with state gambling laws and conducts extensive background investigations of applicants seeking a state gambling license. The Bureau also conducts background checks for all key employees and state gambling license and vendor applications. The Bureau inspects premises where gambling is conducted, examines gambling equipment, audits papers, books, and records of the gambling establishment, investigates suspected violations of gambling laws, and is ultimately responsible for enforcing compliance with all state laws pertaining to gambling. Prior/Related Legislation AB 293 (Mendoza, Chapter 233, Statutes of 2009) allowed limited liability companies and its officers, managers, members, or owners to be eligible for a state gambling license. SB 289 (Vincent, Chapter 294, Statutes of 2007) authorized the CGCC to deem a person suitable to hold a state gambling license even if the person has a specified financial interest in a business that conducts gambling activities outside the state that would violate California law if conducted within the state. FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No SUPPORT: None received SB 777 (Lara) Page 4 of ? OPPOSITION: None received