BILL ANALYSIS Ó SB 777 Page 1 SENATE THIRD READING SB 777 (Lara) As Amended April 6, 2015 Majority vote SENATE VOTE: 36-0 ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Governmental |18-0 |Gray, Linder, | | |Organization | |Achadjian, Alejo, | | | | |Bigelow, Campos, | | | | |Cooley, Cooper, Daly, | | | | |Eduardo Garcia, | | | | |Jones-Sawyer, Levine, | | | | |Mayes, Perea, Salas, | | | | |Steinorth, Waldron, | | | | |Wilk | | | | | | | | | | | | ------------------------------------------------------------------ SUMMARY: Makes various changes to laws regarding corporate ownership of a gambling establishment. Specifically, this bill: SB 777 Page 2 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 Department of Justice (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. EXISTING LAW: 1)Provides, under the Gambling Control Act (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 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 SB 777 Page 3 copy of the corporation's annual federal income tax return, within 30 calendar days after that return is filed with the Internal Revenue Service. FISCAL EFFECT: Unknown. This bill is keyed non-fiscal by the Legislative Counsel. COMMENTS: Purpose of this 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 workdays 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 financial documentation to ensure that corporations are suitable to hold a gambling license. The Gambling Control Act: The Act, established in 1998, created a comprehensive scheme for statewide regulation of legal gambling SB 777 Page 4 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. In support: Supporters state that this bill would include "bonus" compensation among the information to be supplied by corporate licensees to DOJ and which further allows the filing of corporate financial information within 30 "business" days rather than "calendar" days following the filing of a corporation's annual income tax return with the Internal Revenue Service. This bill provides DOJ with the ability to request important information and allows corporations an adequate time within which to file necessary documents with DOJ. In opposition: None on file. Prior 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 777 Page 5 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. Analysis Prepared by: Kenton Stanhope / G.O. / (916) 319-2531 FN: 0001197