BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 1244
                                                                  Page  1

          Date of Hearing:   August 4, 2010

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Felipe Fuentes, Chair

                    SB 1244 (Walters) - As Amended:  May 17, 2010 

          Policy Committee:                             Insurance  
          Vote:12-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill conforms state unemployment insurance law to federal  
          regulations related to Limited Liability Companies (LLCs).  
          Specifically, this bill: 

          1)Adds a definition for an employee of an LLC treated as a  
            corporation for federal income tax purposes. 

          2)Specifies the definition of an employee does not include a  
            member of an LLC treated as a partnership for federal income  
            tax purposes.  

          3)Adds a definition for wages paid to a member of an LLC filing  
            a federal income tax return. 

           FISCAL EFFECT  

          Minor absorbable workload to the Employment Development  
          Department (EDD) to continue oversight of the California  
          unemployment insurance program. 

           COMMENTS  

           Rationale  . This bill clarifies several provisions of state law  
          to conform to federal regulations on LLCs. The changes made in  
          this bill address LLCs and the collection of taxes pursuant to  
          the Federal Unemployment Tax Act (FUTA). Under FUTA, a 6.2  
          percent federal tax is levied on employee wages up to $7,000  
          annually. This bill ensures the members (rather than employees)  
          of an LLC will not have FUTA taxes collected on their behalf. 









                                                                  SB 1244
                                                                  Page  2

           Analysis Prepared by  :    Mary Ader / APPR. / (916) 319-2081