BILL ANALYSIS                                                                                                                                                                                                    



                                                                       SB 777


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        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                  |                    |
        |                |     |                      |                    |
        |                |     |                      |                    |
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        SUMMARY:  Makes various changes to laws regarding corporate  
        ownership of a gambling establishment.  Specifically, this bill:  









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        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  








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          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  








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        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. 








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        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