BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
653 (Correa)
Hearing Date: 5/18/2009 Amended: 05/06/2009
Consultant: Maureen Ortiz Policy Vote: Jud 5-0
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BILL SUMMARY: SB 653 will revise the definition of a foreign
limited liability company to include an entity formed under the
limited liability laws of a federally recognized Indian tribe.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
SOS --------minor, offset by
fee revenue----------- General
Tax revenue --unknown revenue, potentially $145
annually---- General
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STAFF COMMENTS:
Staff recommends an amendment to address concerns raised by the
Secretary of State to replace the term "state or the federally
recognized Indian tribe" with "state, foreign country, or the
federally recognized Indian tribe" throughout the bill in order
to maintain the ability of existing foreign entities to continue
to file as LLC's with the Secretary of State.
Each Limited Liability Corporation will be required to register
with the Secretary of State, paying an initial filing fee of
$70, and will also be required to file annually with the
Franchise Tax Board (FTB) and pay a tax of $800. According to
the FTB, there are over 500 federally recognized tribes, with
approximately 100 that are already formed as LLC's under tribal
law. The FTB estimates assume all 100 will register and then be
required to pay the LLC annual tax of $800, and that
additionally, approximately 15% of the 100 will be formed as
partnerships subject to an additional fee that is calculated
based on income. That fee averages about $4,400 which would
bring additional revenue of $65,000. Therefore, the total
revenue estimate above is derived from 100 LLC's paying the $800
tax, totaling $80,000 annually, and $65,000 from the partnership
fee.
The intent of SB 653 is to enable limited liability companies
organized and operating under tribal law to qualify to do
instrastate business by registering as a foreign limited
liability company with the Secretary of State. Business
entities such as corporations, limited liability companies
(LLC's), limited liability partnerships (LLPs), and limited
partnerships that are organized under the laws of another state
qualify to do business in California by providing relevant
information and registering with the Secretary of State.
Entities formed under the law of a "foreign jurisdiction" are
authorized to do intrastate business in the same manner.
Page 2
SB 653 (Correa)
The Beverly-Killea Limited Liability Company Act first
authorized the organization of LLCs in California in 1994 and
also recognized LLC's organized under the laws of other states.
An LLC is a hybrid form of an unincorporated business entity
affording its members certain benefits such as limited liability
to the extent of a member's equity investment, and flexible
management alternatives.
Indian tribes are treated as sovereign nations under federal
law. However, by choosing to qualify in this state as a
business entity transacting intrastate business under the
formation of a corporation, partnership, or limited partnership,
the tribe will be subject to state regulations governing the
particular business entity and may be deemed to have waived its
claim of sovereign immunity.